PEOPLES BANK CREDIT CARD MASTER TRUST
S-1/A, 1996-06-21
ASSET-BACKED SECURITIES
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<PAGE>
 
     
  AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1996     
 
                                                      REGISTRATION NO. 33-99506
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
                                
                             AMENDMENT NO. 2     
                                      TO
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                               ----------------
 
                                 PEOPLE'S BANK
                  (ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
               (EXACT NAME AS SPECIFIED IN REGISTRANT'S CHARTER)
 
                    PEOPLE'S BANK CREDIT CARD MASTER TRUST
                         (ISSUER OF THE CERTIFICATES)
 
      UNITED STATES                  6025                    06-1213065
     (STATE OR OTHER           (PRIMARY STANDARD          (I.R.S. EMPLOYER
     JURISDICTION OF              INDUSTRIAL            IDENTIFICATION NO.)
    INCORPORATION OR          CLASSIFICATION CODE        
      ORGANIZATION)                 NUMBER)
 
                                850 MAIN STREET
                         BRIDGEPORT, CONNECTICUT 06604
                                (203) 338-7171
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDINGAREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                               ----------------
 
                           WILLIAM T. KOSTURKO, ESQ.
                                GENERAL COUNSEL
                                 PEOPLE'S BANK
                                850 MAIN STREET
                         BRIDGEPORT, CONNECTICUT 06604
                                (203) 338-7171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                               ----------------
 
                                   COPY TO:
       LAURA A. DEFELICE, ESQ.                  ANDREW M. FAULKNER, ESQ.
        MAYER, BROWN & PLATT                      SKADDEN, ARPS, SLATE,
            1675 BROADWAY                            MEAGHER & FLOM
                                                    919 THIRD AVENUE
    NEW YORK, NEW YORK 10019     
           (212) 506-2500                       NEW YORK, NEW YORK 10022
                                                     (212) 735-3000
 
                               ----------------
 
       APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this registration statement becomes effective.
 
                               ----------------
 
  If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
 
                               ----------------
 
                        CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>   
<CAPTION>
                                               PROPOSED           PROPOSED
                                AMOUNT         MAXIMUM            MAXIMUM        AMOUNT OF
  TITLE OF EACH CLASS OF        TO BE     AGGREGATE OFFERING     AGGREGATE      REGISTRATION
SECURITIES BEING REGISTERED   REGISTERED  PRICE PER UNIT (1) OFFERING PRICE (1)   FEE (2)
- --------------------------------------------------------------------------------------------
<S>                          <C>          <C>                <C>                <C>
 Floating Rate Class A
  Asset Backed
  Certificates, Series
  1996-1................     $379,000,000        100%           $379,000,000    $130,689.66
 Floating Rate Class B
  Asset Backed
  Certificates, Series
  1996-1................     $ 21,000,000        100%           $ 21,000,000    $  7,241.38
- --------------------------------------------------------------------------------------------
 Total..................     $400,000,000        100%           $400,000,000    $137,931.04
</TABLE>    
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   
(1) Estimated solely for the purpose of calculating the registration fee.     
   
(2) $70,000 of which has been previously paid.     
 
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
 
                             CROSS REFERENCE SHEET
 
<TABLE>   
<CAPTION>
         NAME AND CAPTION IN FORM S-1               CAPTION IN PROSPECTUS
         ----------------------------               ---------------------
 <C>                                          <S>
  1. Forepart of Registration Statement and
     Outside Front Cover Page of Prospectus.. Front Cover Page of Registration
                                              Statement; Outside Front Cover
                                              Page of Prospectus
  2. Inside Front and Outside Back Cover
     Pages of Prospectus..................... Inside Front Cover Page of
                                              Prospectus; Outside Back Cover
                                              Page of Prospectus
  3. Summary Information, Risk Factors and
     Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk
                                              Factors; The Trust; The
                                              Receivables; Receivables Yield
                                              Considerations; Certain Legal
                                              Aspects of the Receivables
  4. Use of Proceeds......................... Use of Proceeds
  5. Determination of Offering Price.........                 *
  6. Dilution................................                 *
  7. Selling Security Holders................                 *
  8. Plan of Distribution.................... Underwriting
  9. Description of Securities to be          
     Registered.............................. Prospectus Summary; The Trust; 
                                              The Receivables; Maturity      
                                              Assumptions; Receivable Yield  
                                              Considerations; Description of 
                                              the Certificates; Certain      
                                              Federal Income Tax Consequences 
 10. Interests of Named Experts and Counsel..                 *
 11. Information with Respect to the          
     Registrant.............................. The Trust; The Credit Card      
                                              Business of People's Bank;      
                                              People's Bank; Description of   
                                              the Certificates                 
 12. Disclosure of Commission Position on
    Indemnification for Securities Act                       
    Liabilities..............................                 * 
</TABLE>    
- --------
* Not applicable.
<PAGE>
 
                                
                             EXPLANATORY NOTE     
   
  This Registration Statement contains a Prospectus relating to a public
offering by People's Bank Credit Card Master Trust of $379,000,000 aggregate
principal amount of Floating Rate Class A Asset Backed Certificates, Series
1996-1 (the "Class A Certificates") and $21,000,000 aggregate principal amount
of Floating Rate Class B Asset Backed Certificates, Series 1996-1 (the "Class
B Certificates" and, together with the Class A Certificates, the
"Certificates"). This Registration Statement also contains a Prospectus
Supplement which will be used in connection with the Prospectus for the
Certificates in connection with certain offers and sales outside the United
States.     
<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A         +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE   +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY  +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT        +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR   +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE      +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE    +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY SUCH STATE.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                   
                SUBJECT TO COMPLETION, DATED JUNE 21, 1996     
                                  
                               $400,000,000     
                     PEOPLE'S BANK CREDIT CARD MASTER TRUST
     
  $379,000,000 FLOATING RATE CLASS A ASSET BACKED CERTIFICATES, SERIES 1996-1
                                             
$21,000,000 FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1996-1     
 
                                 people's bank

                            TRANSFEROR AND SERVICER
                                  ----------
   
  Each of the Floating Rate Class A Asset Backed Certificates, Series 1996-1
(the "Class A Certificates") and each of the Floating Rate Class B Asset Backed
Certificates, Series 1996-1 (the "Class B Certificates" and, together with the
Class A Certificates, the "Certificates") offered hereby will evidence
undivided interests in certain assets of the People's Bank Credit Card Master
Trust (the "Trust") created pursuant to a pooling and servicing agreement dated
as of June 1, 1993, as amended, between People's Bank, as transferor and
servicer (the "Transferor"), and Bankers Trust Company, as trustee. The
property of the Trust includes, among other things, receivables (the
"Receivables") generated from time to time in a portfolio of VISA(R) and
MasterCard(R) credit card accounts, all monies due or to become due in payment
of the Receivables, Recoveries, Interchange, the benefits of the funds and
securities on deposit in a Cash Collateral Account with respect to the
Certificates and certain interest rate cap agreements, each as defined or
described herein. People's Bank services the Receivables, and People's
Structured Finance Corp. ("PSFC"), a wholly-owned subsidiary of People's Bank,
owns the undivided interest in the Trust not represented by the Certificates or
other series of investor certificates issued by the Trust. People's Bank has
previously offered four series of certificates, and PSFC and People's Bank may
offer from time to time other series of certificates which evidence fractional
undivided interests in certain assets of the Trust, which may have terms
significantly different from the Certificates, by exchanging a portion of
PSFC's interest in the Trust.     
   
  Interest with respect to the Certificates is scheduled to be distributed on
July 15, 1996 and on the 15th day of each month thereafter (or, if such 15th
day is not a business day, on the next succeeding business day) (each a
"Distribution Date"). Interest will accrue on the Class A Certificates from the
Closing Date through and including     
                                                 
                                              (Continued on following page)     
   
 THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE
25.     
                                  ----------
   
THE CERTIFICATES  REPRESENT INTERESTS IN  THE TRUST  ONLY AND DO  NOT REPRESENT
 INTERESTS IN OR RECOURSE  OBLIGATIONS OF PEOPLE'S BANK, PSFC  OR ANY OF THEIR
 AFFILIATES. A CERTIFICATE IS NOT A DEPOSIT  AND IS NOT INSURED BY THE FEDERAL
  DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THE RECEIVABLES ARE NOT INSURED
   OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.     
                                  ----------
 
 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.
 
                                  ----------
 
<TABLE>   
<CAPTION>
                                              PRICE TO  UNDERWRITING PROCEEDS TO
                                              PUBLIC(1) DISCOUNT(2)  PSFC(1)(3)
                                              --------- ------------ -----------
<S>                                           <C>       <C>          <C>
Per Class A Certificate......................        %          %            %
Per Class B Certificate......................        %          %            %
Total........................................   $          $            $
</TABLE>    
- -----
   
(1) Plus accrued interest, if any, at the applicable Certificate Rate (as
    defined herein) from the Closing Date.     
   
(2) People's Bank and PSFC have agreed to indemnify the Underwriters (as
    defined herein) against certain liabilities, including liabilities under
    the Securities Act of 1933, as amended.     
   
(3) Before deduction of expenses of the offering payable by People's Bank
    estimated to be $635,431.04.     
 
                                  ----------
   
  The Certificates are offered by the Underwriters as specified herein, subject
to receipt and acceptance by the Underwriters and subject to their right to
reject in whole or in part. It is expected that the Certificates will be
delivered in book-entry form on or about July   , 1996, through the facilities
of The Depository Trust Company, Cedel Bank, societe anonyme, and the Euroclear
System.     
                    
                 UNDERWRITERS OF THE CLASS A CERTIFICATES     
   
GOLDMAN, SACHS & CO.            
                             J.P. MORGAN & CO.            
                                                       SALOMON BROTHERS INC     
        
                                  ----------
                    
                 UNDERWRITERS OF THE CLASS B CERTIFICATES     
                              
                           GOLDMAN, SACHS & CO.     
 
                                  ----------
       
                    
                 The date of this Prospectus is   , 1996.     
<PAGE>
 
   
(Continued from previous page)     
   
July 14, 1996 at the rate of  % per annum and with respect to each Interest
Period (as defined herein) thereafter in the manner and with the exceptions
described herein at the rate of  % per annum above the London interbank
offered quotations rate for one-month United States dollar deposits. Interest
will accrue on the Class B Certificates from the Closing Date through and
including July 14, 1996 at the rate of  % per annum and with respect to each
Interest Period thereafter in the manner and with the exceptions described
herein at the rate of  % per annum above the London interbank offered
quotations rate for one-month United States dollar deposits. See "Description
of the Certificates--Interest Payments". Principal with respect to the Class A
Certificates is scheduled to be distributed on each Distribution Date
commencing with the December 2000 Distribution Date, but may be paid earlier
under certain limited circumstances as described herein. Principal with
respect to the Class B Certificates is scheduled to be distributed on the
February 2002 Distribution Date, but may be paid earlier or later under
certain limited circumstances as described herein. See "Maturity Assumptions".
Principal payments will not be made to Class B Certificateholders until the
final principal payment has been paid in respect of the Class A Certificates.
See "Description of the Certificates--Principal Payments".     
 
  The fractional undivided interest in the Trust represented by the Class B
Certificates will be subordinated to the Class A Certificates to the extent
described herein.
 
                         REPORTS TO CERTIFICATEHOLDERS
   
  Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports containing unaudited information concerning the
Trust and prepared by the Servicer 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 Certificates, pursuant to the Agreement. See
"Description of the Certificates--Book-Entry Registration", "--Reports to
Certificateholders" and "--Evidence as to Compliance". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Transferor does not intend 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
   
  The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Commission on behalf of the Trust with respect to the Certificates
offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement and amendments thereof and exhibits
thereto, 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 the Registration Statement and amendments thereof and exhibits
thereto 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.     
 
  Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
 
  IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                       2
<PAGE>
 
                               PROSPECTUS SUMMARY
 
  The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used herein are defined elsewhere in this Prospectus. A listing of the pages on
which some of such terms are defined is found in the "Index of Key Terms".
Unless the context requires otherwise, certain capitalized terms, when used
herein, relate only to the Certificates.
 
Title of Securities.........     
                              $379,000,000 Floating Rate Class A Asset Backed
                              Certificates, Series 1996-1 (the "Class A
                              Certificates") and $21,000,000 Floating Rate
                              Class B Asset Backed Certificates, Series 1996-1
                              (the "Class B Certificates" and, together with
                              the Class A Certificates, the "Certificates").
                                                               
The Trust..............       The Certificates represent fractional undivided
                              interests in certain assets of People's Bank
                              Credit Card Master Trust (the "Trust"). The
                              Trust's fiscal year ends December 31. As used
                              herein, the term "Series 1996-1 Supplement"
                              refers to the supplement relating to the
                              Certificates; the term "Agreement" refers to the
                              Pooling and Servicing Agreement dated as of June
                              1, 1993, as amended, and, unless the context
                              requires otherwise, refers to the Agreement as
                              supplemented by the Series 1996-1 Supplement; the
                              term "Certificateholders" refers to holders of
                              the Certificates; the term "Class A
                              Certificateholders" refers to holders of the
                              Class A Certificates and the term "Class B
                              Certificateholders" refers to holders of the
                              Class B Certificates; and the term "Series"
                              refers to any series of certificates issued by
                              the Trust, including the Certificates.     
 
                              The Trust has previously issued four other
                              Series. See "Annex I: Prior Series Issued" for a
                              summary of these previously issued Series.
 
Trustee.....................  Bankers Trust Company, a New York banking
                              corporation (the "Trustee"). The Corporate Trust
                              Office is located at 4 Albany Street, New York,
                              New York 10006.
 
Transferor..................     
                              People's Bank, a Connecticut stock savings bank
                              and a majority-owned subsidiary of People's
                              Mutual Holdings, is the Transferor of the
                              Receivables and the originator of the Trust. The
                              principal executive offices of People's Bank are
                              located at 850 Main Street, Bridgeport Center,
                              Bridgeport, Connecticut 06604, telephone number
                              (203) 338-7171.     
 
Trust Assets................  The property of the Trust includes receivables
                              (the "Receivables") arising under certain
                              VISA(R)* and MasterCard(R)* credit card accounts,
                              all Receivables in Automatic Additional Accounts
                              and Additional Accounts added
- --------
* VISA(R) and MasterCard(R) are registered trademarks of VISA USA, Inc. and
  MasterCard International Incorporated, respectively.
 
                                       3
<PAGE>
 
                                 
                              to the Trust from time to time, all monies due or
                              to become due in payment of the Receivables, all
                              proceeds of the Receivables, proceeds of
                              insurance policies relating to the Receivables,
                              and the right to receive Interchange, Recoveries,
                              all monies on deposit in certain bank accounts of
                              the Trust, all monies on deposit in certain bank
                              accounts established and maintained for the
                              benefit of certificateholders of any Series,
                              funds and securities on deposit in a collateral
                              account in the name of the Trustee (the "Cash
                              Collateral Account") for the benefit of the
                              Certificateholders, an interest rate cap
                              agreement for the exclusive benefit of the Class
                              A Certificateholders (the "Class A Interest Rate
                              Cap") and an interest rate cap agreement for the
                              exclusive benefit of the Class B
                              Certificateholders (the "Class B Interest Rate
                              Cap" and, together with the Class A Interest Rate
                              Cap, the "Interest Rate Caps"), each provided by
                              Swiss Bank Corporation, acting through its London
                              branch (the "Interest Rate Cap Provider"), and
                              any Enhancement issued with respect to any other
                              Series (the benefits of such Enhancement with
                              respect to other Series will not be available for
                              the benefit of the Certificateholders). The
                              holders of the certificates of other Series will
                              not be entitled to the benefits of the Interest
                              Rate Caps or funds deposited in the Cash
                              Collateral Account. The term "Enhancement" shall
                              mean, with respect to any other Series, any
                              letter of credit, cash collateral account, surety
                              bond, guaranteed rate agreement, maturity
                              guaranty facility, tax protection agreement,
                              interest rate cap or swap or other contract or
                              agreement principally for the benefit of
                              certificateholders of such Series. The term
                              "Enhancement" shall mean, with respect to the
                              Certificates, the Available Cash Collateral
                              Amount, the Interest Rate Caps and, in the case
                              of the Class A Certificates, the Class B Investor
                              Interest.     
                                 
                              The Transferor conveyed to the Trust on July 9,
                              1993, on October 4, 1994, on July 14, 1995 and on
                              May 1, 1996, and the assets of the Trust include,
                              Receivables from the portfolio of VISA credit
                              card accounts and MasterCard credit card accounts
                              owned by the Transferor which met the criteria
                              set forth in the Agreement. The Transferor has
                              conveyed, and will continue to convey, to the
                              Trustee all Receivables arising under the
                              Accounts from time to time thereafter until
                              termination of the Trust. The Trust does not and
                              will not include the Receivables of any Removed
                              Accounts which may be removed from the Trust from
                              time to time. Automatic Additional Accounts will
                              consist of certain of the Transferor's VISA
                              credit card accounts and MasterCard credit card
                              accounts (including certain Affinity Program
                              Accounts and Agent Bank Accounts) constituting
                              Eligible Automatic Additional Accounts and
                              satisfying certain other criteria, and arising in
                              Accounts designated by the Transferor from     
 
                                       4
<PAGE>
 
                                 
                              time to time. Additional Accounts may, subject to
                              certain conditions, also include certain other
                              consumer revolving credit accounts. See
                              "Description of the Certificates--Addition of
                              Accounts". The term "Trust Portfolio" means the
                              pool of Eligible Receivables representing assets
                              of the Trust as of a specified date.     
                              
Securities Offered.....       The Class A Certificates and the Class B
                              Certificates will be issued on July  , 1996 (the
                              "Closing Date") in book-entry form only, in the
                              initial principal amounts of $379,000,000 and
                              $21,000,000, respectively, and will be
                              represented by one or more Certificates
                              registered in the name of Cede. A Certificate
                              Owner will not be entitled to receive a
                              definitive certificate representing such person's
                              interest, except in the event that Definitive
                              Certificates are issued under the limited
                              circumstances described herein. In such event,
                              interests in the Certificates will be available
                              in minimum denominations of $1,000 and integral
                              multiples thereof. All references herein to
                              Certificateholders, Class A Certificateholders or
                              Class B Certificateholders shall refer to
                              Certificate Owners, except as otherwise specified
                              herein. See "Description of the Certificates--
                              Definitive Certificates".     
                                 
                              Each of the Certificates offered hereby and
                              issued pursuant to the Agreement represents a
                              fractional undivided interest in certain assets
                              of the Trust. The Trust assets will be allocated
                              among the Certificateholders, the holders of
                              certificates of any other Series which is
                              outstanding at the time of such allocation and
                              the certificate (the "Exchangeable Transferor
                              Certificate") that represents the Transferor
                              Interest (as defined below), which is currently
                              held by People's Structured Finance Corp.
                              ("PSFC"), a wholly-owned special purpose
                              Connecticut subsidiary of People's Bank, pursuant
                              to an Assignment and Assumption Agreement, dated
                              as of December 15, 1995, by and between the
                              Transferor and PSFC. PSFC, in its capacity as
                              holder of the Exchangeable Transferor
                              Certificate, or any other permitted assignee of
                              the Exchangeable Transferor Certificate that is
                              then currently the registered holder of the
                              Exchangeable Transferor Certificate, is sometimes
                              referred to herein as the "Holder of the
                              Exchangeable Transferor Certificate".     
                                 
                              The Certificates represent interests in the Trust
                              only and do not represent interests in or
                              recourse obligations of the Transferor, PSFC or
                              any of their affiliates. A Certificate is not a
                              deposit and is not insured by the Federal Deposit
                              Insurance Corporation (the "FDIC"). The
                              Receivables are not insured or guaranteed by the
                              FDIC or any other governmental agency.     
   
Investor Interest;            
 Transferor Interest...       On the Closing Date, the amount of the Class A
                              Certificateholders' interest in Principal
                              Receivables will equal
                                  
                                       5
<PAGE>
 
                                 
                              $379,000,000 (the "Class A Initial Investor
                              Interest") and the amount of the Class B
                              Certificateholders' interest in Principal
                              Receivables will equal $21,000,000 (the "Class B
                              Initial Investor Interest" and, together with the
                              Class A Initial Investor Interest, the "Initial
                              Investor Interest"). Such amounts may be reduced
                              to reflect the tender and cancellation of
                              Certificates pursuant to an Investor Exchange.
                              The Class A Certificateholders' interest in
                              Principal Receivables on any date after the
                              Closing Date (the "Class A Investor Interest")
                              will equal the Class A Initial Investor Interest,
                              less all payments in respect of principal made on
                              the Class A Certificates, less any charge offs of
                              the Class A Investor Interest, plus any
                              reimbursements of the charge offs of the Class A
                              Investor Interest, in each case as of such date.
                              The Class B Certificateholders' interest in
                              Principal Receivables on any date after the
                              Closing Date (the "Class B Investor Interest")
                              will equal the Class B Initial Investor Interest,
                              less all payments in respect of principal made on
                              the Class B Certificates, less any Reallocated
                              Principal Collections and charge offs of the
                              Class B Investor Interest, plus any
                              reimbursements of Reallocated Principal
                              Collections and charge offs of the Class B
                              Investor Interest, in each case as of such date.
                              The aggregate of the Class A Investor Interest
                              and the Class B Investor Interest at any time is
                              the "Investor Interest". During an Amortization
                              Period, the Investor Interest will decline as
                              principal is paid to the Certificateholders. The
                              Holder of the Exchangeable Transferor Certificate
                              holds in the Trust the remaining undivided
                              interest in the Principal Receivables (as defined
                              below) and amounts not represented by the
                              Certificates or any other Series of certificates
                              that have been issued at the time of such
                              determination (the "Transferor Interest"). As new
                              Receivables are added to the Trust and as
                              payments are made on the Transferor Interest, the
                              principal amount of the Transferor Interest will
                              fluctuate. The Holder of the Exchangeable
                              Transferor Certificate may tender the
                              Exchangeable Transferor Certificate or, if
                              provided in the relevant Supplement, the
                              Transferor may tender certificates representing
                              all or a portion of any Series of certificates
                              and the Holder of the Exchangeable Transferor
                              Certificate may tender 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",
                              which Exchange may have the effect of decreasing
                              the Transferor Interest. As of the date hereof,
                              four other Series have been issued by the Trust.
                              See "Annex I: Prior Series Issued".     
 
                              The Certificates will include the right to
Allocation Percentages......  receive (but only to the extent required to make
                              payments under the Agreement) a percentage (the
                              "Investor Percentage") of the collections of
 
                                       6
<PAGE>
 
                                 
                              Finance Charge Receivables and Principal
                              Receivables received during each calendar month
                              (a "Monthly Period"). The Investor Percentage (x)
                              with respect to the allocation of Finance Charge
                              Receivables and Receivables in Defaulted
                              Accounts, at all times, and (y) with respect to
                              Collections (as defined in the Agreement) of
                              Principal Receivables during the Revolving Period
                              will be, on any date of determination (other than
                              a date of determination occurring during the
                              Paired Amortization Period), the percentage
                              equivalent of a fraction, the numerator of which
                              is the Investor Interest, determined as of the
                              last day of the Monthly Period immediately
                              preceding such date of determination, and the
                              denominator of which is the greater of (i) the
                              Aggregate Principal Receivables, determined as of
                              the last day of the Monthly Period immediately
                              preceding such date of determination, and (ii)
                              the sum of the numerators used to calculate the
                              investor percentages with respect to Principal
                              Receivables for all Series of certificates
                              outstanding. The Investor Percentage with respect
                              to the allocation of Principal Receivables during
                              the Controlled Amortization Period and the Rapid
                              Amortization Period (each, an "Amortization
                              Period") will be, on any date of determination
                              (other than a date of determination occurring
                              during the Paired Amortization Period), the
                              percentage equivalent of a fraction, the
                              numerator of which is the Investor Interest as of
                              the close of business on the last day of the
                              Revolving Period (or, if there has been an
                              Investor Exchange with respect to the
                              Certificates after the end of the Revolving
                              Period, the Investor Interest as of the end of
                              the Revolving Period reduced ratably to reflect
                              the amount of Certificates tendered and cancelled
                              pursuant to any Investor Exchange) and the
                              denominator of which is the greater of (a) the
                              Aggregate Principal Receivables determined as of
                              the last day of the Monthly Period immediately
                              preceding such date of determination and (b) the
                              sum of the numerators used to calculate the
                              investor percentages for such date of
                              determination with respect to Principal
                              Receivables for all Series of certificates
                              outstanding. The period from the Closing Date to
                              and including the date on which the investor
                              interest of the Trust's Series 1993-1 4.80% Asset
                              Backed Certificates (the "Paired Certificates")
                              has been paid in full is referred to herein as
                              the "Paired Amortization Period". The Investor
                              Percentage of Collections of Principal
                              Receivables for the Certificates, for any date of
                              determination in the Revolving Period or the
                              Rapid Amortization Period occurring during the
                              Paired Amortization Period, will be the
                              percentage equivalent of the same fraction as is
                              described above for the applicable period, except
                              that the numerator thereof will be reduced by the
                              numerator used to calculate the investor
                              percentage for such date of determination with
                              respect to Collections of Principal Receivables
                              for the Paired Certificates pursuant to     
 
                                       7
<PAGE>
 
                                 
                              the related Supplement. The expected final
                              distribution date for the Paired Certificates is
                              December 16, 1996. See "Annex I: Prior Series
                              Issued". The foregoing notwithstanding, during
                              the Controlled Amortization Period, the Investor
                              Percentage of Collections of Principal
                              Receivables may be reset at the option of the
                              Servicer (and any such reset Investor Percentage
                              will apply in any Rapid Amortization Period
                              following the Controlled Amortization Period) on
                              the date of issuance of any new Series of
                              certificates to a fixed percentage equivalent of
                              a fraction which shall not be greater than the
                              fraction described in the fifth preceding
                              sentence and shall not be less than the greater
                              of (i) a fraction, the numerator of which is the
                              Investor Interest, determined as of the close of
                              business on the last day of the Monthly Period
                              immediately preceding the date of determination,
                              and the denominator of which is the greater of
                              (a) the Aggregate Principal Receivables
                              determined as of the last day of the Monthly
                              Period immediately preceding such date of
                              determination, and (b) the sum of the numerators
                              used to calculate the investor percentages for
                              such date of determination with respect to
                              Principal Receivables for all Series of
                              certificates outstanding and (ii) a fraction that
                              when multiplied by the amount of collections of
                              Principal Receivables for the preceding Monthly
                              Period will equal the greater of the Class A
                              Controlled Distribution Amount and the Class B
                              Controlled Distribution Amount for such Monthly
                              Period, plus 10% of the Class A Controlled
                              Amortization Amount, minus any Available Shared
                              Principal Collections with respect to such
                              Monthly Period. The Investor Percentage with
                              respect to the allocation of Principal
                              Receivables during the Rapid Amortization Period
                              will remain fixed at the Investor Percentage in
                              effect at the commencement of the Rapid
                              Amortization Period and may not be reset except
                              as described above in connection with the Paired
                              Amortization Period. See "Description of the
                              Certificates--Allocation Percentages" and "--Pay
                              Out Events".     
 
                              The term "Aggregate Principal Receivables" means
                              in the case of any date of determination, the sum
                              of (i) the aggregate amount of Principal
                              Receivables and (ii) the amount on deposit in the
                              Excess Funding Account (exclusive of the amount
                              of any investment earnings thereon), in each
                              case, as of the end of the last day of the
                              Monthly Period immediately preceding such date of
                              determination. The term "Available Shared
                              Principal Collections" means, on any date, Shared
                              Principal Collections allocable to the
                              Certificates from each other Series that has a
                              controlled or scheduled amortization or
                              accumulation period beginning after the Class B
                              Expected Final Distribution Date.
 
                              The Investor Percentage of Collections so
                              allocated during the Revolving Period and the
                              Amortization Periods to the
 
                                       8
<PAGE>
 
                              Certificateholders will be further allocated
                              between the Class A Certificateholders and the
                              Class B Certificateholders in accordance with the
                              Class A Investor Percentage and the Class B
                              Investor Percentage, respectively. The "Class A
                              Investor Percentage" and the "Class B Investor
                              Percentage" mean, respectively, the percentage
                              equivalent of a fraction, the numerator of which
                              is the Class A Investor Interest or the Class B
                              Investor Interest, as the case may be, determined
                              as of the last day of the Monthly Period
                              immediately preceding such date of determination,
                              and the denominator of which is the sum of the
                              Class A Investor Interest and the Class B
                              Investor Interest, determined as of the last day
                              of the Monthly Period immediately preceding such
                              date of determination.
                                 
Interest....................  Interest is required to be distributed on July
                              15, 1996 and on the 15th day of each month
                              thereafter, or, if such 15th day is not a
                              business day, on the next succeeding business day
                              (each, a "Distribution Date"), in an amount equal
                              to, in the case of the Class A Certificates, the
                              sum of (w) the product of (a) the London
                              interbank offered quotations rate for one-month
                              United States dollar deposits ("LIBOR"),
                              determined as described herein, plus   % (the
                              "Class A Certificate Rate") (or   % for the
                              Initial Interest Period), (b) the lesser of the
                              Class A Investor Interest as of the preceding
                              Distribution Date (or, in the case of the first
                              Distribution Date, the Class A Initial Investor
                              Interest) after giving effect to all payments,
                              deposits and withdrawals on such Distribution
                              Date and the Expected Class A Principal as of the
                              preceding Distribution Date, and (c) the actual
                              number of days in the related Interest Period
                              divided by 360, plus (x) the product of (a) the
                              Class A Excess Principal, (b) the lesser of the
                              Class A Certificate Rate and   %, and (c) the
                              actual number of days in the related Interest
                              Period divided by 360 (collectively, the "Class A
                              Monthly Interest"), plus (y) to the extent
                              permitted by applicable law, any interest accrued
                              on the Class A Certificates (including interest
                              on any overdue Class A Monthly Interest) during
                              any prior accrual period which has not been
                              distributed to the Class A Certificateholders,
                              plus, to the extent that there is available
                              Excess Spread, (z) an amount equal to the product
                              of (a) the amount by which the Class A
                              Certificate Rate exceeds   %, (b) the Class A
                              Excess Principal and (c) the actual number of
                              days in the related Interest Period divided by
                              360 (the "Class A Excess Interest"). In the case
                              of the Class B Certificates, interest will be
                              distributed in an amount equal to the sum of (w)
                              the product of (a) LIBOR, determined as described
                              herein, plus   % (the "Class B Certificate Rate";
                              the Class A Certificate Rate and the Class B
                              Certificate Rate are each sometimes referred to
                              as a "Certificate Rate" and collectively, the
                              "Certificate Rates") (or   % for the Initial
                              Interest Period),     
 
                                       9
<PAGE>
 
                                 
                              (b) the lesser of the Class B Investor Interest
                              as of the preceding Distribution Date (or, in the
                              case of the first Distribution Date, the Class B
                              Initial Investor Interest) after giving effect to
                              all payments, deposits and withdrawals on such
                              Distribution Date and the Expected Class B
                              Principal as of the preceding Distribution Date,
                              and (c) the actual number of days in the related
                              Interest Period divided by 360, plus (x) an
                              amount equal to the product of (a) the Class B
                              Excess Principal, (b) the lesser of the Class B
                              Certificate Rate and   %, and (c) the actual
                              number of days in the related Interest Period
                              divided by 360 (collectively, the "Class B
                              Monthly Interest"), plus (y) to the extent
                              permitted by applicable law, any interest accrued
                              on the Class B Certificates (including interest
                              on any overdue Class B Monthly Interest) during
                              any prior accrual period which has not been
                              distributed to the Class B Certificateholders,
                              plus, to the extent that there is available
                              Excess Spread, (z) an amount equal to the product
                              of (a) the amount by which the Class B
                              Certificate Rate exceeds   %, (b) the Class B
                              Excess Principal and (c) the actual number of
                              days in the related Interest Period divided by
                              360 (the "Class B Excess Interest"). For any
                              Interest Period in which the Class A Certificate
                              Rate or the Class B Certificate Rate, as the case
                              may be, exceeds the Class A Cap Rate or the Class
                              B Cap Rate, respectively, the portion of the
                              Class A Monthly Interest or the Class B Monthly
                              Interest attributable to the amount by which the
                              Class A Certificate Rate or the Class B
                              Certificate Rate, as the case may be, exceeds the
                              Class A Cap Rate or the Class B Cap Rate,
                              respectively, will be funded from payments made
                              pursuant to the Class A Interest Rate Cap or the
                              Class B Interest Rate Cap, respectively, and from
                              Excess Spread. Interest distributable on July 15,
                              1996 will accrue from and including the Closing
                              Date to and including July 14, 1996 (the "Initial
                              Interest Period").     
 
Revolving Period............     
                              No principal will be payable to
                              Certificateholders until the December 2000
                              Distribution Date or, upon the occurrence of a
                              Pay Out Event as described herein, the first
                              Distribution Date with respect to the Rapid
                              Amortization Period. For each Monthly Period
                              during the period from and including the Closing
                              Date, up to and including the day prior to the
                              day on which the Controlled Amortization Period
                              or the Rapid Amortization Period commences (the
                              "Revolving Period"), collections of Principal
                              Receivables otherwise allocable to the
                              Certificateholders will, subject to certain
                              limitations, be applied as Shared Principal
                              Collections, as described below, and thereafter
                              paid to the Holder of the Exchangeable Transferor
                              Certificate to maintain the Investor Interest at
                              the Initial Investor Interest. See "Description
                              of the Certificates-Pay Out Events" for a
                              discussion of the events which might lead to the
                                     
                              termination of the Revolving Period prior to the
                              end of the October 2000 Monthly Period.     
 
                                       10
<PAGE>
 
Principal Payments;
 Controlled Amortization         
 Period.....................  Unless a Pay Out Event has occurred or is deemed
                              to occur, commencing on the first day of the
                              Monthly Period relating to the December 2000
                              Distribution Date (the "Controlled Amortization
                              Date") and ending on the earlier of the date when
                              the Certificates have been paid in full, or the
                              occurrence of a Pay Out Event (the "Controlled
                              Amortization Period"), collections of Principal
                              Receivables allocable to the Certificates, along
                              with Shared Principal Collections from other
                              Series, if any, will be distributed monthly on
                              each Distribution Date related to the Controlled
                              Amortization Period to the Class A
                              Certificateholders, in an amount up to the
                              Class A Controlled Distribution Amount, until the
                              Class A Investor Interest is paid in full.
                              Principal payments on the Class B Certificates
                              will commence on the Class B Payment Commencement
                              Date. During either Amortization Period, the
                              aggregate amount of collections of Principal
                              Receivables allocable to the Class A Certificates
                              and the Class B Certificates (together with
                              certain amounts treated as Collections of
                              Principal Receivables, including amounts applied
                              with respect to Investor Default Amounts and
                              Investor Charge Offs, the "Principal Allocation")
                              will equal the product of (a) the applicable
                              Investor Percentage and (b) the amount of
                              collections of Principal Receivables.     
                                 
                              If the Principal Allocation for any Monthly
                              Period during the Controlled Amortization Period
                              is equal to or greater than the sum of the Class
                              A Controlled Amortization Amount or the Class B
                              Controlled Amortization Amount, as applicable,
                              and the existing Deficit Controlled Amortization
                              Amount (such sum, either the "Class A Controlled
                              Distribution Amount" or the "Class B Controlled
                              Distribution Amount", respectively; each, a
                              "Controlled Distribution Amount"), the amount of
                              the applicable Controlled Distribution Amount
                              will be paid as provided herein from the Trust to
                              the Certificateholders in respect of the Investor
                              Interest, and any excess of such Principal
                              Allocation over the applicable Controlled
                              Distribution Amount will be applied as Shared
                              Principal Collections, as described below, and if
                              not so used, paid from the Trust to the Holder of
                              the Exchangeable Transferor Certificate. If the
                              Principal Allocation for any Monthly Period
                              during the Controlled Amortization Period is less
                              than the applicable Controlled Distribution
                              Amount, the sum of such Principal Allocation and
                              the amount of any Shared Principal Collections
                              available from other Series to the Certificates
                              of this Series, in an aggregate amount not to
                              exceed the applicable Controlled Distribution
                              Amount, will be paid from the Trust to the
                              applicable Certificateholders in respect of the
                              Class A Investor Interest or the Class B Investor
                              Interest. The amount of the accrued and unpaid
                              monthly excesses of the applicable Controlled
                              Amortization Amount for the Class A Certificates
                              or     
 
                                       11
<PAGE>
 
                                 
                              the Class B Certificates, as the case may be, for
                              each preceding Monthly Period over the sum of the
                              Principal Allocation and the amount of any Shared
                              Principal Collections available to the
                              Certificates for each such Monthly Period will be
                              the "Deficit Controlled Amortization Amount" for
                              any Transfer Date or Distribution Date. See
                              "Maturity Assumptions", "Description of the
                              Certificates--Application of Collections" and "--
                              Subordination of the Class B Certificates".     
Principal Payments; Rapid
 Amortization Period........  During the period beginning on the day on which a
                              Pay Out Event occurs or is deemed to occur and
                              continuing to and including the earlier of (a)
                              the date on which the Investor Interest has been
                              paid in full and (b) the Scheduled Series 1996-1
                              Termination Date (the "Rapid Amortization
                              Period"), the Principal Allocation along with
                              Shared Principal Collections from other Series,
                              if any, will be distributed monthly to the Class
                              A Certificateholders until the Class A Investor
                              Interest is paid in full and, following the final
                              principal payment to the Class A
                              Certificateholders, to the Class B
                              Certificateholders until the Class B Investor
                              Interest is paid in full, on each Distribution
                              Date beginning with the month following the
                              Monthly Period in which the Rapid Amortization
                              Period commences. See "Description of the
                              Certificates-Pay Out Events" for a discussion of
                              the events which might lead to the commencement
                              of a Rapid Amortization Period.
                                     
Final Payment of Principal
 and Interest...............     
                              The final distributions of principal and interest
                              on the Class A Certificates and the Class B
                              Certificates, respectively, are scheduled to be
                              made on the January 2002 Distribution Date (the
                              "Class A Expected Final Distribution Date") and
                              the February 2002 Distribution Date (the "Class B
                              Expected Final Distribution Date"; the Class A
                              Expected Final Distribution Date and the Class B
                              Expected Final Distribution Date are each
                              sometimes referred to as an "Expected Final
                              Distribution Date" and collectively, the
                              "Expected Final Distribution Dates") and will be
                              made no later than the November 2004 Distribution
                              Date (the "Scheduled Series 1996-1 Termination
                              Date"). After the Scheduled Series 1996-1
                              Termination Date, neither the Trust nor the
                              Transferor will have any further obligation to
                              pay principal or interest on the Certificates.
                                  
Exchanges...................     
                              The Agreement authorizes the Trustee to issue two
                              types of certificates: (i) one or more Series of
                              certificates transferable and having the
                              characteristics described below and (ii) the
                              Exchangeable Transferor Certificate, a
                              certificate evidencing the Transferor Interest,
                              currently held by PSFC and transferable only as
                              provided in the Agreement. The Agreement also
                              provides that, pursuant to any one or more
                              supplements to the Agreement (each, a
                              "Supplement"), the     
 
                                       12
<PAGE>
 
                                 
                              Holder of the Exchangeable Transferor Certificate
                              may tender the Exchangeable Transferor
                              Certificate (a "Transferor Exchange") or, if
                              provided in the relevant Supplement, the
                              Transferor may transfer certificates representing
                              any Series of certificates and the Holder of the
                              Exchangeable Transferor Certificate may transfer
                              the Exchangeable Transferor Certificate (an
                              "Investor Exchange"), to the Trustee in exchange
                              for one or more new Series and a reissued
                              Exchangeable Transferor Certificate (any tender
                              pursuant to a Transferor Exchange or an Investor
                              Exchange being referred to as an "Exchange"). The
                              Series 1996-1 Supplement permits an Investor
                              Exchange with respect to the Certificates. See
                              "Description of the Certificates--Exchanges". At
                              all times, however, the interest in the Principal
                              Receivables in the Trust represented by the
                              Transferor Interest must equal or exceed the
                              Minimum Transferor Interest (as defined below).
                              Under the Agreement, the Supplement executed by
                              the Transferor and the Trust in conjunction with
                              an Exchange will define, with respect to any
                              Series, the Principal Terms of the Series. The
                              Transferor and the Holder of the Exchangeable
                              Transferor Certificate 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 or through the
                              Underwriters or one or more other underwriters or
                              placement agents, in fixed-price offerings or in
                              negotiated transactions or otherwise. The
                              Transferor and the Holder of the Exchangeable
                              Transferor Certificate may offer, from time to
                              time, additional Series issued by the Trust. See
                              "Description of the Certificates-- Exchanges".
                                  
                              Under the 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 the
                              certificates of such Series under existing law
                              will be characterized as indebtedness for Federal
                              income tax purposes and that the issuance of such
                              Series will not materially adversely affect 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 instrument or
                              agreement, (v) written confirmation from the
                              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, and (vi) the existing Exchangeable Transferor
                              Certificate and, if applicable, the certificates
                              representing the Series to be exchanged.
 
                                       13
<PAGE>
 
                                 
                              The Holder of the Exchangeable Transferor
                              Certificate also has the right, upon Transferor
                              consent, to transfer the Exchangeable Transferor
                              Certificate, and the Transferor also has the
                              right to sell, transfer or pledge the Accounts,
                              provided that certain requirements contained in
                              the Agreement are satisfied and that the Rating
                              Agency has confirmed that such sale, transfer or
                              pledge will not result in the reduction or
                              withdrawal of its then existing rating of the
                              Certificates. See "Description of the
                              Certificates--Sale of Accounts" and "--Certain
                              Matters Regarding the Transferor and the
                              Servicer".     
 
Receivables.................     
                              The Receivables arise in Accounts that have been
                              selected from the VISA and MasterCard credit card
                              accounts owned by the Transferor based on
                              criteria provided in the Agreement as applied
                              with respect to each Account upon its inclusion
                              in the portfolio and on the date of the inclusion
                              of the related Receivables in the Trust. The
                              Receivables consist of amounts charged by
                              cardholders for goods and services and cash
                              advances (the "Principal Receivables") plus the
                              related periodic finance charges billed to the
                              Accounts, amounts billed to the Accounts in
                              respect of annual membership fees, cash advance
                              fees, late fees, returned check fees, overlimit
                              fees, the premiums of any insurance covering a
                              cardholder's account balances, Recoveries,
                              Interchange and investment earnings on the Excess
                              Funding Account (collectively, the "Finance
                              Charge Receivables"). Proceeds from the sale of
                              all or a portion of an Interest Rate Cap will
                              also be treated under the Supplement as Finance
                              Charge Collections, allocable to the related
                              class of Certificates. In addition, if the
                              Transferor exercises the Discount Option in
                              accordance with the terms and conditions of the
                              Agreement, an amount equal to the product of the
                              Discount Percentage and the amount of Receivables
                              arising in designated Accounts on and after the
                              date such option is exercised that otherwise
                              would be Principal Receivables will be treated as
                              Finance Charge Receivables. See "Description of
                              the Certificates--Discount Option". "Accounts"
                              means VISA and MasterCard credit card accounts
                              identified as part of the accounts underlying the
                              Receivables in the Trust Portfolio as of March
                              31, 1996 (the "Series Cut-Off Date"), together
                              with Automatic Additional Accounts arising on or
                              prior to the Series Cut-Off Date and Additional
                              Accounts conveyed on or prior to May 1, 1996, but
                              does not include any Removed Accounts.
                              "Recoveries" means amounts received with respect
                              to charged-off credit card receivables of the
                              Bank Portfolio allocable to the Trust. The
                              aggregate amount of Receivables in the Accounts
                              as of the Series Cut-Off Date was approximately
                              $1,798,186,706. The Finance Charge Receivables
                              will not generally affect the amount of the
                              Investor Interest represented by the Certificates
                              or the amount of the Transferor Interest, which
                              are determined on the basis of the amount of the
                              Principal Receivables in the Trust.     
 
                                       14
<PAGE>
 
 
                              During the term of the Trust, all new Receivables
                              arising in the Accounts will be automatically
                              transferred (without further action by the
                              Transferor) 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 Agreement, the Transferor has
                              (subject to certain limitations and conditions)
                              designated and may in the future designate
                              additional eligible consumer revolving credit
                              accounts originated in the ordinary course of the
                              Transferor's business (the "Automatic Additional
                              Accounts") and convey to the Trust all of the
                              Receivables in the Automatic Additional Accounts
                              whether such Receivables are then existing or
                              thereafter created. See "Description of the
                              Certificates-- Addition of Accounts". The
                              Transferor has conveyed and will continue to
                              convey Automatic Additional Accounts consisting
                              of VISA and MasterCard credit card accounts that
                              are Eligible Automatic Additional Accounts and
                              that satisfy certain other criteria.
                              Additionally, pursuant to the Agreement, the
                              Transferor has the right (subject to certain
                              limitations and conditions) and, in some
                              circumstances, is obligated, to designate
                              additional eligible consumer revolving credit
                              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.     
 
                              Further, pursuant to the Agreement, the
                              Transferor has the right (subject to certain
                              limitations and conditions) to remove the
                              Receivables related to certain Accounts
                              designated by the Transferor from the Trust (the
                              "Removed Accounts") and accept the conveyance of
                              all the Receivables in the Removed Accounts,
                              whether such Receivables are then existing or
                              thereafter created.
 
                              The aggregate undivided interest in the Principal
                              Receivables in the Trust evidenced by the
                              Certificates will never exceed the amount of the
                              Investor Interest regardless of the total amount
                              of Principal Receivables in the Trust at any
                              time.
 
Denomination................     
                              The Certificates will be offered for purchase in
                              minimum denominations of $1,000 and integral
                              multiples thereof.     
 
                                       15
<PAGE>
 
       
Registration of               The Certificates will initially be represented by
 Certificates...............  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....     
                              Certificate Owners may elect to hold their
                              Certificates through DTC (in the United States)
                              or Cedel or Euroclear (in Europe), each of which
                              in turn hold through DTC. Transfers within DTC or
                              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" and Annex II.     
 
Servicer....................  The Servicer is People's Bank, a Connecticut
                              chartered stock savings bank. In certain limited
                              circumstances, People's Bank may resign or be
                              removed as Servicer, in which event the Trustee
                              or a third party servicer may be appointed as
                              successor servicer (People's Bank, or any such
                              successor servicer, is referred to herein as the
                              "Servicer"). The Servicer is permitted to
                              delegate certain of its duties as servicer under
                              the Agreement to any of its affiliates, but any
                              such delegation will not relieve the Servicer of
                              its obligations thereunder.
 
Collections.................     
                              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 in the manner provided in the
                              Agreement, as supplemented by the Series 1996-1
                              Supplement, and the Supplements relating to any
                              past or future Series, by the Servicer between
                              amounts collected on Principal Receivables and
                              amounts collected on Finance Charge Receivables.
                              If the Discount Option is exercised by the
                              Transferor, certain collections that would
                              otherwise be characterized as Collections of
                              Principal Receivables may instead be treated as
                              Collections of Finance Charge Receivables. See
                              "Description of the Certificates--Discount
                              Option". In addition, pursuant to the Series
                              1996-1 Supplement, proceeds from any sale of the
                              Class A Interest Rate Cap or the Class B Interest
                              Rate Cap will be allocated as Finance Charge
                              Receivables to the related class of Certificates.
                              All such     
 
                                       16
<PAGE>
 
                                 
                              amounts will then be allocated in accordance with
                              the respective interests of the
                              Certificateholders, the certificateholders of any
                              other Series and the Holder of the Exchangeable
                              Transferor Certificate in the Principal
                              Receivables and in the Finance Charge Receivables
                              in the Trust. See "Description of the
                              Certificates--Allocation Percentages".     
 
Subordination of the Class
 B Certificates.............  The Class B Investor Interest will be
                              subordinated as described herein to the extent
                              necessary to fund payments with respect to the
                              Class A Certificates and the Class A Monthly
                              Servicing Fee as described herein. To the extent
                              the Class B Investor Interest is thereby 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 Investor
                              Interest is not reimbursed, the amount of
                              principal distributable to the Class B
                              Certificateholders will be reduced. Such
                              reductions of the Class B Investor Interest will
                              thereafter be reimbursed and the Class B Investor
                              Interest increased on each Distribution Date by
                              the amount, if any, of Excess Spread and any
                              Shared Finance Charge Collections from other
                              Series available for that purpose for such
                              Distribution Date. See "Description of
                              Certificates--Subordination of the Class B
                              Certificates" and " --Application of
                              Collections".
 
Cash Collateral Account.....     
                              The Trust will have the benefit of an account
                              (the "Cash Collateral Account"), which will be
                              held in the name of the Trustee for the benefit
                              of the Certificateholders. See "Description of
                              the Certificates--The Cash Collateral Account".
                              The Cash Collateral Account will be funded from
                              the proceeds of a loan made pursuant to a loan
                              agreement (the "Loan Agreement") by a certain
                              financial institution as lender (the "Cash
                              Collateral Lender") and from a deposit by the
                              Transferor on the Closing Date in the aggregate
                              amount of $36,000,000 (the "Initial Cash
                              Collateral Amount"). On the Business Day
                              preceding each Distribution Date (each a
                              "Transfer Date"), the amount available in the
                              Cash Collateral Account (the "Available Cash
                              Collateral Amount") will equal the lesser of the
                              amount on deposit in the Cash Collateral Account
                              and the Required Cash Collateral Amount. The
                              "Required Cash Collateral Amount" with respect to
                              any Transfer Date means, generally, the product
                              of (i) the Investor Interest as of the last day
                              of the Monthly Period preceding such date and
                              (ii) 9%, but in no event less than the lesser of
                              (x) $12,000,000 and (y) the Investor Interest as
                              of the last day of the related Monthly Period;
                              provided, however, that if certain withdrawals
                              are made from the Cash Collateral     
 
                                       17
<PAGE>
 
                              Account during the Controlled Amortization Period
                              or if a Pay Out Event occurs, the Required Cash
                              Collateral Amount for such Transfer Date shall be
                              the lesser of the Required Cash Collateral Amount
                              for the Transfer Date immediately preceding the
                              occurrence of such withdrawal or such Pay Out
                              Event and the unpaid principal amount of the
                              Certificates.
 
Application of Funds........  If, in any Monthly Period, collections of Finance
                              Charge Receivables allocable to the Class A
                              Investor Interest for such Monthly Period are
                              insufficient (such insufficiency being the "Class
                              A Required Amount") to pay (i) the interest
                              accrued on the Class A Certificates with respect
                              to the related Distribution Date, in an amount
                              equal to the product of (a) the lesser of the
                              Class A Certificate Rate and the Class A Cap
                              Rate, (b) the Class A Investor Interest as
                              determined as of the preceding Distribution Date
                              (or, for the Initial Interest Period, the Closing
                              Date) after giving effect to all payments,
                              deposits and withdrawals on such Distribution
                              Date or Closing Date, and (c) the actual number
                              of days in the related Interest Period divided by
                              360 (the "Class A Monthly Cap Rate Interest"),
                              and any Class A Monthly Cap Rate Interest accrued
                              during any prior period not distributed to the
                              Class A Certificateholders, (ii) the Class A
                              Monthly Servicing Fee and any accrued and unpaid
                              Class A Monthly Servicing Fees from prior Monthly
                              Periods, (iii) the Class A Investor Default
                              Amount for such Monthly Period, and (iv)
                              unreimbursed Class A Investor Charge Offs (the
                              aggregate of clauses (i) through (iv), the "Class
                              A Payment Amount"), then first, Excess Spread, if
                              any, from collections of Finance Charge
                              Receivables allocable to the Class B Certificates
                              will be allocated to the Class A Certificates up
                              to the Class A Required Amount, second, Shared
                              Finance Charge Collections, if any, allocable to
                              the Certificates will be allocated to the Class A
                              Certificates up to the remaining Class A Required
                              Amount and third, a withdrawal will be made from
                              the Cash Collateral Account on the Distribution
                              Date immediately following such Monthly Period,
                              to the extent of any remaining Class A Required
                              Amount (but not more than the applicable
                              Available Cash Collateral Amount). If such
                              applicable Available Cash Collateral Amount is
                              less than the remaining Class A Required Amount
                              for such Distribution Date, the applicable Class
                              B Investor Percentage of collections in respect
                              of Principal Receivables will then be used to
                              fund the remaining Class A Required Amount (such
                              collections, "Reallocated Principal
                              Collections"). The Class B Investor Interest will
                              be reduced by the amount of Reallocated Principal
                              Collections.
 
                              If, on such Distribution Date, the Available Cash
                              Collateral Amount and Reallocated Principal
                              Collections are insufficient to fund the
                              remaining Class A Required Amount for such
 
                                       18
<PAGE>
 
                              Monthly Period, the remaining Class B Investor
                              Interest will be reduced (but not in excess of
                              the Class A Investor Default Amount for such
                              Distribution Date) by the amount of such
                              remaining insufficiency, until such time as the
                              Class B Investor Interest has been reduced to
                              zero. Thereafter, the Class A Investor Interest
                              will be reduced by the amount of any remaining
                              Class A Required Amount (a "Class A Investor
                              Charge Off"), but not in excess of the Class A
                              Investor Default Amount for such Distribution
                              Date, and the Class A Certificateholders will
                              bear directly the credit and other risks
                              associated with their undivided interest in the
                              Trust.
 
                              If, in any Monthly Period, collections of Finance
                              Charge Receivables allocable to the Class B
                              Investor Interest for such Monthly Period are
                              insufficient (such insufficiency being the "Class
                              B Required Amount" and, together with the Class A
                              Required Amount, the "Required Amounts") to pay
                              (i) the interest which accrued on the Class B
                              Certificates with respect to the related
                              Distribution Date, in an amount equal to the
                              product of (a) the lesser of the Class B
                              Certificate Rate and the Class B Cap Rate, (b)
                              the Class B Investor Interest as determined as of
                              the preceding Distribution Date (or, for the
                              Initial Interest Period, the Closing Date), after
                              giving effect to all payments, deposits and
                              withdrawals on such Distribution Date or Closing
                              Date, and (c) the actual number of days in the
                              related Interest Period divided by 360 (the
                              "Class B Monthly Cap Rate Interest"), and any
                              Class B Monthly Cap Rate Interest accrued during
                              any prior period which has not been distributed
                              to the Class B Certificateholders, (ii) the Class
                              B Monthly Servicing Fee and any accrued and
                              unpaid Class B Monthly Servicing Fees from prior
                              Monthly Periods, (iii) the Class B Investor
                              Default Amount for such Monthly Period, and (iv)
                              unreimbursed Class B Investor Charge Offs (the
                              aggregate of clauses (i) through (iv), the "Class
                              B Payment Amount"), then first, Excess Spread, if
                              any, from collections of Finance Charge
                              Receivables allocable to the Class A Certificates
                              will be allocated to the Class B Certificates up
                              to the Class B Required Amount, second, Shared
                              Finance Charge Collections, if any, allocable to
                              the Certificates and not required to pay the
                              Class A Required Amount for such Distribution
                              Date will be allocated to the Class B
                              Certificates up to the remaining Class B Required
                              Amount and third, a withdrawal will be made from
                              the Cash Collateral Account on the Distribution
                              Date immediately following such Monthly Period,
                              to the extent of any remaining Class B Required
                              Amount (but not more than the portion of the
                              applicable Available Cash Collateral Amount, if
                              any, not required to pay the Class A Required
                              Amount for such Distribution Date).
 
                              If, on such Distribution Date, such portion of
                              the Available Cash Collateral Amount is
                              insufficient to fund the remaining
 
                                       19
<PAGE>
 
                              Class B Required Amount for such Monthly Period,
                              the Class B Investor Interest will be reduced
                              (but not in excess of the Class B Investor
                              Default Amount for such Distribution Date) by the
                              amount of such remaining insufficiency (a
                              "Class B Investor Charge Off"). See "Description
                              of the Certificates--The Cash Collateral
                              Account", "--Reallocation of Cash Flows".
                                 
                              "Excess Spread" on any Transfer Date will equal
                              the sum of (a) the excess of any collections of
                              Finance Charge Receivables allocated to the Class
                              A Investor Interest over the Class A Payment
                              Amount and (b) the excess of any collections of
                              Finance Charge Receivables allocated to the Class
                              B Investor Interest over the Class B Payment
                              Amount. Any Excess Spread will be applied first,
                              to cover the Required Amounts, second, to cover
                              any accrued and unpaid interest on any overdue
                              Class A Monthly Interest, calculated at a default
                              rate of interest, third, to cover any accrued and
                              unpaid interest on any overdue Class B Monthly
                              Interest, calculated at a default rate of
                              interest, fourth, to reimburse any reductions in
                              the Class B Investor Interest in connection with
                              the payment of the Class A Required Amount,
                              fifth, to replenish the Cash Collateral Account
                              to the Required Cash Collateral Amount, sixth, to
                              cover any Class A Monthly Interest in excess of
                              the Class A Monthly Cap Rate Interest (other than
                              Class A Excess Interest), to the extent not paid
                              by the Interest Rate Cap Provider pursuant to the
                              Class A Interest Rate Cap, seventh, to cover any
                              Class B Monthly Interest in excess of the Class B
                              Monthly Cap Rate Interest (other than Class B
                              Excess Interest), to the extent not paid by the
                              Interest Rate Cap Provider pursuant to the Class
                              B Interest Rate Cap, eighth, to amounts due and
                              payable under the Loan Agreement, ninth, to cover
                              any Class A Excess Interest, tenth, to cover any
                              Class B Excess Interest, eleventh, as Shared
                              Finance Charge Collections, as specified below,
                              twelfth, to cover other accrued and unpaid
                              expenses of the Trust, if any, and thereafter
                              paid to the Holder of the Exchangeable Transferor
                              Certificate. See "Description of the
                              Certificates--Allocation of Funds--Payment of
                              Fees, Interest and Other Items".     
                                 
                              In addition, if on any Transfer Date, the amount
                              on deposit in the Cash Collateral Account exceeds
                              the Required Cash Collateral Amount, such excess
                              will be withdrawn from the Cash Collateral
                              Account and applied as Excess Spread to items
                              sixth through twelfth above, and thereafter paid
                              to the Holder of the Exchangeable Transferor
                              Certificate. See "Description of the
                              Certificates--The Cash Collateral Account".     
 
Interest Rate Cap...........  On the Closing Date, the Trustee will enter into
                              the Class A Interest Rate Cap and the Class B
                              Interest Rate Cap with the
 
                                       20
<PAGE>
 
                              Interest Rate Cap Provider for the exclusive
                              benefit of the Class A Certificateholders and the
                              Class B Certificateholders, respectively. On each
                              Transfer Date that the Class A Certificate Rate
                              or the Class B Certificate Rate for the related
                              Interest Period exceeds the Class A Cap Rate or
                              the Class B Cap Rate, respectively, the Interest
                              Rate Cap Provider will make a payment to the
                              Trustee, on behalf of the Trust, based on the
                              amount of such excess and the notional amount of
                              the applicable Interest Rate Cap. The Class A
                              Notional Amount will at all times equal the
                              amount of the Expected Class A Principal, and the
                              Class B Notional Amount will at all times equal
                              the amount of the Expected Class B Principal. The
                              Class A Interest Rate Cap and the Class B
                              Interest Rate Cap will terminate on the day
                              immediately following the Class A Expected Final
                              Distribution Date and the Class B Expected Final
                              Distribution Date, respectively; provided,
                              however, that the Class A Interest Rate Cap and
                              the Class B Interest Rate Cap may each be
                              terminated at an earlier date if the Trustee has
                              obtained a Replacement Interest Rate Cap or
                              entered into a Qualified Substitute Arrangement
                              with respect thereto.
 
Shared Collections..........  In any Monthly Period during the Revolving
                              Period, collections of Principal Receivables
                              otherwise allocable to the Certificates will be
                              available to cover principal payments due to or
                              for the benefit of the certificateholders of
                              other Series. In addition, if, in any Monthly
                              Period during the Controlled Amortization Period,
                              the Principal Allocation is greater than the
                              Controlled Distribution Amount for the class of
                              Certificates entitled to receive principal
                              payments during such Monthly Period, such excess
                              will also be available to cover principal
                              payments due to or for the benefit of
                              certificateholders of other Series. Such
                              principal collections applied to the payment of
                              certificates of other Series are herein referred
                              to as "Shared Principal Collections". Any such
                              application of Shared Principal Collections will
                              not result in a reduction in the Investor
                              Interest of this Series. In addition, amounts
                              designated as Shared Principal Collections
                              pursuant to the Supplement for any other Series
                              may be applied to cover principal payments due to
                              or for the benefit of the Certificateholders. See
                              "Description of the Certificates--Allocation of
                              Funds".
                                 
                              In any Monthly Period, the amount of Excess
                              Spread available after application to the first
                              ten items listed in the fifth paragraph under
                              "Application of Funds" above (such amount
                              constituting "Shared Finance Charge Collections")
                              will be applied to cover any shortfalls with
                              respect to amounts payable from Finance Charge
                              Collections allocable to any other Series then
                              outstanding. In addition, amounts designated as
                              Shared Finance Charge Collections pursuant to the
                              Supplement for any other Series may be applied to
                              cover     
 
                                       21
<PAGE>
 
                              certain payments due to be made out of Finance
                              Charge Collections to the Certificateholders,
                              including the reimbursement of reductions in the
                              Class B Investor Interest arising in connection
                              with the payment of the Class A Required Amount.
                              See "Description of the Certificates-- Allocation
                              of Funds".
 
                              Shared Finance Charge Collections and Shared
                              Principal Collections shall be applied to any
                              Series then outstanding, pro rata based upon the
                              amount of shortfall, if any, with respect to such
                              Series.
 
Excess Funding Account......     
                              At any time during which no Series is in an
                              accumulation period or amortization period, or
                              the principal funding account for a Series in
                              amortization is fully funded, and the Transferor
                              Interest equals or is less than the Minimum
                              Transferor Interest, funds (to the extent
                              available therefor as described herein) otherwise
                              payable to the Holder of the Exchangeable
                              Transferor Certificate will be deposited in the
                              Excess Funding Account on each business day;
                              provided, however, that to the extent the
                              reduction of the Transferor Interest below the
                              Minimum Transferor Interest is a result of
                              Receivables in Defaulted Accounts, no funds will
                              be deposited in the Excess Funding Account in
                              respect of such reduction attributable to
                              Receivables in Defaulted Accounts (which are not
                              Ineligible Receivables). Funds on deposit in the
                              Excess Funding Account will be withdrawn and paid
                              to the Holder of the Exchangeable Transferor
                              Certificate to the extent that on any day the
                              Transferor Interest exceeds the Minimum
                              Transferor Interest as a result of the addition
                              of new Receivables to the Trust or allocated to
                              one or more Series when they are in accumulation
                              or amortization periods.     
 
                              Any funds on deposit in the Excess Funding
                              Account at the beginning of the Rapid
                              Amortization Period for the Series will be paid
                              to the Certificateholders as provided herein as a
                              payment in respect of principal. Any funds on
                              deposit in the Excess Funding Account during the
                              Controlled Amortization Period will be paid to
                              the Certificateholders as a payment in respect of
                              principal to the extent that monthly collections
                              in respect of Principal Receivables and Shared
                              Principal Collections allocable to the Investor
                              Interest are insufficient to pay the applicable
                              Controlled Distribution Amount.
 
Repurchase..................     
                              The Investor Interest will be subject to optional
                              purchase by the Transferor on any Distribution
                              Date after the Investor Interest is reduced to an
                              amount less than or equal to 5% of the Initial
                              Investor Interest, if certain conditions set
                              forth in the Agreement are met. The Investor
                              Interest will be subject to mandatory purchase by
                              the Transferor on the Distribution     
 
                                       22
<PAGE>
 
                                 
                              Date immediately preceding the Scheduled Series
                              1996-1 Termination Date if the Investor Interest
                              is reduced to an amount less than or equal to 5%
                              of the Initial Investor Interest, if certain
                              conditions set forth in the Agreement are met.
                              The mandatory purchase requirement is in addition
                              to any other provisions and remedies provided by
                              the Agreement and will not serve to relieve any
                              party of obligations it may otherwise have or
                              waive any remedy that is otherwise provided. The
                              purchase price will equal the Investor Interest
                              plus accrued and unpaid interest on the
                              Certificates and amounts owing to the Cash
                              Collateral Lender through the last day preceding
                              the Distribution Date on which the purchase
                              occurs. See "Description of the Certificates--
                              Final Payment of Principal; Termination of the
                              Trust".     
 
Tax Status..................     
                              Special tax counsel to the Transferor, Mayer,
                              Brown & Platt, is of the opinion that under
                              existing law the Certificates will be
                              characterized as indebtedness for federal income
                              tax purposes. Under the Agreement, the
                              Transferor, the Holder of the Exchangeable
                              Transferor Certificate and the Certificate Owners
                              will agree to treat the Certificates as debt for
                              tax purposes. See "Certain 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 an employee benefit plan holding
                              the Certificates of any class if certain
                              conditions are met, including that the
                              Certificates of such class be held by at least
                              100 persons independent of the Transferor and
                              each other upon completion of the public offering
                              being made hereby. The Class A Underwriters will
                              not sell the Class A Certificates to employee
                              benefit plans unless they believe that the Class
                              A Certificates will be held by at least 100
                              persons upon the completion of this offering. The
                              Transferor anticipates that the other conditions
                              of the regulations will be met. The Class B
                              Certificates may not be acquired with the assets
                              of any employee benefit plan. 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"), would apply to
                              all transactions involving the Trust's assets.
                              Regardless of whether the Trust's assets are
                              deemed to constitute "plan assets", an employee
                              benefit plan's purchase of Certificates may, in
                              the absence of an exemption, constitute a
                              prohibited transaction if any of the Transferor,
                              the Servicer, the Holder of the Exchangeable
                              Transferor Certificate, the Trustee or the
                              Underwriters is a party in interest with respect
                              to that plan. Accordingly, employee     
 
                                       23
<PAGE>
 
                              benefit plans contemplating purchasing the
                              Certificates should consult their counsel before
                              making a purchase. See "Certain Employee Benefit
                              Plan Considerations".
 
Class A Certificate
 Rating.....................  It is a condition to the issuance of the Class A
                              Certificates that they be rated in the highest
                              generic rating category by at least one
                              nationally recognized rating agency.
 
Class B Certificate           It is a condition to the issuance of the Class B
 Rating.....................  Certificates that they be rated in one of the
                              three highest generic rating categories by at
                              least one nationally recognized rating agency.
 
Listing.....................
                              Application will be made to list the Class A
                              Certificates on the Luxembourg Stock Exchange.
 
                                       24
<PAGE>
 
                                  
                               RISK FACTORS     
 
  Limited Liquidity. There is currently no market for the Certificates. The
Underwriters intend to make a market in the Certificates but are not obligated
to do so. There is no assurance that a secondary market will develop or, if it
does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue until the Certificates are paid in full.
 
  Certain Legal Aspects. While the Transferor transferred interests in the
Receivables to the Trust, a court could treat such transaction 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 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
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,
a tax or government lien on property of the Transferor where notice of such
lien has been filed before Receivables are transferred to the Trust may have
priority over the Trust's interest in such Receivables, and if the FDIC were
appointed conservator or receiver of the Transferor, certain administrative
expenses of the conservator, receiver or the State of Connecticut Department
of Banking may have priority over the Trust's interest in such Receivables.
See "Certain Legal Aspects of the Receivables--Transfer of Receivables".
   
  To the extent that the Transferor has granted a security interest in the
Receivables to the Trust and that security interest was validly perfected
before the appointment of the FDIC as conservator or receiver and before the
Transferor's insolvency, and certain other conditions are satisfied including
that such security interest was not taken in contemplation of the insolvency
of the Transferor, and was not taken with the intent to hinder, delay or
defraud the Transferor or the creditors of the Transferor, such security
interest should be enforceable (to the extent of the Trust's "actual direct
compensatory damages") and should not be subject to avoidance by the FDIC, as
receiver or conservator for the Transferor, and, therefore, in such
circumstances, payments to the Trust with respect to the Receivables (up to
the amount of such damages) should not be subject to recovery by a conservator
or receiver for the Transferor. The foregoing conclusions are based on FDIC
general counsel opinions and policy statements regarding the application of
certain provisions of the Federal Deposit Insurance Act (as amended, the
"FDIA"). While a Policy Statement of the Resolution Trust Company (the "RTC")
indicates that "actual direct compensatory damages" would include outstanding
principal plus interest accrued to the date of payment, in one case a federal
district court held that such damages constituted the fair market value of the
repudiated bonds as of the date of repudiation, which, with respect to the
Certificates, depending upon circumstances existing on the date of
repudiation, could be an amount less than the outstanding principal plus
interest accrued to the date of repudiation. The FDIC has not adopted a policy
statement on payment of interest on collateralized borrowings of banks. If the
conservator or receiver for the Transferor were to assert that such security
interest should not be enforceable or should be subject to avoidance or were
to require the Trustee to establish its right to those payments by submitting
to and completing the administrative claims procedure under the FDIA, or the
conservator or receiver were to request a stay of proceedings with respect to
the Transferor as provided under the FDIA, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. In addition, the appointment of a receiver or conservator could result
in administrative expenses of the receiver or conservator having priority over
the interest of the Trust in the Receivables. The FDIC, as conservator or
receiver, would also have the rights and powers conferred under Connecticut
law. See "Certain Legal Aspects of the Receivables--Certain Matters Relating
to Conservatorship and Receivership".     
   
  If a conservator or receiver were appointed for the Transferor, then a Pay
Out Event could occur with respect to all Series then outstanding and,
pursuant to the Agreement, new Principal Receivables would not be transferred
to the Trust and, unless holders of more than 50% of the investor interest of
each Series of certificates issued and outstanding (or with respect to any
Series with two or more classes, more than 50% of each class) instruct
otherwise, the Trustee would sell the portion of the Receivables allocable to
each Series that did not vote to disapprove of the sale of the Receivables in
    
                                      25
<PAGE>
 
   
accordance with the Agreement in a commercially reasonable manner and on
commercially reasonable terms, which may cause early termination of the Trust
and a loss to certificateholders of each such Series (including the
Certificateholders) if the proceeds from such early sale allocable to such
Series, if any, and the amounts available under any Enhancement applicable to
such Series were insufficient to pay certificateholders of such Series in
full. If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver would have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. A conservator or receiver may also have the power
to cause the early sale of the Receivables and the early retirement of the
Certificates, to prohibit the continued transfer of Principal Receivables to
the Trust, and to repudiate the servicing obligations of the Transferor. In
addition, in the event of a Servicer Default relating to the insolvency of the
Servicer, if no Servicer Default other than such conservatorship or
receivership or insolvency exists, the conservator or receiver for the
Servicer may have the power to prevent either the Trustee or the
certificateholders from appointing a successor Servicer. See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Conservatorship and
Receivership".     
 
  Consumer Protection Laws. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws imposing requirements on
the making, enforcement and collection of consumer loans. The United States
Congress ("Congress") and the states may enact laws and amendments to existing
laws to regulate further the credit card industry or to reduce finance charges
or other fees or charges applicable to credit card accounts. Such laws, as
well as any new laws or rulings which may be adopted, may adversely affect the
Servicer's ability to collect on the Receivables or maintain the required
level of periodic finance charges, annual membership fees and other fees. In
addition, failure by the Servicer to comply with such requirements could
adversely affect the Servicer's ability to enforce the Receivables. In October
1987, November 1991, and March 1994, certain members of Congress attempted
unsuccessfully to limit legislatively the maximum annual percentage rate that
may be assessed on credit card accounts. In addition, another unsuccessful
attempt was made in 1994 to impose additional disclosure obligations on credit
card issuers. The General Accounting Office (the "GAO") issued a report in
April 1994 suggesting that an interest rate cap on credit card accounts could
increase investor risk and have an adverse effect on the market for credit
card-backed securities. In its report, the GAO did not recommend any specific
legislative action, but did recommend that the Federal Reserve Board monitor
and report on credit card interest rates, profitability, and competitiveness.
The Transferor cannot predict what action, if any, will be taken by Congress
in connection with the GAO report. If federal legislation were enacted
containing an interest rate cap substantially lower than the annual percentage
rates currently assessed on the Accounts, it is likely that the Portfolio
Yield (averaged over a period of three consecutive Monthly Periods) would be
reduced to a rate below the Base Rate for the last of such Monthly Periods and
therefore a Pay Out Event would occur with respect to the Certificates. See
"Description of the Certificates--Pay Out Events". In addition, during recent
years, there has been increased consumer awareness with respect to the level
of finance charges and fees and other practices of credit card issuers. As a
result of these developments and other factors, there can be no assurance as
to whether any federal or state legislation will be promulgated imposing
additional limitations on the monthly periodic finance charges or fees
relating to the Accounts.
   
  Since October 1991, a number of lawsuits and administrative actions have
been filed in several states against out-of-state banks (both federally-
insured state chartered banks and federally-insured national banks) issuing
credit cards. These actions challenge a portion of all of various fees and
charges (such as late fees, overlimit fees, returned check fees and annual
membership fees) assessed against residents of the states in which such suits
were filed, based on restrictions or prohibitions under such states' laws
alleged to be applicable to the out-of-state credit card issuers. However, on
June 3, 1996, the United States Supreme Court unanimously upheld the right of
national banks to charge, in any state, late payment fees on credit card
accounts permitted by the law of the state in which the credit card issuing
national bank has its principal place of business. The United States Supreme
Court held that these charges fall within the definition of "interest" as such
term is used in     
 
                                      26
<PAGE>
 
   
the National Bank Act, as interpreted by a regulation of the Comptroller of
the Currency, and that such fees and charges charged by national banks are
consequently governed by federal law. In a related decision, on June 7, 1996,
the United States Supreme Court vacated and remanded decisions of the New
Jersey Supreme Court which had held that New Jersey laws prohibiting late fees
on credit cards were enforceable in New Jersey against state-chartered credit
card issuing banks chartered in other states permitting such late charges. In
the future, any decisions that limit a credit card issuer's right to impose
credit card charges outside the state of its residence could, to the extent
applicable to the Accounts reduce the Portfolio Yield and, if such reduction
were significant, result in a Pay Out Event, in which case the Rapid
Amortization Period would commence. Certificateholders of an affected Series
might then receive principal payments earlier than expected. If the resulting
reduction in the Portfolio Yield were significant enough, reductions in
payments to certificateholders of an affected Series would occur.     
 
  Pursuant to the Agreement, the Transferor covenants to accept reassignment
of each Receivable not complying in all material respects with all
requirements of applicable law as of the time of its creation if, as a result
of such noncompliance, the related Account becomes a Defaulted Account or the
Trust's rights in, to or under the Receivable or its proceeds are impaired or
unavailable. The Transferor makes certain other representations and warranties
relating to the validity and enforceability of the Receivables. The Trustee
has not, however, and it is not anticipated that it will, 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 is that the Transferor will be obligated to
accept reassignment of the Investor Interest in the Receivables affected
thereby. See "Description of the Certificate--Representations and Warranties"
and "Certain Legal Aspects of the Receivables--Consumer Protection Laws".
 
  Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are
insufficient funds available in the Cash Collateral Account to reimburse such
losses. See "Description of the Certificates--Defaulted Receivables;
Adjustments and Fraudulent Charges".
 
  Competition in the Bank Credit Card Industry. The bank credit card industry
is highly competitive and operates in a regulatory environment increasingly
focused on the cost of services charged for credit cards. As new card issuers
enter the market and existing issuers seek to expand their shares of the
market, there is increased use of advertising, target marketing and pricing
competition. The MasterCard and Visa organizations 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.
People's Bank has traditionally competed as a low rate provider of credit card
services and the growth of People's Bank's credit card portfolio is largely
due to the low rates charged. The Transferor is participating in such
competition through marketing programs, average annual percentage rates,
annual membership fees and monthly minimum payment rates the Transferor
believes compare favorably to rates and fees charged by certain of the
Transferor's competitors and operating efficiencies which permit it to
maintain a favorable cost structure. If cardholders choose to utilize
competing sources of credit, the amount 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".
 
                                      27
<PAGE>
 
   
  Effect of Paired Series on Allocations. In the event that a Pay Out Event
occurs during the Paired Amortization Period, such that both the Certificates
and the Paired Certificates are in rapid amortization simultaneously, the
Investor Percentage used to determine the share of Collections of Principal
Receivables allocable to the Certificates, on any date of determination after
the Pay Out Event until the date on which the investor interest of the Paired
Certificates is paid in full, will be determined by using a numerator that, as
compared to the numerator normally used for such determination during an
Amortization Period, is reduced by an amount equal to the numerator used to
calculate the investor percentage for the Paired Certificates with respect to
Principal Receivables for such date of determination. This change to the
Investor Percentage calculation will result in an allocation of Collections of
Principal Receivables that is lower than would be the case if the Certificates
were not "paired" with the Paired Certificates. Such allocation may lengthen
the Rapid Amortization Period and delay the final payment of principal to the
Certificateholders. See "Description of the Certificates--Allocation
Percentages".     
 
  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 the Controlled Amortization Period 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 the Certificateholders and the
commencement of the Rapid Amortization Period. 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.
The minimum monthly payment currently required on the Accounts generally
approximates 3% of the statement balances (as of specific dates), plus past
due amounts. A portion of the Receivables volume is a result of convenience
use by obligors who pay their entire monthly statement balance on or prior to
its due date and do not incur finance charges thereon. A significant decrease
in the cardholder monthly payment rate or minimum required payment could slow
the return of principal during either Amortization Period, and such delay of
the return of principal could adversely affect the ability of investors to
reinvest profitably. See "--Ability to Change Terms of the Receivables",
"Maturity Assumptions" and "The Credit Card Business of People's Bank--
Underwriting Procedures".
   
  Social, Legal and Economic Factors. Changes in card usage and payment
pattern by cardholders may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels,
personal bankruptcy levels and relative interest rates. While the Trust
Portfolio is a geographically diverse portfolio, the largest concentration of
accounts giving rise to the Receivables included in the Trust Portfolio are in
Connecticut. See "The Receivables". The loss and delinquency experience in
Connecticut is currently more favorable than the experience of the
Transferor's overall portfolio of accounts as a whole. Connecticut's economy
has historically been highly dependent on the defense industry, which recently
has been adversely affected by cutbacks in federal spending. During the past
several years, Connecticut has been adversely impacted by employment losses
more severe than those of the United States as a whole. Connecticut residents
continue, however, to have among the highest per capita income in the United
States. The Transferor is unable to determine and has no basis to predict
whether, or to what extent, social, legal or economic factors will affect
future credit card usage or payment patterns.     
 
  Effect of Subordination. The Class B Certificates are subordinated in right
of payment of principal to payments of principal and interest on the Class A
Certificates. Payments of principal in respect of the Class B Certificates
will not commence until after the final principal payment with respect to the
Class A Certificates has been made as described herein. In addition, the Class
B Investor Interest is subject to reduction if the Class A Required Amount for
any Monthly Period is not funded from collections allocable to the Class A
Investor Interest, from payments under the Class A Interest Rate Cap, from
Excess Spread, from Shared Finance Charge Collections allocable to the
Certificates from other Series or from a withdrawal from the Cash Collateral
Account. If the Class B Investor Interest suffers such a reduction, the
portion of collections of Finance Charge Receivables allocable to
 
                                      28
<PAGE>
 
the Class B Certificateholders in future Monthly Periods will be reduced and
principal and interest payments on the Class B Certificates may be delayed or
reduced. See "Description of the Certificates--Subordination of the Class B
Certificates". Such reductions of the Class B Investor Interest will
thereafter be reimbursed and the Class B Investor Interest increased on each
Distribution Date by the amount, if any, of Excess Spread and Shared Finance
Charge Collections from other Series available for that purpose for such
Distribution Date.
 
  Further, in the event of a sale of the Receivables due to an Insolvency
Event, the portion of the net proceeds of such sale allocable to pay principal
of the Certificateholders' Interest will first be used to pay principal
amounts due to the Class A Certificateholders and any remainder will be used
to pay amounts due to the Class B Certificateholders, thereby causing a loss
to Class B Certificateholders if such portion plus any amount available to be
withdrawn from the Cash Collateral Account are insufficient to pay the Class B
Certificateholders in full. See "Description of the Certificates--Principal
Payments" and "--Pay Out Events". If the Class B Investor Interest is reduced
to zero, the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust.
   
  Ability to Change Terms of the Receivables. Pursuant to the Agreement, the
Transferor has not transferred, and will not transfer, the Accounts to the
Trust. Only the Receivables arising in the Accounts have been and will be so
transferred. As owner of the Accounts, the Transferor has the right (to the
extent provided in the applicable credit card agreements and the Agreement) to
determine the monthly periodic finance charge 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 charges,
annual membership fees, cash advance fees or Interchange could decrease the
effective yield on the Accounts and could result in the occurrence of a Pay
Out Event for the Certificateholders and the commencement of the Rapid
Amortization Period. Under the Agreement, the Transferor has agreed that,
except as otherwise required by law or as is deemed by the Transferor to be
necessary in order to maintain its credit card business, based upon a good
faith assessment by it, in its sole discretion, of the nature of the
competition in that business, the Transferor will not (i) reduce the annual
percentage rate which determines the monthly periodic finance charges assessed
on the Receivables or other fees on the accounts, if as a result of such
reduction, its reasonable expectation of the Portfolio Yield as of such date
would be less than the weighted average base rates of all Series or (ii)
unless required by law, reduce such periodic finance charge if its reasonable
expectation is that the Portfolio Yield would be less than the highest
certificate rate for any Series then issued and outstanding. Such changes may
include the reduction or waiver of annual membership fees in connection with
the Transferor's marketing effort. The term "Base Rate" with respect to the
Certificates generally means, with respect to any Monthly Period, the weighted
average of (x) the lesser of the Class A Certificate Rate and Class A Cap Rate
and (y) the lesser of the Class B Certificate Rate and the Class B Cap Rate
(weighted based on the Class A Investor Interest and the Class B Investor
Interest, respectively, as of the last day of the preceding Monthly Period)
plus 2% per annum. The term "Portfolio Yield" means generally, with respect to
the Certificates and any Monthly Period, the annualized percentage equivalent
of a fraction, the numerator of which is the Finance Charge Receivables
allocable to the Investor Interest billed during such Monthly Period after
subtracting the Investor Default Amounts for such Monthly Period (but in no
event greater than the aggregate amount of Collections for such Monthly
Period), and the denominator of which is the Investor Interest as of the last
day of the preceding Monthly Period. In addition, the Transferor has agreed
that, upon the occurrence of the Pay Out Event described in clause (iv) of
"Description of the Certificates--Pay Out Events" (relating to the average of
the Portfolio Yield for any three consecutive Monthly Periods being less than
the Base Rate), the Transferor will not, unless required by law, reduce the
annual percentage rate determining the monthly periodic finance charges on the
Accounts to a rate resulting in the weighted average     
 
                                      29
<PAGE>
 
   
annual percentage rate on the Accounts being less than the weighted average
certificate rate then in effect of all classes of investor certificates of
each Series plus 2% per annum. The Transferor has also agreed not to change
the terms of the Accounts, unless (i) if the Transferor has a comparable
segment of credit card accounts, the change is also made applicable to the
comparable segment of the portfolio of accounts with similar characteristics
owned by it and (ii) if the Transferor does not own such a comparable segment,
any such change is not made with the intent to benefit the Transferor
materially over the Certificateholders. 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. While the Transferor
has no current intention of decreasing the monthly periodic finance charges on
the overall Trust Portfolio, 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 changing this
or other Account terms.     
 
  Master Trust Considerations. The Trust, as a master trust, will issue the
Certificates, has issued four prior Series of certificates in July 1993, in
February 1994, in October 1994 and in March 1995, and may issue additional
Series of certificates in the future. See "Annex I: Prior Series Issued".
While the Principal Terms of any 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, provisions subordinating such Series to another Series (if the
Supplement relating to such Series so permits; the Series 1996-1 Supplement
will not permit the subordination of such Series) or other Series to such
Series, and any other amendment or supplement to the Agreement which is made
applicable only to such Series. It is a condition precedent to the issuance of
any additional Series that either (x) each Rating Agency deliver written
confirmation to the Trustee that such issuance or Exchange will not result in
such Rating Agency reducing or withdrawing its rating on any outstanding
Series or (y) if at the time of the issuance or Exchange there is no
outstanding Series currently rated by a Rating Agency, a nationally recognized
investment banking firm or commercial bank deliver a certificate to the
Trustee to the effect that the issuance or Exchange will not have an adverse
effect on the timing or distribution of payments to such other Series. There
can be no assurance, however, that the Principal Terms of any other Series,
including any Series issued from time to time hereafter, or that a change in
the character of the Trust Portfolio, through, for instance, the addition of
Receivables arising from Accounts and Receivables arising from Additional
Accounts, might not have an impact on the timing and amount of payments
received by a Certificateholder, including as a result of the refixing of the
Investor Percentage with respect to the allocation of the Principal
Receivables. See "Description of the Certificates--Exchanges" and "--
Allocation Percentages".
 
  Control. Subject to certain exceptions, the certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Agreement or the related Supplement. Under certain circumstances, however,
the consent or approval of a specified percentage of the aggregate investor
interest of all Series or of the investor interest of each Series will be
required to take or direct certain actions, including requiring the
appointment of a successor Servicer following a Servicer Default, amending the
Agreement in certain circumstances and directing a repurchase of all
outstanding Series upon the breach of certain representations and warranties
by the Transferor. In such instances, the interests of the Holders of the
Certificates may not be aligned with the interests of the holders of
certificates of such other Series. Thus, even if the requisite majority of
Certificateholders votes to take or direct such action, the certificateholders
of such other Series may control whether or not such action occurs.
 
                                      30
<PAGE>
 
  Certificate Ratings. It is a condition to issuance of the Class A
Certificates that they be rated in the highest generic rating category by at
least one nationally recognized rating agency. It is a condition to the
issuance of the Class B Certificates that they be rated in one of the three
highest generic rating categories by at least one nationally recognized rating
agency. As used herein, the term "Rating Agency" with respect to the
Certificates, and with respect to any other Series, means the rating agency or
agencies from whom ratings have been solicited as specified in the Supplement
with respect to such Series. The ratings address the likelihood of full
payment of principal and interest of the Certificates by the Scheduled Series
1996-1 Termination Date. The ratings are based primarily on the quality of the
Receivables, the credit support provided by the Cash Collateral Account, the
Interest Rate Caps and, with respect to the rating of the Class A
Certificates, the terms of the Class B Certificates. The ratings are not a
recommendation to purchase, hold or sell Certificates, inasmuch as such
ratings do not comment as to the market price or suitability for a particular
investor. There is no assurance that the ratings will remain for any given
period of time or that the ratings will not be lowered or withdrawn by the
Rating Agency if in its judgment circumstances so warrant. The ratings do not
address the possibility of the occurrence of a Pay Out Event, and they do not
address the likelihood of any payment in respect of either Class A Excess
Interest or Class B Excess Interest.
 
  Limited Credit Enhancement. Although credit enhancement with respect to the
Certificates will be provided by (i) the funds and securities held in the Cash
Collateral Account, up to the Available Cash Collateral Amount and (ii) with
respect to the Class A Certificates, the subordination of the Class B
Certificates, the amounts available in the Cash Collateral Account and the
Class B Investor Interest are limited and will be reduced by withdrawals and
claims made that are not reimbursed from either Excess Spread or, with respect
to the Class B Investor Interest, Shared Finance Charge Collections. If
Collections of Finance Charge Receivables allocated to the Investor Interest,
funds available in the Cash Collateral Account and Reallocated Principal
Collections are not sufficient to cover the Investor Default Amount in any
Monthly Period, the Investor Interest will be reduced (unless it is otherwise
reimbursed) resulting in a reduction of the amount of collections allocable to
Certificateholders in future Monthly Periods and in a reduction of the
aggregate principal amount returned to the Certificateholders. If the
Available Cash Collateral Amount and, with respect to the Class A
Certificates, the Class B Investor Interest are reduced to zero,
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust. See "Description of the
Certificates--The Cash Collateral Account".
   
  The Cash Collateral Account, after the initial deposit, will be replenished
and reductions of the Class B Investor Interest will be reimbursed by Excess
Spread. Certain factors, such as lowering the finance charges (including late
fees and membership charges) on outstanding Receivables balances and increased
convenience use by obligors, may lower the amount of Finance Charge
Receivables generated as well as collections in respect thereof, and may
thereby reduce the Excess Spread available to replenish the credit
enhancement. See "Description of the Certificates--The Cash Collateral
Account" and "--Subordination of the Class B Certificates". Finally, a slowing
in payment rates on the Receivables could extend the expected final
Distribution Date for the Class A Certificates and Class B Certificates
beyond, respectively, the applicable Expected Final Distribution Date. See "--
Payment and Maturity". The Cash Collateral Account and the Class B Investor
Interest may only be utilized to cover Required Amounts on and prior to the
Scheduled Series 1996-1 Termination Date and will not be available otherwise
to pay the remaining principal on the Certificates at any time.     
 
  Book-Entry Registration. The Certificates will be initially 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. Because of this, unless and until Definitive Certificates are
issued, Certificate Owners will not be recognized by the Trustee as
Certificateholders, as that term is used in the Agreement. Hence, until such
time, Certificate Owners will only be able to exercise the rights of
Certificateholders indirectly through DTC and its participating organizations.
See "Description of the Certificates--Book-Entry Registration" and "--
Definitive Certificates".
 
                                      31
<PAGE>
 
  Reports to Certificateholders. Unless and until Definitive Certificates are
issued, monthly and annual reports, containing information concerning the
Trust and prepared by the Servicer, will be sent on behalf of the Trust to
Cede, as nominee for DTC and the registered holder of the Certificates. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles and will not be sent by the Servicer
or the Trustee to the Certificate Owners. See "Description of the
Certificates--Book-Entry Registration", "--Definitive Certificates", and "--
Reports to Certificateholders".
 
  Effect of Reduced Rate of Principal Payments on Interest Rate Cap
Coverage. The Class A Notional Amount and the Class B Notional Amount will
amortize according to the expected amortization schedule of the Class A
Certificates and Class B Certificates, respectively, based upon equal payments
of the Class A Controlled Amortization Amount being paid monthly for fourteen
months and the Class B Controlled Amortization Amount being paid in the
fifteenth month following the Controlled Amortization Date. If the rate of
amortization of the Class A Certificates or the Class B Certificates occurs at
a rate that is slower than such expected amortization, the amount of any Class
A Excess Principal or Class B Excess Principal will not have the benefit of
the Interest Rate Caps. In addition, the Certificates will not include the
right to receive any interest on Excess Principal in excess of the Class A Cap
Rate or the Class B Cap Rate, as applicable. While distributions may be made
in respect of the Class A Excess Interest or the Class B Excess Interest, such
distributions are not addressed in the ratings assigned by the Rating
Agencies.
 
                                   THE TRUST
 
  The Trust has been formed in accordance with the laws of the State of New
York pursuant to the Agreement. Prior to its formation, the Trust did not have
any assets or obligations. The Trust has not and will not engage in any
activity, other than as described herein. The Trust will exist only for the
transactions described herein, including the receipt of the Receivables and
holding such Receivables, the issuance of the Exchangeable Transferor
Certificate, the issuance of certificates of other, previously-issued Series,
the issuance of the Certificates and certificates representing additional
Series and related activities (including, with respect to any Series,
receiving any Enhancement and entering into the Enhancement agreement relating
thereto) and making payments thereon. As a consequence, the Trust is not
expected to have any need for additional capital resources.
 
                                      32
<PAGE>
 
                   THE CREDIT CARD BUSINESS OF PEOPLE'S BANK
 
GENERAL
   
  People's Bank began its credit card program in 1985. It launched this
program by marketing a low interest rate credit card to highly creditworthy
individuals in its market area. As a result of the initial program's success,
beginning in January 1987, People's Bank gradually expanded the program
nationally. The March 1996 issue of the Nilson Report ranked People's Bank the
25th largest VISA USA, Inc. ("VISA") and MasterCard International Incorporated
("MasterCard") credit card issuer in the United States on the basis of active
accounts.     
   
  The Receivables conveyed or to be conveyed to the Trust by People's Bank
pursuant to the Agreement have been or will be generated from transactions
made by holders of certain VISA and certain MasterCard credit card accounts, a
subset of People's Bank's entire portfolio of credit card accounts, and
include finance charges and fees billed to the Accounts. The Accounts were
generated under the VISA or MasterCard associations of which People's Bank is
a member.     
 
  People's Bank services all of its accounts and receivables at its facilities
located in Bridgeport, Connecticut. Certain operations are performed on behalf
of People's Bank by Total System Services, Inc., of Columbus, Georgia ("Total
System"), which operations include statement processing, printing and mailing.
People's Bank has used Total System for such services since it launched its
credit card program in 1985. If Total System were to fail or become insolvent,
delays in processing and recovery of information with respect to charges
incurred by cardholders could occur, and the replacement of such services
provided to People's Bank could be time-consuming. As a result, delays in
payments to Certificateholders could occur.
   
  The entire portfolio of People's Bank VISA and MasterCard credit card
accounts (the "Bank Portfolio"), of which the accounts giving rise to the
Trust Portfolio are a part, includes premium accounts (i.e., VISA Gold, Gold
MasterCard and business accounts) and standard accounts (i.e., VISA Classic
and standard MasterCard). The accounts from which Receivables arose in the
initial Trust Portfolio included only the standard accounts and not premium
accounts. Effective with the May 1, 1996 addition of Additional Accounts, the
Trust Portfolio includes both standard and premium accounts. As of March 31,
1996, 4.83% of the accounts in the Bank Portfolio were premium accounts and
95.17% were standard accounts, and the receivables balance of premium accounts
and standard accounts, as a percentage of the total balance of the receivables
in the Bank Portfolio, was 5.63% and 94.37%, respectively. Both premium and
standard accounts undergo the same credit analysis, but premium accounts
generally carry higher annual membership fees and have higher credit limits.
    
  The VISA and MasterCard credit card accounts may be used for three types of
transactions: credit card purchases, cash advances and convenience checks.
Purchases occur when cardholders use credit cards to buy goods and/or
services. A cash advance is made when a credit card is used to obtain cash
from a financial institution or an automated teller machine. Cardholders may
also use convenience checks allowing cardholders to (i) transfer balances from
other credit card accounts to their People's Bank accounts and (ii) draw
against their VISA and MasterCard credit card accounts at any time. Amounts
due with respect to purchases, cash advances and convenience checks are
included in the Receivables.
   
  In addition, cardholders have been able to purchase insurance covering their
account balances since March 1985. Premiums for this insurance are charged to
the account for each monthly Billing Cycle. Such insurance premiums are
included in the Receivables transferred to the Trust and are treated as
Finance Charge Receivables.     
 
  Each cardholder is subject to an agreement with People's Bank governing the
terms and conditions of the related VISA or MasterCard credit card account.
Pursuant to each such agreement,
 
                                      33
<PAGE>
 
except as described herein, People's Bank reserves the right, subject to
fifteen days' prior notice to the cardholder or as may be required by law, to
add to, change or terminate any terms, conditions, services or features of its
VISA or MasterCard credit card accounts at any time, including increasing or
decreasing the periodic finance charges, other charges or the minimum monthly
payment requirements.
 
  The credit evaluation, collection and charge-off policies and servicing
practices of People's Bank, as well as the terms and conditions governing
cardholder agreements in effect as of the date hereof, are under continuous
review and may change at any time in accordance with its business judgment,
applicable law and guidelines established by regulatory authorities.
 
  Transactions creating the Receivables through the use of the credit cards
are processed through the VISA and MasterCard systems. Should either system
materially curtail its activities, or should People's Bank cease to be a
member of VISA or MasterCard, for any reason, a Pay Out Event could occur, and
delays in payments on the Receivables and possible reductions in the amounts
thereof could also occur.
 
ACCOUNT ORIGINATION
   
  The VISA and MasterCard credit card accounts owned by People's Bank were
principally generated through: (i) direct mail solicitations of individuals
who have been prescreened at credit bureaus on the basis of criteria furnished
by People's Bank; (ii) applicant-initiated requests; (iii) applications mailed
to customers of People's Bank and customers of certain agent banks for which
People's Bank acts as a sponsor with VISA and/or MasterCard pursuant to
People's Bank's Agent Bank Account program (the "Agent Bank Accounts"); and
(iv) affinity marketing programs which are originated by People's Bank by
soliciting prospective cardholders from identifiable groups with a common
interest or a common cause, and with the assistance of an organization of the
members of such group ("Affinity Program Accounts"). In addition to these
account origination methods, People's Bank originates certain co-brand
accounts and solicits accounts from students and alumni of local Connecticut
universities. People's Bank applies the same credit criteria without
distinction among the foregoing sources of applications, as described below in
"Underwriting Procedures", and the performance by the cardholders of such
accounts is generally comparable to the remaining Bank Portfolio of accounts.
       
  The largest percentage of all national accounts are originated through
targeted, prescreened direct-mail requests and a significant number of
accounts are originated through applicant-initiated requests. People's Bank's
strategy of offering a low interest rate credit card to highly creditworthy
customers has received significant attention by national consumer groups,
consumer focused publications and financial journals. These sources frequently
publish information regarding People's Bank's credit card products, including
People's Bank's toll free customer service telephone number. Prospective
applicants contact People's Bank using the toll free telephone number and
request an application, which they then complete and return to People's Bank
or complete an application over the telephone.     
 
UNDERWRITING PROCEDURES
 
  All applications for accounts originated by People's Bank are reviewed for
completeness and creditworthiness based on the credit underwriting criteria
established by People's Bank. People's Bank
 
                                      34
<PAGE>
 
uses credit reports issued by independent credit reporting agencies with
respect to the applicant. In the event there are discrepancies between the
application and the credit report, and in certain other circumstances,
People's Bank may verify certain information regarding the applicant.
   
  Applications and prescreened direct mail candidates are evaluated by
utilizing a credit scoring system, which was installed in July 1992. Prior to
such installation, People's Bank's credit card accounts were underwritten
completely judgmentally. Since July 1992, the judgmental underwriting has been
used to evaluate only those who score above a preset level. The credit scoring
model used by People's Bank was developed with Fair, Isaac Companies, which
has extensive experience in developing credit scoring models. Credit scoring
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. Credit scoring evaluates a potential cardholder's credit profile
and certain application information in order to statistically quantify credit
risk. Models for credit scoring are developed by using statistics to evaluate
common characteristics and their correlation with credit risk. From time to
time, the credit scoring models used by People's Bank are reviewed and are
periodically updated to reflect more current statistical data. Based on
statistical analysis, People's Bank established a policy, as of August 1,
1994, that certain accounts receiving high credit scores may be automatically
approved without judgmental review.     
 
  In the case of prescreened direct mail solicitations, selection criteria
established by People's Bank are used by credit bureaus to generate or screen
lists of qualifying individuals. Members of People's Bank's Consumer Credit
Department then mail solicitations to those qualifying individuals on the
list. Additional credit criteria are applied on a case-by-case basis to those
qualifying individuals accepting such solicitation to determine the
appropriate line of credit for such individuals. The information requested in
the response forms mailed to prescreened prospects is less extensive than the
information requested in the applications mailed to individuals who have not
been prescreened. Credit limits are assigned to prescreened prospective
cardholders based on a credit profile that includes existing indebtedness,
past payment patterns on other consumer loans and certain other criteria. The
response forms of individuals responding to prescreened direct mail
solicitations are reviewed by People's Bank and are checked again through
credit reporting bureaus. If no change in credit performance has occurred, an
offer of credit is made. Generally, each new cardholder is issued a credit
card that expires two years after issuance. People's Bank generally reissues
credit cards with two-year expiration dates, so long as the payment history of
the cardholder satisfies certain criteria.
 
BILLING AND PAYMENTS
 
  The Bank Portfolio has different billing and payment structures, including
minimum payment levels, annual membership fees and monthly periodic charges.
 
  For purposes of administrative convenience, the VISA and MasterCard credit
card accounts of People's Bank are currently grouped into twenty-two billing
cycles ending on the 5th through 27th day of each month (other than the 24th
day) (each, a "Billing Cycle"). Each Billing Cycle has its own monthly billing
date, at which time the activity in the related accounts during the month
ending on such billing date is processed and billed to accountholders. See
"The Receivables". The Accounts include VISA and MasterCard credit card
accounts in Billing Cycles ending at the close of business on each of the days
referred to above. See "The Receivables".
   
  Monthly billing statements are sent to accountholders with either debit or
credit activity during the Billing Cycle. Generally, each month,
accountholders must make at least a minimum payment equal to the greater of
(i) 3% of the account balance and (ii) $10, plus any past due amount;
provided, however, that if the remaining balance is less than $10, the minimum
payment will be equal to the amount of such remaining balance.     
 
 
                                      35
<PAGE>
 
   
  The monthly periodic finance charges assessed on cash advances and
convenience checks are calculated by multiplying the average daily cash
advance balance by the applicable monthly periodic rate. Monthly periodic
finance charges are calculated on cash advances (including unpaid finance
charges) from the date of the transaction or, if a convenience check is used,
the day the convenience check is posted to the cardholder's account. The
monthly periodic finance charges assessed on purchases are calculated by
multiplying the average daily purchase balance by the applicable monthly
periodic rate. Monthly periodic finance charges are calculated on purchases
(including certain fees and unpaid finance charges) from the date of the
purchase or the first day of the Billing Cycle in which the purchase is posted
to the account (whichever is later). The credit card agreement provides that
monthly periodic finance charges are not assessed in most circumstances on
purchases if the purchaser's new balance shown in the billing statement is
paid within 25 days after the last day of the Billing Cycle, or if the
purchaser's previous balance is zero. With certain exceptions, the current
fixed annual percentage rate for purchases is 13.9%; however, periodically
People's Bank will offer introductory rates below the standard rate. An
increase in the fixed annual percentage rate for purchases might have the
result of decreasing the volume of Receivables generated. The current fixed
annual percentage rate for cash advances is 18%. For a break-down of the yield
from finance charges and fees billed, see the table titled "Revenue Experience
Representative Portfolio" included under "Receivable Yield Considerations".
    
  People's Bank may, at its option, reduce the minimum payment requirements
and monthly periodic finance charges described above for the accounts of
cardholders who are members of Consumer Credit Counseling Services, an
organization which assists financially troubled cardholders with outstanding
credit card balances to devise a repayment program. Such repayment program
generally involves reducing the minimum monthly payment and/or reducing the
finance charges assessed. People's Bank may, but is not obligated to, accept
such repayment program.
   
  People's Bank generally assesses a non-refundable annual membership fee of
$25 for standard accounts, $30 for business accounts and $40 for premium
accounts. In response to market trends commencing in 1995, People's Bank
originated a proportionately larger amount of credit card accounts that did
not require payment of an annual membership fee. In addition, People's Bank
may waive the annual membership fee, or a portion thereof, in connection with
certain solicitations, affinity programs and in certain other cases. Some of
the accounts may be subject to certain additional fees, including: (i) a late
fee, generally in the amount of $20, with respect to any monthly payment if
the required minimum monthly payment is not received by the payment due date
shown on the monthly billing statement; (ii) a cash advance fee of $3 per
transaction at ATMs, People's Bank or any bank; (iii) an overlimit fee,
generally in the amount of $15; and (iv) a returned check fee, generally in
the amount of $15. Subject to the requirements of applicable laws, People's
Bank may change certain of these fees and rates at any time by written notice
to cardholders. Pursuant to the terms of the cardholder agreement, People's
Bank may change the terms of such agreement and must give cardholders 15 days
prior notice of any change which would result in an increase in the rate of
finance charges on existing balances or new activity, or other fees, or impose
a fee not set forth in such agreement.     
   
  Payments on People's Bank accounts are generally applied, in the following
order, to: finance charges, principal balances for accounts charging
introductory rates of interest, the balance of purchases prior to March 1992
and balance transfers prior to May 5, 1993, the balance of cash advances and
convenience checks (other than convenience checks used to pay balance
transfers) previously billed, the balance of new cash advances, balance
transfers on or after May 5, 1993, the balance of purchases previously billed
after March 1992 and the balance of new purchases.     
   
  There can be no assurance that periodic finance charges, fees, and other
charges imposed by People's Bank will remain at current levels in the future,
or that the order of application of payments made on People's Bank's accounts
will remain as described above. See "Risk Factors--Consumer Protection Laws".
    
                                      36
<PAGE>
 
  Collection of Delinquent Accounts. An account is initially considered
delinquent if the minimum monthly payment indicated on the accountholder's
statement is not received within one calendar month from the statement date.
Efforts to collect delinquent credit card receivables are made by People's
Bank's personnel and collection agencies and attorneys retained by People's
Bank. Under current practice, accountholders that become one to ten days
delinquent are sent a notice on the billing statement and telephone calls to
the accountholder begin once an account becomes delinquent. People's Bank uses
an automated dialer to telephone delinquent accountholders. People's Bank also
uses the on-line collections system of Total System and a Fair, Isaac
Companies scoring system to analyze the collection risk on such accounts.
   
  Generally, within 31 days of contractual delinquency, no additional
extensions of credit through such account are authorized and, at 61 days of
contractual delinquency, the account is closed. Consistent with the credit and
collection policies of People's Bank, in certain infrequent circumstances,
People's Bank may enter into arrangements with cardholders to extend or
otherwise change payment schedules, which can include the suspension of
finance charge accruals or bringing current (or "reaging") accounts where
cardholders make three consecutive minimum monthly payments. People's Bank
will enter into such arrangements only in circumstances where it believes its
ability to collect on the account will be enhanced by such arrangements.     
 
  The current policy of People's Bank is to charge off, as a loan loss, the
principal portion of the receivables balance for both purchases and cash
advances at any time after the 210th through the 240th day of delinquency.
Charge offs may occur earlier in some circumstances, as in the case of
bankrupt cardholders. At the time an account is charged off, an evaluation of
its collectibility is made on a case by case basis to determine whether
further remedies should be pursued by collection personnel at People's Bank,
outside collection agencies or, in some cases, outside attorneys. Delinquency
levels are monitored by collection managers and information is reported
regularly to senior management. Under the terms of the Agreement, any
Recoveries will be included in the assets of the Trust and considered Finance
Charge Receivables.
 
LOSS AND DELINQUENCY EXPERIENCE
   
  The following tables set forth the delinquency and loss experience for each
of the periods shown for receivables in accounts which would have
substantially satisfied the criteria for inclusion of its related receivables
in the Trust Portfolio (the "Representative Portfolio") set forth in the
Agreement as applied on each date listed in the tables below (adjusted for the
three months ending March 31, 1996 to reflect the May 1, 1996 addition of
Additional Accounts). The Servicer will file with the Commission monthly
reports with respect to the Trust, including information with respect to
revenues, losses and Portfolio Yield with respect to the Accounts. There can
be no assurance that the delinquency and loss experience for the Receivables
in the future will be similar to the historical experience of the
Representative Portfolio included in the tables set forth below because, among
other things, economic and financial conditions affecting the ability of
cardholders to pay may be different from those which prevailed during the
periods reflected below.     
 
                                      37
<PAGE>
 
                                LOSS EXPERIENCE
                           REPRESENTATIVE PORTFOLIO
                            (DOLLARS IN THOUSANDS)
 
<TABLE>   
<CAPTION>
                             THREE MONTH        YEAR ENDED DECEMBER 31,
                             PERIOD ENDED    --------------------------------
                            MARCH 31, 1996      1995        1994       1993
                            --------------   ----------  ----------  --------
<S>                         <C>              <C>         <C>         <C>
Average Receivables
 Outstanding(1)............   $1,824,704     $1,649,780  $1,182,028  $794,728
Gross Charge Offs(2)(3)....       21,557         56,101      27,858    20,014
Recoveries.................        1,644          5,175       3,876     3,372
Net Charge Offs(3).........       19,913         50,926      23,982    16,642
Net Charge Offs as
 Percentage of Average
 Receivables
 Outstanding(3)............         4.37%(4)       3.09%       2.03%     2.09%
</TABLE>    
- --------
(1) Average Receivables Outstanding is the average of the daily receivable
    balance during the period indicated.
(2) Gross Charge Offs are calculated before Recoveries and do not include the
    amount of any reductions in Average Receivables Outstanding due to fraud.
(3) The amounts of charge-offs include the principal and interest portion of
    charged off receivables.
   
(4) Calculated on an annualized basis.     
 
                            DELINQUENCY EXPERIENCE
                           REPRESENTATIVE PORTFOLIO
                            (DOLLARS IN THOUSANDS)
 
<TABLE>   
<CAPTION>
                          AS OF MARCH 31,                      AS OF DECEMBER 31,
                         ------------------ --------------------------------------------------------
                                1996               1995               1994               1993
                         ------------------ ------------------ ------------------ ------------------
     NUMBER OF DAYS
     DELINQUENT(1)       AMOUNT  PERCENTAGE AMOUNT  PERCENTAGE AMOUNT  PERCENTAGE AMOUNT  PERCENTAGE
- ------------------------ ------- ---------- ------- ---------- ------- ---------- ------- ----------
<S>                      <C>     <C>        <C>     <C>        <C>     <C>        <C>     <C>
31 to 60 days........... $24,087    1.34%   $23,227    1.27%   $13,888    0.92%   $ 7,199    0.71%
61 to 90 days...........  16,165    0.90     13,292    0.73      7,476    0.50      4,094    0.40
91 to 120 days..........  12,052    0.67     11,397    0.62      5,178    0.34      3,256    0.32
121 to 150 days.........   9,288    0.52      9,032    0.49      4,069    0.27      2,368    0.23
151 to 180 days.........   7,460    0.41      7,384    0.40      3,124    0.21      2,030    0.20
181 days or greater.....  12,576    0.70     10,613    0.58      4,498    0.30      3,101    0.31
                         -------    ----    -------    ----    -------    ----    -------    ----
Total (2)............... $81,628    4.54%   $74,945    4.09%   $38,233    2.54%   $22,048    2.17%
                         =======    ====    =======    ====    =======    ====    =======    ====
</TABLE>    
- --------
(1) Number of days delinquent means the number of days after the billing date
    next following the original billing date. For example, 31 days delinquent
    means that no payment is received within 61 days after the original
    billing date.
(2) Delinquencies are calculated as a percentage of outstanding receivables as
    of the end of each calendar month. Delinquencies include bankruptcies.
   
  The rise in delinquencies and charge-offs as a percentage of the
Representative Portfolio in 1995 and in year-to-date 1996 are the result of a
variety of factors. Among them are: (i) the reduction in the rate of growth in
the Receivables in the Representative Portfolio in calendar year 1995 as
compared to the rate of growth in the Receivables in the Representative
Portfolio that occurred in 1993 and 1994 (the rate of delinquency on new
accounts typically being below the rate of delinquency on seasoned accounts);
(ii) general economic conditions in the United States and particularly the
nationwide rise in consumer loan delinquencies and the rise in personal
bankruptcy filings; and (iii) the creation and inclusion in the Representative
Portfolio of a new product group that generated higher revenues and     
 
                                      38
<PAGE>
 
   
higher losses. This new product group represented approximately $119 million
of receivables as of March 31, 1996. People's Bank will not add additional
receivables of this type to the Trust without rating agency approval.     
   
  To the extent that average receivables outstanding do not continue to rise
at the same rate as they did from 1993 to 1994, and to the extent that the
rate of account seasoning does not remain the same, there can be no assurance
that the loss and delinquency amounts as a percentage of the Representative
Portfolio will remain at current levels.     
       
  People's Bank believes that conformity with its underwriting procedures (see
"--Underwriting Procedures") will keep the loss and delinquency experience
within historical norms.
 
INTERCHANGE
 
  Creditors participating in the VISA and MasterCard associations receive
certain fees 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 these fees collected in
connection with cardholder charges for merchandise and services is passed from
the banks clearing the transactions for merchants to credit card issuing
banks. These fees currently range from approximately 0.90% to 2.18% of the
transaction amount. People's Bank is required, pursuant to the terms of the
Agreement, to transfer to the Trust those fees attributed to cardholder
charges for merchandise and services in the Accounts ("Interchange"). Such
percentages are set by the VISA and MasterCard associations and may be changed
by either of them respectively from time to time. Interchange is treated as
Finance Charge Receivables for the purposes of determining the amount of
Finance Charge Receivables, allocating collections and payments to
Certificateholders and calculating the Portfolio Yield.
 
                                THE RECEIVABLES
   
  The Receivables conveyed to the Trust arise in Accounts from the Bank
Portfolio of VISA and MasterCard credit card accounts on the basis of
eligibility criteria set forth in the Agreement (the "Trust Portfolio"). Such
criteria do not create a selection adverse to the Certificateholders. Pursuant
to the Agreement, the Transferor has the right (and, under certain
circumstances, the obligation), subject to certain limitations and conditions
set forth therein, to designate from time to time Additional Accounts and to
transfer to the Trust all Receivables of such Additional Accounts, whether
such Receivables are then existing or thereafter created. Any Additional
Accounts designated pursuant to the Agreement must be Eligible Additional
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. The Agreement also provides that the Transferor will add as
Automatic Additional Accounts certain new accounts opened in the ordinary
course of its business. Automatic Additional Accounts will be added to the
Trust on the business day that they are originated if certain requirements are
satisfied. See "Description of the Certificates--Addition of Accounts".
Automatic Additional Accounts will consist of certain of the Transferor's VISA
and MasterCard credit card accounts (including certain Affinity Program
Accounts and Agent Bank Accounts), constituting Eligible Automatic Additional
Accounts and satisfying certain other criteria, and arising in Accounts
designated by the Transferor from time to time. The Transferor may designate
additional categories of Automatic Additional Accounts; provided, however,
that the Transferor shall have received notice from each Rating Agency that
such designation will not result in a downgrading or withdrawal of its rating
of any certificates of any Series outstanding. In addition, the Transferor is
required to designate Eligible Additional Accounts as Additional Accounts (x)
to maintain the Transferor Interest such that on any Record Date the
Transferor Interest for the related Monthly     
 
                                      39
<PAGE>
 
   
Period equals or exceeds 7% or such higher percentage as may be stated in any
Supplement (such percentage, the "Minimum Transferor Interest") of the average
Aggregate Principal Receivables and (y) to maintain, for so long as
certificates of any Series, including the Certificates, remain outstanding,
Aggregate Principal Receivables in an amount equal to or greater than the
Minimum Aggregate Principal Receivables. The "Minimum Aggregate Principal
Receivables" required to be maintained through the designation by the
Transferor of Additional Accounts shall generally be an amount equal to the
sum of the numerators used to calculate the Investor Percentage with respect
to Principal Receivables for each Series. Such amount may be increased by a
Supplement pursuant to which additional Series may be issued. The Transferor
will convey the Receivables then existing or thereafter created under such
Additional Accounts to the Trust. See "Description of the Certificates--
Addition of Accounts". Further, pursuant to the Agreement, the Transferor has
the right (subject to certain limitations and conditions discussed herein) to
remove certain Accounts designated by the Transferor whether such Receivables
are then existing or thereafter created. See "Description of Certificates--
Removal of Accounts". Throughout the term of the Trust, the Accounts from
which the Receivables arise will be the same Accounts designated and conveyed
by the Transferor to the Trust plus any Additional Accounts and Automatic
Additional Accounts and minus any Removed Accounts. As of each date an Account
is added, and on any date Additional Accounts or Automatic Additional Accounts
are added, to the Trust, and on the date any new Receivables are created or
are added to the Trust, as applicable, the Transferor will (or will be deemed
to) represent and warrant to the Trust that the Receivables meet the
eligibility requirements specified in the Agreement. See "Description of the
Certificates--Representations and Warranties".     
 
  Some of the Accounts are recently solicited, unseasoned accounts and the
Receivables include Receivables that may be up to 240 days contractually
delinquent. Because the Accounts were selected as of the Series Cut-Off Date,
there can be no assurance that all of the accounts will continue to meet the
eligibility requirements during the life of the Trust. The Receivables in the
Accounts are the unsecured obligations of the cardholders.
   
  The Receivables in the Trust Portfolio as of the Series Cut-Off Date
(including Receivables in Additional Accounts added on May 1, 1996) totalled
approximately $1,798,186,706. The Accounts had, as of the March 1996 Monthly
Period, an average outstanding balance of $1,456 and an average credit limit
of $5,024. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was 28.98%, and the weighted average age of the
Accounts was approximately 37.13 months. As of the March 1996 Monthly Period,
cardholders whose Accounts giving rise to the Receivables are included in the
Trust Portfolio have billing addresses in all 50 States and the District of
Columbia.     
   
  The following tables summarize the Trust Portfolio's balance and account
characteristics of the accounts giving rise to the Receivables as of the close
of the March 1996 Monthly Period for each of the Accounts (including the
Additional Accounts added on May 1, 1996). Because the future composition of
the Trust Portfolio may change over time, these tables may not necessarily be
indicative of the composition of the Trust Portfolio after the March 1996
Monthly Period.     
 
                                      40
<PAGE>
 
                         COMPOSITION BY ACCOUNT BALANCE
                                TRUST PORTFOLIO
 
<TABLE>   
<CAPTION>
       ACCOUNT         NUMBER OF PERCENTAGE OF TOTAL                     PERCENTAGE OF TOTAL
    BALANCE RANGE      ACCOUNTS  NUMBER OF ACCOUNTS  RECEIVABLES BALANCE RECEIVABLES BALANCE
    -------------      --------- ------------------- ------------------- -------------------
<S>                    <C>       <C>                 <C>                 <C>
Credit
 Balance.....             17,296         1.40%        $   (1,631,542.44)        (0.09)%
Zero
 Balance.....            481,755        39.01                      0.00          0.00
$0.01-
 $500.00.....            163,395        13.23             27,811,210.60          1.55
$500.01-
 $1,000.00...             74,080         6.00             55,562,476.00          3.09
$1,000.01-
 $3,000.00...            234,237        18.97            470,208,030.74         26.15
$3,000.01-
 $5,000.00...            178,273        14.44            698,082,901.72         38.82
$5,000.01-
 $10,000.00..             83,654         6.77            521,932,638.06         29.02
Over
 $10,000.00..              2,199         0.18             26,220,990.94          1.46
                       ---------       ------         -----------------        ------
Total........          1,234,889       100.00%        $1,798,186,705.62        100.00%
                       =========       ======         =================        ======
 
                          COMPOSITION BY CREDIT LIMIT
                                TRUST PORTFOLIO
 
<CAPTION>
       CREDIT          NUMBER OF PERCENTAGE OF TOTAL                     PERCENTAGE OF TOTAL
     LIMIT RANGE       ACCOUNTS  NUMBER OF ACCOUNTS  RECEIVABLES BALANCE RECEIVABLES BALANCE
     -----------       --------- ------------------- ------------------- -------------------
<S>                    <C>       <C>                 <C>                 <C>
$0.01-
 $1,000.00...             68,217         5.52%        $   14,368,020.04          0.80%
$1,000.01-
 $2,000.00...             83,548         6.77             46,468,412.19          2.58
$2,000.01-
 $3,000.00...            130,389        10.56            115,430,065.05          6.42
$3,000.01-
 $4,000.00...            147,827        11.97            178,808,113.25          9.94
$4,000.01-
 $5,000.00...            231,206        18.72            357,223,082.79         19.87
$5,000.01-
 $10,000.00..            533,984        43.24            997,226,917.60         55.46
Over
 $10,000.00..             39,718         3.22             88,662,094.70          4.93
                       ---------       ------         -----------------        ------
Total........          1,234,889       100.00%        $1,798,186,705.62        100.00%
                       =========       ======         =================        ======
 
                      COMPOSITION BY PERIOD OF DELINQUENCY
                                TRUST PORTFOLIO
 
<CAPTION>
PERIOD OF DELINQUENCY
 (DAYS CONTRACTUALLY   NUMBER OF PERCENTAGE OF TOTAL                     PERCENTAGE OF TOTAL
     DELINQUENT)       ACCOUNTS  NUMBER OF ACCOUNTS  RECEIVABLES BALANCE RECEIVABLES BALANCE
- ---------------------  --------- ------------------- ------------------- -------------------
<S>                    <C>       <C>                 <C>                 <C>
Current......          1,170,376        94.78%        $1,612,691,526.89         89.68%
1-30 Days....             38,355         3.11            103,867,308.92          5.78
31-60 Days...              8,295         0.67             24,087,356.59          1.34
61 or More
 Days........             17,863         1.44             57,540,513.22          3.20
                       ---------       ------         -----------------        ------
Total........          1,234,889       100.00%        $1,798,186,705.62        100.00%
                       =========       ======         =================        ======
</TABLE>    
 
                                       41
<PAGE>
 
                          COMPOSITION BY ACCOUNT AGE
                                TRUST PORTFOLIO
 
<TABLE>   
<CAPTION>
                 NUMBER OF PERCENTAGE OF TOTAL                     PERCENTAGE OF TOTAL
  ACCOUNT AGE    ACCOUNTS  NUMBER OF ACCOUNTS  RECEIVABLES BALANCE RECEIVABLES BALANCE
  -----------    --------- ------------------- ------------------- -------------------
<S>              <C>       <C>                 <C>                 <C>
0 to 6 Months..     97,036         7.86%        $  168,486,432.56          9.37%
Over 6 to 12
 Months........    103,872         8.41            190,186,653.21         10.58
Over 12 to 24
 Months........    303,480        24.58            533,082,749.02         29.64
Over 24 to 48
 Months........    475,358        38.49            573,225,958.08         31.88
Over 48
 Months........    255,143        20.66            333,204,912.75         18.53
                 ---------       ------         -----------------        ------
Total..........  1,234,889       100.00%        $1,798,186,705.62        100.00%
                 =========       ======         =================        ======
 
                GEOGRAPHIC DISTRIBUTION BY RECEIVABLES BALANCE
                                TRUST PORTFOLIO
 
<CAPTION>
                 NUMBER OF PERCENTAGE OF TOTAL                     PERCENTAGE OF TOTAL
                 ACCOUNTS  NUMBER OF ACCOUNTS  RECEIVABLES BALANCE RECEIVABLES BALANCE
                 --------- ------------------- ------------------- -------------------
<S>              <C>       <C>                 <C>                 <C>
Connecticut....    224,465        18.18%        $  293,322,142.22         16.31%
California.....     86,733         7.02            148,641,390.45          8.27
Texas..........     71,792         5.81            115,103,953.39          6.40
New York.......     72,604         5.88            101,049,110.36          5.62
Florida........     60,329         4.89             85,041,468.76          4.73
Ohio...........     50,419         4.08             72,185,549.22          4.01
Illinois.......     45,040         3.65             67,819,468.55          3.77
Pennsylvania...     45,240         3.66             61,130,336.60          3.40
Michigan.......     37,377         3.03             57,575,473.71          3.20
Massachusetts..     38,539         3.12             56,406,275.03          3.14
Other(1).......    502,351        40.68            739,911,537.33         41.15
                 ---------       ------         -----------------        ------
Total..........  1,234,889       100.00%        $1,798,186,705.62        100.00%
                 =========       ======         =================        ======
</TABLE>    
- --------
   
(1) States with less than 3.14% of the Percentage of Total Receivables
    Balance.     
 
  The largest concentration of Accounts giving rise to Receivables in the
Trust Portfolio is in Connecticut. Connecticut's economy has historically been
highly dependent on the defense industry, which recently has been adversely
affected by cutbacks in federal spending. During the past several years,
Connecticut has been adversely impacted by employment losses more severe in
Connecticut than in the United States as a whole. See "Risk Factors-Social,
Legal and Economic Factors".
 
                                      42
<PAGE>
 
                             MATURITY ASSUMPTIONS
   
  The Agreement provides that Certificateholders will not receive principal
payments until the Distribution Date following the commencement of the
Controlled Amortization Period, which will commence with the November 2000
Monthly Period, except in the event of a Pay Out Event, which will result in
the commencement of the Rapid Amortization Period. A "Pay Out Event" occurs,
either automatically or after specified notice, upon (a) the failure of the
Transferor to make certain payments or transfers of funds for the benefit of
the Certificateholders within the time periods stated in the Agreement, (b)
material breaches of certain representations, warranties or covenants of the
Transferor, (c) certain insolvency events involving the Transferor, (d) 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 when required by the Agreement,
(f) the Trust becoming subject to regulation as an "investment company" by the
Commission within the meaning of the Investment Company Act of 1940, as
amended, (g) a reduction in the Portfolio Yield averaged for any three
consecutive Monthly Periods to a rate which is less than the Base Rate, (h)
reduction of the Available Cash Collateral Amount to less than the lesser of
the Investor Interest as of the last day of the related Monthly Period and 3%
of the Initial Investor Interest, (i) the failure to pay each class of
Certificates in full on or prior to its applicable Expected Final Distribution
Date or (j) the failure of the Interest Rate Cap Provider to make any payment
under the Interest Rate Caps within five days of the date such payment was
due. See "Description of the Certificates--Pay Out Events".     
   
  During the Controlled Amortization Period, distributions of monthly
principal will be made on each Distribution Date (beginning with the December
2000 Distribution Date) to the Class A Certificateholders until the earlier of
(x) the termination of the Trust and (y) the date on which the Class A
Investor Interest is paid in full and, beginning with the Class B Payment
Commencement Date, to the Class B Certificateholders until the earlier of (x)
the termination of the Trust and (y) the date on which the Class B Investor
Interest is paid in full, in an amount on any such Distribution Date equal to
the lesser of (a) the sum of (i) the Principal Allocation and (ii) the amount
of Shared Principal Collections, if any, allocable to the Certificates with
respect to such Monthly Period and (b) the applicable Controlled Distribution
Amount for the class receiving such distributions, which is equal to the sum
of the applicable Controlled Amortization Amount and any existing Deficit
Controlled Amortization Amount (both as defined below). The "Class A
Controlled Amortization Amount" means $27,071,428.57 and the "Class B
Controlled Amortization Amount" means $21,000,000 and "Controlled Amortization
Amount" means either the Class A Controlled Amortization Amount or the Class B
Controlled Amortization Amount, as context requires. Such amounts may be
reduced to reflect the tender and cancellation of Certificates pursuant to an
Investor Exchange. The "Class A Controlled Distribution Amount" means, on any
Distribution Date, the Class A Controlled Amortization Amount plus the related
Deficit Controlled Amortization Amount as of such Distribution Date, and the
"Class B Controlled Distribution Amount" means, on any Distribution Date, the
Class B Controlled Amortization Amount plus the related Deficit Controlled
Amortization Amount as of such Distribution Date, and the "Controlled
Distribution Amount" means either the Class A Controlled Distribution Amount
or the Class B Controlled Distribution Amount, as context requires. The term
"Deficit Controlled Amortization Amount" means, on the Closing Date, zero and,
on any Transfer Date or Distribution Date, the amount of the accrued and
unpaid monthly excesses of the Controlled Amortization Amount for the
applicable class of Certificates and for each preceding Monthly Period over
the sum of the Principal Allocation and the amount of any Shared Principal
Collections available to the Certificates for each such Monthly Period. Should
the Rapid Amortization Period commence, the Certificateholders will be
entitled to receive monthly payments as provided herein of principal on each
Distribution Date (beginning with the Distribution Date in the month following
the month in which the Rapid Amortization Period commences) equal to the
product of the applicable Investor Percentage and collections in respect of
Principal Receivables received during the related Monthly Period, certain
amounts treated as Collections of Principal Receivables with respect to such
Monthly Period (including amounts applied with respect to     
 
                                      43
<PAGE>
 
   
Investor Default Amounts and Investor Charge Offs) and the amount of Shared
Principal Collections, if any, allocable to the Certificates with respect to
such Monthly Period. Allocations based upon the applicable Investor Percentage
during either the Controlled Amortization Period or the Rapid Amortization
Period may result in distributions of principal to Certificateholders greater,
relative to the declining balance of the Investor Interest, than would be the
case if a percentage based on such declining balance were used to determine
the percentage of collections to be distributed in respect of the Investor
Interest. See "Description of the Certificates--Allocation Percentages".     
   
  A significant decline in the amount of Receivables generated during the
Revolving Period could result in the occurrence of a Pay Out Event for the
Certificateholders and the commencement of the Rapid Amortization Period, thus
shortening the maturity of the Certificates. Conversely, a significant decline
in the amount of Receivables generated during an Amortization Period could
result in an extension of the final payment of the Certificates. If the
maturity of the Certificates has been shortened at a time when interest rates
generally available are lower than the Certificate Rates, the yield to
maturity realized by the Certificateholders upon reinvestment at the lower
prevailing interest rates may be lower than if the Certificates remained
outstanding until the expected maturity. Conversely, if the maturity of the
Certificates is extended at a time when interest rates generally available are
higher than the Certificate Rates, the yield to maturity realized by the
Certificateholders may be lower than if the Certificates had matured when
expected and the Certificateholders had reinvested at the higher prevailing
interest rates.     
 
  The following table sets forth the highest and lowest cardholder monthly
payment rates for the Representative Portfolio during any month in the period
shown and the average cardholder monthly payment rates for all months during
the periods shown, in each case calculated as a percentage of the prior
month's ending outstanding receivables balance 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(1)
                           REPRESENTATIVE PORTFOLIO
 
<TABLE>   
<CAPTION>
                                         THREE MONTH
                                         PERIOD ENDED YEAR ENDED DECEMBER 31,
                                          MARCH 31,   -------------------------
                                             1996      1995     1994     1993
                                         ------------ -------  -------  -------
<S>                                      <C>          <C>      <C>      <C>
Lowest..................................     9.68%       9.12%    9.82%   11.44%
Highest.................................    10.54       11.19    13.02    13.75
Average(2)..............................    10.18       10.03    11.08    12.27
</TABLE>    
- --------
(1) Monthly payment rates represent total payments collected during a given
    month expressed as a percentage of the prior month's ending outstanding
    receivables.
(2) The average monthly payment rates shown are expressed as an arithmetic
    average of the payment rate during each month of the period indicated.
 
  The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio, and thus the rate
at which Certificateholders could expect to receive payments of principal on
the Certificates during either the Controlled Amortization Period or the Rapid
Amortization Period, will be similar to the historical experience set forth
above. In addition, if a Pay Out Event occurs, the average life and maturity
of the Certificates could be significantly reduced.
 
  Because there may be a slowdown in the payment rate below the payment rate
used to determine the Controlled Amortization Amount, or because 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
 
                                      44
<PAGE>
 
   
the beginning of the Controlled Amortization Period to the final Distribution
Date with respect to the Class A Certificates or the Class B Certificates will
equal the expected number of months (respectively, 14 months and 15 months).
    
                        RECEIVABLE YIELD CONSIDERATIONS
   
  The gross revenues from finance charges and fees billed to accounts in the
Representative Portfolio for each of the three years ended December 31, 1995,
1994 and 1993 and the three month period ended March 31, 1996 (adjusted to
include the May 1, 1996 addition of Additional Accounts) are set forth in the
following table. The historical yield figures in the table are calculated on a
billed basis, net of rebated fees and other charges. Collections of
Receivables included in the Trust are on a cash basis and may not reflect the
historical yield experience in the table. During periods of increasing
delinquencies or periodic payment deferral programs, accrual yields may exceed
cash yields as amounts collected on credit card receivables lag behind amounts
accrued and billed to cardholders. Conversely, as delinquencies decrease, cash
yields may exceed accrual yields as amounts collected in a current period may
include amounts accrued during prior periods. The Transferor believes,
however, that during the periods shown, the yields presented on an accrual
basis closely approximated the yields on a cash basis. The yield on both an
accrual and a cash basis will be affected by numerous factors, including the
monthly periodic finance charges on the Receivables, the amount of the annual
membership fees and cash advance fees, Interchange, changes in the delinquency
rate on the Receivables and the percentage of cardholders who pay their
balances in full each month and do not incur monthly periodic finance charges.
                               
                            REVENUE EXPERIENCE     
                            
                         REPRESENTATIVE PORTFOLIO     
                             
                          (DOLLARS IN THOUSANDS)     
 
<TABLE>   
<CAPTION>
                             THREE MONTH
                             PERIOD ENDED       YEAR ENDED DECEMBER 31,
                              MARCH 31,      --------------------------------
                                 1996           1995        1994       1993
                             ------------    ----------  ----------  --------
<S>                          <C>             <C>         <C>         <C>
Finance Charges and Fees
 Billed(1)..................  $   73,727     $  263,583  $  182,657  $134,354
Average Receivables Out-
 standing(2)................  $1,824,704     $1,649,780  $1,182,028  $794,728
Yield from Finance Charges
 and Fees Billed(3)(4)......       16.16%(5)      15.98%      15.45%    16.91%
</TABLE>    
- --------
(1) Finance Charges and Fees Billed include periodic finance charges, annual
    membership fees, late fees, returned check fees, overlimit fees, the
    premium of any insurance covering a cardholder's account balances, cash
    advance transaction fees, interchange and recoveries allocable to the
    related receivables. The annual membership fees, as presented, reflect
    full recognition upon billing.
(2) Average Receivables Outstanding is the average of the daily receivable
    balance during the period indicated.
(3) Yield from Finance Charges and Fees Billed is calculated as a percentage
    of the Average Receivables Outstanding.
   
(4) Finance Charges and Fees Billed in 1993 and 1994 does not include
    interchange fees collected on certain accounts that are included in this
    Representative Portfolio. The Transferor does not believe that the effect
    on Yield from Finance Charges and Fees Billed resulting from such
    exclusion is material.     
   
(5) Calculated on an annualized basis.     
   
  The decline in yield from finance charges and fees billed during the years
ended December 31, 1993 through 1994, as reflected in the foregoing table,
resulted in part both from the decision by the     
 
                                      45
<PAGE>
 
   
Transferor in 1992 to lower the fixed annual percentage rate to 11.5% and from
the offers of lower introductory rates from time to time. The Transferor's
subsequent increase in 1995 in the fixed annual percentage rate to 13.9%
contributed to an increase in the yield from finance charges and fees billed
over time. There can be no assurance that the yield will remain at levels
comparable to historical experience.     
 
  As payment rates decline, the balances subject to monthly periodic finance
charges tend to grow, assuming no change in the level of purchasing activity.
Accordingly, under these circumstances, the yield related to periodic finance
charges normally increases. As account balances increase, annual membership
fees, which remain constant, represent a smaller percentage of the aggregate
account balance. See "The Credit Card Business of People's Bank".
 
                                USE OF PROCEEDS
   
  The net proceeds from the sale of the Certificates, approximately $   ,
before deduction of expenses, will be paid to PSFC. PSFC intends to distribute
substantially all of such proceeds to the Transferor through the declaration
and payment of a dividend and/or a distribution of capital to the Transferor,
and the Transferor will use such proceeds for its general corporate purposes.
    
                                 PEOPLE'S BANK
   
  People's Bank was formed in 1842 and is headquartered in Bridgeport,
Connecticut. People's Bank is a majority-owned subsidiary of People's Mutual
Holdings, which as of March 31, 1996 owns 62.5% of the issued and outstanding
common stock of People's Bank. In May 1993, People's Bank issued $69,000,000
of convertible preferred stock. In May 1996, People's Bank notified its
preferred shareholders of its intent to redeem all shares of preferred stock,
as soon as practicable, subject to regulatory approval. After such stock is
fully converted, People's Mutual Holdings will own 60.1% of the common stock
of People's Bank. People's Bank is chartered as a Connecticut stock savings
bank, and, as a state chartered non-member bank, is regulated by the State of
Connecticut Department of Banking and by the FDIC. As of March 31, 1996,
People's Bank's total assets were approximately $6.9 billion, total
liabilities were approximately $6.3 billion, and total stockholders' equity
was approximately $565 million. At March 31, 1996, People's Bank Tier 1
leverage capital ratio was 7.7%, satisfying the minimum ratio of 4.0% to 5.0%
generally required by the FDIC. People's Bank is also subject to the FDIC's
risk-based capital regulations, which require minimum ratios of Tier 1 Capital
and total capital to risk-weighted assets of 4.0% and 8.0%, respectively.
People's Bank satisfied these requirements at March 31, 1996 with ratios of
10.7% and 12.0%, respectively. People's Bank regulatory capital ratios at
March 31, 1996, exceed the FDIC's numeric criteria for classification as a
"well-capitalized" institution. People's Bank's lending activities consist of
originating loans secured by residential and commercial properties, and
extending secured and unsecured loans to consumers and businesses.     
          
  People's Structured Finance Corp. ("PSFC"), which is currently the Holder of
the Exchangeable Transferor Certificate, is a wholly-owned special purpose
Connecticut subsidiary of People's Bank. In establishing PSFC, People's Bank
has taken steps to ensure that PSFC is a bankruptcy-remote corporation, which
steps include (but are not limited to) (a) the appointment of two independent
directors to PSFC's board of directors, (b) the creation of PSFC as a special
purpose subsidiary of People's Bank pursuant to a certificate of incorporation
containing certain limitations (including restrictions on the nature of PSFC's
business and restrictions on PSFC's ability to commence a voluntary case or
proceeding under the United States Bankruptcy Code or similar state laws
without the prior unanimous affirmative vote of all of its directors,
including the prior unanimous affirmative vote of both of its independent
directors), and (c) the maintenance by PSFC of separate bank accounts,
corporate records and books of account. The Exchangeable Transferor
Certificate, representing the Transferor Interest in the Trust, was
transferred to PSFC pursuant to an Assignment and Assumption Agreement, dated
as of December 15, 1995, by and between People's Bank and PSFC.     
 
                                      46
<PAGE>
 
                        DESCRIPTION OF THE CERTIFICATES
   
  The Certificates will be issued pursuant to the Agreement, including the
Series 1996-1 Supplement, entered into between People's Bank, as Transferor of
the Certificates and as Servicer of the Accounts and the Receivables, and
Bankers Trust Company, as Trustee for the certificateholders, substantially in
the form filed as exhibits to the Registration Statement of which this
Prospectus is a part. Pursuant to the Agreement, the Transferor has executed
four Supplements in connection with the issuance of other Series of
certificates and may execute further Supplements thereto between the
Transferor and the Trustee in order to issue additional Series. See "--
Exchanges". The Trustee will provide a copy of the Agreement (without exhibits
or schedules), including each Supplement, to certificateholders without charge
upon written request. The following summary describes certain terms of the
Agreement (including the Series 1996-1 Supplement) and is qualified in its
entirety by reference to the Agreement (including the Series 1996-1
Supplement).     
 
GENERAL
 
  The Certificates will represent a fractional undivided interest in certain
assets of the Trust, including the right to receive the collections received
with respect to the Receivables in the Trust allocable to the Certificates,
funds on deposit and securities held in the Cash Collateral Account, and the
benefit of the Interest Rate Caps. The property of the Trust consists of the
Receivables, all monies due or to become due thereunder, all proceeds of the
Receivables, Interchange, Recoveries, all monies on deposit in the Collection
Account and the Excess Funding Account, funds on deposit in accounts
established pursuant to the Series 1996-1 Supplement, funds on deposit in any
Series accounts established for the benefit of certificateholders other than
the Certificateholders pursuant to the related Supplement, funds on deposit
and securities held in the Cash Collateral Account for the benefit of the
Certificateholders, the benefit of the Interest Rate Caps and any other
Enhancement issued with respect to any additional Series (the drawing on,
withdrawal from or payment on such Enhancement, and the funds on deposit in
any Series account with respect to any additional Series, will not be
available to Certificateholders). The Trust will include the Receivables from
Additional Accounts and Automatic Additional Accounts which may be added from
time to time pursuant to the terms of the Agreement and will not include the
Receivables from any Removed Accounts which may be removed from the Trust from
time to time pursuant to the terms of the Agreement.
   
  Payments of interest and principal will be made on each related Distribution
Date to Certificateholders in whose names the Certificates were registered as
of (i) the business day preceding the Distribution Date with respect to book-
entry Certificates and (ii) the last day of the calendar month preceding such
Distribution Date with respect to Definitive Certificates (each, a "Record
Date"). Interest will be distributed to Certificateholders on the fifteenth
day of each month (or, if such day is not a business day, on the next
succeeding business day) (each, a "Distribution Date"), commencing July 15,
1996. Monthly Interest on the Class A Certificates and the Class B
Certificates will be distributed to each Certificateholder in an amount equal
to the sum of (w) the product of (a) the applicable Certificate Rate, (b) the
actual number of days in the related Interest Period or Initial Interest
Period divided by 360 and (c) the lesser of the Class A Investor Interest or
the Class B Investor Interest, as the case may be, as of the preceding
Distribution Date (or, in the case of the first Distribution Date, the Class A
Initial Investor Interest or the Class B Initial Investor Interest, as the
case may be), after giving effect to all payments, deposits and withdrawals on
such Distribution Date, and the Expected Class A Principal or the Expected
Class B Principal, as the case may be, as of the preceding Distribution Date,
plus (x) the product of (a) the Class A Excess Principal or the Class B Excess
Principal, as the case may be, (b) the lesser of the applicable Certificate
Rate and either  % for the Class A Certificates or  % for the Class B
Certificates, and (c) the actual number of days in the related Interest Period
divided by 360, plus (y) to the extent permitted by applicable law, any
interest accrued on such Certificates (including interest on any overdue Class
A Monthly Interest or     
 
                                      47
<PAGE>
 
Class B Monthly Interest, as the case may be) during any prior accrual period
which has not been distributed to Certificateholders, plus (z) to the extent
that there is available Excess Spread, any Class A Excess Interest or any
Class B Excess Interest, as the case may be. Class A Monthly Interest and
Class B Monthly Interest will accrue from and including the Distribution Date
occurring in the preceding month (in the case of the first Distribution Date,
from and including the Closing Date) to and including the day preceding the
current Distribution Date. Interest payments will be derived from collections
allocated to Finance Charge Receivables and, if necessary, withdrawals from
the Cash Collateral Account, amounts paid under the Interest Rate Caps and,
for the Class A Certificateholders, certain principal collections otherwise
allocable to the Class B Certificates. Allocations of collections of Finance
Charge Receivables with respect to any Distribution Date will not exceed the
product of the Investor Percentage with respect to Finance Charge Receivables
and such collections.
   
  Each of the Class A Certificates and the Class B Certificates will initially
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. The Certificates will be available
for purchase in minimum denominations of $1,000 and integral multiples thereof
in book-entry form. The Transferor has been informed by DTC that DTC's nominee
will be Cede. Accordingly, Cede is expected to be the holder of record of the
Certificates. No Certificate Owner acquiring an interest in the Certificates
will be entitled to receive a certificate representing such person's interest
in the Certificates. Unless and until Definitive Certificates are issued 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".     
 
  Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
 
  In the event that Definitive Certificates are issued, a Class A 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 Class A Certificate or satisfactory
evidence of the 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 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.
 
DETERMINATION OF LIBOR
 
  The Trustee will determine LIBOR for each Interest Period (as defined below)
following the Initial Interest Period. For purposes of calculating LIBOR,
"London Banking Day" is any day on which commercial banks are open for
business (including dealings in foreign exchange and deposits in U.S. dollars)
in London.
 
  "LIBOR" means, for a specific Interest Period (other than the Initial
Interest Period), the rate for deposits in U.S. dollars for a period equal to
one month (commencing on the first day of an Interest Period) which appears on
Telerate Page 3750 (as defined below) as of 11:00 a.m., London time, on the
LIBOR Determination Date (as defined below) for such Interest Period. If such
rate does not appear on Telerate Page 3750, the rate for such Interest Period
will be determined on the basis of the rates at which deposits in U.S. dollars
are offered by the Reference Banks (as defined below) at
 
                                      48
<PAGE>
 
approximately 11:00 a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market for a period equal to one month
(commencing on the first day of such Interest 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 such Interest Period will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for such
Interest Period will be the arithmetic mean of the rates quoted by major banks
in New York City, selected by the Trustee, at approximately 11:00 a.m., New
York City time, on the first day of such Interest Period for loans in U.S.
dollars to leading European banks for a period equal to one month (commencing
on the first day of such Interest Period).
 
  "Interest Period" means, with respect to any Distribution Date, a period
from and including the preceding Distribution Date to and including the day
immediately preceding such Distribution Date; provided, however, that the
Initial Interest Period will commence on the Closing Date.
 
  "LIBOR Determination Date" means with respect to any Interest Period, the
second London Banking Day preceding the first day of each Interest Period.
 
  "Reference Banks" means four major banks in the London interbank market
selected by the Trustee.
 
  "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).
   
THE INTEREST RATE CAPS     
 
  On the Closing Date, the Trustee will enter into the Interest Rate Caps with
the Interest Rate Cap Provider. The Class A Interest Rate Cap and the Class B
Interest Rate Cap will be for the exclusive benefit of the Class A
Certificateholders and the Class B Certificateholders, respectively.
 
  The notional amount of the Class A Interest Rate Cap (the "Class A Notional
Amount") will at all times be equal to the amount of the Expected Class A
Principal. Pursuant to the Class A Interest Rate Cap, on each Transfer Date on
which the Class A Certificate Rate for the related Interest Period exceeds  %
(the "Class A Cap Rate"), the Interest Rate Cap Provider will make a payment
to the Trustee, on behalf of the Trust, in an amount equal to the product of
(i) such excess, (ii) the Class A Notional Amount as of such Transfer Date and
(iii) the actual number of days in the related Monthly Period divided by 360.
The Class A Interest Rate Cap will terminate on the day following the Class A
Expected Final Distribution Date; provided, however, that the Class A Interest
Rate Cap may be terminated at an earlier date if the Trustee has obtained a
substitute interest rate cap or entered into an alternative arrangement
satisfactory to the Rating Agencies, which in each case will not result in the
reduction or withdrawal of the rating of the Certificates (such substitute
interest rate cap, a "Replacement Interest Rate Cap"; such alternative
arrangement, a "Qualified Substitute Arrangement").
 
  The notional amount of the Class B Interest Rate Cap (the "Class B Notional
Amount") will at all times be equal to the amount of the Expected Class B
Principal. Pursuant to the Class B Interest Rate Cap, on each Transfer Date on
which the Class B Certificate Rate for the related Interest Period exceeds  %
(the "Class B Cap Rate"), the Interest Rate Cap Provider will make a payment
to the Trustee, on behalf of the Trust, in an amount equal to the product of
(i) such excess, (ii) the Class B Notional Amount as of such Transfer Date and
(iii) the actual number of days in the related Monthly Period divided by 360.
The Class B Interest Rate Cap will terminate on the day following the Class B
Expected Final Distribution Date; provided, however, that the Class B Interest
Rate Cap may be terminated at an earlier date if the Trustee has obtained a
Replacement Interest Rate Cap or entered into a Qualified Substitute
Arrangement.
 
                                      49
<PAGE>
 
   
  In the event that the rating of the Interest Rate Cap Provider is reduced or
withdrawn, as specified in the Interest Rate Caps, the Trustee, at the
direction of the Servicer, shall use its best efforts either to obtain for
each such Interest Rate Cap a Replacement Interest Rate Cap, at the expense of
the Interest Rate Cap Provider, or to enter into a Qualified Substitute
Arrangement.     
   
  The Trustee, on behalf of the Trust, may sell all or a portion of an
Interest Rate Cap in an amount equal to the excess on such date of the Class A
Notional Amount or the Class B Notional Amount, as applicable, over the Class
A Investor Interest or the Class B Investor Interest, respectively, subject to
(among other things) Rating Agency confirmation of the rating of the related
class of Certificates. Funds from any such sale will be applied as Finance
Charge Collections allocable to the related class of Certificates in
accordance with the allocations described below in "--Allocation of Funds."
    
THE INTEREST RATE CAP PROVIDER
 
  The following information has been obtained from the Interest Rate Cap
Provider and has not been verified by People's Bank or the Underwriters. No
representation or warranty is made by People's Bank or the Underwriters with
respect thereto.
          
  The interest rate cap provider is Swiss Bank Corporation (the "Bank"),
acting through its London Branch.     
   
  The Bank is a full service universal bank, with core businesses of
international investment banking and corporate finance; private banking and
asset management; and retail and corporate banking in Switzerland. The Bank is
the third largest bank in Switzerland and ranks among the 50 largest banks
worldwide based on total assets. It is publicly owned, and its shares are
listed on each of the Zurich, Basel and Geneva stock exchanges in Switzerland,
as well as on the stock exchanges in Frankfurt and Tokyo. American depositary
receipts representing the Bank's shares are also traded in the United States.
       
  As reflected in the Bank's 1995 Annual Report, as of December 31, 1995, the
Bank had total unconsolidated assets of Sfr. 242.2 billion ($209.8 billion)
and total unconsolidated capital and reserves of Sfr. 14.0 billion ($12.2
billion).     
   
  The foregoing figures in Swiss francs were determined in accordance with
generally accepted accounting principles in Switzerland, which differ in
certain respects from generally accepted accounting principles in the United
States. On December 29, 1995, the exchange rate for Swiss francs and U.S.
dollars, based on the noon buying rates in New York City for cable transfers
payable in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York was 1.1540 Swiss francs per U.S. dollar, and
conversion from Swiss francs to U.S. dollars has been made at that rate.     
   
  Upon written request, the Bank will provide without charge to any person to
whom this Prospectus is delivered a copy of the most recent Annual Report of
the Bank. Written requests should be directed to Swiss Bank Corporation, New
York Branch, Box 395, Church Street Station, New York, New York 10008,
Attention: Director of Public Relations.     
 
BOOK-ENTRY REGISTRATION
   
  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.     
 
                                      50
<PAGE>
 
   
  Cede, as nominee for DTC, will hold the physical Certificate or
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" or "DTC Participants") and facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating the
need for physical movement of certificates. Participants include securities
brokers and dealers (who may include the underwriters of any Series), banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly (the "Indirect Participants").
   
  Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.     
   
  Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its Depositary; however, such cross-
market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the Depositaries.     
   
  Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant Cedel or Euroclear cash account only as of the business day
following settlement in DTC. See Annex II.     
 
  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 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" (as such term is used in
the
 
                                      51
<PAGE>
 
Agreement) 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 Agreement, and Certificate
Owners will only be permitted to exercise the rights of Certificateholders
indirectly through the Participants who in turn will exercise the rights of
Certificateholders through DTC.
 
  Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate Owners
will receive payments and will be able to transfer their interests.
 
  Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
 
  DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the 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 Investor Interest only at the
direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
   
  Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled by Cedel in any of 28 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 33 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System,     
 
                                      52
<PAGE>
 
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. See Annex II. Cedel or the Euroclear Operator, as the case may
be, will take any other action permitted to be taken by a Certificateholder
under the Agreement on behalf of a Cedel Participant or a Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf
through DTC.     
   
  Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.     
 
DEFINITIVE CERTIFICATES
 
  The Certificates 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 properly discharge its
responsibilities as Depository with respect to the Certificates, and the
Trustee or the Transferor is unable to locate a qualified successor, (ii) the
Transferor, at its option, 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% of each of the Class A Investor Interest and
the Class B Investor Interest advise the Trustee and DTC through Participants
in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the best interests of the Certificate
Owners.
 
  Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all the Certificate Owners
through Participants of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the definitive certificate representing
the Certificates
 
                                      53
<PAGE>
 
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 of the Certificates under
the Agreement ("Holders").
 
  Distribution of principal and interest on the Certificates will be made by
the "Paying Agent" (as defined in the Agreement) directly to Holders of
Definitive Certificates in accordance with the procedures set forth herein and
in the Agreement. During the Revolving Period, interest payments, and during
either Amortization Period, interest and principal payments in respect of the
Certificates, will be made to Certificateholders as provided herein on each
Distribution Date to the 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 certificate register. The final payment on any Certificate
(whether Definitive Certificates or the Certificates registered in the name of
Cede representing the Certificates), however, will be made only upon
presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders. The
Trustee will provide such notice to registered Certificateholders not later
than the fifth day of the month of such final distributions.
 
  Definitive Certificates will be transferable and exchangeable at the offices
of the "Transfer Agent and Registrar" (as defined in the Agreement), which
shall initially be Bankers Trust Company. No service charge will be imposed
for any registration of transfer or exchange, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. The Transfer Agent and
Registrar, as the case may be, shall not be required to register the transfer
or exchange of Definitive Certificates for a period of 15 days preceding the
due date for any payment with respect to such Definitive Certificates.
 
INTEREST PAYMENTS
   
  Interest will accrue on the Class A Investor Interest at the Class A
Certificate Rate and on the Class B Investor Interest at the Class B
Certificate Rate during each Interest Period following the Initial Interest
Period and will accrue on the Class A Investor Interest at a rate of  % per
annum and on the Class B Investor Interest at a rate of  % per annum during
the Initial Interest Period. Interest will be distributed on July 15, 1996,
and on each Distribution Date thereafter to Certificateholders. Interest on
the Class A Certificates will be distributed in the amount of the sum of (w)
the product of (a) the Class A Certificate Rate, (b) the lesser of the Class A
Investor Interest as of the preceding Distribution Date (or, in the case of
the first Distribution Date, the Class A Initial Investor Interest) after
giving effect to all payments, deposits and withdrawals on such Distribution
Date and the Expected Class A Principal as of the preceding Distribution Date,
and (c) the actual number of days in the related Interest Period divided by
360, plus (x) an amount equal to the product of (a) the Class A Excess
Principal, (b) the lesser of the Class A Certificate Rate and  % per annum,
and (c) the actual number of days in the related Interest Period divided by
360 (collectively, the "Class A Monthly Interest"), plus (y) to the extent
permitted by applicable law, any interest accrued on such Certificates
(including interest on any overdue Class A Monthly Interest calculated at a
default rate of interest) during any prior accrual period which has not been
distributed to the Certificateholders, plus (z) to the extent that there is
available Excess Spread, an amount equal to the product of (a) the amount by
which the Class A Certificate Rate exceeds  % per annum, (b) the Class A
Excess Principal, if any, and (c) the actual number of days in the related
Interest Period divided by 360 (the "Class A Excess Interest").     
 
  In the case of the Class B Certificates, interest will be distributed in the
amount of the sum of (w) the product of (a) the Class B Certificate Rate, (b)
the lesser of the Class B Investor Interest as of the preceding Distribution
Date (or, in the case of the first Distribution Date, the Class B Initial
Investor Interest) after giving effect to all payments, deposits and
withdrawals on such Distribution Date and the Expected Class B Principal as of
the preceding Distribution Date, and (c) the actual number of days in the
related Interest Period divided by 360, plus (x) an amount equal to the
product of (a) the Class
 
                                      54
<PAGE>
 
   
B Excess Principal, (b) the lesser of the Class B Certificate Rate and  % per
annum, and (c) the actual number of days in the related Interest Period
divided by 360 (collectively, the "Class B Monthly Interest"), plus (y) to the
extent permitted by applicable law, any interest accrued on such Certificates
(including interest on any overdue Class B Monthly Interest calculated at a
default rate of interest) during any prior accrual period not distributed to
the Certificateholders, plus (z) to the extent that there is available Excess
Spread, an amount equal to the product of (a) the amount by which the Class B
Certificate Rate exceeds  % per annum, (b) the Class B Excess Principal, if
any, and (c) the actual number of days in the related Interest Period divided
by 360 (the "Class B Excess Interest").     
   
  "Expected Class A Principal" means the amount of the Class A Investor
Interest equal to (a) on each date to but excluding the first Distribution
Date in the Controlled Amortization Period on which a principal payment is
scheduled to be made to the Class A Certificateholders (the "Initial Class A
Scheduled Principal Payment Date"), the Class A Initial Investor Interest, (b)
on each date thereafter through but not including the Class A Expected Final
Distribution Date, the Class A Initial Investor Interest less the product of
(i) the Class A Controlled Amortization Amount and (ii) the number of
Distribution Dates occurring from and including the Initial Class A Scheduled
Principal Payment Date, and (c) on each date thereafter, zero. "Expected Class
B Principal" means the amount of the Class B Investor Interest that is equal
to (a) the Class B Initial Investor Interest on each date to but excluding the
Class B Expected Final Distribution Date, and (b) on each date thereafter,
zero. "Class A Excess Principal" and "Class B Excess Principal" (collectively,
the "Excess Principal") mean on any date of determination the amount by which
the Class A Investor Interest or the Class B Investor Interest exceeds the
Expected Class A Principal or the Expected Class B Principal, respectively,
after giving effect to all payments, deposits and withdrawals on such date.
    
  Any amounts in respect of distributable interest specified in clauses (z)
above with respect to the Class A Certificates and the Class B Certificates
that are unpaid on the Distribution Date following the Interest Period in
which they accrued will not be carried over to future Distribution Dates.
 
  Interest payments up to the Class A Monthly Cap Rate Interest and Class B
Monthly Cap Rate Interest on any Distribution Date will be funded from
collections of Finance Charge Receivables allocated to the Investor Interest
during the preceding Monthly Period and Shared Finance Charge Collections
available to the Certificates. The Class A Monthly Interest in excess of the
Class A Monthly Cap Rate Interest and Class B Monthly Interest in excess of
the Class B Monthly Cap Rate Interest will be funded from payments made
pursuant to, respectively, the Class A Interest Rate Cap and the Class B
Interest Rate Cap and, if necessary, Excess Spread. To the extent the sum of
the applicable Investor Percentage of collections on Finance Charge
Receivables (including Excess Spread) during the preceding Monthly Period and
Shared Finance Charge Collections available to the Certificates is
insufficient to pay such Class A Monthly Cap Rate Interest and Class B Monthly
Cap Rate Interest, first, withdrawals from the Cash Collateral Account, up to
the Available Cash Collateral Amount, will be used to make such payments and,
second, if the Available Cash Collateral Amount is insufficient to pay any
remaining interest due with respect to the Class A Certificates, Reallocated
Principal Collections (to the extent available) will be used to make such
payments to the Class A Certificates.
 
PRINCIPAL PAYMENTS
   
  During the Revolving Period (which begins on the Closing Date and ends on
the day before the Controlled Amortization Period or the Rapid Amortization
Period begins), no principal payments will be made to Certificateholders.
During the Controlled Amortization Period, scheduled to begin with the
November 2000 Monthly Period, and during the Rapid Amortization Period, which
will begin upon the occurrence of a Pay Out Event, and ending no later than
the Scheduled Series 1996-1 Termination Date, principal will be paid to the
Class A Certificateholders until the Class A Investor Interest is paid in full
and, following the final principal payment to the Class A Certificateholders,
to the Class B Certificateholders until the Class B Investor Interest is paid
in full. The first principal payment will be     
 
                                      55
<PAGE>
 
   
made to Class A Certificateholders beginning on the Distribution Date
following the Monthly Period in which either the Controlled Amortization
Period or the Rapid Amortization Period commences. Principal payments on the
Class B Certificates will commence on the Class B Payment Commencement Date.
The "Class B Payment Commencement Date" means either (i) the Distribution Date
on which the Class A Investor Interest is reduced to zero or, (ii) if the
Class A Investor Interest is paid in full on the Class A Expected Final
Distribution Date, and the Rapid Amortization Period has not commenced, the
Distribution Date following the Class A Expected Final Distribution Date.
Principal payments will be funded from (among other things) the collections of
Principal Receivables allocated to the Investor Interest during or with
respect to the preceding Monthly Period and Shared Principal Collections
available to the Certificates. See "--Pay Out Events" below for a discussion
of events which might lead to the commencement of the Rapid Amortization
Period. See "--Application of Collections" and "--Allocation of Funds" below
for a discussion of the method by which collections of Principal Receivables
and Shared Principal Collections available to the Certificates are allocated
during either the Controlled Amortization Period or the Rapid Amortization
Period.     
 
SUBORDINATION OF THE CLASS B CERTIFICATES
   
  The Class B Investor Interest will be subordinated to the extent necessary
to fund certain payments with respect to the Class A Certificates. No payment
of principal will be made to the Class B Certificateholders until the Class A
Investor Interest is paid in full. In addition, payment of the Required
Amounts, which includes payments to cover shortfalls in respect of (among
other things) interest and Monthly Servicing Fees, will be made on each
Distribution Date first to the Class A Certificateholders and then to the
Class B Certificateholders. Certain principal payments otherwise allocable to
the Class B Certificateholders may be reallocated to the Class A
Certificateholders, and the Class B Investor Interest may thereby decrease. To
the extent the Class B Investor Interest is so 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 decrease in the Class B Investor Interest is not
reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "--Allocation of Funds", "--
Reallocation of Cash Flows".     
 
CONVEYANCE OF RECEIVABLES
   
  On July 9, 1993 the Transferor transferred and assigned to the Trust all of
its right, title and interest in and to the Receivables in the Accounts then
outstanding and all Receivables thereafter created in the Accounts and all
monies due or to become due with respect thereto (including Principal
Receivables, Finance Charge Receivables and all proceeds of such Receivables).
On October 4, 1994, on July 14, 1995 and on May 1, 1996, the Transferor
transferred and assigned to the Trust Receivables arising from certain
Additional Accounts designated pursuant to the Agreement.     
   
  In connection with the transfer of the Receivables to the Trust, the
Transferor indicated in its computer files the conveyance of the Receivables
to the Trust. In addition, the Transferor provided the Trustee a computer file
or a microfiche list containing a true and complete list showing each Account,
identified by account number and indicating the total outstanding Receivable
balance transferred. The Transferor has provided the Trustee an updated list
of each Account, identified by account number and indicating the total
outstanding Receivable balance as of April 30, 1996, which list has been and
will be further updated periodically to reflect Automatic Additional Accounts
and Additional Accounts. The Transferor will not deliver to the Trustee any
other records or agreements relating to the Accounts or Receivables. Except as
stated above, the records and agreements relating to the Accounts and the
Receivables maintained by the Transferor or the Servicer will not be
segregated by the Transferor or the Servicer from other documents and
agreements relating to other credit card accounts and receivables and will not
be 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     
 
                                      56
<PAGE>
 
   
Transferor has filed UCC financing statements with respect to the Receivables
meeting the requirements of Connecticut state law. See "Risk Factors--Certain
Legal Aspects" and "Certain Legal Aspects of the Receivables".     
 
EXCHANGES
   
  The Agreement provides for the Trustee to issue two types of certificates:
(i) one or more Series of certificates transferable and having the
characteristics described below and (ii) the Exchangeable Transferor
Certificate, a certificate evidencing the Transferor Interest, currently held
by PSFC and transferable only as provided in the Agreement. The Agreement also
provides that, pursuant to any one or more Supplements, the Holder of the
Exchangeable Transferor Certificate may tender such certificate, or the Holder
of the Exchangeable Transferor Certificate may tender the Exchangeable
Transferor Certificate and the Transferor may tender the certificates
evidencing all or a portion of any Series of certificates, to the Trustee in
exchange for one or more new Series and a reissued Exchangeable Transferor
Certificate. Under the Agreement, the Transferor and the Trustee will execute
a Supplement in conjunction with such an Exchange that will specify, with
respect to any newly issued Series, certain terms which may include: (i) its
name or designation; (ii) its initial principal amount (or method for
calculating such amount); (iii) its coupon rate (or formula for the
determination thereof); (iv) the closing date; (v) the rating agency or
agencies, if any, rating the Series; (vi) the interest payment date or dates
and the date or dates from which interest shall accrue including the interest
accrual period with respect to such Series; (vii) the name of the clearing
agency, if any; (viii) the method for allocating Collections to
certificateholders of such Series; (ix) the names of any accounts to be used
by such Series and the terms governing the operations of any such accounts;
(x) the percentage used to calculate monthly servicing fees; (xi) the Minimum
Transferor Interest; (xii) the minimum amount of Aggregate Principal
Receivables required to be maintained by the Transferor through the
designation of Additional Accounts; (xiii) the enhancer and terms of the
Enhancement with respect thereto; (xiv) the base rate applicable to such
Series; (xv) the terms on which the certificates of such Series may be
repurchased by the Transferor or remarketed to other investors; (xvi) the
series termination date; (xvii) any deposit into any account maintained for
the benefit of certificateholders of such Series; (xviii) the number of
classes of such Series, and if more than one class, the rights and priorities
of each such class; (xix) the extent to which the certificates of such Series
will be issuable in temporary or permanent global form (and, in such case, the
depositary for such global certificate or certificates, the terms and
conditions, if any, upon which such global certificate may be exchanged, in
whole or in part, for definitive certificates, and the manner in which any
interest payable on a temporary or global certificate will be paid); (xx)
whether the certificates of such Series may be issued in bearer form and any
limitations imposed thereon; (xxi) whether Interchange or other fees will be
included in funds available to certificateholders of such Series; (xxii) the
priority of any Series with respect to any other Series; (xxiii) the rights of
the Holder of the Exchangeable Transferor Certificate that have been
transferred to the holders of such Series; and (xxiv) any other relevant terms
(all such terms, the "Principal Terms" of such Series). None of the
Transferor, the Servicer, the Holder of the Exchangeable Transferor
Certificate, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder to issue any additional Series. As a
condition of an Exchange, however, the Trustee must receive written
confirmation that the Exchange will not result in the Rating Agency reducing
or withdrawing its rating of any outstanding Series, including the
Certificates. 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. The Transferor may offer, from time to time, additional Series.
       
  The Agreement provides that the Holder of the Exchangeable Transferor
Certificate may perform Exchanges and the related Supplements may define
Principal Terms such that each Series has a     
 
                                      57
<PAGE>
 
   
period during which amortization of the principal amount thereof is intended
to occur which may have a different length and begin on a different date than
such period for any other Series. Further, one or more Series may be in their
amortization periods while other Series are not. Thus, certain Series may not
be amortizing, while other Series are amortizing. Moreover, each Series may
have the benefits of the Enhancement available only to such Series. Under the
Agreement, the Trustee shall hold any such form of Enhancement only on behalf
of the Series to which the Enhancement relates. Likewise, with respect to each
such form of Enhancement, a different form of Enhancement agreement may be
delivered to the Trustee. The Agreement also provides that the related
Supplements may specify different coupon rates and monthly servicing fees with
respect to each Series (or a particular class within such Series) and may vary
between Series the terms upon which a Series (or a particular class within
such Series) may be repurchased by the Transferor or remarketed to other
investors. In addition, a Series Supplement may permit (as does the Series
1996-1 Supplement) an Investor Exchange by which the certificateholders of
such Series may elect to exchange their certificates for one or more newly
issued Series of certificates upon the satisfaction of certain conditions
specified in the Agreement and the related Supplement. Additionally, certain
Series may be subordinated to other Series, or classes within a Series may
have different priorities. The Series 1996-1 Supplement will not permit the
subordination of such Series to any other Series issued or which may hereafter
be issued by the Trust. There is no limit to the number of Exchanges that may
be performed under the Agreement. The Trust will terminate only as provided in
the Agreement.     
   
  Under the Agreement and pursuant to a Supplement, an Exchange may only occur
upon the satisfaction of certain conditions provided in the Agreement. Under
the Agreement, the Holder of the Exchangeable Transferor Certificate may
perform an Exchange by notifying the Trustee at least three days in advance of
the date upon which the Exchange is to occur. Under the 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
plus, in the case of an Investor Exchange, the current principal amount of the
investor certificates to be exchanged, (ii) its certificate rate (or method
for 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 Agreement provides that the Trustee will authenticate any
such Series only upon delivery to it of the following, among others: (i) a
Supplement in form satisfactory to the Trustee signed by the Transferor and
specifying the Principal Terms of such Series, (ii) an opinion of counsel to
the effect that the certificates of such Series, unless otherwise stated, will
be characterized as indebtedness of the Transferor under existing law for
Federal, Connecticut and New York state income tax purposes, (iii) an opinion
of counsel to the effect that the issuance of such Series will not materially
adversely impact the Federal, Connecticut or New York state income tax
characterization of any outstanding Series or result in the Trust being
subject to Federal, New York or Connecticut tax at the entity level, (iv) the
Enhancement, if any, and an appropriate form of Enhancement agreement or
instrument with respect thereto executed by the Transferor and the issuer of
the Enhancement, (v) written confirmation from the Rating Agency that the
Exchange will not result in such Rating Agency reducing or withdrawing its
rating on any outstanding Series, (vi) the existing Exchangeable Transferor
Certificate and, if applicable, certificates of the Series to be exchanged,
and (vii) a certificate of an officer of the Transferor that on the date such
Exchange occurs, after giving effect to such Exchange, the Transferor Interest
will 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 upon execution of each Supplement
certain representations and warranties to the Trust to the effect that, among
other things, (a) as of the Closing
 
                                      58
<PAGE>
 
Date and the closing date of the issuance by the Trust of the initial Series
of certificates, the Transferor was duly incorporated and in good standing and
that it has the authority to consummate the transactions contemplated by the
Agreement and (b) as of the Series Cut-Off Date, or, with respect to any
Additional Account or Automatic Additional Account, the date on which such
Additional Account or Automatic Additional Account was transferred to the
Trust, 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 Certificateholders holding not less than 50% of each of the Class A
Investor Interest and the Class B 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 not less than 50% of each of the Class A
Investor Interest and the Class B 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 upon the execution of each Supplement
representations and warranties to the Trust relating to the Receivables to the
effect, among other things, that (a) as of the closing date of the issuance by
the Trust of the related Series of certificates, 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 (but no longer than 120 days), 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 any
"Enhancement Provider" (as defined in the Agreement), or, with respect to
certain breaches relating to prior liens, immediately upon the earlier to
occur of such discovery or notice and (ii) that, except with respect to
certain breaches relating to prior liens, 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 such Receivables or their 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) depositing into the Collection Account
an amount equal to the Finance Charge Receivables collected with respect to
such Ineligible Receivable and (ii) 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; provided,
however, that if the exclusion of an Ineligible Receivable from the
calculation of the Transferor Interest would cause the Transferor Interest to
be less than the Minimum Transferor Interest or would otherwise not be
permitted by law, then such Ineligible Receivable shall be removed upon the
Transferor depositing in the Excess Funding Account (for allocation as a
Principal Receivable) in immediately available funds an amount equal to the
amount by which the Transferor Interest would be reduced below the Minimum
Transferor Interest. 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
Certificateholders or the Trustee on behalf of Certificateholders.
 
  The Transferor has made and will make upon the execution of each Supplement
representations and warranties to the Trust to the effect, among other things,
that as of the Closing Date and the
 
                                      59
<PAGE>
 
   
closing date of the issuance by the Trust of the related Series of
certificates (a) the Agreement, including the Supplement, constitutes a legal,
valid and binding obligation of the Transferor and (b) the transfer of
Receivables by it to the Trust under the Agreement constitutes 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 the certificateholders), Recoveries allocable to the Trust and Interchange
with respect to the Trust or the grant of a first priority 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 the
certificateholders), which is effective as to each such Receivable upon the
creation thereof and which has been perfected. The Transferor has made, and
will make (or has been or will be deemed to make), similar representations and
warranties to the Trust in connection with each assignment of Receivables in
Additional Accounts or Automatic Additional Accounts. In the event of a breach
of any of the representations and warranties described in the first sentence
of this paragraph, either the Trustee or the holders of certificates
evidencing undivided interests in the Trust aggregating more than 50% of the
sum of the investor interests of all Series issued and outstanding, by written
notice to the Transferor (and to the Trustee and the Servicer if given by the
certificateholders), 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 (but no longer than 120 days). 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
with respect to each Series of certificates required to be repurchased
following such notice, including the Certificates, will generally be equal to
the investor interest of each such Series on the last day of the Monthly
Period preceding the Distribution Date on which the reassignment is scheduled
to be made plus an amount equal to all interest accrued but unpaid on such
certificates at the applicable certificate rate (less the amounts previously
allocated for payment of interest and principal with respect to each such
Series of certificates) through the end of the interest accrual periods of
each such Series. The reassignment deposit amount shall equal the sum of the
reassignment deposits with respect to each Series then issued and outstanding
which is required to be repurchased following such notice. The payment of such
reassignment deposit amount into the Collection Account will be considered a
prepayment in full of all Receivables and will be paid in full to the
certificateholders of such Series upon presentation and surrender of their
certificates. In the Series 1996-1 Supplement, the Transferor represents and
warrants that, as of the Closing Date, the Agreement, as supplemented by such
Supplement, constitutes a legal, valid and binding obligation of the
Transferor. Upon a breach of this representation, either the Trustee or the
holders of Certificates evidencing aggregate undivided interests in the Trust
aggregating more than 50% of each of the Class A Investor Interest and the
Class B Investor Interest by written notice to the Transferor (and to the
Trustee and the Servicer if given by the Certificateholders) may direct the
Transferor to purchase the Certificates (but not the certificates of any other
Series) on terms and conditions substantially similar to those set forth
above. If the Trustee or the certificateholders (including the
Certificateholders) give a notice as provided above, the obligation of the
Transferor to make any such deposit or repurchase will constitute the sole
remedy respecting a breach of the representations and warranties (set forth in
this paragraph) available to the Trustee or the certificateholders.     
   
  An "Eligible Account" is defined to mean a VISA or MasterCard credit card
account owned by the Transferor which, as of the Series Cut-Off Date, (a) is
payable in United States dollars, (b) has not been identified on the computer
files of the Transferor as relating to a cardholder who has died or commenced
action relating to bankruptcy or who is the subject of an involuntary
bankruptcy, insolvency or similar action, (c) has not been classified by the
Transferor as counterfeit, fraudulent, stolen or lost, or as a corporate
business card, (d) has not been charged off by the Transferor in its customary
and usual manner for charging off such Account as of the Series Cut-Off Date,
(e) has not     
 
                                      60
<PAGE>
 
been (and no Receivables in such Account have been) sold or pledged to any
other person, (f) is not an account on which People's Bank or an affiliate of
People's Bank is the obligor and (g) as of the date of origination of such
account, the obligor of which had a billing address in the United States, its
territories or possessions.
 
  An "Eligible Receivable" is defined to mean each Receivable (a) arising
under an Eligible Account, an Eligible Additional Account (in the case of
Additional Accounts) or an Eligible Automatic Additional Account (in the case
of Automatic Additional Accounts), as the case may be, (b) created in
compliance, in all material respects, with all requirements of law applicable
to the Transferor, and pursuant to a credit card agreement complying in all
material respects with all requirements of law applicable to the Transferor,
(c) with respect to which all consents or authorizations of, or registrations
with, any governmental authority required to be obtained or given by the
Transferor in connection with the creation of such Receivable or the
execution, delivery, creation and performance by the Transferor of the related
credit card agreement have been duly obtained or given and are in full force
and effect as of the date of the creation of such Receivable, (d) as to which,
at the time of its creation and at all times thereafter, the Transferor or the
Trust had good and marketable title free and clear of all liens and security
interests (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), (f) which constitutes an "account" or "general intangible" under
and as defined in Article 9 of the UCC as then in effect in the State of New
York, (g) as to which as of the time of its transfer to the Trust, the
Transferor has satisfied all material obligations on its part with respect to
such Receivable required to be satisfied, (h) which is not, at the time of its
transfer to the Trust, subject to any right of rescission, setoff,
counterclaim or defense (including the defense of usury), other than certain
bankruptcy related defenses and (i) as to which the Transferor has done
nothing to impair, or omitted to take any action the omission of which would
impair, the rights of the Trust or the certificateholders.
 
  The Trustee has not made, and it is not required or anticipated that the
Trustee will make, any 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, has delivered and
will deliver to the Trustee on or before March 31 of each year, beginning in
1994, an opinion of counsel with respect to the validity of the security
interest of the Trust in and to the Receivables and certain other components
of the Trust. The Transferor has undertaken to file any such opinion of
counsel delivered to the Trustee with the Commission as an exhibit to a report
on Form 8-K filed under the provisions of the Exchange Act.
 
SALE OF ACCOUNTS
 
  The Transferor has the right to sell, transfer or pledge the Accounts;
provided, however, that (i) the Rating Agency has advised the Transferor and
the Trustee that such sale, transfer or pledge will not result in the
reduction or withdrawal of the then-existing rating of the certificates, (ii)
the Transferor and the Servicer determine such sale, transfer or pledge will
not be materially adverse to the interests of the certificateholders, (iii)
such purchaser, transferee or pledgee shall expressly assume in a supplemental
agreement the applicable obligations and covenants of the Transferor and (iv)
certain other conditions specified in the Agreement are satisfied.
 
ADDITION OF ACCOUNTS
 
  On each day an Eligible Automatic Additional Account is originated (and on
any day such Account exists but has not been previously added to the Trust as
a result of the limitations expressed in the next succeeding sentence), the
Transferor will add the Receivables in each such account to the Trust
 
                                      61
<PAGE>
 
   
and such accounts shall be treated as Automatic Additional Accounts in an
amount not in excess of the Maximum Addition Amount. An "Eligible Automatic
Additional Account" is, as of the relevant date of addition, an Automatic
Additional Account that is (i) a VISA Account or MasterCard credit card
account, satisfying the criteria set forth in the definition of Eligible
Account, or (ii) any other consumer revolving credit account (x) satisfying
the criteria set forth in the definition of Eligible Account without regard to
the requirement that such account be a VISA or MasterCard credit card account,
(y) which would not cause the Rating Agency to indicate in writing that such
addition would result in the reduction or withdrawal of its then-existing
rating of any Series of certificates and (z) to which, to the extent provided
in any Supplement, the provider of any Enhancement for the related Series of
certificates consents, which consent shall not be unreasonably withheld. The
Agreement provides that Automatic Additional Accounts will be transferred to
the Trust only if the following conditions are met: the number of Automatic
Additional Accounts the Receivables of which are designated to be added to the
Trust since (i) the first day of the eleventh preceding Monthly Period minus
the number of Accounts of the type described in clause (ii) in the preceding
sentence added on the initial day of the addition of such type of Account
since the first day of such eleventh preceding Monthly Period plus the number
of Additional Accounts, if any, the Receivables of which have been designated
to be added to the Trust since the first day of such eleventh preceding
Monthly Period pursuant to the next paragraph minus any Removed Accounts
removed since the first day of such eleventh preceding Monthly Period shall
not exceed 15% of the number of Accounts on the first day of such eleventh
preceding Monthly Period, and (ii) the first day of the second preceding
Monthly Period minus the number of Accounts of the type described in clause
(ii) in the preceding sentence added on the initial day of the addition of
such type of Account since the first day of such second preceding Monthly
Period plus the number of Additional Accounts, if any, the Receivables of
which have been designated to be added to the Trust since the first day of
such second preceding Monthly Period pursuant to the next paragraph minus any
Removed Accounts removed since the first day of such second preceding Monthly
Period shall not exceed 10% of the number of Accounts on the first day of such
second preceding Monthly Period (the lesser of the amounts described in
clauses (i) and (ii) of this sentence, the "Maximum Addition Amount"). The
Transferor, at its option, may terminate or suspend the inclusion of Automatic
Additional Accounts at any time.     
   
  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 add
Additional Accounts (i) if on any Record Date the Transferor Interest for the
related Monthly Period is less than the Minimum Transferor Interest of the
Aggregate Principal Receivables (or such higher amount established pursuant to
a Supplement) or (ii) if, on any date of determination, the Aggregate
Principal Receivables is less than the Minimum Aggregate Principal
Receivables. Each such Additional Account must be an "Eligible Additional
Account". An "Eligible Additional Account" is, as of the date such account is
added to the Trust, either (i) a VISA or MasterCard credit card account
satisfying the criteria set forth in the definition of Eligible Account or
(ii) any other consumer revolving credit account, (a) satisfying the criteria
set forth in the definition of Eligible Account (without regard to the
requirement that such account be a VISA or MasterCard credit card account),
(b) the addition of the receivables of which would not cause the Rating Agency
to indicate in writing that such addition would result in the reduction or
withdrawal of its then existing rating of any Series of certificates and (c)
to which, to the extent provided in any Supplement, the provider of any
Enhancement for the related Series of certificates consents, which consent
shall not be unreasonably withheld. 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) the Transferor shall have given prior written
notice of such additions to the Rating Agency, (ii) the Transferor shall have
received notice from the Rating Agency that the inclusion of such accounts as
Additional Accounts will not result in the reduction or withdrawal of its then
existing rating of any Series of certificates, (iii) no selection procedure
believed by the Transferor to be materially adverse to the interests of the
holders of any     
 
                                      62
<PAGE>
 
Series of certificates, including the Certificateholders, was used in
selecting the Additional Accounts and (iv) each Account was an Eligible
Additional Account.
 
REMOVAL OF ACCOUNTS
   
  Subject to the conditions set forth in the next succeeding sentence, on each
Determination Date on which the Transferor Interest for the related Monthly
Period exceeds 10% of Aggregate Principal Receivables on such Determination
Date, the Transferor may, but shall not be obligated to, designate Receivables
from Accounts for deletion and removal from the Trust without notice to the
certificateholders (the "Removed Accounts"). The Transferor is permitted to
designate and require reassignment of Receivables from Removed Accounts only
upon satisfaction of the following conditions, among others: (i) the
Transferor shall have delivered to the Trustee for execution a written
reassignment and a computer file or microfiche list containing a true and
complete list of all Removed Accounts, the Accounts to be identified by, among
other things, account number and their aggregate amount of Principal
Receivables as of the "Removal Date" (as defined in the Agreement); (ii) the
Transferor shall represent and warrant that no selection procedure used by the
Transferor which is materially adverse to the interests of the
certificateholders was utilized in selecting the Removed Accounts; (iii) the
removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, (a) cause a Pay Out Event to occur or (b)
cause the Transferor Interest as a percentage of Aggregate Principal
Receivables to be less than 10% on such Removal Date; (iv) the Transferor
shall have delivered prior written notice of the removal to the Rating Agency
and prior to the date on which such Receivables are to be removed, the
Transferor shall have received notice from the Rating Agency that such removal
will not result in the reduction or withdrawal of the then-existing rating of
any Series of certificates; (v) the Transferor shall have delivered to the
Trustee an officer's certificate confirming the items set forth in clauses (i)
through (iv) above; and (vi) the Transferor, the Trustee and the Rating Agency
will have received an opinion of counsel that the proposed removal will not
adversely affect the federal income tax characterization of the Trust.     
 
COLLECTION AND OTHER SERVICING PROCEDURES
 
  Pursuant to the 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 maintains a blanket bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in
the servicing of credit card receivables covering such actions and in such
amounts as the Servicer believes to be reasonable from time to time.
   
DISCOUNT OPTION     
   
  The Transferor may at its option at any time designate a specified fixed or
variable percentage (the "Discount Percentage") of the amount of Receivables
arising in designated Accounts on and after the date such option (the
"Discount Option") is exercised that otherwise would have been treated as
Principal Receivables to be treated as Finance Charge Receivables. Such
designation of the Discount Percentage will become effective only upon
satisfaction of the requirements set forth in the Agreement, including
confirmation by each Rating Agency that such designation will not result in a
withdrawal or reduction of its rating of any outstanding Series of
certificates. On the date of processing of any Collections, the product of the
Discount Percentage and Collections of Receivables that arise in the
designated Accounts on such day on or after the date such option is exercised
that otherwise would be Principal Receivables will be deemed collections of
Finance Charge Receivables and will be applied accordingly. The Transferor may
at its option, at any time, temporarily or permanently suspend the Discount
Option. Each Certificateholder by its acceptance of a beneficial interest in a
Certificate shall be deemed to have consented to the exercise by the
Transferor of the Discount Option at such time as the Transferor determines to
exercise such option.     
 
                                      63
<PAGE>
 
THE COLLECTION ACCOUNT
   
  The Servicer has established and will maintain, or cause to be maintained,
in the name of the Trust, for the benefit of certificateholders, a "Collection
Account", which is a non-interest bearing segregated trust account established
with a "Qualified Institution", defined either as the corporate trust
department of a Qualified Trust Institution or as a depository institution
(which may include the Servicer, the Trustee or an affiliate of the Servicer),
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 Services, Inc. ("Moody's") and of A-1+ by Standard & Poor's
Corporation ("Standard & Poor's") or a long term rating of at least Aa3 by
Moody's and of at least AAA by Standard & Poor's and deposit insurance as
required by law and by the FDIC. In addition, the Supplement with respect to
any Series may require the Trustee to establish and maintain a subaccount of
the Collection Account for such Series (such subaccount, a "Collection
Subaccount"). Funds in the Collection Account or, as provided in the related
Supplement, any Collection Subaccount, may be invested to the extent provided
in such Supplement, at the direction of the Servicer, in specified investments
including (i) obligations of or fully guaranteed by the United States of
America, (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies, the certificates of deposit of
which have a rating from Standard & Poor's of A-1+ and either the certificates
of deposit of which have a rating from Moody's of P-1 or the long-term
unsecured debt obligations of which have a rating from Moody's of Aa3, and
which demand deposits, time deposits and certificates of deposit are fully
insured to the limits as required by law and by the FDIC, (iii) commercial
paper having, at the time of the Trust's investment, a rating of P-1 and A-1+,
respectively, 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 rated AAA-m or AAA-mG by Standard & Poor's or P-
1 by Moody's or which have otherwise been approved in writing by the Rating
Agency and (vi) certain open-end diversified investment companies which have
been approved in writing by the Rating Agency ("Permitted Investments"). Any
earnings (net of losses and investment expenses) on funds in the Collection
Account or any Collection Subaccount will be paid monthly to the Transferor or
as otherwise specified in the related Supplement. The Servicer has the
revocable power to withdraw funds from the Collection Account or any
Collection Subaccount for the sole purpose of carrying out the Servicer's
duties under the Agreement. The Servicer will initially make daily deposits of
Collections allocable to the Investor Interest into the Collection Account and
will not be entitled to use any such deposited funds for its own purposes. The
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account or any Collection Subaccount for the purpose of making
distributions to the certificateholders in the manner provided in the related
Supplement. The Paying Agent shall initially be the Trustee. The Series 1996-1
Supplement provides for the establishment of a Series 1996-1 Collection
Subaccount and the investment of certain funds therein in Permitted
Investments. In addition, the Servicer has established and will maintain or
cause to be maintained with a Qualified Institution (other than the
Transferor) in the name of the Trustee, on behalf of the Trust, a segregated
trust account, the "Excess Funding Account" for the benefit of the
certificateholders of each Series and the Holder of the Exchangeable
Transferor Certificate. Amounts on deposit in such Excess Funding Account will
be invested in the manner directed by the Transferor in Permitted Investments.
    
SERIES 1996-1 ACCOUNTS
   
  The Servicer will establish and maintain with a Qualified Trust Institution
in the name of the Trustee, two separate accounts in a segregated trust
account maintained in the corporate trust department of such Qualified Trust
Institution (which accounts need not be deposit accounts), a "Finance Charge
Account" and a "Principal Account" for the benefit of the Certificateholders.
The Servicer will also establish a "Distribution Account" (a non-interest
bearing segregated demand deposit account established with a Qualified Trust
Institution).     
 
  A "Qualified Trust Institution" is a depository institution (which may
include the Trustee) having corporate trust powers, organized under the laws
of the United States or any one of the states thereof,
 
                                      64
<PAGE>
 
   
which at all times has a long term rating of at least Baa3 by Moody's and of
at least BBB- by Standard & Poor's and deposit insurance as required by law
and by the FDIC. Funds in the Principal Account and the Finance Charge Account
will be invested, at the direction of the Servicer, in 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 will have the revocable power to withdraw funds from the Collection
Account, the Finance Charge Account, the Principal Account and the Excess
Funding Account for the purpose of carrying out the Servicer's duties under
the Agreement. The Paying Agent shall have the revocable power to withdraw
funds from the Distribution Account for the purpose of making distributions to
the Certificateholders. The Distribution Account shall not contain any funds
of the Transferor or amounts allocable to the Transferor Interest, and no
amounts on deposit therein shall be made available to the Transferor.     
 
  The Finance Charge Account, the Principal Account and the Distribution
Account are collectively referred to as the "Series 1996-1 Accounts".
 
THE CASH COLLATERAL ACCOUNT
 
  The Trust will have the benefit of the Cash Collateral Account, which will
be held with a Qualified Trust Institution in the name of the Trustee for the
benefit of the Certificateholders. Funds on deposit in the Cash Collateral
Account will be invested in Permitted Investments.
   
  The Cash Collateral Account will have an initial Available Cash Collateral
Amount of $36,000,000 to be funded from the proceeds of a loan to be made
pursuant to the Loan Agreement by the Cash Collateral Lender and from a
deposit by the Transferor.     
 
  On each Determination Date, the Servicer will determine the Required Amounts
to be withdrawn from the Cash Collateral Account on the related Distribution
Date, up to the Available Cash Collateral Amount, as described below in "--
Allocation of Funds-Payment of Fees, Interest and Other Items". Amounts
withdrawn from the Cash Collateral Account will be reimbursed up to the
Required Cash Collateral Amount from Excess Spread as described below in "--
Allocation of Funds-Excess Spread". On each Transfer Date, the Trustee, acting
pursuant to the Servicer's instructions, will withdraw from the Cash
Collateral Account an amount equal to the amount by which the amount on
deposit in the Cash Collateral Account exceeds the Required Cash Collateral
Amount and apply such amounts as Excess Spread to items (g) through (n) of "--
Allocation of Funds-Excess Spread" below.
   
  The "Required Cash Collateral Amount" with respect to any Transfer Date
means, generally, the product of (i) the Investor Interest as of the last day
of the Monthly Period preceding such date and (ii) 9.0%, but in no event less
than the lesser of $12,000,000 and the Investor Interest as of the last day of
the related Monthly Period; provided, however, that if certain withdrawals are
made from the Cash Collateral Account during the Controlled Amortization
Period or if a Pay Out Event occurs, the Required Cash Collateral Amount for
such Transfer Date shall be the lesser of the Required Cash Collateral Amount
for the Transfer Date immediately preceding the occurrence of such withdrawal
or such Pay Out Event and the unpaid principal amount of the Certificates.
    
ALLOCATION PERCENTAGES
 
  Pursuant to the Agreement, the Servicer will allocate between the Investor
Interest, the investor interest of all other Series of certificates issued and
outstanding and the Transferor Interest all amounts collected on Finance
Charge Receivables, all amounts collected on Principal Receivables and all
Receivables in Defaulted Accounts. The Servicer will make each allocation by
reference to the applicable Investor Percentage (or the applicable percentage
for each other Series) and the Transferor Percentage in each case.
"Collections" (as defined in the Agreement) will be applied first, as
Collections in respect of Finance Charge Receivables billed ("Finance Charge
Collections") and, second, as Collections in respect of Principal Receivables
billed.
 
                                      65
<PAGE>
 
  The Investor Percentage will be calculated as follows:
 
  Finance Charge Receivables and Receivables in Defaulted Accounts. When used
with respect to Finance Charge Receivables, or when used with respect to
Receivables in Accounts written off as uncollectible at any time ("Defaulted
Accounts"), "Investor Percentage" means for any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is the Investor Interest,
determined as of the last day of the Monthly Period immediately preceding such
date of determination, and the denominator of which is the Aggregate Principal
Receivables, determined as of the last day of the Monthly Period immediately
preceding such date of determination.
   
  Principal Receivables during Revolving Period. When used with respect to
Principal Receivables during the Revolving Period, "Investor Percentage" means
for any Monthly Period, the percentage equivalent of a fraction, the numerator
of which is the Investor Interest (determined as of the end of the last day of
the Monthly Period immediately preceding such date of determination) less, for
any date of determination in the Revolving Period occurring during the Paired
Amortization Period, the numerator used to calculate the investor percentage
for such date of determination with respect to Principal Receivables for the
Paired Certificates pursuant to the related Supplement, and the denominator of
which is the greater of (a) the Aggregate Principal Receivables (determined as
of the end of the last day of the Monthly Period immediately preceding such
date of determination) and
       
(b) the sum of the numerators used to calculate the investor percentages with
respect to Principal Receivables for all Series of certificates outstanding.
       
  Principal Receivables during the Controlled Amortization Period or the Rapid
Amortization Period. When used with respect to Principal Receivables for any
Monthly Period during the Controlled Amortization Period or the Rapid
Amortization Period, "Investor Percentage" means the percentage equivalent of
a fraction, the numerator of which is the Investor Interest as of the close of
business on the last day of the Revolving Period (or, if there has been an
Investor Exchange with respect to the Certificates after the end of the
Revolving Period, the Investor Interest as of the end of the Revolving Period
will be reduced ratably to reflect the amount of Certificates tendered and
cancelled pursuant to any Investor Exchange) less, for any date of
determination in the Rapid Amortization Period occurring during the Paired
Amortization Period, the numerator used to calculate the investor percentage
for such date of determination with respect to Principal Receivables for the
Paired Certificates pursuant to the related Supplement, and the denominator of
which is the greater of (a) the Aggregate Principal Receivables determined as
of the last day of the Monthly Period immediately preceding such date of
determination and (b) the sum of the numerators used to calculate the investor
percentages for such date of determination with respect to Principal
Receivables for all Series of certificates outstanding; provided, however,
that during the Controlled Amortization Period, the Investor Percentage of
Principal Receivables may be reset at the option of the Servicer (and any such
reset Investor Percentage will apply in any Rapid Amortization Period
following the Controlled Amortization Period) on the date of issuance of any
new Series of certificates to a fixed percentage equivalent of a fraction not
to be greater than the fraction described above in this sentence and not to be
less than the greater of (i) a fraction, the numerator of which is the
Investor Interest, determined as of the close of business on the last day of
the Monthly Period immediately preceding the date of determination, and the
denominator of which is the greater of (a) the Aggregate Principal
Receivables, determined as of the last day of the Monthly Period immediately
preceding such date of determination, and (b) the sum of the numerators used
to calculate the investor percentages for such date of determination with
respect to Principal Receivables for all Series of certificates outstanding
and (ii) a fraction, that when multiplied by the amount of collections of
Principal Receivables for the preceding Monthly Period will equal the greater
of the Class A Controlled Distribution Amount or the Class B Controlled
Distribution Amount for such Monthly Period plus 10% of the greater of the
Class A Controlled Amortization Amount or the Class B Controlled Amortization
Amount minus any Available Shared Principal Collections with respect to such
Monthly Period. The Investor Percentage with respect to the allocation of
Principal Receivables during the Rapid Amortization Period will (except in
    
                                      66
<PAGE>
 
   
connection with the Paired Amortization Period) remain fixed at the then
existing Investor Percentage and may not be reset.     
 
  The Investor Percentage of collections so allocated during the Revolving
Period and the Amortization Periods to the Certificateholders will be further
allocated between the Class A Certificateholders and the Class B
Certificateholders in accordance with the Class A Investor Percentage and the
Class B Investor Percentage, respectively. The "Class A Investor Percentage"
and the "Class B Investor Percentage" mean, respectively, the percentage
equivalent of a fraction, the numerator of which is the Class A Investor
Interest or the Class B Investor Interest, as the case may be, determined as
of the last day of the Monthly Period immediately preceding such date of
determination, and the denominator of which is the sum of the Class A Investor
Interest and the Class B Investor Interest, determined as of the last day of
the Monthly Period immediately preceding such date of determination.
 
  The term "Available Shared Principal Collections" means, on any date, Shared
Principal Collections allocable to the Certificates from each other Series
that has a controlled or scheduled amortization or accumulation period
beginning after the Class B Expected Final Distribution Date.
 
  The "Transferor Percentage" will, in all cases, be equal to 100% minus the
sum of the applicable Investor Percentage and the applicable investor
percentages with respect to all Series of investor certificates issued and
outstanding.
   
  As a result of the calculations described above, collections of Finance
Charge Receivables received during any Monthly Period will generally be
allocated to the Certificateholders based on the relationship of the amount of
the Investor Interest to the Aggregate Principal Receivables in the Trust
(which may fluctuate from month to month). As described above, during the
Revolving Period the Investor Percentage applied when allocating collections
of Principal Receivables is expected to vary from month to month because the
Investor Interest as a percentage of the Aggregate Principal Receivables in
the Trust will fluctuate from day to day. During the Controlled Amortization
Period and the Rapid Amortization Period, however, the amount of collections
of Principal Receivables allocated to the Investor Interest each day will
generally be equal to the Investor Percentage with respect to Aggregate
Principal Receivables on the last day of the Revolving Period or as of the
effective date of the most recent tender and cancellation of Certificates
pursuant to an Investor Exchange, if any, after the commencement of the
Controlled Amortization Period or the Rapid Amortization Period, assuming the
Servicer has not elected to reset the Investor Percentage and assuming the
Paired Amortization Period is not continuing during such Amortization Period.
    
EXCESS FUNDING ACCOUNT
   
  At any time during which no Series is in an accumulation period or
amortization period (including any early amortization period), or for a Series
in amortization, the principal funding account, if any, is fully funded or
amounts have otherwise been deposited in an account established for the
benefit of such Series sufficient to pay the principal amount of such Series
in full, and the Transferor Interest does not exceed the Minimum Transferor
Interest, funds (to the extent available therefor as described herein)
otherwise payable to the Holder of the Exchangeable Transferor Certificate
will be deposited in the Excess Funding Account on any business day in an
amount equal to the difference on such business day between the Transferor
Interest and the Minimum Transferor Interest; provided, however, that to the
extent the Transferor Interest has been reduced below the Minimum Transferor
Interest as a result of Receivables in Defaulted Accounts allocated to the
Transferor Interest, no funds will be deposited in the Excess Funding Account
in respect of such reduction attributable to Receivables in Defaulted
Accounts, as determined below. Funds on deposit in the Excess Funding Account
will be withdrawn and paid to the Holder of the Exchangeable Transferor
Certificate to the extent that on any day the Transferor Interest exceeds the
Minimum Transferor Interest as a result of the addition of new     
 
                                      67
<PAGE>
 
Receivables to the Trust or allocated to one or more Series when they are in
accumulation or amortization periods (including any early amortization
period). Such deposits in and withdrawals from the Excess Funding Account may
be made on a daily basis. With respect to any date, to the extent that the
Minimum Transferor Interest exceeds the Transferor Interest due to the
allocation of Principal Receivables in any Defaulted Accounts to the
Transferor Interest on such date, the Transferor will not be required to make
a deposit to the Excess Funding Account with respect to the portion of such
excess equal to the lesser of (i) the product of the Principal Receivables in
such Defaulted Accounts and the Transferor Percentage on such date and (ii)
the product of (a) the amount by which the Minimum Transferor Interest exceeds
the Transferor Interest and (b) a percentage, the numerator of which is the
Transferor Percentage of the Principal Receivables in such Defaulted Accounts
on such day and the denominator of which is the Aggregate Principal
Receivables at the end of the preceding date of processing minus the Aggregate
Principal Receivables on the current date prior to the deposit of any amount
in the Excess Funding Account.
 
  Any funds on deposit in the Excess Funding Account at the beginning of the
Rapid Amortization Period will be paid to the Certificateholders as a payment
in respect of principal, and during the Controlled Amortization Period will be
paid to the Certificateholders as a payment in respect of principal to the
extent that monthly Collections received in respect of Principal Receivables
and Shared Principal Collections allocable to the Investor Interest are
insufficient to pay the applicable Controlled Amortization Amount.
 
  Funds on deposit in the Excess Funding Account will be invested by the
Trustee at the direction of the Transferor in Permitted Investments. On each
Distribution Date, all net investment income earned on amounts in the Excess
Funding Account since the preceding Distribution Date will be withdrawn from
the Excess Funding Account and applied as Collections in respect of Finance
Charge Receivables as described herein.
 
APPLICATION OF COLLECTIONS
 
  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. Notwithstanding the foregoing, for as long as
(a) (i) the Servicer provides to the Trustee a letter of credit or other
arrangement covering risk of collection of the Servicer acceptable to the
Rating Agency and (ii) the Transferor and the Trustee shall have received a
notice from the Rating Agency that such letter of credit or other arrangement
would not result in the lowering or withdrawal of such Rating Agency's then-
existing rating of any Series of certificates or (b) People's Bank remains the
Servicer under the Agreement, if People's Bank or any of its affiliates in
which the Collection Account is maintained 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 as required by law and the FDIC, then the Servicer need not deposit
collections on the day indicated in the preceding sentence but may use for its
own benefit all such collections until the related Transfer Date at which time
the Servicer will make such deposits 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.
   
  Throughout the existence of the Trust, on each business day the Servicer
shall allocate and pay to the Holder of the Exchangeable Transferor
Certificate, an amount equal to the Transferor Percentage of the aggregate
amount of Collections allocable to Principal Receivables and Finance Charge
Receivables in respect of such business day.     
 
  On each business day, the Servicer will withdraw the following amounts from
the Collection Account for application as indicated:
 
    (a) an amount equal to the Investor Percentage of the aggregate amount of
  such deposits in respect of Finance Charge Receivables will be deposited
  into the Finance Charge Account;
 
                                      68
<PAGE>
 
    (b) during the Revolving Period, an amount equal to the applicable
  Investor Percentage of the aggregate amount of such deposits in respect of
  Principal Receivables will be applied as Shared Principal Collections;
     
    (c) during the Controlled Amortization Period, an amount equal to the sum
  of (i) the applicable Investor Percentage of the aggregate amount of such
  deposits in respect of Principal Receivables, together with certain amounts
  treated as Collections of Principal Receivables, including amounts applied
  with respect to Investor Default Amounts and Investor Charge Offs
  (collectively, the "Principal Allocation"), (ii) any amount of Shared
  Principal Collections and (iii) amounts withdrawn from the Excess Funding
  Account allocated to the Certificates will be deposited in the Principal
  Account, up to, during any Monthly Period, an amount equal to the
  applicable Controlled Distribution Amount. On any business day when the
  amount on deposit in the Principal Account exceeds the applicable
  Controlled Distribution Amount for the Certificates, such excess will be
  treated as Shared Principal Collections and applied as such; and     
     
    (d) during the Rapid Amortization Period, if any, an amount equal to the
  Principal Allocation, any amount of Shared Principal Collections and any
  amounts withdrawn from the Excess Funding Account allocated to the
  Certificates, up to the amount of the Investor Interest, will be deposited
  into the Principal Account.     
   
  During any Monthly Period, Shared Principal Collections will be allocated to
each outstanding Series pro rata based on the amount of the shortfall in
deposits in respect of Principal Receivables to cover amounts payable to the
certificateholders of any Series out of Collections in respect of Principal
Receivables. The Servicer will pay any remaining Shared Principal Collections
on such business day to the Holder of the Exchangeable Transferor Certificate.
       
  Any Shared Principal Collections and other amounts not paid to the
Transferor because the Transferor Interest on any date, after giving effect to
the inclusion in the Trust of all Receivables on or prior to such date and the
application of all prior payments to the Transferor, does not exceed the
Minimum Transferor Interest, together with any adjustment payments (as
described in the third paragraph of "--Defaulted Receivables; Adjustments and
Fraudulent Charges" below), will be deposited into and held in the Excess
Funding Account, and on the commencement of the Amortization Period with
respect to any Series, such amounts will be deposited in the Principal Account
of such Series to the extent specified in the related Supplement until the
holders of certificates of such Series have been paid in full. Any proceeds
from any repurchase of the certificates occurring in connection with a Service
Transfer and the proceeds of any sale, disposition or liquidation of
Receivables following the occurrence of a Pay Out Event caused by the
appointment of a receiver or conservator for the Transferor or in connection
with the termination of the Trust will be deposited into the Collection
Account immediately upon receipt and will be allocated as collections of
Principal Receivables or Finance Charge Receivables, as applicable.     
 
ALLOCATION OF FUNDS
 
  Payment of Fees, Interest and Other Items. On each Transfer Date (except as
noted below), the Servicer or the Trustee, acting pursuant to the Servicer's
instructions, will withdraw all amounts on deposit in the Finance Charge
Account in respect of allocations of Finance Charge Receivables during the
immediately preceding Monthly Period and make the following payments and
deposits in the following order:
     
    (i) An amount equal to the product of (x) the Class A Investor Percentage
  and (y) the Investor Percentage of Finance Charge Collections deposited
  into the Collection Account with respect to such preceding Monthly Period
  will be distributed in the following priority:     
 
      (a) an amount equal to the product of (i) the lesser of the Class A
    Certificate Rate and the Class A Cap Rate (or   % for the Initial
    Interest Period), (ii) the Class A Investor
 
                                      69
<PAGE>
 
    Interest determined as of the preceding Distribution Date or, for the
    Initial Interest Period, the Closing Date (after giving effect to all
    payments, deposits and withdrawals made on such Distribution Date or
    Closing Date) and (iii) the actual number of days in the related
    Interest Period or the Initial Interest Period divided by 360 ("Class A
    Monthly Cap Rate Interest") plus any overdue Class A Monthly Cap Rate
    Interest in respect of which a distribution to Class A
    Certificateholders has not been made, will be deposited in the
    Distribution Account for distribution to Class A Certificateholders on
    the next succeeding Distribution Date;
 
      (b) an amount equal to the Class A Monthly Servicing Fee for the
    preceding Monthly Period and any accrued and unpaid Class A Monthly
    Servicing Fees will be paid to the Servicer;
       
      (c) an amount equal to the Class A Investor Default Amount for the
    preceding Monthly Period will be treated as Collections of Principal
    Receivables and will be (i) treated as Shared Principal Collections
    during the Revolving Period and (ii) deposited in the Distribution
    Account for distribution to Class A Certificateholders on the next
    succeeding Distribution Date, during either the Controlled Amortization
    Period (in which case such deposit, together with any other funds in
    the Distribution Account, will not exceed the Class A Controlled
    Distribution Amount) or the Rapid Amortization Period (in which case
    such deposit, together with any other funds in the Distribution
    Account, will not exceed the Class A Investor Interest);     
       
      (d) an amount equal to the unreimbursed Class A Investor Charge Offs
    will be treated as Collections of Principal Receivables and will be
    applied in accordance with subclauses (i) and (ii) of clause (c) above;
    and     
 
      (e) the balance, if any, will constitute a portion of Excess Spread
    and will be allocated and distributed as described below.
 
  The excess of the Class A Monthly Interest over the Class A Monthly Cap Rate
Interest will be funded from and to the extent of payments made pursuant to
the Class A Interest Rate Cap and from Excess Spread.
     
    (ii) An amount equal to the product of (x) the Class B Investor
  Percentage and (y) the Investor Percentage of Finance Charge Collections
  deposited into the Collection Account with respect to such preceding
  Monthly Period will be distributed in the following priority:     
 
      (a) an amount equal to the product of (i) the lesser of the Class B
    Certificate Rate and the Class B Cap Rate (or   % for the Initial
    Interest Period), (ii) the Class B Investor Interest determined as of
    the preceding Distribution Date or, for the Initial Interest Period,
    the Closing Date (after giving effect to all payments, deposits and
    withdrawals made on such Distribution Date or Closing Date) and (iii)
    the actual number of days in the related Interest Period or the Initial
    Interest Period divided by 360 ("Class B Monthly Cap Rate Interest"),
    plus any overdue Class B Monthly Cap Rate Interest in respect of which
    a distribution to Class B Certificateholders has not been made, will be
    deposited in the Distribution Account for distribution to Class B
    Certificateholders on the next succeeding Distribution Date;
 
      (b) an amount equal to the Class B Monthly Servicing Fee for the
    preceding Monthly Period and any accrued and unpaid Class B Monthly
    Servicing Fees will be paid to the Servicer;
       
      (c) an amount equal to the Class B Investor Default Amount for the
    preceding Monthly Period will be treated as Collections of Principal
    Receivables and will be (i) treated as Shared Principal Collections
    during the Revolving Period and (ii) deposited in the Distribution
    Account for distribution to the Class A Certificateholders on the next
    succeeding Distribution Date until paid in full and then to the Class B
    Certificateholders on the Class B Payment Commencement Date and on each
    succeeding Distribution Date, during either the Controlled Amortization
    Period (in which case such deposit, together with any other funds in
    the     
 
                                      70
<PAGE>
 
       
    Distribution Account, will not exceed the Class B Controlled
    Distribution Amount) or the Rapid Amortization Period (in which case
    such deposit, together with any other funds in the Distribution
    Account, will not exceed the Class B Investor Interest);     
 
      (d) an amount equal to the unreimbursed Class B Investor Charge Offs
    will be treated as Collections of Principal Receivables and (other than
    those amounts treated as Reallocated Principal Collections) will be
    applied in accordance with subclauses (i) and (ii) of clause (c) above;
    and
 
      (e) the balance, if any, will constitute a portion of Excess Spread
    and will be allocated and distributed as described below.
 
  The excess of the Class B Monthly Interest over the Class B Monthly Cap Rate
Interest will be funded from and to the extent of payments made pursuant to
the Class B Interest Rate Cap and from Excess Spread.
 
  Excess Spread. Excess Spread will be allocated and distributed in the
following priority:
 
    (a) an amount equal to the Class A Required Amount will be applied to pay
  such Class A Required Amount;
 
    (b) an amount equal to the Class B Required Amount will be applied to pay
  such Class B Required Amount;
 
    (c) an amount equal to the amount of any accrued and unpaid interest on
  any overdue Class A Monthly Interest, calculated on the basis of (x) a
  default rate of interest equal to the Class A Certificate Rate plus 0.5%
  and (y) the actual number of days such Class A Monthly Interest is or was
  at any time overdue, divided by 360;
 
    (d) an amount equal to the amount of any accrued and unpaid interest on
  any overdue Class B Monthly Interest, calculated on the basis of (x) a
  default rate of interest equal to the Class B Certificate Rate plus 0.5%
  and (y) the actual number of days such Class B Monthly Interest is or was
  at any time overdue, divided by 360;
 
    (e) an amount equal to any reductions in the Class B Investor Interest in
  connection with the payment of the Class A Required Amount will be applied
  to reinstate the Class B Investor Interest;
 
    (f) an amount equal to the amount by which the Required Cash Collateral
  Amount exceeds the amount on deposit in the Cash Collateral Account will be
  deposited in the Cash Collateral Account;
 
    (g) an amount equal to the amount by which the Class A Monthly Interest
  for the preceding Interest Period exceeds the Class A Monthly Cap Rate
  Interest (other than Class A Excess Interest), to the extent such amount is
  not paid by the Interest Rate Cap Provider pursuant to the Class A Interest
  Rate Cap, and any such accrued and unpaid amounts for prior Interest
  Periods;
 
    (h) an amount equal to the amount by which the Class B Monthly Interest
  for the preceding Interest Period exceeds the Class B Monthly Cap Rate
  Interest (other than Class B Excess Interest), to the extent such amount is
  not paid by the Interest Rate Cap Provider pursuant to the Class B Interest
  Rate Cap, and any such accrued and unpaid amounts for prior Interest
  Periods;
 
    (i) any amounts due and payable under the Loan Agreement will be applied
  in accordance with and to the extent specified in the Loan Agreement;
 
    (j) an amount equal to the amount of any Class A Excess Interest accruing
  during the related Interest Period;
 
    (k) an amount equal to the amount of any Class B Excess Interest accruing
  during the related Interest Period;
 
                                      71
<PAGE>
 
     
    (l) the balance will constitute Shared Finance Charge Collections, to be
  applied and distributed as described below in "--Shared Finance Charge
  Collections";     
     
    (m) any amounts remaining after application as Shared Finance Charge
  Collections will be applied to the payment of other accrued and unpaid
  expenses of the Trust, if any; and     
     
    (n) any amounts remaining after application as Shared Finance Charge
  Collections and to expenses of the Trust, if any, will be paid to the
  Holder of the Exchangeable Transferor Certificate.     
   
  Shared Finance Charge Collections. Shared Finance Charge Collections derived
from Excess Spread will be applied to cover any shortfalls with respect to
amounts payable from Finance Charge Collections allocable to any other Series
then outstanding. Any such Shared Finance Charge Collections remaining after
covering shortfalls with respect to all outstanding Series will be distributed
to the Holder of the Exchangeable Transferor Certificate. Any amounts
designated as Shared Finance Charge Collections pursuant to Supplements for
any other Series and allocable to the Certificates will be applied first, to
the extent of any shortfalls in the amount available from the Finance Charge
Account, to make the payments and deposits described in clauses (i)(a) through
(d) above, second, to make the payments and deposits described in clauses
(ii)(a) through (d) above, third, to reimburse any reductions in the Class B
Investor Interest arising in connection with the payment of the Class A
Required Amount and fourth, to make the payments described above in clauses
(g) and (h) of "--Excess Spread" and thereafter paid to the Holder of the
Exchangeable Transferor Certificate. If the amount on deposit in the Finance
Charge Account with respect to the allocations of Finance Charge Receivables
during the preceding Monthly Period and any amounts designated as Shared
Finance Charge Collections pursuant to the Supplements for any other Series
and allocable to the Certificates are insufficient to make any of the payments
or deposits specified in clauses (i)(a) through (d) and (ii)(a) through (d)
above, the Trustee, acting pursuant to the Servicer's instructions, will make
a withdrawal from the Cash Collateral Account of the remaining Required
Amounts, up to the Available Cash Collateral Amount, to be applied first to
the remaining Class A Required Amount and then to the remaining Class B
Required Amount, and if the Available Cash Collateral Amount is less than the
remaining Required Amounts, apply collections of Principal Receivables
allocated to the Class B Certificate as Reallocated Principal Collections on
the Transfer Date to cover any remaining Class A Required Amount. See "--The
Cash Collateral Account" and "--Reallocation of Cash Flows".     
   
  Payments of Principal. On the Transfer Date in the Monthly Period for each
Series following the Monthly Period in which either Amortization Period begins
and on each Transfer Date thereafter, the Trustee, acting in accordance with
instructions from the Servicer, will withdraw all amounts on deposit in the
Principal Account in respect of allocations of Principal Receivables during or
in respect of the immediately preceding Monthly Period plus the amount of any
Shared Principal Collections allocable to the Certificates, and deposit such
amounts in the Distribution Account for distribution to the Certificateholders
on the next succeeding Distribution Date. The first principal payment will be
made to Class A Certificateholders beginning on the Distribution Date
following the Monthly Period in which either the Controlled Amortization
Period or the Rapid Amortization Period commences.     
 
REALLOCATION OF CASH FLOWS
 
  On each Distribution Date during the Revolving Period, the Controlled
Amortization Period and the Rapid Amortization Period, if any, 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 after application of
available Finance Charge Collections, Excess Spread, and Shared Finance Charge
Collections, in each case allocable to the Class A Certificates, a withdrawal
will be made from the Cash Collateral Account, to the extent of the Class A
Required Amount remaining after such application (but not more than the
Available Cash Collateral Amount). If the Available Cash Collateral Amount is
less than such remaining Class A Required Amount, collections of Principal
Receivables allocable to the Class B
 
                                      72
<PAGE>
 
Certificates will then be reallocated and applied to fund the remaining Class
A Required Amount (such reallocated collections, "Reallocated Principal
Collections"). The Class B Investor Interest will be reduced by the amount of
Reallocated Principal Collections.
   
  If, as of such Distribution Date, the Available Cash Collateral Amount and
Reallocated Principal Collections are insufficient to fund the remaining Class
A Required Amount for such Distribution Date, the Class B Investor Interest
will be further reduced (but not, in the aggregate, in excess of the Class A
Investor Default Amount for such Distribution Date) by the amount of such
remaining insufficiency. If the Class B Investor Interest is reduced to zero,
the Class A Investor Interest will be reduced by the amount of any unpaid
Class A Required Amount for such Distribution Date, but not in excess of the
Class A Investor Default Amount for such Distribution Date, and the Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust.     
 
  If, on any such Distribution Date, the Class B Required Amount is greater
than zero, after application of available Finance Charge Collections, Excess
Spread, and Shared Finance Charge Collections, in each case allocable to the
Class B Certificates, a withdrawal will be made from the Cash Collateral
Account, to the extent of the Class B Required Amount remaining after such
application (but not more than the portion of the Available Cash Collateral
Amount, if any, not required to pay the Class A Required Amount).
 
  If, as of such Distribution Date, such portion of the Available Cash
Collateral Amount is not sufficient to fund the remaining Class B Required
Amount, the Class B Investor Interest will be reduced (but not in excess of
the Class B Investor Default Amount for such Distribution Date) by the amount
of any unpaid Class B Required Amount for such Distribution Date.
   
  Collections of Principal Receivables allocable to the Class B Certificates
for the purpose of determining Collections available to be applied as
Reallocated Principal Collections will be determined for any Monthly Period
during the Revolving Period and Amortization Periods by multiplying the
Class B Investor Percentage by the applicable Investor Percentage of
Collections of Principal Receivables for such Monthly Period, and adding
certain other amounts treated as collections of Principal Receivables
(including amounts applied with respect to Investor Default Amounts and
Investor Charge Offs).     
 
  Any reductions of the Class B Investor Interest due to payment of the Class
A Required Amount will thereafter be reimbursed and the Class B Investor
Interest increased on each Distribution Date by the amount, if any, of Excess
Spread and any Shared Finance Charge Collections from other Series available
for that purpose.
 
DEFAULTED RECEIVABLES; ADJUSTMENTS AND FRAUDULENT CHARGES
 
  On the eighth business day of each month but not later than the tenth
calendar day (and if such day is not a business day, the preceding business
day) (such date, a "Determination Date"), the Servicer will calculate the
Class A Investor Default Amount and the Class B Investor Default Amount for
the preceding Monthly Period. The terms "Class A Investor Default Amount" and
"Class B Investor Default Amount" mean, respectively, for any Monthly Period,
the product of (a) the Class A Investor Percentage or the Class B Investor
Percentage, as the case may be, determined as of the end of the Monthly
Period, (b) the Investor Percentage for Defaulted Accounts and (c) the amount
of Defaulted Receivables (the sum of the Class A Investor Default Amount and
the Class B Investor Default Amount is sometimes referred to as the "Investor
Default Amount"); the term "Defaulted Receivables" means, for any Monthly
Period, Receivables which in such Monthly Period were written off as
uncollectible in accordance with the Servicer's policies and procedures for
servicing credit card receivables comparable to the Receivables.
 
                                      73
<PAGE>
 
   
  If the amount payable on a Distribution Date in respect of interest on the
Certificates and the Class A Investor Default Amount or the Class B Investor
Default Amount, as the case may be, as described in "--Allocation of Funds--
Payment of Fees, Interest and Other Items", exceeds the amount on deposit in
the Finance Charge Account with respect to allocations of collections of
Finance Charge Receivables during the preceding Monthly Period, Shared Finance
Charge Collections allocable to the Certificates, the Available Cash
Collateral Amount and available Reallocated Principal Collections, then the
Class A Investor Interest or the Class B Investor Interest, as the case may
be, will be reduced by the amount of such excess, but not by more than such
Class A Investor Default Amount or such Class B Investor Default Amount
(respectively, a "Class A Investor Charge Off" and a "Class B Investor Charge
Off" and together, "Investor Charge Offs"). Such reduction will have the
effect of reducing, pro rata, the principal balance of each Class A
Certificate or Class B Certificate, as the case may be. Investor Charge Offs
will be reimbursed on any Distribution Date to the extent amounts on deposit
in the Finance Charge Account with respect to allocations of collections of
Finance Charge Receivables during the preceding Monthly Period, Shared Finance
Charge Collections allocable to the Certificates and the Available Cash
Collateral Amount exceed the interest on the Certificates and any Investor
Default Amount payable on such date, as described above in "--Allocation of
Funds--Payment of Fees, Interest and Other Items". Such reimbursements of
Investor Charge Offs will result in an increase in the Investor Interest,
which will have the effect of increasing, pro rata, the principal balance of
each Certificate.     
 
  The Servicer shall be obligated to reduce on a net basis at the end of each
Monthly Period the aggregate amount of Principal Receivables (i) created in
respect of merchandise refused or returned by the obligor thereunder or as to
which the obligor thereunder has asserted a counterclaim or defense, (ii)
reduced by the Servicer by any charge-back or other principal adjustment,
(iii) created as a result of a fraudulent or counterfeit charge, (iv)
resulting from adjustments relating to returned or dishonored checks, or (v)
resulting from Servicer error. The Transferor Interest will be reduced by the
amount of any such adjustment; provided, however, that if the Transferor
Interest would be reduced below the Minimum Transferor Interest by virtue of
any such adjustment, the Transferor will be required to make an adjustment
payment to be deposited to the Excess Funding Account in an amount equal to
the amount by which the Transferor Interest would have been reduced below the
Minimum Transferor Interest.
 
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
   
  The Certificates will be subject to optional purchase by the Transferor on
any Distribution Date on or after which the Investor Interest is reduced to an
amount less than or equal to 5% of the Initial Investor Interest if certain
conditions set forth in the Agreement are met. The Investor Interest will be
subject to mandatory purchase by the Transferor on the Distribution Date
immediately preceding the Scheduled Series 1996-1 Termination Date if the
Investor Interest is reduced to an amount less than or equal to 5% of the
Initial Investor Interest, if certain conditions set forth in the Agreement
are met. The mandatory purchase requirement is in addition to any other
provisions and remedies provided by the Agreement and will not serve to
relieve any party of obligations it may otherwise have or waive any remedy
that is otherwise provided. The purchase price will be equal to the Investor
Interest, plus accrued and unpaid interest (other than Class A Excess Interest
or Class B Excess Interest, as the case may be) on the Certificates at the
applicable Certificate Rate through the date preceding the date on which the
purchase occurs, less the amounts, if any previously accumulated for the
payment of principal and interest. The net proceeds of such purchase and any
collections on the Receivables will be distributed pro rata to
certificateholders including the Certificateholders on the Distribution Date
following the Monthly Period in which such purchase occurs as final payment of
the Certificates. Subject to prior termination as provided above, the
Agreement provides that the final distribution of principal and interest on
the Certificates will be made no later than the November 2004 Distribution
Date (the "Scheduled Series 1996-1 Termination Date").     
 
 
                                      74
<PAGE>
 
   
  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 day on which funds shall have been deposited in the Collection
Account or the applicable Series account sufficient to pay in full (i) the
aggregate investor interest of all Series outstanding plus accrued interest
thereon (other than Class A Excess Interest or Class B Excess Interest, as the
case may be) at the applicable certificate rates through the applicable
interest accrual period prior to the Distribution Date with respect to each
such Series and (ii) all amounts owed to each Enhancement Provider and (b) if
a trust extension has occurred, the extended trust termination date, which
shall be no later than the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the father of the late
President of the United States, living on the date of the Agreement. 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 Collection Account and other similar bank accounts of the Trust with
respect to other Series).     
 
  In the event that the Investor Interest is greater than zero on the
Scheduled Series 1996-1 Termination Date, the Trustee will sell or cause to be
sold interests in the Receivables or certain Receivables as specified in the
Agreement, in an amount up to 110% of the Investor Interest of the
Certificates at the close of business on such date (but not more than the
total amount of Receivables allocable to the Certificates). The net proceeds
of such sale and any collections on the Receivables will be distributed on the
Scheduled Series 1996-1 Termination Date, as the final payment of the
Certificates, first, pro rata to the Class A Certificateholders in an amount
sufficient to pay the Class A Investor Interest in full, and the balance pro
rata to the Class B Certificateholders.
 
PAY OUT EVENTS
   
  The Revolving Period will continue through the end of the October 2000
Monthly Period and the Controlled Amortization Period will begin at such time,
unless a Pay Out Event occurs. The Rapid Amortization Period will commence
when a Pay Out Event occurs or is deemed to occur. A Pay Out Event with
respect to the Certificates refers to any of the following events:     
     
    (i) failure on the part of the Transferor or the Holder of the
  Exchangeable Transferor Certificate (a) to make any payment or deposit on
  the date required under the Agreement (or within the applicable grace
  period which will not exceed five business days), unless such failure is
  due to certain force majeure events, or (b) duly to observe or perform in
  any material respect any covenants or agreements of the Transferor, which
  in the case of subclause (b) hereof has a material adverse effect on the
  Certificateholders (which determination shall be made without regard to
  whether funds are on deposit in the Cash Collateral Account or amounts are
  available under the Interest Rate Caps), continues unremedied for a period
  of 60 days after written notice and continues to affect materially and
  adversely the interests of the Certificateholders for such period;     
 
    (ii) any representation or warranty made by the Transferor in the
  Agreement, including the Series 1996-1 Supplement, or any information
  required to be given by the Transferor to the Trustee to identify the
  Accounts proves to have been incorrect in any material respect when made
  and 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; provided,
  however, that a Pay Out Event described in this clause (ii) shall not be
  deemed to occur if the Transferor has accepted the transfer 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;
 
    (iii) certain events of insolvency, conservatorship or receivership
  relating to the Transferor;
 
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<PAGE>
 
    (iv) the average of the Portfolio Yield for any three consecutive Monthly
  Periods is a rate which is less than the Base Rate;
 
    (v) the Trust becomes subject to regulation as an "investment company"
  within the meaning of the Investment Company Act of 1940, as amended;
 
    (vi) after any applicable grace period, a failure by the Transferor to
  convey Receivables in Additional Accounts to the Trust when required by the
  Agreement;
     
    (vii) any Servicer Default occurs which would have a material adverse
  effect on the certificateholders (which determination shall be made without
  regard to whether funds are on deposit in the Cash Collateral Account or
  amounts are available under the Interest Rate Caps);     
     
    (viii) on any Transfer Date the Available Cash Collateral Amount is less
  than the lesser of the Investor Interest as of the last day of the related
  Monthly Period and 3% of the Initial Investor Interest;     
 
    (ix) failure to have paid each Certificate in full on the applicable
  Expected Final Distribution Date; or
     
    (x) failure of the Interest Rate Cap Provider to make any payment under
  the Class A Interest Rate Cap or the Class B Interest Rate Cap within five
  days of the date such payment was due.     
   
  In the case of any event described in clause (i), (ii) or (vii), a Pay Out
Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period described in such clauses, either the
Trustee or Certificateholders evidencing undivided interests aggregating more
than 50% of each of the Class A Investor Interest and the Class B Investor
Interest, by written notice to the Transferor and the Servicer (and to the
Trustee, if given by the Certificateholders) declare that, as of the date of
such notice, a Pay Out Event has occurred. In the case of either event
described in clause (iii) or (v), a Pay Out Event with respect to all Series,
and in the case of any event described in clause (iv), (vi), (viii), (ix), or
(x), 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. The Rapid Amortization Period will commence
on the date a Pay Out Event occurs or is deemed to have occurred. Monthly
distributions of principal to the Certificateholders will begin (if they have
not already) on the first Distribution Date in the Monthly Period following
the Monthly Period in which such Pay Out Event occurs. Thus,
Certificateholders may begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the final maturity of the
Certificates.     
   
  In addition to the consequences of a Pay Out Event discussed above, if
pursuant to certain provisions of federal or state law, the Transferor
voluntarily enters liquidation or a receiver is appointed for the Transferor
(an "Insolvency Event"), 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. Under the terms of the Agreement,
within 15 days, the Trustee will publish a notice of the occurrence of the
Insolvency Event 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 the
certificateholders representing undivided interests aggregating more than 50%
of the investor interest of each Series (or, with respect to any Series with
two or more classes, 50% of each class) to the effect that such
certificateholders disapprove of the liquidation of Receivables and wish to
continue having Principal Receivables transferred to the Trust as before such
Insolvency Event, and if not so instructed the Trustee will sell, dispose of,
or otherwise liquidate the portion of the Receivables allocable to each Series
that did not vote to disapprove of the liquidation of the Receivables in
accordance with the 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 as provided above in "--Application of Collections".
    
                                      76
<PAGE>
 
  If the only Pay Out Event to occur is either the insolvency of a Transferor
or the appointment of a conservator or receiver for a 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.
 
COLLECTION AND OTHER SERVICING PROCEDURES
 
  Pursuant to the Agreement, the Servicer is responsible for servicing,
collecting, enforcing and administering the Receivables in accordance with the
policies and procedures for servicing credit card receivables and exercising a
degree of skill and care consistent with those of a reasonable and prudent
servicer of credit card receivables, but in any event at least comparable with
the policies and procedures and the degree of skill and care applied or
exercised with respect to its own credit card receivables. The Servicer
maintains blanket 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.
 
  Servicing activities performed by the Servicer include collecting and
recording payments, communicating with cardholders, investigating payment
delinquencies, evaluations in relation to increasing credit limits and in
issuing credit cards, providing billing records to cardholders and maintaining
internal records with respect to each Account. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Accounts and Receivables by the Trustee pursuant to the Agreement, maintaining
the agreements, documents and files relating to the Accounts and Receivables
as custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
 
SERVICER COVENANTS
 
  In the Agreement, the Servicer covenants with the certificateholders
(including the Certificateholders) and the Trustee, as to each Receivable and
related Account, that: (a) it will duly fulfill all obligations on its part to
be fulfilled under or in connection with the Receivables and the related
Accounts, and will maintain in effect all qualifications required in order to
service the Receivables and the related Accounts, the failure to comply with
which would have a material adverse effect on the certificateholders
(including the Certificateholders); (b) it will not permit any rescission or
cancellation of the Receivables, except in accordance with the credit and
collection policies of the Transferor or as ordered by a court of competent
jurisdiction or other governmental authority; (c) it will do nothing to impair
the rights of the certificateholders (including the Certificateholders) in the
Receivables or the related Accounts; and (d) it will not reschedule, revise or
defer payments due on the Receivables except in accordance with the credit and
collection policies of the Transferor for servicing receivables.
 
  Under the terms of the Agreement, all Receivables in an Account will be
assigned and transferred or reassigned and transferred to the Servicer and
such account shall no longer be included as an Account if the Servicer
discovers, or receives written notice from the Trustee, that any covenant of
the Servicer set forth above has not been complied with and such noncompliance
has not been cured within 60 days thereafter and has a material adverse effect
on the certificateholders' interest in such Receivable. If the Transferor is
the Servicer, such reassignment and retransfer shall be made on or before the
end of the Monthly Period in which such reassignment obligation arises, by the
Servicer deducting the portion of any such Receivable which is a Principal
Receivable from the aggregate amount of Principal Receivables used to
calculate the Transferor Interest. In addition, if the Transferor Interest
would be reduced below the Minimum Transferor Interest, People's Bank as
Servicer will deposit into the Collection Account an amount equal to the
amount by which the Transferor Interest
 
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<PAGE>
 
will be reduced below the Minimum Transferor Interest (such reassignment and
retransfer to the Servicer to be effected only upon such deposit by the
Servicer in the Excess Funding Account). If the Transferor is not the
Servicer, such assignment and transfer will be made when the Servicer deposits
an amount equal to the amount of such Receivable in the Collection Account no
later than the Transfer Date following the Monthly Period during which such
obligation arises. The amount of such deposit shall be allocated as
Collections pursuant to the Agreement. In either case, this retransfer and
reassignment or transfer and assignment to the Servicer constitutes the sole
remedy available to the certificateholders if such covenant or warranty of the
Servicer is not satisfied. In either case, the Trust's interest in any such
assigned Receivables shall be automatically assigned to the Servicer.
 
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
 
  The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the "Servicing Fee"). The
Servicing Fee will be allocated among the Transferor Interest (the "Transferor
Servicing Fee"), the Certificateholders and certificateholders of all of the
other Series. The portion of the Servicing Fee allocable to each Series of
certificates, including the Certificates, on any Distribution Date will
generally be equal to one-twelfth of the product of (a) the applicable
servicing fee percentage with respect to such Series and (b) the investor
interest of such Series with respect to the related Monthly Period. The
portion of the Servicing Fee allocable to each of the Class A
Certificateholders and the Class B Certificateholders on each Distribution
Date (respectively, the "Class A Monthly Servicing Fee" and the "Class B
Monthly Servicing Fee"; together, the "Monthly Servicing Fees") will be equal
to one-twelfth of the product of 2% per annum and the Class A Investor
Interest or the Class B Investor Interest, as the case may be, as of the last
day of the related Monthly Period. The Monthly Servicing Fees will be paid
each month from the Finance Charge Account; however, payment thereof will be
made after payment to Certificateholders of the distributions of interest. On
any Distribution Date with respect to any Monthly Period, the Transferor
Servicing Fee will equal one-twelfth of the product of (a) the Transferor
Interest and (b) the weighted average servicing fee percentage with respect to
all Series of certificates.
 
  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, Paying
Agent, Transfer Agent and Registrar and independent accountants and other fees
which are not expressly stated in the Agreement to be payable by the Trust or
the certificateholders other than federal, state and local income and
franchise taxes, if any, of the Trust.
 
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
 
  The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that performance of its duties is no
longer permissible under applicable law and except as described below. 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
Agreement. Notwithstanding the foregoing, People's Bank may transfer its
servicing obligations to any of its affiliates (which meets certain
eligibility standards set forth in the Agreement) or, subject to certain
conditions set forth in the Agreement, to any other entity which the Rating
Agency has advised in writing will not result in the reduction or withdrawal
of its then-existing rating of the Certificates and be relieved of its
obligations and duties under the Agreement.
 
  The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of the certificateholders (including the Certificateholders), 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 pursuant to the Agreement; provided, however, that the Servicer
shall not indemnify (a) the Trustee for liabilities imposed by reason of or
resulting from fraud, negligence, breach of fiduciary duty or willful
 
                                      78
<PAGE>
 
misconduct by the Trustee in the performance of its duties under the
Agreement, (b) the Trust, the Certificateholders or the Certificate Owners for
liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Trust, the Certificateholders or the Certificate
Owners for any losses, claims, damages or liabilities incurred by any
Certificateholder in its capacity as an investor, including without
limitation, losses incurred as a result of defaulted Receivables or
Receivables which are written off as uncollectible or (d) the Trust, the
Certificateholders or the Certificate Owners for any liabilities, costs or
expenses of the Trust, the Certificateholders or the Certificate Owners
arising under any tax law, including without limitation any federal, state or
local income or franchise tax or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, the
Certificateholders or the Certificate Owners in connection therewith to any
taxing authority.
 
  The 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 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 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 Agreement and which in its opinion may expose it to
any expense or liability.
   
  The Agreement provides that, in addition to Exchanges, the Holder of the
Exchangeable Transferor Certificate may transfer all or a portion of the
Exchangeable Transferor Certificate to any other party upon written consent of
the Transferor; provided, however, that, in each case, prior to any such
transfer (i) (a) the Trustee receives written notification from the Rating
Agency then rating each Series 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 (among other things) a written opinion of counsel
confirming that such transfer would not adversely affect the treatment of the
Certificates of each series as debt for Federal, New York or Connecticut state
income tax purposes or result in the trust being treated as a taxable entity
and will not be treated as a taxable exchange to Certificateholders or (ii)
such transfer complies with the provisions of the next succeeding paragraph.
The Transferor, in its capacity as the original holder of the Exchangeable
Transferor Certificate, transferred its interest in the Exchangeable
Transferor Certificate to PSFC in accordance with the requirements described
in clause (i) of the preceding sentence, pursuant to an Assignment and
Assumption Agreement dated as of December 15, 1995 by and between the
Transferor and PSFC.     
   
  Any person into which, in accordance with the 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 supplemental agreement and delivery of an officer's certificate
with respect to the compliance of the transaction with the applicable
provisions of the Agreement and an opinion of counsel to the effect that such
supplemental agreement is legal, valid and binding, will be the successor to
the Transferor or the Servicer, as the case may be, under the Agreement. The
Transferor may effect any sale, transfer or pledge of the Accounts or any of
its obligations under the Agreement or effect any merger, consolidation or
assumption which is not in accordance with the provisions of the preceding
sentence so long as, among other conditions set forth in the Agreement: (a)
the Transferor and Servicer determine that such event will not be adverse to
the interests of the certificateholders of any Series; (b) the Rating Agency
indicates that such event will not adversely affect the then-existing rating
of certificates of any Series outstanding, including the Certificates; and (c)
the purchaser, transferee, pledgee or successor entity executes a supplemental
agreement whereby such entity agrees to assume the obligations of the
Transferor.     
 
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<PAGE>
 
SERVICER DEFAULT
   
  In the event of any Servicer Default (as defined below), either the Trustee
or holders representing undivided interests aggregating more than 50% of the
sum of the investor interests of all certificates outstanding, by written
notice to the Servicer (and to the Trustee if given by the
certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor and the Holder of the
Exchangeable Transferor Agreement under the Agreement and, as applicable, in
the Transferor Interest will not be affected by such termination. The Trustee
shall as promptly as possible appoint a successor Servicer, which successor
Servicer must satisfy certain eligibility criteria contained in the Agreement.
If no such Servicer has been appointed and has accepted such appointment by
the time the Servicer ceases to act as Servicer, all authority, power and
obligations of the Servicer under the Agreement shall pass to and be vested in
the Trustee. If the Trustee is unable to obtain any bids from eligible
servicers and the Servicer delivers an officer's certificate to the effect
that it cannot in good faith cure the Servicer Default which gave rise to a
transfer of servicing, and if the Trustee is legally unable to act as
successor Servicer, then the Trustee shall give the Transferor the right to
accept reassignment of the Receivables at a price generally equal to the
higher of the outstanding principal balance of the certificates plus accrued
interest through the date of reassignment and the average bid quoted by two
recognized dealers for a similar security rated in the highest rating category
by the Rating Agency and having a remaining maturity approximately equal to
the remaining maturity of such Series.     
 
  A "Servicer Default" refers to any of the following events:
 
    (a) failure by the Servicer to make any payment, transfer or deposit or
  to give instructions to the Trustee to make any withdrawal, on the date the
  Servicer is required to do so under the Agreement (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 holders of outstanding Series, including the
  Certificateholders (which determination shall be made without regard to
  whether funds are available in any Enhancement) and which continues
  unremedied for a period of 60 days after written notice and continues to
  have a material adverse effect on the certificateholders for such period;
  or the delegation by the Servicer of its duties under the Agreement, except
  as specifically permitted thereunder;
 
    (c) any representation, warranty or certification made by the Servicer in
  the Agreement or any Supplement, or in any certificate delivered pursuant
  to the Agreement or any Supplement, proves to have been incorrect when made
  which has a material adverse effect on the rights of certificateholders
  (which determination shall be made without regard to whether funds are
  available in any Enhancement) and which continues to be incorrect in any
  material respect for a period of 60 days after written notice; or
 
    (d) the occurrence of certain events of bankruptcy, insolvency or
  receivership of the Servicer.
 
  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 Paying Agent will forward to each
Certificateholder of record a statement (the "Monthly Servicer Report")
prepared by the Servicer setting forth among other things: (a) the total
amount distributed to Class A Certificateholders and the Class B
Certificateholders, respectively, (b) the amount of the distribution made on
such Distribution Date allocable to principal on
 
                                      80
<PAGE>
 
the Class A Certificates and the Class B Certificates, respectively, (c) the
amount of the distribution made on such Distribution Date allocable to
interest on the Class A Certificates and the Class B Certificates,
respectively, (d) the amount of collections of Principal Receivables processed
during the preceding Monthly Period and allocated in respect of the Class A
Certificates and the Class B Certificates, (e) the aggregate amount of
Principal Receivables, the Class A Investor Interest and the Class B Investor
Interest and the Class A Investor Percentage and the Class B Investor
Percentage as of the end of the last day of the preceding Monthly Period, (f)
the aggregate outstanding balance of Accounts which are up to 30 days
delinquent, 31 to 60 days delinquent, and 61 or more days delinquent in
accordance with the Servicer's then existing credit card guidelines by class
of delinquency as of the end of the preceding Monthly Period, (g) the Class A
Investor Default Amount and the Class B Investor Default Amount for the
preceding Monthly Period, (h) the aggregate amount of Class A Investor Charge
Offs and Class B Investor Charge Offs for the preceding Monthly Period and the
aggregate amount of Investor Charge Offs reimbursed to each class on the
Transfer Date immediately preceding such Distribution Date, (i) the amount of
the Class A Monthly Servicing Fee and the Class B Monthly Servicing Fee for
the preceding Monthly Period, (j) the Available Cash Collateral Amount as of
the close of business on such Distribution Date, (k) the "Pool Factor" as of
the end of the last day of the preceding Monthly Period (consisting of a
seven-digit decimal expressing the ratio of Investor Interest to Initial
Investor Interest), (l) the Deficit Controlled Amortization Amount for each
class of the Series, (m) the aggregate amount of collections of Finance Charge
Receivables allocable to the Investor Interest for the preceding Monthly
Period, (n) the Required Amounts, if any, to be withdrawn from the Cash
Collateral Account and, if the Available Cash Collateral Amount, the amount
payable under the Interest Rate Caps and Shared Finance Charge Collections
available to the Certificates are insufficient to satisfy the Required Amount,
the amount of Reallocated Principal Allocations to be applied thereto, and any
reductions in the Class B Investor Interest to satisfy the Class A Required
Amount and (o) the ratio of the Available Cash Collateral Amount to the
Investor Interest of the Certificates as of the last day of the preceding
Monthly Period.
   
  On or before January 31 of each calendar year, beginning with 1997, the
Paying Agent will furnish to each person who at any time during the preceding
calendar year was a Certificateholder of record a statement prepared by the
Servicer containing the information required to be contained in the Monthly
Servicer Report, 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 tax returns.     
 
  The Trustee will publish or will cause to be published following each
Distribution Date (including the Scheduled Series 1996-1 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.
 
EVIDENCE AS TO COMPLIANCE
 
  The Agreement provides that on or before March 31 of each calendar year,
beginning in 1994, the Servicer will cause a firm of independent accountants
to furnish a report to the effect that such firm has made a study and
evaluation of the Servicer's internal accounting controls relative to the
servicing of Accounts under the Agreement, and that, on the basis of such
study and evaluation, such firm is of
 
                                      81
<PAGE>
 
   
the opinion that the system of internal accounting controls in effect on the
date set forth in such report relating to certain servicing procedures
performed by the Servicer under the Agreement, taken as a whole, was
sufficient for the prevention and detection of errors and irregularities in
amounts that would be material to the financial statements of the Servicer and
that such servicing was conducted in compliance with the applicable sections
of the Agreement, except for such exceptions, errors or irregularities as such
firm shall believe to be immaterial to the financial statements of the
Servicer and such other exceptions, errors or irregularities as shall be set
forth in such report. In addition, on or before March 31 of each calendar
year, beginning in 1994, such firm has compared or will compare the amounts
contained in the Servicer's statements and certificates delivered during such
year with the computer reports of the Servicer and statements of any agents
engaged by the Servicer to perform servicing activities which were the source
of such amounts and deliver a report confirming that such amounts are in
agreement except for such exceptions as it believes to be immaterial to the
financial statements of the Servicer and such other exceptions as shall be set
forth in such report.     
 
  The Agreement provides for delivery to the Trustee on or before March 31 of
each calendar year, beginning in 1994, of an annual statement signed by an
officer of the Servicer to the effect that the Servicer has fully performed,
or has caused to be performed, its obligations in all material respects under
the Agreement throughout the preceding year, or, if there has been a default
in the performance of any such obligation in any material respect, specifying
the nature and status of the default.
 
AMENDMENTS
   
  The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee, without certificateholder consent, to cure any
ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, and to add any other provisions
with respect to matters or questions arising under the Agreement and any
Supplement which are not inconsistent with the provisions of the Agreement and
any Supplement. See "The Receivables". The Agreement may be amended from time
to time without the consent of the Certificateholders by the Trustee, and by
the Transferor or the Servicer with the consent of the Trustee, to (a) provide
for the transfer by the Transferor of its interest in and to all or part of
the Accounts in accordance with the provisions of the Agreement and (b)
provide for the purchase of Principal Receivables by the Trust at a price
which is less than 100% of the outstanding balance thereof, and to provide for
the treatment of Collections of Principal Receivables, in an amount up to the
aggregate amount by which the purchase price of Principal Receivables as sold
thereafter is less than 100%, as Collections of Finance Charge Receivables;
provided, however, that any such action shall not adversely affect in any
material respect the interests of the certificateholders (each
Certificateholder will be deemed to have agreed that the exercise of such
option by the Transferor, at such time the Transferor determines to exercise
such options, will not adversely affect in any material respects the interests
of Certificateholders); provided, further, however, that the Servicer and the
Trustee shall have received notice from the Rating Agency that any such
amendment will not result in the reduction or withdrawal of its then-existing
rating of the certificates of any Series. Moreover, any Supplement and any
amendments regarding the addition or removal of Receivables to or from the
Trust will not be considered amendments requiring certificateholder consent
under the provisions of the Agreement or any Supplement.     
 
  The Agreement 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 principal amount 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 Agreement or any
Supplement or of modifying in any manner the rights of certificateholders of
any 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 such
Series, (b) change the definition of or the manner of calculating the interest
of any certificateholder of
 
                                      82
<PAGE>
 
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 Agreement
or any Supplement, the Trustee will furnish written notice of the substance of
such amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).
 
LIST OF CERTIFICATEHOLDERS
   
  Upon written request of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the Investor Interest,
the Trustee after having been adequately indemnified by such
Certificateholders for its costs and expenses, and having given the Servicer
notice that such request has been made, will afford such Certificateholders
access during business hours to the current list of certificateholders of the
Trust for purposes of communicating with other Certificateholders with respect
to their rights under the Agreement. The Agreement generally does not provide
for any annual or other meetings of certificateholders. See "--Book-Entry
Registration" and "--Definitive Certificates" above.     
 
                                      83
<PAGE>
 
                   CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
 
TRANSFER OF RECEIVABLES
   
  The Transferor independently represents and warrants in the Agreement that
the transfer of Receivables, Interchange and Recoveries constitutes either a
valid transfer and assignment to the Trust of all right, title and interest of
the Transferor in and to the Receivables, Interchange and Recoveries, except
for the interest of the Transferor as the then current holder of the
Exchangeable Transferor Certificate, or the grant to the Trust of a security
interest in such property. The Transferor also independently represents and
warrants in the Agreement that, in the event the transfer of Receivables,
Interchange and Recoveries by the Transferor to the Trust is deemed to create
a security interest under the Uniform Commercial Code (the "UCC"), as in
effect in the State of New York, there will exist a valid, subsisting and
enforceable first priority perfected security interest in such property in
existence at the time of the formation of the Trust in favor of the Trust and
a valid, subsisting and enforceable first priority perfected security interest
in such property created thereafter in favor of the Trust on and after their
creation, except for certain tax and other customary 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 independently represents that the Receivables are "accounts"
or "general intangibles" for purposes of the UCC as in effect in the States of
New York and Connecticut. The transfer and assignment of accounts and the
transfer of accounts and general intangibles as security for an obligation are
covered by Article 9 of the UCC, with the transfer and assignments of accounts
treated in the same fashion as the creation and perfection of a security
interest therein. The filing of an appropriate financing statement is required
to perfect the interest of the Trust therein. 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 of the issuance by the Trust of the initial Series of certificates could
have an interest in such Receivables with priority over the Trust's interest.
Under the Agreement, however, the Transferor represents and warrants that it
has transferred the Receivables to the Trust free and clear of the lien of any
third party. In addition, the Transferor covenants 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 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 or the State of Connecticut Department
of Banking may have priority over the interest of the Trust in such
Receivable.
   
CERTAIN MATTERS RELATING TO CONSERVATORSHIP AND RECEIVERSHIP     
   
  The Transferor is chartered as a Connecticut stock savings bank and is
subject to regulation and supervision by the State of Connecticut Department
of Banking. If the Transferor becomes insolvent or is in an unsound condition
or if certain other circumstances occur, the State of Connecticut Department
of Banking may request the Attorney General of Connecticut to apply to the
Connecticut Court for an order appointing a conservator or receiver for the
Transferor. Since the Transferor is a FDIC-insured bank, Connecticut law
requires the conservator or receiver to be the Connecticut Banking
Commissioner and permits the Commissioner to request that the FDIC be
appointed conservator or receiver. In addition, the FDIC may appoint itself as
conservator or receiver for the Transferor if the FDIC determines that one or
more of certain conditions exist (such as, but not limited to, the
Transferor's assets being insufficient for obligations, substantial
dissipation of assets or earnings, the existence of unsafe or unsound
conditions, the willful violation of a cease-and-desist     
 
                                      84
<PAGE>
 
   
order, concealment of records or assets, inability to meet obligations, the
incurrence (or likelihood) of losses resulting in depletion of substantially
all of its capital, violations of law likely to cause financial deterioration,
cessation of insured status or undercapitalization of the Transferor).     
   
  The FDIA sets forth certain powers that the FDIC in its capacity as
conservator or receiver for the Transferor could exercise. To the extent that
the Transferor has granted a security interest in the Receivables to the
Trust, and that interest was validly perfected before the appointment of the
FDIC as conservator or receiver and before the Transferor's insolvency, was
not taken in contemplation of the insolvency of the Transferor, and was not
taken with the intent to hinder, delay or defraud the Transferor or the
creditors of the Transferor, such security interest should not be subject to
avoidance if the Pooling and Servicing Agreement and Supplements thereto and
related documents are approved by the Transferor and are continuously
maintained as records of the Transferor (as required by the FDIA) and the
transactions represent bona fide and arm's length transactions undertaken for
adequate consideration in the ordinary course of business and the secured
party is neither an insider nor an affiliate of the Transferor. As a result,
payments to the Trust with respect to the Receivables (up to the amount of
actual, direct compensatory damages, as described below) should not be subject
to recovery by the FDIC as conservator or receiver of the Transferor. The
foregoing conclusions regarding avoidance or recovery are based on FDIC
general counsel opinions and policy statements regarding the application of
certain provisions of the FDIA. If, however, the FDIC, as conservator or
receiver for the Transferor were to assert a contrary position, or were to
require the Trustee to establish its right to those payments by submitting to
and completing the administrative claims procedure established under the FDIA,
or the conservator or receiver were to request a stay of proceedings with
respect to the Transferor as provided under the FDIA, delays in payments on
the Certificates and possible reductions in the amount of those payments could
occur. The FDIA provides that the FDIC may repudiate contracts determined by
it to be burdensome and that claims for repudiated obligations are limited to
actual, direct compensatory damages determined as of the date of the
appointment of the 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 direct collateralized
borrowings of savings associations. 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. However,
in a case involving zero-coupon bonds issued by a savings association which
were repudiated by the RTC, a federal district court in the Southern District
of New York held, in 1993, that the RTC was obligated to pay holders the fair
market value of repudiated bonds as of the date of repudiation. The FDIC
itself has not adopted a policy statement on payment of interest on
collateralized borrowings of banks. The FDIC, as conservator or receiver,
would also have the rights and powers conferred under Connecticut law.     
   
  The 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
Agreement, newly created Principal Receivables will not be transferred to the
Trust on and after any such appointment or voluntary liquidation (although
Finance Charge Receivables on existing balances will continue to be
transferred), and unless otherwise instructed within a specified period by
holders of more than 50% of the investor interest of each Series outstanding
(or, with respect to any Series with two or more classes, 50% of each class)
to the effect that such certificateholders disapprove of the liquidation of
the Receivables and wish to continue having Principal Receivables transferred
to the Trust as before such appointment or voluntary liquidation, the Trustee
will proceed to sell, dispose of     
 
                                      85
<PAGE>
 
   
or otherwise liquidate the portion of the Receivables allocable to each Series
that did not vote to disapprove of the liquidation of the Receivables in
accordance with the Agreement in a commercially reasonable manner and on
commercially reasonable terms. There can be no assurance, however, that a
receiver or conservator will allow and not seek avoidance of continued
transfer of Receivables to the Trust after receivership or conservatorship of
the Transferor. Under the Agreement, the proceeds from the sale of the
Receivables would be treated as collections of the Receivables and the
Investor Percentage of such proceeds would be distributed to the
Certificateholders. This procedure could be delayed, as described above. If
the only Pay Out Event to occur is either the insolvency of the Transferor or
the appointment of a conservator or receiver for the Transferor, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables, the commencement of the Rapid
Amortization Period and the transfer of servicing obligations from the
Transferor. A conservator or receiver would have the power to cause the early
sale of the Receivables and the early retirement of the Certificates, to
prohibit the continued transfer of Principal Receivables to the Trust, and to
repudiate the servicing obligations of the Transferor. See "Description of the
Certificates--Pay Out Events". In addition, the appointment of a receiver or
conservator could adversely affect the Transferor's ability to repurchase
ineligible Receivables from the Trust or make cash deposits in respect of
credits, adjustments or fraudulent charges and could result in administrative
expenses of the receiver or conservator having priority over the interest of
the Trust in the Receivables.
    
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 Transferor, the most significant laws include the
federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting and
Fair Debt Collection Practice Acts and applicable state law. These statutes
impose disclosure requirements when a credit card account is advertised, when
it is opened, at the end of monthly Billing Cycles, and at year end. In
addition, these statutes limit 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. Cardholders are entitled under these laws to have payments and
credits applied to the credit card accounts promptly, to receive prescribed
notices and to require billing errors to be resolved promptly. The Trust may
be liable for certain violations of consumer protection laws that apply to the
Receivables, either as assignee from 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 warrants to the Trust in the Agreement that all Receivables have
been and will be created in compliance with the requirements of such laws. The
Servicer has also agreed in the Agreement to indemnify the Trust, among other
things, for any liability arising from such violations caused by the Servicer.
For a discussion of the Trust's rights arising from the breach of these
warranties, see "Description of the Certificates--Representations and
Warranties".
 
  Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Transferor's credit card
operations or the yield on the Receivables in the Trust.
 
  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 there are insufficient
funds available in the Cash Collateral Account. See "Description of the
Certificates-- Defaulted Receivables; Adjustments and Fraudulent Charges".
 
                                      86
<PAGE>
 
                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
GENERAL
   
  The following discussion represents the opinion of Mayer, Brown & Platt,
special tax counsel to the Transferor ("Tax Counsel"), subject to the
exceptions and qualifications described herein, as to the material Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates. This discussion, however, does not address every aspect of the
Federal income tax laws that may be relevant to holders of Certificates in
light of their personal investment circumstances or to certain types of
Certificateholders subject to special treatment under the Federal income tax
laws (for example, banks and life insurance companies). Accordingly, investors
should consult their own tax advisors regarding Federal, state, local, foreign
and any other tax consequences to them of the purchase, ownership and
disposition of the Certificates in their own particular circumstances. The
discussion is generally limited to those persons who are the initial holders
of the Certificates and to investors who will hold Certificates as capital
assets. This discussion is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), its legislative history, the Treasury
regulations thereunder, and published rulings and court decisions in effect
(or, in the case of certain Treasury regulations, that are proposed) as of the
date hereof, all of which are subject to change, possibly retroactively. No
ruling on any of the issues discussed below has been or will be sought from
the Internal Revenue Service (the "IRS") and no assurance can be given that
the IRS will not take contrary positions. It is anticipated that the Trust
will not be indemnified for any Federal income tax that may be imposed upon
it, and the imposition of any such taxes on the Trust could result in a
reduction in the amounts available for distribution to the Certificateholders.
    
TREATMENT OF THE CERTIFICATES AS INDEBTEDNESS
   
  Tax Counsel is of the opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, based upon its analysis of
the factors discussed below, the Certificates, when issued, will be
characterized for Federal income tax purposes as indebtedness that is secured
by the Receivables and the Trust will be disregarded.     
   
  The Transferor and Certificateholders will express in the Agreement the
intent that, for Federal, state and local income and franchise tax purposes,
and for the purposes of any other tax imposed on or measured by income, the
Certificates will be indebtedness secured by the Receivables. The Transferor,
by entering into the Agreement, PSFC, by its beneficial ownership of the
Transferor Interest, and each Certificateholder, by virtue of accepting a
beneficial interest in a Certificate, will agree to treat the Certificates (or
the beneficial interests therein) as indebtedness secured by the Receivables
for Federal, state and local income and franchise tax purposes and for the
purposes of any other tax imposed on or measured by income. Because, however,
different criteria are used in determining the nontax accounting treatment of
a transaction, the Transferor and PSFC will treat the Agreement for financial
accounting purposes as a transfer of an ownership interest in the Receivables
and not as creating a debt obligation.     
 
  The economic substance of a transaction generally determines its Federal
income tax consequences and the form of a transaction, while a relevant
factor, is generally not conclusive evidence of its economic substance. In
appropriate circumstances the courts have allowed taxpayers, as well as the
IRS, to treat a transaction in accordance with its economic substance,
notwithstanding that participants characterized the transaction differently
for nontax purposes. In some instances, however, courts have held that a
taxpayer is bound by the particular form it has chosen for a transaction, even
if the substance of the transaction does not accord with its form. Tax Counsel
believes that the rationale of those cases will not apply to this transaction.
 
 
                                      87
<PAGE>
 
   
  The determination of whether the economic substance of a transfer of an
interest in property is a sale or a loan secured by the transferred property
depends on numerous factors that indicate whether the transferor has
relinquished (and the transferee has obtained) substantial incidents of
ownership in the property. Among the primary factors considered are whether
the transferee has obtained the opportunity for gain if the property increases
in value, has assumed the risk of loss if the property decreases in value and
whether the transferee, at the time of transfer, has a fixed interest in the
proceeds of the receivable when collected. Based upon its analysis of such
factors, Tax Counsel is of the opinion that the Certificates will be
characterized for Federal income tax purposes as indebtedness secured by the
Receivables. Contrary characterizations that could be asserted by the IRS are
described under "--Possible Characterization of the Arrangement as an
Association Taxable as a Corporation or a Partnership" below. Except as
otherwise expressly indicated, the following discussion assumes that the
Certificates will be treated as debt obligations for Federal income tax
purposes.     
 
INTEREST INCOME TO CERTIFICATEHOLDERS
   
  It is anticipated that the Certificates will be issued at par value (or at
an insubstantial discount from par value). To the extent that stated interest
on the Certificates constitutes "qualified stated interest", it will be
taxable as ordinary income for Federal income tax purposes when received or
accrued by Certificateholders in accordance with their respective methods of
tax accounting. Qualified stated interest generally includes stated interest
that is unconditionally payable at least annually at a single fixed rate or at
a qualified floating or objective variable rate that appropriately takes into
account the length of the interval between payments. To the extent the
Certificates were treated as being issued with original issue discount
(generally, the excess of the "stated redemption price at maturity" of a
Certificate, or all payments other than qualified stated interest, over the
Certificate issue price) a Certificateholder would be required, subject to a
de minimis exception, to include original issue discount ("OID") in income as
interest over the term of the Certificate under a constant yield method, and,
in general, OID must be included in income in advance of the receipt of cash
representing that income.     
   
  Because payment of a portion of the interest at the Certificate Rates may be
subordinated during an Amortization Period to payments of other amounts, it is
possible that all or a significant portion of the stated interest on the
Certificates may not be treated as contingent interest. If any portion of the
interest on the Certificates is treated as contingent interest, the manner in
which such contingent interest would accrue is unclear. No currently effective
Treasury regulations would govern the accrual of such contingent interest on a
Certificate and it is not expected that regulations will be promulgated that
would apply to the Certificates. Although Treasury regulations governing the
treatment of debt instruments that provide for contingent payments were
published on June 11, 1996, those regulations are only effective for debt
instruments issued on or after August 13, 1996 and therefore are not expected
to apply to the Certificates. The Treasury Department background statement
accompanying those regulations provides that for debt instruments providing
for contingent payments that are issued before August 13, 1996, a taxpayer may
use any reasonable method to account for the debt instrument. In the absence
of governing regulations one reasonable method of treating contingent interest
(if any) payable in respect of the Certificates would permit a holder to
include such contingent interest in income when received. If instead stated
interest is treated neither as qualified stated interest nor as contingent
interest, the amount of such stated interest would be included in the stated
redemption price at maturity of a Certificate, and, as a result, the
Certificates may be treated as having been issued with OID and taxed as above.
Because of the uncertainty of treatment, Tax Counsel is unable to opine as to
the appropriate treatment of stated interest on the Certificates. Holders are
urged to consult their own tax advisors regarding the treatment of stated
interest on the Certificates.     
 
  A Certificateholder who purchases a Certificate at a market discount 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 Certificate, and for the deferral of interest
deductions with respect to debt incurred to acquire or carry the market
discount Certificate.
 
                                      88
<PAGE>
 
  If a Certificate is purchased by a Certificateholder at a premium, such
premium will be amortized as an offset to interest income (with a
corresponding reduction in the Certificateholder's basis) under a constant
yield method over the term of the Certificate if an election under Section 171
of the Code is made or is previously in effect.
 
DISPOSITION OF CERTIFICATES
 
  If a Certificate is sold, exchanged or otherwise disposed of, a
Certificateholder generally will recognize gain or loss in an amount equal to
the difference between the amount realized on the sale, exchange or
disposition and the Certificateholder's adjusted basis in the Certificate. The
adjusted basis of a Certificate generally will equal the cost of the
Certificate to the Certificateholder, increased by any OID or market discount
previously includible in the Certificateholder's gross income, and reduced by
the portion of the basis of the Certificate allocable to payments on the
Certificate previously received by the Certificateholder and any amortized
premium. Subject to the market discount rules, gain or loss on the sale or
other disposition of a Certificate will be capital gain or loss if the
Certificate is held by the Certificateholder as a capital asset, except to the
extent a holder realizes ordinary income attributable to accrued interest.
Capital gain or loss will be long-term if the Certificate is held by the
Certificateholder for more than one year and otherwise will be short-term.
 
POSSIBLE CHARACTERIZATION OF THE ARRANGEMENT AS AN ASSOCIATION TAXABLE AS A
CORPORATION OR A PARTNERSHIP
   
  Although, as described above, it is the opinion of Tax Counsel that the
Certificates are properly characterized as debt for Federal income tax
purposes, such opinion is not binding on the IRS or the courts and no
assurance can be given that this characterization would prevail. If the IRS
were to contend successfully that the Certificates were not debt obligations
for Federal income tax purposes, the arrangement created by the Agreement
might be classified for Federal income tax purposes as an association taxable
as a corporation that owns the Receivables or, possibly, as a partnership,
including a "publicly traded partnership".     
   
  If the arrangement created by the Agreement were treated as either an
association taxable as a corporation or a "publicly traded partnership"
taxable as a corporation, the resulting entity may be subject to Federal
income taxes at corporate tax rates on its taxable income from the
Receivables. Such a tax might result in reduced distributions to
Certificateholders and Certificateholders might be liable for a share of such
a tax. Moreover, it is unlikely that distributions by the entity would be
deductible in computing the entity's taxable income (assuming that the
Certificates were treated as ownership interests in the Receivables rather
than as debt) with the result that the entity would have significant taxable
income and tax liability. In addition, all or part of the distributions to
Certificateholders would generally be treated as dividend income to the
Certificateholders.     
   
  If, alternatively, the Certificates were treated as interests in a
partnership, the income reportable by the Certificateholders as partners could
differ from the income reportable by the Certificateholders as holders of debt
obligations. For example, a cash basis Certificateholder might be required to
report income when it accrued to the partnership rather than when it is
received by the Certificateholder. Moreover, 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 Certificates. Finally,
if a class of Certificates were treated as interests in a partnership and
another class of Certificates were treated as debt, a portion of the taxable
income allocated to a Certificateholder of the class of Certificates treated
as interests in a partnership that is a pension, profit sharing or employee
benefit plan or other tax-exempt entity (including an individual retirement
account) would constitute "unrelated business taxable income" generally
taxable to the holder under the Code.     
 
                                      89
<PAGE>
 
   
  Since the Transferor and PSFC will treat the Certificates as indebtedness
for Federal income tax purposes, neither the Transferor nor PSFC will comply
with the tax reporting requirements that would apply under these alternative
characterizations of the Certificates.     
 
FOREIGN INVESTORS
   
  Assuming the Certificates represent debt obligations for Federal income tax
purposes, if interest (including OID) paid to a nonresident alien individual,
foreign corporation, foreign partnership or foreign estate or trust is not
effectively connected with the conduct of a United States trade or business of
the recipient, it will be considered "portfolio interest" and will (subject to
the discussion of backup withholding below) be generally exempt from United
States withholding tax; provided, however, that the Certificateholder complies
with applicable certification requirements (and does not actually or
constructively own ten percent or more of the voting stock of the Transferor
or PSFC and is not a controlled foreign corporation related to the Transferor
or its affiliates).     
 
  If the Certificates were recharacterized as interests in an association
taxable as a corporation or a "publicly traded partnership" taxable as a
corporation, to the extent distributions under the Agreement were treated as
dividends, a nonresident alien individual or foreign corporation would
generally be subject to withholding tax on the gross amount of such dividends
at the rate of 30% (or lower rate as provided by an applicable treaty). If the
IRS were to contend successfully that the Certificates represent interests in
a partnership (not taxable as a corporation), a Certificateholder that is a
nonresident alien, foreign corporation or foreign estate or trust might be
required to file a United States individual or corporate income tax return and
pay tax on its share of partnership income at regular U.S. rates, including
the branch profits tax in the case of a Certificateholder that is a
corporation, and would be subject to withholding tax on its share of
partnership income.
 
INFORMATION REPORTING AND BACKUP WITHHOLDING
 
  The Servicer will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and OID accrued, if
any) on the Certificates (and the amount of interest withheld for Federal
income taxes, if any) for each calendar year, except as to exempt holders
(generally, holders that are corporations, certain tax-exempt organizations or
nonresident aliens who provide certification as to their status as
nonresidents). Each non-exempt Certificateholder will be required to provide,
under penalty of perjury, a certificate on IRS Form W-9 containing his or her
name, address, correct Federal taxpayer identification number and a statement
that he or she is not subject to backup withholding. Should a nonexempt
Certificateholder fail to provide the required certification, the
Certificateholder will be subject to backup withholding of U.S. Federal income
tax at a rate of 31% of the amounts otherwise payable to the holder. Such
amount would be remitted to the IRS as a credit against the holder's Federal
income tax liability.
 
                       STATE AND LOCAL TAX CONSEQUENCES
   
GENERAL     
   
  State tax consequences to each Certificateholder will depend upon the
provisions of the state tax laws to which the Certificateholder is subject.
Most states modify or adjust the taxpayer's Federal taxable income to arrive
at the amount of income potentially subject to state tax. Resident individuals
generally pay state tax on 100% of such state-modified income, while
corporations and other taxpayers generally pay state tax only on that portion
of state-modified income assigned to the taxing state under the state's own
apportionment and allocation rules. Because each state's tax law varies, it is
impossible to predict the tax consequences to the Certificateholders in all of
the state taxing jurisdictions in which they are already subject to tax.     
 
 
                                      90
<PAGE>
 
   
CONNECTICUT     
   
  The activities to be undertaken by the Servicer in servicing and collecting
the Receivables will take place in Connecticut. Connecticut imposes an income
tax on corporations doing business in Connecticut measured by their net income
apportioned to Connecticut. This discussion is based upon present provisions
of Connecticut law and regulations, and applicable judicial or ruling
authority, all of which are subject to change, which change may be
retroactive. No ruling on any of the issues discussed below will be sought
from the Connecticut Department of Revenue.     
   
  Assuming the Certificates are treated as indebtedness for Federal income tax
purposes, Pullman & Comley, LLC, special Connecticut counsel to the
Transferor, is of the opinion that this treatment will also apply for
Connecticut tax purposes. Pursuant to this treatment, Certificateholders not
otherwise subject to Connecticut tax would not become subject to such tax
solely because of their ownership of the Certificates. Certificateholders
already subject to taxation in Connecticut as corporations, however, could be
required to pay tax on the income generated from ownership of these
Certificates.     
 
  In the alternative, if the Certificates are treated as interests in a
partnership (not taxable as a corporation) for Federal income tax purposes,
the same treatment should also apply for Connecticut tax purposes. In such
case, Connecticut could view the partnership as doing business in Connecticut.
Connecticut would not impose any tax on the Trust, but a Certificateholder not
otherwise subject to taxation in Connecticut could become subject to
Connecticut income taxes as a result of its mere ownership of Certificates.
 
  If the Certificates are instead treated as ownership interests in an
association taxable as a corporation or a "publicly traded partnership"
taxable as a corporation, then the entity could be subject to Connecticut
income tax. Such taxes could result in reduced distributions to
Certificateholders. A Certificateholder not otherwise subject to tax in
Connecticut would not become subject to Connecticut taxes as a result of its
mere ownership of such an interest.
 
  Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the Certificateholders in all of the state taxing
jurisdictions in which they are already subject to tax. There can be no
assurance that other states will not claim that the Servicer has undertaken
activities in such states. If such a claim were made, no assurances can be
given as to whether the Certificates would be treated as indebtedness by any
particular state. Certificateholders are urged to consult their own tax
advisors with respect to state taxes.
 
  ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL OR FOREIGN INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CERTIFICATES.
 
                 CERTAIN EMPLOYEE BENEFIT PLAN CONSIDERATIONS
 
  Section 406 of ERISA and section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, Keogh plans, individual
retirement accounts or annuities and employee annuity plans (collectively,
"Benefit Plans") 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 Benefit Plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons.
 
  A possible violation of the prohibited transaction rules could occur if the
Certificates were to be purchased with assets of any Benefit Plan if the
Transferor, the Servicer, the Trustee or the Underwriters were a "party in
interest" or a "disqualified person", with respect to such Benefit Plan. The
Transferor, the Servicer, the Trustee and the Underwriters are "parties in
interest" or "disqualified persons" with respect to many Benefit Plans. Prior
to the purchase of a Certificate, the fiduciary of any
 
                                      91
<PAGE>
 
   
Benefit Plan should consider whether a prohibited transaction might arise by
virtue of the relationship between the Benefit Plan and the Transferor, the
Servicer, the Trustee, the Underwriters or any affiliate of any thereof and,
if so, should consult counsel regarding the purchase. The Department of Labor
(the "DOL") has issued five class exemptions that may apply to otherwise
prohibited transactions arising from the purchase or holding of the
Certificates: DOL Prohibited Transaction Exemption 84-14 (Class Exemption for
Plan Asset Transactions Determined by Independent Qualified Professional Asset
Managers), 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 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).     
   
  Other prohibited transactions may arise through the operation of a
regulation (the "Plan Asset Regulation") issued by the DOL. Under certain
circumstances, the Plan Asset Regulation treats the assets of an entity in
which a Benefit Plan has an equity interest as assets of such Benefit Plan.
Although the Transferor and the Certificate Owners have agreed to treat the
Certificates as debt instruments for tax purposes, the Certificates may be
considered equity interests in the Trust for purposes of the Plan Asset
Regulation. In such a case, if investment in the Certificates by Benefit Plans
is substantial, the Plan Asset Regulation may apply to treat assets of the
Trust as assets of an investing Benefit Plan unless the exception described
below applies.     
 
  The assets of the Trust would not be treated as plan assets if the
Certificates constitute "publicly offered securities". A publicly-offered
security is a security that is (a) freely transferable, (b) part of a class of
securities that is owned, immediately subsequent to the initial offering, by
100 or more investors independent of the issuer and of one another and (c)
either is (i) part of a class of securities registered under section 12(b) or
12(g) of the Exchange Act or (ii) 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.
For the purpose of this exception, the Class A Certificates should be deemed a
"class" of securities that would be tested separately from any other
securities that may be issued by the Trust. It is anticipated that the Class A
Certificates will meet the criteria of publicly-offered securities as set
forth above. The Class A Underwriters will not sell the Class A Certificates
to Benefit Plans unless they believe that the Class A Certificates will be
held by at least 100 persons at the conclusion of the offering. In addition,
there are no restrictions imposed on the transfer of the Class A Certificates;
and the Class A Certificates 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. The Class B Certificates may not be
acquired with the assets of any Benefit Plan.
   
  If the Plan Asset Regulation were to apply so that the Trust is considered
to hold "plan assets", transactions involving the Trust and "parties in
interest" or "disqualified persons" with respect to a Benefit Plan that is a
Certificate Owner might be prohibited under Section 406 of ERISA and section
4975 of the Code unless an exemption is applicable. The five DOL class
exemptions mentioned above may not provide relief for all transactions
involving the Trust's assets even if they would otherwise be applicable to the
purchase of a Certificate by a Benefit Plan.     
 
  In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of Certificates should consult their own counsel regarding whether
the assets of the Trust would be considered plan assets, the consequences that
would apply if the Trust's assets were considered plan assets and the
possibility of exemptive relief from the prohibited transaction rules.
 
 
                                      92
<PAGE>
 
   
  Finally, fiduciaries of a Benefit Plan should consider the fiduciary
standards under ERISA or other applicable law in the context of the Benefit
Plan's particular circumstances before authorizing an investment of a portion
of a Benefit Plan's assets in the Certificates. Accordingly, among other
factors, such fiduciaries should consider whether the investment (i) satisfies
the diversification requirement of ERISA or other applicable law, (ii) is in
accordance with the Benefit Plan's governing instruments and (iii) is prudent
considering the "Risk Factors" and other factors discussed in this Prospectus.
    
                                 UNDERWRITING
   
  Subject to the terms and conditions set forth in the underwriting agreement
with respect to the Certificates (the "Underwriting Agreement"), PSFC and the
Transferor have agreed with respect to the Class A Certificates to sell to
each of the Underwriters named below (the "Class A Underwriters"), and each of
the Class A Underwriters has severally agreed to purchase, the principal
amount of Class A Certificates set forth opposite its name below:     
 
<TABLE>     
<CAPTION>
                                                            PRINCIPAL AMOUNT OF
   UNDERWRITERS                                             CLASS A CERTIFICATES
   ------------                                             --------------------
   <S>                                                      <C>
   Goldman, Sachs & Co.....................................      106,334,000
   J.P. Morgan Securities Inc..............................      106,333,000
   Salomon Brothers Inc....................................      106,333,000
   Lehman Brothers Inc.....................................       20,000,000
   Morgan Stanley & Co. Incorporated.......................       20,000,000
   SBC Warburg.............................................       20,000,000
                                                                ------------
                                                                $379,000,000
                                                                ============
</TABLE>    
   
  Under the terms and conditions of the Underwriting Agreement, the several
Class A Underwriters are committed to take and pay for all of the Class A
Certificates, if any are taken.     
   
  Subject to the terms and conditions set forth in the Underwriting Agreement,
PSFC and the Transferor have agreed with respect to the Class B Certificates
to sell to Goldman, Sachs & Co. (the "Class B Underwriters" and together with
the Class A Underwriters, the "Underwriters"), and the Class B Underwriters
have agreed to purchase, the Class B Certificates.     
 
  Under the terms and conditions of the Underwriting Agreement, the Class B
Underwriters are committed to take and pay for all of the Class B
Certificates, if any are taken.
   
  PSFC and the Transferor have been advised by the Class A 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 Class A 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 Class A Certificates
are released for sale to the public, the public offering price and other
selling terms may from time to time be varied by the Class A Underwriters.
       
  PSFC and the Transferor have been advised by the Class B 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 Class B 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 Class B Certificates
are released for sale to the public, the public offering price and other
selling terms may from time to time be varied by the Class B Underwriters.
    
  Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
   
  Each Underwriter has represented and agreed that (a) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the Certificates in, from
or otherwise involving the United Kingdom; (b) it has only issued or passed
    
                                      93
<PAGE>
 
   
on and will only issue or pass on in the United Kingdom any document received
by it in connection with the issue of the Certificates to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or who is a person to whom the
document may otherwise lawfully be issued or passed on; 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.     
   
  PSFC and 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.     
 
                                 LEGAL MATTERS
   
  Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by William T. Kosturko, General Counsel to
People's Bank. Certain legal matters relating to the Certificates will be
passed upon for the Transferor by Mayer, Brown & Platt, New York, New York.
Certain legal matters relating to the federal tax consequences of the issuance
of the Certificates and certain other matters relating thereto will be passed
upon for the Transferor by Mayer, Brown & Platt, New York, New York and
certain legal matters relating to Connecticut state income tax consequences
will be passed upon for the Transferor by Pullman & Comley, LLC, Bridgeport,
Connecticut, special Connecticut counsel to People's Bank. Certain legal
matters relating to the issuance of the Certificates will be passed upon for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New York.
    
                                      94
<PAGE>
 
                               INDEX OF KEY TERMS
 
<TABLE>   
<S>                                                                          <C>
Accounts....................................................................  14
Additional Accounts.........................................................  15
Affinity Program Accounts...................................................  34
Agent Bank Accounts.........................................................  34
Aggregate Principal Receivables.............................................   8
Agreement...................................................................   3
Amortization Period.........................................................   7
Automatic Additional Accounts...............................................  15
Available Cash Collateral Amount............................................  17
Available Shared Principal Collections......................................   8
Bank Portfolio..............................................................  33
Base Rate...................................................................  29
Benefit Plans...............................................................  91
Billing Cycle...............................................................  35
Cash Collateral Account.....................................................   4
Cash Collateral Lender......................................................  17
Cede........................................................................   2
Cedel Participants..........................................................  52
Cedel.......................................................................  52
Certificate Owners..........................................................   2
Certificate Rate............................................................   9
Certificate Rates...........................................................   9
Certificateholder...........................................................  51
Certificateholders..........................................................   3
Certificates................................................................   1
Class A Cap Rate............................................................  49
Class A Certificate Rate....................................................   9
Class A Certificateholders..................................................   3
Class A Certificates........................................................   1
Class A Controlled Amortization Amount......................................  43
Class A Controlled Distribution Amount......................................  11
Class A Excess Interest.....................................................   9
Class A Excess Principal....................................................  55
Class A Expected Final Distribution Date....................................  12
Class A Initial Investor Interest...........................................   6
Class A Interest Rate Cap...................................................   4
Class A Investor Charge Off.................................................  19
Class A Investor Default Amount.............................................  73
Class A Investor Interest...................................................   6
Class A Investor Percentage.................................................   9
Class A Monthly Cap Rate Interest...........................................  18
Class A Monthly Interest....................................................   9
Class A Monthly Servicing Fee...............................................  78
Class A Notional Amount.....................................................  49
Class A Payment Amount......................................................  18
Class A Required Amount.....................................................  18
Class A Underwriters........................................................  93
Class B Cap Rate............................................................  49
Class B Certificate Rate....................................................   9
Class B Certificateholders..................................................   3
</TABLE>    
 
                                       95
<PAGE>
 
<TABLE>   
<S>                                                                          <C>
Class B Certificates........................................................   1
Class B Controlled Amortization Amount......................................  43
Class B Controlled Distribution Amount......................................  11
Class B Excess Interest.....................................................  10
Class B Excess Principal....................................................  55
Class B Expected Final Distribution Date....................................  12
Class B Initial Investor Interest...........................................   6
Class B Interest Rate Cap...................................................   4
Class B Investor Charge Off.................................................  20
Class B Investor Default Amount.............................................  73
Class B Investor Interest...................................................   6
Class B Investor Percentage.................................................   9
Class B Monthly Cap Rate Interest...........................................  19
Class B Monthly Interest....................................................  10
Class B Monthly Servicing Fee...............................................  78
Class B Notional Amount.....................................................  49
Class B Payment Amount......................................................  19
Class B Payment Commencement Date...........................................  56
Class B Required Amount.....................................................  19
Closing Date................................................................   5
Code........................................................................  87
Collection Account..........................................................  16
Collection Subaccount.......................................................  64
Collections.................................................................  65
Commission..................................................................   2
Congress....................................................................  26
Controlled Amortization Amount..............................................  43
Controlled Amortization Date................................................  11
Controlled Amortization Period..............................................  11
Controlled Distribution Amount..............................................  11
Cooperative.................................................................  53
Defaulted Accounts..........................................................  66
Defaulted Receivables.......................................................  73
Deficit Controlled Amortization Amount......................................  12
Definitive Certificates.....................................................  53
Depositaries................................................................  51
Depository..................................................................  48
Determination Date..........................................................  73
Disclosure Document.........................................................  13
Discount Option.............................................................  63
Discount Percentage.........................................................  63
Distribution Account........................................................  64
Distribution Date...........................................................   1
DOL.........................................................................  92
DTC Participants............................................................  51
DTC.........................................................................   2
Eligible Account............................................................  60
Eligible Additional Account.................................................  62
Eligible Automatic Additional Account.......................................  62
Eligible Receivable.........................................................  61
Enhancement Provider........................................................  59
Enhancement.................................................................   4
</TABLE>    
 
                                       96
<PAGE>
 
<TABLE>   
<S>                                                                        <C>
ERISA.....................................................................    23
Euroclear Operator........................................................    52
Euroclear Participants....................................................    52
Euroclear System..........................................................    52
Euroclear.................................................................    52
Excess Funding Account....................................................    64
Excess Principal..........................................................    55
Excess Spread.............................................................    20
Exchange..................................................................    13
Exchange Act..............................................................     2
Exchangeable Transferor Certificate.......................................     5
Expected Class A Principal................................................    55
Expected Class B Principal................................................    55
Expected Final Distribution Date..........................................    12
FDIA......................................................................    25
FDIC......................................................................     1
Finance Charge Account....................................................    64
Finance Charge Collections................................................    65
Finance Charge Receivables................................................    14
FIRREA....................................................................    25
GAO.......................................................................    26
Global Securities......................................................... AII-1
Holders...................................................................    54
Indirect Participants.....................................................    50
Ineligible Receivable.....................................................    59
Initial Cash Collateral Amount............................................    17
Initial Class A Scheduled Principal Payment Date..........................    55
Initial Interest Period...................................................    10
Initial Investor Interest.................................................     6
Insolvency Event..........................................................    76
Interchange...............................................................    39
Interest Period...........................................................    49
Interest Rate Cap Provider................................................     4
Interest Rate Caps........................................................     4
Investor Charge Offs......................................................    74
Investor Default Amount...................................................    73
Investor Exchange.........................................................    13
Investor Interest.........................................................     6
Investor Percentage.......................................................     6
IRS.......................................................................    87
LIBOR.....................................................................     9
LIBOR Determination Date..................................................    49
Loan Agreement............................................................    17
London Banking Day........................................................    48
MasterCard................................................................    33
Maximum Addition Amount...................................................    62
Minimum Aggregate Principal Receivables...................................    40
Minimum Transferor Interest...............................................    40
Monthly Period............................................................     7
Monthly Servicer Report...................................................    80
Monthly Servicing Fees....................................................    78
Moody's...................................................................    64
</TABLE>    
 
                                       97
<PAGE>
 
<TABLE>   
<S>                                                                          <C>
OID.........................................................................  88
Paired Amortization Period..................................................   7
Paired Certificates.........................................................   7
Participants................................................................  51
Pay Out Event...............................................................  43
Paying Agent................................................................  54
Permitted Investments.......................................................  64
Plan Asset Regulation.......................................................  92
Pool Factor.................................................................  81
Portfolio Yield.............................................................  29
Principal Account...........................................................  64
Principal Allocation........................................................  11
Principal Receivables.......................................................  14
Principal Terms.............................................................  57
PSFC........................................................................   1
Qualified Institution.......................................................  64
Qualified Substitute Arrangement............................................  49
Qualified Trust Institution.................................................  64
Rapid Amortization Period...................................................  12
Rating Agency...............................................................  31
Reallocated Principal Collections...........................................  18
Receivables.................................................................   1
Record Date.................................................................  47
Recoveries..................................................................  14
Reference Banks.............................................................  49
Removal Date................................................................  63
Removed Accounts............................................................  15
Replacement Interest Rate Cap...............................................  49
Representative Portfolio....................................................  37
Required Amounts............................................................  19
Required Cash Collateral Amount.............................................  17
Revolving Period............................................................  10
Securities Act..............................................................   2
Series......................................................................   3
Series Cut-Off Date.........................................................  14
Service Transfer............................................................  80
Servicer....................................................................  16
Servicer Default............................................................  80
Servicing Fee...............................................................  78
Shared Finance Charge Collections...........................................  21
Standard & Poor's...........................................................  64
Supplement..................................................................  12
Tax Counsel.................................................................  87
Telerate Page 3750..........................................................  49
Terms and Conditions........................................................  53
Total System................................................................  33
Transfer Agent and Registrar................................................  54
Transfer Date...............................................................  17
Transferor..................................................................   1
Transferor Exchange.........................................................  13
Transferor Interest.........................................................   6
Transferor Percentage.......................................................  67
</TABLE>    
 
                                       98
<PAGE>
 
<TABLE>   
<S>                                                                        <C>
Transferor Servicing Fee..................................................    78
Trust.....................................................................     1
Trust Portfolio...........................................................     5
Trustee...................................................................     3
U.S. Person............................................................... AII-4
UCC.......................................................................    84
Underwriting Agreement....................................................    92
VISA......................................................................    33
</TABLE>    
 
 
                                       99
<PAGE>
 
                                                                        ANNEX I
 
                              PRIOR SERIES ISSUED
   
  The table below sets forth the principal characteristics of the four Series
previously issued by the Trust: the Series 1993-1 Certificates, the Series
1994-1 Certificates, the Series 1994-2 Certificates and the Series 1995-1
Certificates. For more specific information with respect to a Series, any
prospective investor should contact People's Bank at (203) 338-7171. People's
Bank will provide, without charge, to any prospective purchaser of the
Certificates, a copy of the Disclosure Documents for any previously publicly-
issued Series.     
 
<TABLE>   
<S>                                                           <C>
SERIES 1993-1
Initial Investor Interest....................................       $200,000,000
Certificate Rate.............................................    4.80% per annum
Current Investor Interest....................................       $100,000,000
Controlled Amortization Amount...............................     $16,666,666.67
Controlled Amortization Date.................................   December 1, 1995
Monthly Servicing Fee........................................       2% per annum
Initial Cash Collateral Amount...............................         $6,000,000
Surety Bond Initial Amount...................................        $19,000,000
Issuer of the Surety Bond.................................... Financial Guaranty
                                                               Insurance Company
Expected Series Final Distribution Date......................      December 1996
                                                               Distribution Date
Scheduled Series Termination Date............................      December 1998
                                                               Distribution Date
Series Issuance Date.........................................       July 9, 1993
SERIES 1994-1
Initial Investor Interest....................................       $200,000,000
Certificate Rate.............................................    5.10% per annum
Current Investor Interest....................................       $200,000,000
Controlled Amortization Amount...............................     $16,666,666.67
Controlled Amortization Date.................................     August 1, 1996
Monthly Servicing Fee........................................       2% per annum
Initial Cash Collateral Amount...............................         $6,000,000
Surety Bond Initial Amount...................................        $19,000,000
Issuer of the Surety Bond.................................... Financial Guaranty
                                                               Insurance Company
Expected Series Final Distribution Date......................        August 1997
                                                               Distribution Date
Scheduled Series Termination Date............................        August 2000
                                                               Distribution Date
Series Issuance Date.........................................  February 16, 1994
</TABLE>    
 
                                     AI-1
<PAGE>
 
<TABLE>   
<S>                                                            <C>
SERIES 1994-2
Initial Investor Interest.....................................      $400,000,000
Class A Certificate Rate
 through November 14, 1994.................................... 5.0875% per annum
 after November 14, 1994......................................  LIBOR plus 0.15%
Class B Certificate Rate
 through November 14, 1994.................................... 5.3375% per annum
 after November 14, 1994......................................  LIBOR plus 0.40%
Current Investor Interest.....................................      $400,000,000
Class A Controlled Amortization Amount........................    $27,142,857.14
Class B Controlled Amortization Amount........................       $20,000,000
Controlled Amortization Date..................................     March 1, 1997
Monthly Servicing Fee.........................................   2.00% per annum
Initial Cash Collateral Amount................................       $36,000,000
Class A Expected Final Distribution Date......................          May 1998
                                                               Distribution Date
Class B Expected Final Distribution Date......................         June 1998
                                                               Distribution Date
Scheduled Series 1994-2 Termination Date......................        March 2001
                                                               Distribution Date
Series Issuance Date..........................................  October 27, 1994
SERIES 1995-1
Initial Investor Interest.....................................      $400,000,000
Class A Certificate Rate
 through April 16, 1995.......................................  6.325% per annum
 after April 16, 1995.........................................  LIBOR plus 0.20%
Class B Certificate Rate
 through April 16, 1995.......................................  6.475% per annum
 after April 16, 1995.........................................  LIBOR plus 0.35%
Current Investor Interest.....................................      $400,000,000
Class A Controlled Amortization Amount........................    $27,142,857.14
Class B Controlled Amortization Amount........................       $20,000,000
Controlled Amortization Date..................................    August 1, 1999
Monthly Servicing Fee.........................................   2.00% per annum
Initial Cash Collateral Amount................................       $36,000,000
Class A Expected Final Distribution Date......................      October 2000
                                                               Distribution Date
Class B Expected Final Distribution Date......................     November 2000
                                                               Distribution Date
Scheduled Series 1995-1 Termination Date......................       August 2003
                                                               Distribution Date
Series Issuance Date..........................................    March 21, 1995
</TABLE>    
 
                                      AI-2
<PAGE>
 
                                                                       ANNEX II
 
         GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
   
  Except in certain limited circumstances, the globally offered People's Bank
Credit Card Master Trust Floating Rate Class A Asset Backed Certificates,
Series 1996-1 and Floating Rate Class B Asset Backed Certificates, Series
1996-1 (collectively, the "Global Securities") will be available only in book-
entry form. Investors in the Global Securities may hold such Global Securities
through 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 People's Bank Credit Card Master Trust
issues.
   
  Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear (in
such capacity) and as DTC Participants.     
 
  Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
   
INITIAL SETTLEMENT     
   
  All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
Participants and Indirect Participants in DTC. As a result, Cedel and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
DTC Participants.     
 
  Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior People's Bank Credit 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 the
same-day funds.     
   
SECONDARY MARKET TRADING     
 
  Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
 
  Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior People's
Bank Credit Card Master Trust issues in same-day funds.
 
                                     AII-1
<PAGE>
 
   
  Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
       
  Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued to the Global Securities from and including the last coupon payment
date to and excluding the settlement date, on the basis of actual days elapsed
and a 360 day year. Payment will then be made by the respective Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's
account. The Global Securities credit will appear the next day (European time)
and the cash debit will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debit
will be valued instead as of the actual settlement date.     
   
  Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.     
   
  As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the settlement.
Under this procedure, Cedel Participants or Euroclear Participants purchasing
Global Securities would incur overdraft charges for one day, assuming they
cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the
value date. Therefore, in many cases the investment income on the Global
Securities earned during that one-day period may substantially reduce or
offset the amount of such overdraft charges, although this result will depend
on each Cedel Participant's or Euroclear Participant's particular cost of
funds.     
   
  Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.     
   
  Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
Cedel or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date on the basis of
actual days elapsed and a 360 day year. The payment will then be reflected in
    
                                     AII-2
<PAGE>
 
   
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 a debit position in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.     
   
  Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
       
    (a) borrowing through Cedel or Euroclear for one day (until the purchase
  side of the day trade is reflected in their Cedel or Euroclear accounts) in
  accordance with the clearing system's customary procedures;     
     
    (b) borrowing the Global Securities in the U.S. from a DTC Participant no
  later than one day prior to settlement, which would give the Global
  Securities sufficient time to be reflected in their Cedel or Euroclear
  account in order to settle the sale side of the trade; or     
     
    (c) staggering the value dates for the buy and sell sides of the trade so
  that the value date for the purchase from the DTC Participant is at least
  one day prior to the value date for the sale to the Cedel Participant or
  Euroclear Participant.     
 
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
   
  A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:     
 
  Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Certificates
that are non-U.S. Persons can obtain a complete exemption from the withholding
tax by filing a signed Form W-8 (Certificate of Foreign Status). If the
information shown on Form W-8 changes, a new Form W-8 must be filed within 30
days of such change.
 
  Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
 
  Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a
country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless
the filer alternatively files Form W-8. Form 1001 may be filed by the
Certificate Owner or its agent.
 
                                     AII-3
<PAGE>
 
  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, its
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 or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
 
 
                                     AII-4
<PAGE>
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
 NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PEOPLE'S BANK OR THE UNDERWRITERS. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
                                  -----------
 
                               TABLE OF CONTENTS
 
<TABLE>   
<CAPTION>
                                                                          PAGE
                                                                          -----
<S>                                                                       <C>
Reports to Certificateholders............................................     2
Available Information....................................................     2
Prospectus Summary.......................................................     3
Risk Factors.............................................................    25
The Trust................................................................    32
The Credit Card Business of People's Bank................................    33
The Receivables..........................................................    39
Maturity Assumptions.....................................................    43
Receivable Yield Considerations..........................................    45
Use of Proceeds..........................................................    46
People's Bank............................................................    46
Description of the Certificates..........................................    47
Certain Legal Aspects of the Receivables.................................    84
Certain Federal Income Tax Consequences..................................    87
State and Local Tax Consequences.........................................    90
Certain Employee Benefit Plan Considerations.............................    91
Underwriting.............................................................    93
Legal Matters............................................................    94
Index of Key Terms.......................................................    95
Annex I Prior Series Issued..............................................  AI-1
Annex II Global Clearance, Settlement and Tax Documentation Procedures... AII-1
</TABLE>    
 
                                  -----------
 
 UNTIL       , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
                                  
                               $400,000,000     
 
                           PEOPLE'S BANK CREDIT CARD
                                 MASTER TRUST
                           
                        $379,000,000 FLOATING RATE     
                             CLASS A ASSET BACKED
                          CERTIFICATES, SERIES 1996-1
                           
                        $21,000,000 FLOATING RATE     
                             CLASS B ASSET BACKED
                          CERTIFICATES, SERIES 1996-1
 
                                 people's bank
 
                            TRANSFEROR AND SERVICER
 
                                  -----------
 
                                  PROSPECTUS
 
                                  -----------
       
                    
                 UNDERWRITERS OF THE CLASS A CERTIFICATES     
       
                              
                           GOLDMAN, SACHS & CO.     
                               
                            J.P. MORGAN & CO.     
                              
                           SALOMON BROTHERS INC     
       
                    
                 UNDERWRITERS OF THE CLASS B CERTIFICATES     
                              
                           GOLDMAN, SACHS & CO.     
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
 
PROSPECTUS SUPPLEMENT
TO PRELIMINARY PROSPECTUS DATED JUNE 21, 1996
(THE "SEC PROSPECTUS")
 
                                 $400,000,000
 
                    PEOPLE'S BANK CREDIT CARD MASTER TRUST
 
 $ 379,000,000 FLOATING RATE CLASS A ASSET BACKED CERTIFICATES, SERIES 1996-1
  $ 21,000,000 FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1996-1
 
                                 PEOPLE'S BANK
                            TRANSFEROR AND SERVICER
 
  Each of the Floating Rate Class A Asset Backed Certificates, Series 1996-1
(the "Class A Certificates") and each of the Floating Rate Class B Asset
Backed Certificates, Series 1996-1 (the "Class B Certificates" and, together
with the Class A Certificates, the "Certificates") offered hereby will
evidence undivided interests in certain assets of the People's Bank Credit
Card Master Trust (the "Trust") created pursuant to a pooling and servicing
agreement dated as of June 1, 1993 between People's Bank, as transferor and
servicer (the "Transferor" or "Peoples Bank"), and Bankers Trust Company, as
trustee. The property of the Trust includes, among other things, receivables
(the "Receivables") generated from time to time in a portfolio of VISA(R) and
MasterCard(R) credit card accounts, all monies due or to become due in payment
of the Receivables, Recoveries, Interchange, the benefits of the funds and
securities on deposit in a Cash Collateral Account with respect to the
Certificates and certain interest rate cap agreements. People's Bank services
the Receivables and People's Structured Finance Corp. ("PSFC"), a wholly-owned
subsidiary of People's Bank, owns the undivided interest in the Trust not
represented by the Certificates or other series of investor certificates
issued by the Trust. Principal with respect to the Class A Certificates is
scheduled to be distributed on each Distribution Date commencing with the
December 2000 Distribution Date, but may be paid earlier under certain limited
circumstances as described in the SEC Prospectus. Principal with respect to
the Class B Certificates is scheduled to be distributed on the February 2002
Distribution Date, but may be paid earlier or later under certain limited
circumstances as described in the SEC Prospectus.
 
  Interest on the Certificates will accrue from July 2, 1996.
 
  This Prospectus Supplement contains certain limited information about the
offering of the Certificates which is relevant to non-U.S. persons. Detailed
information concerning the offering is contained in the SEC Prospectus and
purchasers are urged to read each of this Prospectus Supplement, which is
attached to the SEC Prospectus, and the SEC Prospectus together and in full.
Sales of the Certificates may not be consummated unless the purchaser has
received this Prospectus Supplement and the SEC Prospectus.
 
  Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
 
  The distribution of this Prospectus Supplement and the SEC Prospectus and
the offering of the Certificates in certain jurisdictions may be restricted by
law. Persons into whose possession this Prospectus Supplement and the SEC
Prospectus come are required by the Underwriters to inform themselves about
and to observe any such restrictions.
 
  This Prospectus Supplement and the SEC Prospectus do not constitute an offer
to sell or the solicitation of an offer to buy the Certificates in any
jurisdiction in which such offer or solicitation is unlawful.
 
  No person has been authorized to give information or make statements other
than those of this Prospectus Supplement and of the SEC Prospectus and no
person may rely on such information or statements as having been authorized.
The publication of this Prospectus Supplement does not imply that the
information contained herein is still valid after the date of publication.
 
  As used in this Prospectus Supplement and the SEC Prospectus, all reference
to "dollars" and "$" are to United States dollars.
<PAGE>
 
                          DESCRIPTION OF CERTIFICATES
 
  Reference should be made to the accompanying SEC Prospectus for a detailed
summary of the provisions of the Certificates. Certain terms used and not
defined in this Prospectus Supplement are defined in the SEC Prospectus.
 
DISTRIBUTIONS ON THE CERTIFICATES
 
  Interest will accrue on the Class A Investor Interest at the Class A
Certificate Rate and on the Class B Investor Interest at the Class B
Certificate Rate during each Interest Period following the Initial Interest
Period and will accrue on the Class A Investor Interest at a rate of  % per
annum and on the Class B Investor Interest at a rate of  % per annum during
the Initial Interest Period. Interest will be distributed to
Certificateholders on July 15, 1996, and on the 15th day of each month
thereafter (or, if such 15th day is not a Business Day, on the next succeeding
Business Day (each a "Distribution Date"). Certificateholders will receive all
distributions of principal of and interest on the Certificates in the manner
described under "Description of the Certificates--Book Entry Registration" and
"--Definitive Certificates" in the SEC Prospectus. For further discussion of
distributions of principal and interest with respect to the Certificates, see
"Prospectus Summary--Interest," "--Principal Payments; Controlled Amortization
Period," "--Principal Payments; Rapid Amortization Period" and "--Final
Payment of Principal and Interest" and "Description of the Certificates--
General," "--Interest Payments" and "--Principal Payments" in the SEC
Prospectus. "Interest Period" means, with respect to any Distribution Date, a
period from and including the preceding Distribution Date to and including the
day immediately preceding such Distribution Date; provided, however, that the
Initial Interest Period will commence on the Closing Date. A "Business Day"
for purposes other than determining LIBOR is any day other than a Saturday or
Sunday and other than a day on which banking institutions in New York, New
York or Connecticut are authorized or obligated by law or executive order to
be closed.
 
  The Trustee will maintain a paying agency in Luxembourg for so long as the
Class A Certificates are outstanding. The name and address of the paying agent
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. 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.
 
  No additional amounts will be payable to a Certificateholder in the event
any deduction or withholding for or on account of any present or future tax,
assessment or other governmental charge is imposed upon any payment to such
Certificateholder by the United States or any political subdivision or taxing
authority therein or thereof.
 
REPLACEMENT CERTIFICATES
 
  In the event that Definitive Certificates are issued, a Class A 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 Class A Certificate or satisfactory
evidence of the 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 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.
 
REPORTS; NOTICES
 
  The Trustee will publish or will cause to be published following each
Distribution Date in a daily newspaper in Luxembourg (expected to be the
Luxemburger Wort) a notice to the effect that the information set forth in the
statement described under "Description of the Certificates--Reports to
Certificateholders" in the SEC Prospectus will be available at the main office
of the listing agent of the issuer in Luxembourg City, Bankers Trust
Luxembourg S.A., 14 Boulevard F.D. Roosevelt, Luxembourg.
 
                                      S-2
<PAGE>
 
  Notices to Class A 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.
 
STATUS OF THE CERTIFICATES
 
  The Class A Certificates and Class B Certificates constitute general
contractual obligations of the Trust and rank pari passu among themselves
within each respective class and collectively as a Series with other present
and future outstanding unsubordinated obligations of the Trust.
 
USE OF PROCEEDS
 
  The net proceeds from the sale of the Certificates, approximately $
before deduction of expenses, will be paid to PSFC. PSFC intends to distribute
substantially all of such proceeds to the Transferor through the declaration
and payment of a dividend and/or a distribution of capital to the Transferor,
and the Transferor will use such proceeds for its general corporate purposes.
 
PAY OUT EVENTS
 
  The rights of Certificateholders upon the occurrence of a Pay Out Event are
described under "Description of the Certificates--Pay Out Events" in the SEC
Prospectus. In addition to the consequences of a Pay Out Event described
therein, if a receiver or conservator is appointed for the Transferor, on the
day of such appointment the Transferor will (pursuant to the Agreement and
subject to the actions of the Certificateholders) immediately cease to
transfer Receivables to the Trust and promptly give notice to the Trustee of
such appointment. Under the terms of the Agreement the Trustee will publish a
notice of the appointment of a receiver or conservator stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in
a commercially reasonable manner and on commercially reasonable terms unless
within a specific period of time the holders of more than 50% of the principal
amount of each Series outstanding (or 50% of each class of each such Series
with more than one class) instruct the Trustee not to dispose of or liquidate
the Receivables and to continue having Principal Receivables transferred to
the Trust as before such appointment of a receiver or conservator. The
proceeds from the sale, disposition or liquidation of the Receivables
allocable to any Series that did not vote to disapprove the liquidation of the
Receivables will be treated as collections on the Receivables (payable solely
to such Series). If the portion of such proceeds allocated to the
Certificateholders and the proceeds of any collections on the Receivables in
the Distribution Account allocable to the Certificateholders are not
sufficient to pay the Certificateholders in full, the amount of principal
returned to Certificateholders will be reduced and the Certificateholders will
incur a loss.
 
LIABILITY OF THE TRANSFEROR
 
  The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of the certificateholders (including the Certificateholders), 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 pursuant to the Agreement; provided, however, that the Servicer
shall not indemnify (a) the Trustee for liabilities imposed by reason of or
resulting from fraud, negligence, breach of fiduciary duty or willful
misconduct by the Trustee in the performance of its duties under the
Agreement, (b) the Trust, the Certificateholders or the Certificate Owners for
liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Trust, the Certificateholders or the Certificate
Owners for any losses, claims, damages or liabilities incurred by any
Certificateholder in its capacity as an investor, including without limitation
losses incurred as a result of defaulted Receivables or Receivables which are
written off as uncollectible or (d) the Trust, the Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation any federal, state or local income or franchise
tax or any other tax imposed on or
 
                                      S-3
<PAGE>
 
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 therewith to
any taxing authority.
 
  The 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 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 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 Agreement and which in its opinion may expose it to
any expense or liability.
 
                                 PEOPLE'S BANK
 
  People's Bank was formed in 1842 and is headquartered in Bridgeport,
Connecticut. People's Bank is a majority-owned subsidiary of People's Mutual
Holdings, which as of March 31, 1996 owns 62.5% of the issued and outstanding
common stock of People's Bank. In May 1993, People's Bank issued $69,000,000
of convertible preferred stock. In May 1996, People's Bank notified its
preferred shareholders of its intent to redeem all shares of preferred stock,
as soon as practicable, subject to regulatory approval. After such stock is
fully converted, People's Mutual Holdings will own 60.1% of the common stock
of People's Bank. People's Bank is chartered as a Connecticut stock savings
bank, and as a state chartered non-member bank is regulated by the State of
Connecticut Department of Banking and by the FDIC. As of March 31, 1996,
People's Bank's total assets were approximately $6.9 billion, total
liabilities were approximately $6.3 billion, and total stockholders' equity
was approximately $565 million. At March 31, 1996, People's Bank Tier 1
leverage capital ratio was 7.7%, satisfying the minimum ratio of 4.0% to 5.0%
generally required by the FDIC. People's Bank is also subject to the FDIC's
risk-based capital regulations, which require minimum ratios of Tier 1 Capital
and total capital to risk-weighted assets of 4.0% and 8.0%, respectively.
People's Bank satisfied these requirements at March 31, 1996 with ratios of
10.7% and 12.0%, respectively. People's Bank regulatory capital ratios at
March 31, 1996, exceed the FDIC's numeric criteria for classification as a
"well-capitalized" institution. People's Bank's principal business is to
provide full banking services to individuals and businesses within the State
of Connecticut. People's Bank's lending activities consist of originating
loans secured by residential and commercial properties, and extending secured
and unsecured loans to consumers and businesses.
 
                        LISTING AND GENERAL INFORMATION
 
  Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange. In connection with the listing application, the Articles of
Association and By-laws of the Transferor, as well as legal notice relating to
the issuance of the Class A 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 Class A Certificates have been
so listed, trading of the Class A Certificates may be effected on the
Luxembourg Stock Exchange. The Certificates will be accepted for clearance
through the facilities of The Depository Trust Company and Cedel Bank, societe
anonyme, and the Euroclear System (ISIN number US    with respect to the Class
A Certificates and ISIN number US    with respect to the Class B Certificates
and Common Code number     with respect to the Class A Certificates and Common
Code number     with respect to the Class B Certificates).
 
  The transactions contemplated in this Prospectus and the SEC Prospectus were
authorized by resolutions adopted by the Transferor on May 16, 1996 and by
PSFC on June 6, 1996.
 
  The Trust was formed on June 1, 1993 pursuant to the Pooling and Servicing
Agreement. The Trust has no assets other than those described in the SEC
Prospectus.
 
                                      S-4
<PAGE>
 
  Copies of the Agreement, the Series 1996-1 Supplement, the annual report of
independent public accountants, the documents listed under "Available
Information" in the SEC Prospectus and the reports to Certificateholders
referred to in the second paragraph under "Description of Certificates--
Reports to Certificateholders" in the SEC Prospectus, will be available at the
office of Bankers Trust Luxembourg S.A., the Listing Agent of the Issuer in
Luxembourg, whose address is 14 Boulevard F.D. Roosevelt, Luxembourg City,
Luxembourg. Financial information regarding the Transferor is included in the
consolidated financial statements of People's Bank's Annual Report and Form F-
2 for the fiscal year ended December 31, 1995 and Form F-4 for the fiscal
quarter ended March 31, 1996, each of which will be available at the office of
the Listing Agent in Luxembourg.
 
  On or prior to each Distribution Date the Luxembourg Stock Exchange shall be
advised of (i) the Class A Certificate Rate as determined under "Prospectus
Summary--Interest" and "Description of Certificates--Determination of LIBOR"
in the SEC Prospectus, for the immediately following Distribution Date, (ii)
the amount of interest to be distributed in respect of the Class A
Certificates for the Distribution Date referred to in (i) above and (iii) the
principal amount of the Class A Certificates that will be outstanding after
the principal distribution made on the Distribution Date on which such report
is being furnished. Also, promptly following each Distribution Date a notice
will be published in a daily newspaper (expected to be the Luxemburger Wort)
specifying the information described above in Items (i) and (ii).
 
  The Certificates, the Agreement and the Series 1996-1 Supplement are
governed by the laws of the State of New York.
 
                                      S-5
<PAGE>
 
                       PRINCIPAL OFFICE OF PEOPLE'S BANK
                               Bridgeport Center
                                850 Main Street
                           Bridgeport, CT 06604-4913
 
                                    TRUSTEE
 
                             BANKERS TRUST COMPANY
                                4 Albany Street
                                   10th Floor
                            New York, New York 10005
 
                                 PAYING AGENTS
 
        BANKERS TRUST COMPANY                   BANKERS TRUST LUXEMBOURG,
           4 Albany Street                                S.A.
             10th Floor                        14 Boulevard F.D. Roosevelt
      New York, New York 10005                       Luxembourg City
                                                       Luxembourg
 
                                 LISTING AGENT
 
                           BANKERS TRUST LUXEMBOURG,
                                      S.A.
                          14 Boulevard F.D. Roosevelt
                                Luxembourg City
                                   Luxembourg
 
        LEGAL ADVISER TO THE                      LEGAL ADVISER TO THE
                BANK                                  UNDERWRITERS
       As to United States Law                   As to United States Law
        MAYER, BROWN & PLATT                      SKADDEN, ARPS, SLATE,
            1675 Broadway                            MEAGHER & FLOM
    New York, New York 10019-5820                   919 Third Avenue
                                                New York, New York 10022
 
                               ACCOUNTANTS TO THE
                                      BANK
                               KPMG PEAT MARWICK
                              2001 M Street, N.W.
                                   9th Floor
                             Washington, D.C. 20036
<PAGE>
 
                                    PART II
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
<TABLE>     
   <S>                                                              <C>
   Registration Fee................................................ $137,931.04
   Printing and Engraving..........................................      70,000
   Legal Fees and Expenses.........................................     150,000
   Blue Sky Fees and Expenses......................................      10,000
   Accountants' Fees and Expenses..................................      30,000
   Rating Agency Fees..............................................     162,500
   Miscellaneous Fees..............................................      75,000
                                                                    -----------
     Total......................................................... $635,431.04
                                                                    ===========
</TABLE>    
       
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  Article X of the Articles of Incorporation of People's Bank provides that
the Bank shall indemnify its directors, officers, employees, agents, and all
other persons eligible for indemnification by People's Bank, to the fullest
extent permitted or required by Section 33-320a of the Connecticut General
Statutes and as provided by the Bylaws of the Bank. Furthermore, no director
of People's Bank shall be personally liable to People's Bank or its
stockholders for monetary damages for breach of duty as a director in any
amount in excess of the compensation received by the director for serving
People's Bank in that capacity during the year such violation occurred, unless
such breach (1) involves a knowing and culpable violation of law by the
director, (2) enables the director or an associate of such director (as
defined in subdivision (3) of Section 33-374d of the Connecticut General
Statutes), to receive an improper personal economic gain, (3) shows a lack of
good faith and a conscious disregard for the duty of the director to People's
Bank under circumstances in which the director was aware that his conduct or
omission created an unjustifiable risk of serious injury to People's Bank, (4)
constitutes a sustained and unexcused pattern of inattention that amounted to
an abdication of the director's duty to People's Bank, or (5) creates
liability under Section 36-9 of the Connecticut General Statutes. Furthermore,
Article X of the Articles of Incorporation provides that any repeal or
modification of Article X by the stockholders of People's Bank shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a director of People's Bank existing at the time of such repeal
or modification.
 
  Article VI of the By-laws of People's Bank provides that the Bank shall
indemnify (a) its currently acting and its former directors, officers,
employees or agents to the fullest extent that indemnification of directors is
permitted by the Connecticut Stock Corporation Act and (b) its officers to the
same extent as its directors (and to such further extent as is consistent with
law). In addition, Article VI of such By-Laws provides that People's Bank
shall indemnify its directors and officers who, while serving as directors or
officers of People's Bank, also serve at the request of People's Bank as a
director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the fullest extent permitted by the Connecticut Stock
Corporation Act.
 
  Article VI of People's Bank's By-laws also provides that any director or
officer seeking indemnification within the foregoing rights of indemnification
shall be entitled to advances from People's Bank for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is
seeking indemnification as authorized by the Board of Directors in accordance
with the provisions of and in the manner and to the fullest extent permissible
under the Connecticut Stock Corporation Act. Further, such Section provides
that the foregoing rights of indemnification shall not be deemed exclusive of
any other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled and shall inure to the benefit of the
heirs, executors and administrators of such director or officer. Furthermore,
any such right of indemnification shall be consistent with the laws of the
State of Connecticut.
 
                                     II-1
<PAGE>
 
  The Connecticut Stock Corporation Act provides that a corporation may
indemnify any person made a party to any proceeding, other than an action by
or in the right of the corporation, by reason of the fact that he, or the
person whose legal representative he is, is or was a shareholder, director,
officer, employee or agent of the corporation, or an eligible outside party,
against judgments, fines, penalties, amounts paid in settlement and reasonable
expenses actually incurred by him, and the person whose legal representative
he is, in connection with such proceeding such person shall not be entitled to
indemnification if (1) it is established that such person, and the person
whose legal representative he is, was successful on the merits in the defense
of any proceeding referred to in this subsection, or (2) it shall be concluded
that such person, and the person whose legal representative he is, acted in
good faith and in a manner he reasonably believed to be in the best interests
of the corporation or, in the case of a person serving as a fiduciary of an
employee benefit plan or trust, either in the best interests of the
corporation or in the best interests of the participants and beneficiaries of
such employee benefit plan or trust and consistent with the provisions of such
employee benefit plan or trust and, with respect to any criminal action or
proceeding, that he had no reasonable cause to believe his conduct was
unlawful, or (3) the court shall have determined that in view of all the
circumstances such person is fairly and reasonably entitled to be indemnified,
and then for such amount as the court shall determine; except that, in
connection with an alleged claim based upon his purchase or sale of securities
of the corporation or of another enterprise, which he serves or served at the
request of the corporation, the corporation shall only indemnify such person
after the court shall have determined that in view of all the circumstances
such person is fairly and reasonably entitled to be indemnified, and then for
such amount as the court shall determine.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
  The Trust has not previously issued any unregistered securities.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
 
  (a) Exhibits
 
<TABLE>   
<S>   <C>
 1.1  --Form of Underwriting Agreement.
 3.1  --Articles of Incorporation as amended. (Incorporated herein by reference to Exhibit of
       Registration Statement No. 33-63146 of People's Bank)
 3.2  --By-laws, as amended. (Incorporated herein by reference to Exhibit 3.2 of Registration
       Statement No. 33-90012 of People's Bank)
 4.1  --Pooling and Servicing Agreement, and certain other related agreements as Exhibits thereto.
 4.2  --Form of Series 1996-1 Supplement, including form of Series 1996-1 Certificate, and certain
       other related agreements as Exhibits thereto.
 4.3  --Form of Interest Rate Caps
 5.1  --Opinion of Mayer, Brown & Platt with respect to legality.
 8.1  --Opinion of Mayer, Brown & Platt with respect to tax matters.
 8.2  --Opinion of Pullman & Comley, LLC with respect to tax matters.
23.1  --Consent of Mayer, Brown & Platt (included in its opinions filed as Exhibit 5.1 and Exhibit 8.1).
23.2  --Consent of Pullman & Comley, LLC (included in its opinion filed as an Exhibit to Exhibit 8.2.)
24.1  --Powers of Attorney.*
</TABLE>    
- --------
   
* Previously filed.     
 
  (b) Financial Statements
 
  All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
 
                                     II-2
<PAGE>
 
ITEM 17. UNDERTAKINGS
 
  The undersigned registrant hereby undertakes as follows:
 
  (a) To provide to the Underwriters at the closing specified in the
Underwriting Agreement Certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
 
  (b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described under Item 14 above, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the questions whether such indemnification
by it is against public policy as expressed in such Act and will be governed
by the final adjudication of such issue.
 
  (c) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
 
  (d) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
 
 
                                     II-3
<PAGE>
 
                                  SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF BRIDGEPORT, STATE OF CONNECTICUT, ON JUNE 20, 1996.     
 
                                          People's Bank, as originator of the
                                           Trust (Registrant)
 
                                                  /s/ George W. Morriss
                                          By: _________________________________
                                                    GEORGE W. MORRISS
                                           Executive Vice President and Chief
                                                    Financial Officer
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON JUNE 20, 1996
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.     
 
              SIGNATURES                                TITLE
 
                   *                        President and Chief Executive
_______________________________________     Officer,  Director
           DAVID E.A. CARSON
 
                   *                        Executive Vice President, Director
_______________________________________
            JAMES P. BIGGS
 
         /s/ George W. Morriss              Executive Vice President and Chief
_______________________________________     Financial  Officer
           GEORGE W. MORRISS
 
                   *                        Senior Vice President,
_______________________________________     Comptroller,  as Chief Accounting
            CARLOS R. MELLO                 Officer
 
                   *                                  Director
_______________________________________
           GEORGE P. CARTER
 
                   *                                  Director
_______________________________________
           JOSEPH E. CLANCY
 
                   *                                  Director
_______________________________________
           GEORGE R. DUNBAR
 
                   *                                  Director
_______________________________________
        NORWICK R.G. GOODSPEED
 
                                     II-4
<PAGE>
 
               SIGNATURES                                TITLE
 
                   *                                    Director
________________________________________
            SAMUEL W. HAWLEY
 
                   *                                    Director
________________________________________
          BETTY RUTH HOLLANDER
 
                   *                                    Director
________________________________________
           JEAN M. LAVECCHIA
 
                   *                                    Director
________________________________________
            EUNICE S. GROARK
 
                   *                                    Director
________________________________________
              SAUL KWARTIN
 
                   *                                    Director
________________________________________
            JACK E. MCGREGOR
 
                   *                                    Director
________________________________________
            JOHN F. MERCHANT
 
                   *                                    Director
________________________________________
         WILMOT F. WHEELER, JR.
 
         /s/ George W. Morriss
*By: ___________________________________
           GEORGE W. MORRISS
          as attorney-in-fact
 
                                      II-5
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>   
<S>   <C>
 1.1  --Form of Underwriting Agreement.
 3.1  --Articles of Incorporation, as amended. (Incorporated herein by reference to Exhibit 3.1 of
       Registration Statement No. 33-63146 of People's Bank)
 3.2  --By-laws, as amended. (Incorporated herein by reference to Exhibit 3.2 of Registration
       Statement No. 33-90012 of People's Bank)
 4.1  --Pooling and Servicing Agreement, and certain other related agreements as Exhibits thereto.
 4.2  --Form of Series 1996-1 Supplement, including form of Series 1996-1 Certificate, and certain
       other related agreements as Exhibits thereto.
 4.3  --Form of Interest Rate Caps
 5.1  --Opinion of Mayer, Brown & Platt with respect to legality.
 8.1  --Opinion of Mayer, Brown & Platt with respect to tax matters.
 8.2  --Opinion of Pullman & Comley, LLC with respect to tax matters.
23.1  --Consent of Mayer, Brown & Platt (included in its opinions filed as Exhibit 5.1 and Exhibit 8.1).
23.2  --Consent of Pullman & Comley, LLC (included in its opinion filed as an Exhibit to Exhibit 8.2).
24.1  --Powers of Attorney.*
</TABLE>    
- --------
   
* Previously filed     

<PAGE>
 
                                                                     EXHIBIT 1.1



                    PEOPLE'S BANK CREDIT CARD MASTER TRUST
                      $ 379,000,000 Floating Rate Class A
                   Asset Backed Certificates, Series 1996-1

                      $ 21,000,000 Floating Rate Class B
                   Asset Backed Certificates, Series 1996-1


                            Underwriting Agreement


GOLDMAN, SACHS & CO.,
 as Representatives of
 the Class A Underwriters and
 as Class B Underwriters
85 Broad Street
New York, New York 10004


                                                                __________, 1996

Dear Sirs:

          People's Structured Finance Corp., a Connecticut corporation ("PSFC")
and a wholly owned subsidiary of People's Bank, a Connecticut stock savings bank
(the "Bank"), proposes, subject to the terms and conditions stated herein, to
sell to the underwriters listed on Schedule A hereto (the "Underwriters"), an
                                                           ------------      
aggregate of $379,000,000 principal amount of People's Bank Credit Card Master
Trust Floating Rate Class A Asset Backed Certificates, Series 1996-1 (the "Class
                                                                           -----
A Certificates") and $21,000,000 Floating Rate Class B Asset Backed
- --------------                                                     
Certificates, Series 1996-1 (the "Class B Certificates" and, together with Class
                                  --------------------                          
A Certificates, the "Certificates").  We refer to you herein in your capacities
                     ------------                                              
as Underwriters and as representatives of the Underwriters as the
"Representatives".

          Each Certificate will represent an undivided interest in the People's
Bank Credit Card Master Trust (the "Trust") established pursuant to a Pooling
                                    -----                                    
and
<PAGE>
 
Servicing Agreement between the Bank, as Seller and as Servicer of the credit
card receivables transferred to the Trust, and Bankers Trust Company, as trustee
(the "Trustee"), dated as of June 1, 1993, as amended by the Amendment, dated as
      -------                                                                   
of December 15, 1995, (the "P&S Agreement").  Additional credit card receivables
                            -------------                                       
have been transferred to the Trust subsequent to the date of the P&S Agreement
pursuant to Assignment No. 1 between the Bank and the Trustee, dated as of
October 4, 1994 ("Assignment No. 1"), Assignment No. 2 between the Bank and the
Trustee, dated as of July 14, 1995 ("Assignment No. 2") and Assignment No. 3
between the Bank and the Trustee, dated as of May 1, 1996 ("Assignment No. 3").
The Bank assigned to PSFC all of the Bank's right, title and interest in, to and
under the Exchangeable Seller Certificate pursuant to the Assignment and
Assumption Agreement (the "Assignment"), dated as of December 15, 1995.  The
Certificates will be issued pursuant to the P&S Agreement and the Series 1996-1
Supplement between People's Bank, as Transferor and Servicer, and Bankers Trust
Company as Trustee, dated as of _____ __, 1996 (the "Series Supplement" and,
                                                     -----------------      
together with the P&S Agreement, Assignment No. 1, Assignment No. 2 and
Assignment No. 3, the "Pooling and Servicing Agreement").  The property of the
                       -------------------------------                        
Trust will include, among other things, receivables (the "Receivables")
                                                          -----------  
generated from time to time in a portfolio of MasterCard and VISA credit card
accounts, all monies due or to become due in payment of the Receivables,
Recoveries and Interchange allocable to the Trust, the benefits of the funds and
securities on deposit in a Cash Collateral Account with respect to the
Certificates and an interest rate cap agreement for the exclusive benefit of the
Class A Certificateholders and an interest rate cap agreement for the exclusive
benefit of the Class B Certificateholders.  To the extent not defined herein,
capitalized terms used herein have the meanings assigned in the Pooling and
Servicing Agreement.

          1.  PSFC and the Bank,as applicable, each represents and warrants to,
and agrees with, the Underwriters that:

          (a)  A registration statement in respect of the Certificates has been
 filed with the Securities and Exchange Commission (the "Commission"); such
                                                         ----------        
 registration statement and any post-effective amendment thereto, each in the
 form heretofore delivered to the

                                       2
<PAGE>
 
 Underwriters, has been declared effective by the Commission in such form; no
 other document with respect to such registration statement has heretofore been
 filed with the Commission and no stop order suspending the effectiveness of
 such registration statement has been issued and no proceeding for that purpose
 has been initiated or, to PSFC's or the Bank's knowledge, as applicable,
 threatened by the Commission (any preliminary prospectus included in such
 registration statement or filed with the Commission pursuant to Rule 424(a) of
 the rules and regulations of the Commission under the Securities Act of 1933,
 as amended (the "Act"), being hereinafter called a "Preliminary Prospectus";
                  ---                                ----------------------  
 the various parts of such registration statement, including all exhibits
 thereto and including the information contained in the form of final prospectus
 filed with the Commission pursuant to Rule 424(b) under the Act in accordance
 with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be
 part of the registration statement at the time it was declared effective, each
 as amended at the time such part of the registration statement became
 effective, being hereinafter called the "Registration Statement"; and such
                                          ----------------------           
 final prospectus, in the form first filed pursuant to Rule 424(b) under the
 Act, being hereinafter called the "Prospectus");
                                    ----------   

          (b)  No order preventing or suspending the use of any Preliminary
 Prospectus has been issued by the Commission, and each Preliminary Prospectus,
 at the time of filing thereof, conformed in all material respects to the
 requirements of the Act and the rules and regulations of the Commission
 thereunder, and did not contain an untrue statement of a material fact or omit
 to state a material fact required to be stated therein or necessary to make the
 statements therein, in the light of the circumstances under which they were
 made, not misleading; provided, however, that this representation and warranty
 shall not apply to any statements or omissions made in reliance upon and in
 conformity with information furnished in writing to either PSFC or the Bank by
 the Representatives expressly for use therein;

          (c)  The Registration Statement conforms, and the Prospectus and any
 further amendments or supplements to the Registration Statement or the
 Prospectus

                                       3
<PAGE>
 
 will conform, in all material respects to the requirements of the Act and the
 rules and regulations of the Commission thereunder and do not and will not, as
 of the applicable effective date as to the Registration Statement and any
 amendment thereto and as of the applicable filing date as to the Prospectus and
 any amendment or supplement thereto, contain an untrue statement of a material
 fact or omit to state a material fact required to be stated therein or
 necessary to make the statements therein with respect to the Prospectus, in the
 light of the circumstances under which they were made, not misleading;
 provided, however, that this representation and warranty shall not apply to any
 statements or omissions made in reliance upon and in conformity with
 information furnished in writing to either PSFC or the Bank by the
 Representatives expressly for use therein;

          (d)  Since the respective dates as of which information is given in
 the Registration Statement and the Prospectus, (i) there has not been any
 material adverse change, or any development involving a prospective material
 adverse  change, in or affecting the general affairs, business, management,
 financial position, stockholders' equity or results of operations of either
 PSFC or the Bank or any of the Bank's other subsidiaries, on a consolidated
 basis, and (ii) neither PSFC, the Bank nor any of the Bank's other subsidiaries
 has entered into any transaction or agreement (whether or not in the ordinary
 course of business) material to PSFC or the Bank and its other subsidiaries,
 taken as a whole, that, in the case of either such clause (i) or (ii), would
 reasonably be expected to materially adversely affect the interests of the
 holders of the Certificates, otherwise than as set forth or contemplated in the
 Prospectus;

          (e)  The Bank has been duly incorporated and is validly existing as a
 Connecticut stock savings bank in good standing under the laws of the State of
 Connecticut, with all power, authority and legal right necessary to own its
 properties and conduct its business as described in the Prospectus, and to
 enter into and perform its obligations under the Underwriting Agreement, and
 the Pooling and Servicing Agreement and had at all relevant times, and now has,
 the power, authority and legal right to acquire, own and sell the Receiv-

                                       4
<PAGE>
 
 ables, and is duly qualified to do business and is in good standing as a
 foreign corporation (or is exempt from such requirements), and has obtained all
 necessary licenses and approvals with respect to the Bank in each jurisdiction
 in which failure to qualify or to obtain such licenses or approvals would
 render any Receivable unenforceable by the Bank or the Trust or would have a
 material adverse effect on the Certificateholders, or any Enhancement Provider;

          (f)  PSFC has been duly incorporated and is validly existing as a
 Connecticut corporation in good standing under the laws of the State of
 Connecticut, with all power, authority and legal right necessary to own its
 properties and conduct its business as described in the Prospectus, and to
 enter into and perform its obligations under the Underwriting Agreement and had
 at all relevant times, and now has, the power, authority and legal right to
 acquire, own and exchange the Exchangeable Seller Certificate, and is duly
 qualified to do business and is in good standing as a foreign corporation (or
 is exempt from such requirements), and has obtained all necessary licenses and
 approvals in each jurisdiction in which failure to qualify or to obtain such
 licenses or approvals would render any Receivable unenforceable by the Bank or
 the Trust or would have a material adverse effect on the Certificateholders, or
 any Enhancement Provider;

          (g)  The Certificates have been duly authorized and, when executed,
 issued and delivered pursuant to the Pooling and Servicing Agreement, duly
 authenticated by the Trustee and paid for by the Underwriters in accordance
 with the terms of this Agreement, will have been duly and validly executed,
 authenticated, issued and delivered and will be entitled to the benefits
 provided by the Pooling and Servicing Agreement; the Pooling and Servicing
 Agreement has been duly authorized by the Bank and, when executed and delivered
 by the Bank, the Servicer and the Trustee, will constitute a valid and binding
 agreement of the Bank and the Servicer, subject (x) to the effect of any
 applicable bankruptcy, insolvency, reorganization, moratoriums, and other
 similar laws affecting creditors' rights generally, (y) to the effect of
 general principles of equity including (without limitation) concepts of
 materiality, reasonableness, good faith and fair deal-

                                       5
<PAGE>
 
 ing (regardless of whether considered in a proceeding in equity or at law), and
 (z) to the further qualification that certain remedial provisions in the
 Pooling and Servicing Agreement may be limited or rendered ineffective by the
 applicable laws of the State of New York or judicial decisions governing such
 provisions or holding their enforcement to be unreasonable under the then
 existing circumstances (but there exists in the Pooling and Servicing Agreement
 or pursuant to applicable law legally adequate remedies for a realization of
 the principal benefits purported to be provided thereby); the Certificates and
 the Pooling and Servicing Agreement conform to the descriptions thereof in the
 Prospectus in all material respects;

          (h)  the Assignment has been duly authorized by PSFC and the Bank, as
 applicable, and constitutes a valid and binding agreement of PSFC and the Bank,
 subject to the effect of (x) any applicable bankruptcy, insolvency,
 reorganization, moratoriums, and other similar laws affecting creditors' rights
 generally and (y) general principles of equity including (without limitation)
 concepts of materiality, reasonableness, good faith and fair dealing
 (regardless of whether considered in a proceeding in equity or at law);

          (i)  The issuance and sale of the Certificates and the compliance by
 PSFC and the Bank, as applicable, with all of the provisions of the
 Certificates, the Pooling and Servicing Agreement, the Assignment and this
 Agreement, as applicable, and the consummation of the transactions herein and
 therein contemplated will not conflict with or result in a breach or violation
 of any of the terms or provisions of, or constitute a default under, or result
 in the creation of any lien, mortgage, pledge, charge, security interest or
 encumbrance (collectively, "Liens"), other than as contemplated in or permitted
                             -----                                              
 by the Pooling and Servicing Agreement, upon any property or assets of PSFC or
 the Bank, as applicable, pursuant to, any material indenture, mortgage, deed of
 trust, loan agreement or other material agreement or instrument to which any of
 PSFC, the Bank or any of the Bank's other subsidiaries is a party or by which
 any of them is bound or to which any of the property or assets of any of PSFC,
 the Bank or any of the Bank's other subsidiaries is subject, nor

                                       6
<PAGE>
 
 will such action result in any violation of the provisions of the Certificate
 of Incorporation or By-laws of PSFC or of the Articles of Incorporation or By-
 laws of the Bank, as applicable, or any statute or any order, rule or
 regulation of any court or governmental agency or body having jurisdiction over
 any of PSFC, the Bank or any of the Bank's other subsidiaries or any of their
 properties; and no consent, approval, authorization, order, registration or
 qualification of or with any such court or governmental agency or body is
 required for the issue and sale of the Certificates or the consummation by PSFC
 or the Bank, as applicable, of the transactions contemplated by this Agreement,
 the Assignment or the Pooling and Servicing Agreement, except the filing of
 Uniform Commercial Code financing statements with respect to the Receivables,
 the registration under the Act of the Certificates, and such consents,
 approvals, authorizations, registrations or qualifications as may be required
 under state securities or Blue Sky laws in connection with the purchase and
 distribution of the Certificates by the Underwriters;

          (j)  Other than as set forth in the Prospectus, there are no legal or
 governmental proceedings pending to which either PSFC or the Bank, as
 applicable, is a party or of which any property of either PSFC or the Bank is
 the subject which are reasonably probable of adverse determination and which,
 if determined adversely to PSFC or the Bank, as applicable, would have a
 material adverse effect on the financial position, stockholders' equity or
 results of operations of PSFC  or the Bank or which could interfere with or
 adversely affect the consummation of the transactions contemplated herein, or
 in the Pooling and Servicing Agreement; and, to the best of PSFC's and the
 Bank's knowledge, as applicable, no such proceedings are threatened or
 contemplated by governmental authorities or threatened by others except as set
 forth in or contemplated by the Prospectus;

          (k)  Neither PSFC, the Bank nor any of the Bank's affiliates does
 business with the government of Cuba or with any person or affiliate located in
 Cuba within the meaning of Section 517.075, Florida Statutes;

                                       7
<PAGE>
 
          (l)  KPMG Peat Marwick, who have certified the statistical data
 included in the Registration Statement, are independent public accountants as
 required by the Act and the rules and regulations of the Commission thereunder;

          (m)  At the Time of Delivery (as specified in Section 4 hereof), the
 representations and warranties of the Seller and of the Servicer, made in
 Sections 2.3 and 3.3, respectively, of the Pooling and Servicing Agreement
 shall be true and correct; and the representations and warranties of the Seller
 relating to the Receivables made in Section 2.4 of the Pooling and Servicing
 Agreement shall be true and correct; provided, however, that the breach of any
                                      --------  -------                        
 such representations and warranties in Section 2.4 of the Pooling and Servicing
 Agreement shall not be deemed to be a breach hereunder unless such breach
 materially adversely affects the interests of the holders of either the Class A
 Certificates or the Class B Certificates;

          (n)  At the time of execution and delivery of the Pooling and
 Servicing Agreement, the Bank had good and marketable title to the Receivables
 transferred to the Trustee pursuant thereto, free and clear of any Liens (other
 than as contemplated in the Pooling and Servicing Agreement), and will not have
 assigned to any Person any of its right, title or interest in the Receivables
 or in such Pooling and Servicing Agreement and PSFC will not have assigned to
 any Person any of its right, title or interest in the Certificates being issued
 pursuant to the Pooling and Servicing Agreement (other than, in each case, as
 contemplated in the Pooling and Servicing Agreement); the Bank had at such time
 the power and authority to transfer the Receivables to the Trustee; PSFC has
 the power and authority to transfer the Certificates to the Underwriters, and,
 upon execution and delivery to the Trustee of the Series Supplement by the
 Transferor and execution, authentication and delivery to the Underwriters of
 the Certificates by the Transferor, the Trustee will have good and marketable
 title to or a perfected security interest in the Receivables and the
 Underwriters will have good and marketable title to the Certificates, in each
 case free and clear of any Liens (other than Liens created by the Underwriters
 and other than as contemplated in Section 2.5(b) of the Pooling and Servicing
 Agreement);

                                       8
<PAGE>
 
 (o)  Any taxes, fees and other governmental charges imposed upon PSFC or the
 Bank or on the assets of the Trust in connection with the execution, delivery
 and issuance by the Bank of this Agreement, the Pooling and Servicing Agreement
 and the Certificates and which are due at or prior to the Time of Delivery have
 been or will have been paid by PSFC or the Bank, as applicable, at or prior to
 the Time of Delivery;

          (p)  The Receivables pledged by the Bank to the Trustee under the
 Pooling and Servicing Agreement have an aggregate outstanding balance
 determined as of __________ __, 1996 ("the Series Cut-Off Date"), in accordance
 with the Pooling and Servicing Agreement of not less than $______________;

          (q)  The Trust is not an "investment company" or a company "controlled
 by" an "investment company" within the meaning of the Investment Company Act of
 1940, as amended (the "1940 Act"); and
                        --------       

          (r)  Neither the Pooling and Servicing Agreement nor any indenture is
 required to be qualified under the Trust Indenture Act of 1939.

          2.  Subject to the terms and conditions herein set forth, PSFC agrees
to sell and deliver to the Underwriters, and the Underwriters agree, severally
and not jointly,  to purchase from PSFC the number and type of Certificates set
forth in Schedule A opposite the name of each such Underwriter.  The Class A
Certificates being purchased by the Underwriters hereunder are to be purchased
at a purchase price equal to ______% of the principal amount thereof.  The Class
B Certificates being purchased by the Underwriters hereunder are to be purchased
at a purchase price equal to ______% of the principal amount thereof.

          3.  Upon the authorization by PSFC of the release of the Certificates,
the Underwriters propose to offer the Certificates for sale upon the terms and
conditions set forth in the Prospectus.

          4.  The Certificates to be purchased by the Underwriters hereunder, in
definitive or book-entry form, and in such authorized denominations and
registered in such names as the Underwriters may request upon at least

                                       9
<PAGE>
 
forty-eight hours' prior notice to PSFC, shall be delivered by or on behalf of
PSFC to the Underwriters against payment by the Underwriters or on behalf of the
Underwriters of the purchase price therefor, in immediately available funds,
drawn to the order of PSFC, at the office of Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, at 10:00 a.m. on June __, 1996, or at such
other place and time and date as the Underwriters and PSFC may agree upon in
writing, such time and date being herein called the "Time of Delivery" for such
                                                     ----------------          
Certificates.  Such Certificates will be made available for checking at least
twenty-four hours prior to the Time of Delivery at the office of Mayer Brown &
Platt described above.

          5.  PSFC and the Bank each agrees with the Underwriters:

          (a)  To advise the Underwriters promptly of any proposal to amend or
 supplement the Registration Statement as filed, or the Prospectus, and will not
 effect such amendment or supplement without the consent of the Representatives,
 which consent shall not be unreasonably delayed or withheld; to prepare and
 file the Prospectus in a form approved by the Representatives and to file such
 Prospectus pursuant to Rule 424(b) under the Act not later than the
 Commission's close of business on the second business day following the
 execution and delivery of this Agreement, or, if applicable, such earlier time
 as may be required by Rule 430A(a)(3) under the Act; to advise the
 Underwriters, promptly after it receives notice thereof, of the time when the
 Registration Statement, or any amendment thereto, has been filed or becomes
 effective or any supplement to the Prospectus or any amended Prospectus has
 been filed and to furnish the Underwriters with copies thereof; to advise the
 Underwriters, promptly after it receives notice thereof, of the issuance by the
 Commission of any stop order or of any order preventing or suspending the use
 of any Preliminary Prospectus or Prospectus, of the suspension of the
 qualification of the Certificates for offering or sale in any jurisdiction, of
 the initiation or threatening of any proceeding for any such purpose, or of any
 request by the Commission for the amending or supplementing of the Registration
 Statement or Prospectus or for additional information; and, in the event of the
 issuance of any stop order or any

                                       10
<PAGE>
 
 order preventing or suspending the use of any Preliminary Prospectus or
 Prospectus or suspending any such qualification, to use promptly its best
 efforts to obtain its withdrawal;

          (b)  Promptly from time to time to take such action as the
 Underwriters may reasonably request to qualify the Certificates for offering
 and sale under the securities laws of such jurisdictions as the Underwriters
 may request and to comply with such laws so as to permit the continuance of
 sales and dealings therein in such jurisdictions for as long as may be
 necessary to complete the distribution of the Certificates, provided that in
 connection therewith neither PSFC nor the Bank shall be required to qualify as
 a foreign corporation or dealer in securities or to file a general consent to
 service of process in any jurisdiction;

          (c)  To furnish the Underwriters with copies of the Prospectus in such
 quantities as the Underwriters may from time to time reasonably request, and,
 if the delivery of a prospectus is required at any time prior to the expiration
 of nine months after the time of issue of the Prospectus in connection with the
 offering or sale of the Certificates and if at such time any event shall have
 occurred as a result of which the Prospectus as then amended or supplemented
 would include an untrue statement of a material fact or omit to state any
 material fact necessary in order to make the statements therein, in light of
 the circumstances under which they were made when such Prospectus is delivered,
 not misleading, or, if for any other reason it shall be necessary during such
 same period to amend or supplement the Prospectus in order to comply with the
 Act, to notify the Underwriters and to prepare and file with the Commission and
 furnish without charge to the Underwriters and to any dealer in securities as
 many copies as the Underwriters may from time to time reasonably request of an
 amended Prospectus or a supplement to the Prospectus which will correct such
 statement or omission or effect such compliance; and in case the Underwriters
 are required to deliver a prospectus in connection with the sales of any of the
 Certificates at any time nine months or more after the date of issue of the
 Prospectus, upon the request of the Underwriters but at the expense of the
 Underwriters, to prepare and deliver to the Underwriters as many copies as the
 Underwriters

                                       11
<PAGE>
 
 may reasonably request of an amended or supplemented Prospectus complying with
 Section 10(a)(3) of the Act;

          (d)  To make generally available to the Certificateholders, as soon as
 practicable, but in any event not later than eighteen months after the
 effective date of the Registration Statement (as defined in Rule 158(c)), an
 earnings statement of the Trust (which need not be audited) complying with
 Section 11(a) of the Act and the rules and regulations of the Commission
 thereunder (including, at the option of the Bank, Rule 158);

          (e)  During the period beginning from the date hereof and continuing
 to and including the earlier of (i) the termination of trading restrictions on
 the Certificates, as notified to PSFC and the Bank by the Representatives, and
 (ii) the Time of Delivery, not to offer, sell, contract to sell or otherwise
 dispose of any securities of PSFC or the Bank or a trust formed by the Bank
 which mature more than one year after the Time of Delivery and which are
 substantially similar to the Certificates, without the prior written consent of
 the Representatives;

          (f)  So long as any Certificates are outstanding, to furnish to the
 Underwriters copies of all reports or other written communications (financial
 or other) furnished to holders of the Certificates, and deliver to the
 Underwriters as soon as they are available, copies of any reports and financial
 statements furnished to or filed by PSFC or the Bank with the Commission, or
 any national securities exchange on which the Certificates or any class of
 securities of the Bank are listed;

          (g)  So long as any Certificates are outstanding, to furnish to the
 Underwriters copies of all such additional information concerning the business
 and financial condition of the Trust as the Underwriters may from time to time
 reasonably request; and

          (h)  To the extent, if any, that the rating provided with respect to
 the Certificates by Standard & Poor's Ratings Group and Moody's Investors
 Service, Inc. is conditional upon the furnishing of documents or the taking of
 any other actions by PSFC or the Bank,

                                       12
<PAGE>
 
 PSFC or the Bank, as applicable, shall furnish such documents and take any such
 other actions.

          6.  PSFC and the Bank each covenants and agrees with the Underwriters
that together they will pay or cause to be paid the following:  (i) the fees,
disbursements and expenses of the counsel and accountants of PSFC and the Bank,
as applicable, in connection with the registration of the Certificates under the
Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing this Agreement, the Pooling and Servicing Agreement, the Blue Sky and
Legal Investment Memoranda and any other documents in connection with the
offering, purchase, sale and delivery of the Certificates; (iii) all expenses in
connection with the qualification of the Certificates for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Certificates;
(v) any cost of preparing the Certificates; (vi) the fees and expenses of the
Trustee and any agent of the Trustee and the fees and disbursements of counsel
for the Trustee in connection with the Pooling and Servicing Agreement, and the
Certificates; and (vii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section.  It is understood, however, that, except as provided in this
Section, Section 8 and Section 11 hereof, the Underwriters will pay all of its
own costs and expenses, including the fees of its counsel, transfer taxes on
resale of any of the Certificates by it, and any advertising expenses connected
with any offers it may make.

          7.  The obligations of each of the Underwriters hereunder shall be
subject, in its discretion, to the condition that all representations and
warranties and other statements of each of PSFC and the Bank herein are, at and
as of the Time of Delivery, true and correct, the condition that each of PSFC
and the Bank shall have performed all of their respective obligations hereunder

                                       13
<PAGE>
 
theretofore to be performed, and the following additional conditions:

          (a)  The Prospectus shall have been filed with the Commission pursuant
 to Rule 424(b) within the applicable time period prescribed for such filing by
 the rules and regulations under the Act and in accordance with Section 5(a)
 hereof; no stop order suspending the effectiveness of the Registration
 Statement or any part thereof shall have been issued and no proceeding for that
 purpose shall have been initiated or, to the knowledge of PSFC, the Bank or the
 Underwriters, threatened by the Commission; and all requests for additional
 information on the part of the Commission shall have been complied with to the
 reasonable satisfaction of the Representatives;

          (b)  Since the respective dates as of which information is given in
 the Prospectus, there shall not have been any material adverse change, or any
 development involving a prospective material adverse change, in or affecting
 the general affairs, business, management, financial position, stockholders'
 equity or results of operations of either PSFC or the Bank and its other
 subsidiaries on a consolidated basis otherwise than as set forth or
 contemplated in the Prospectus, the effect of which in the judgment of the
 Underwriters makes it impracticable to proceed with the public offering or the
 delivery of the Certificates on the terms and in the manner contemplated in the
 Registration Statement;

          (c)  At the Time of Delivery, each of PSFC and the Bank shall have
 furnished to the Underwriters certificates of an executive officer of PSFC or
 the Bank, as applicable, as to the accuracy of the representations and
 warranties of PSFC or the Bank, as applicable, herein at and as of the Time of
 Delivery, as to the performance by PSFC or the Bank of all of their respective
 obligations hereunder to be performed at or prior to such Time of Delivery, as
 to the matters set forth in subsections (a) through (c) of this Section and as
 to such other matters as the Underwriters may reasonably request;

          (d)  Skadden, Arps, Slate, Meagher & Flom, counsel for the
 Underwriters, shall have furnished to

                                       14
<PAGE>
 
 the Underwriters such opinion or opinions, dated the Time of Delivery, with
 respect to the validity of the Pooling and Servicing Agreement, the
 Certificates, the Registration Statement, the Prospectus, and other related
 matters as the Underwriters may reasonably request, and such counsel shall have
 received from PSFC or the Bank and their counsel such papers and information as
 they may reasonably request from PSFC or the Bank and their counsel to enable
 them to pass upon such matters;

          (e)  Mayer, Brown & Platt, counsel for PSFC  and the Bank, shall have
 furnished to the Underwriters their written opinion, addressed to the
 Underwriters and dated the Time of Delivery, in form and substance satisfactory
 to the Underwriters and their counsel, substantially to the effect that:

                    (i)  The Underwriting Agreement has been duly authorized,
          executed and delivered by the each of PSFC and Bank;

                    (ii)  The Certificates have been duly authorized, executed
          and delivered by the Bank and, when duly authenticated in accordance
          with the terms of the Pooling and Servicing Agreement and delivered to
          and paid for by the Underwriters in accordance with the terms of the
          Underwriting Agreement, will be validly issued and entitled to the
          benefits provided by the Pooling and Servicing Agreement;

                    (iii)  The Pooling and Servicing Agreement has been duly
          authorized, executed and delivered by the Bank and constitutes the
          legal, valid and binding agreement of the Bank enforceable against the
          Bank in accordance with its terms, subject (x) to the effect of any
          applicable bankruptcy, insolvency, reorganization, moratorium, and
          other similar laws affecting creditors' rights generally, (y) to the
          effect of general principles of equity including (without limitation)
          concepts of materiality, reasonableness, good faith and fair dealing
          (regardless of whether considered in a proceeding in equity or at
          law), and (z) with respect to the Pooling and Servicing

                                       15
<PAGE>
 
          Agreement, to the further qualification that certain remedial
          provisions in the Pooling and Servicing Agreement may be limited or
          rendered ineffective by the applicable laws of the State of New York
          or judicial decisions governing such provisions or holding their
          enforcement to be unreasonable under the then existing circumstances
          (but, in such counsel's opinion, there exists in the Pooling and
          Servicing Agreement or pursuant to applicable law legally adequate
          remedies for a realization of the principal benefits purported to be
          provided thereby);

                    (iv)  The Assignment has been duly authorized, executed and
          delivered by each of PSFC and the Bank and constitutes the legal,
          valid and binding agreement of each of PSFC and the Bank enforceable
          against PSFC and the Bank in accordance with its terms, subject (x) to
          the effect of any applicable bankruptcy, insolvency, reorganization,
          moratorium, and other similar laws affecting creditors' rights
          generally and (y) to the effect of general principles of equity
          including (without limitation) concepts of materiality,
          reasonableness, good faith and fair dealing (regardless of whether
          considered in a proceeding in equity or at law);

                    (v)  The Pooling and Servicing Agreement need not be
          qualified under the Trust Indenture Act of 1939, as amended; and the
          Trust is not now, and immediately following the sale of the
          Certificates pursuant to the Underwriting Agreement will not be,
          required to register under the 1940 Act;

                    (vi)  Such counsel has participated in the preparation of
          the Registration Statement and Prospectus.  From time to time, such
          counsel has had discussions with the officers and employees of PSFC
          and the Bank, the independent accountants of PSFC and the Bank, and
          employees and representatives of the Underwriters concerning the
          information contained in the Registration Statement and Prospectus.
          Based thereupon such counsel is of the opinion that

                                       16
<PAGE>
 
          the Registration Statement and the Prospectus (except for the
          operating statistics, financial statements, financial schedules and
          other financial and  operating data included therein, as to which it
          expresses no view) comply as to form with the Act and the rules and
          regulations thereunder;

                    (vii)  The statements in the Prospectus under "Certain Legal
          Aspects of the Receivables," insofar as such statements constitute a
          summary of the legal matters, documents or proceedings referred to
          therein, have been reviewed by such counsel and are correct in all
          material respects.  Furthermore, insofar as the statements contained
          in the Registration Statement purport to summarize certain provisions
          of the Certificates and the Pooling and Servicing Agreement, such
          statements present summaries of such provisions that are accurate in
          all material respects;

                    (viii)  The Registration Statement has become effective
          under the Act, and the Prospectus has been filed with the Commission
          pursuant to Rule 424(b) thereunder in the manner and within the time
          period required by Rule 424(b).  To the best of such counsel's
          knowledge, no stop order suspending the effectiveness of the
          Registration Statement has been issued and no proceedings for that
          purpose are pending or threatened by the Commission.  Such counsel
          does not know of any contracts or documents of a character required to
          be described in the Registration Statement or Prospectus or to be
          filed as exhibits to the Registration Statement that are not described
          and filed as required;

                    (ix)  Such counsel has not independently verified and is not
          passing upon, and does not assume any responsibility for, the
          accuracy, completeness or fairness (except as set forth in paragraph
          (vi) above and under the headings "Prospectus Summary--Tax Status,"
          "Prospectus Summary--ERISA Considerations," "Certain Federal Income
          Tax Consequences" and

                                       17
<PAGE>
 
          "Certain Employee Benefit Plan Considerations") of the information
          contained in the Registration Statement and Prospectus.  Based upon
          the participation and discussions described above, no facts have come
          to such counsel's attention that cause it to believe that the
          Registration Statement, as of its effective date (except for the
          financial statements, financial schedules and other financial data
          included therein as to all of which such counsel expresses no view),
          contains any untrue statement of a material fact or omits to state a
          material fact required to be stated therein or necessary in order to
          make the statements therein not misleading, or that the Prospectus, as
          of its date and as of the Closing Date (except for the financial
          statements, financial schedules, and other financial data included
          therein as to which such counsel expresses no view) contains any
          untrue statement of a material fact or omits to state a material fact
          required to be stated therein or necessary in order to make the
          statements therein, in light of the circumstances under which they
          were made, not misleading; and

                    (x)  The Receivables are accounts or general intangibles as
          defined in the Uniform Commercial Code.

 In rendering such opinion, such counsel shall be entitled to rely as to matters
 of fact upon such certificates or other assurances of public officials and such
 certificates of one or more officers of PSFC and the Bank or its other
 subsidiaries or the legal opinion of the general counsel of the Bank as such
 counsel shall reasonably deem necessary.

          (f)  Mayer, Brown & Platt, counsel for PSFC and the Bank, shall have
 furnished to the Underwriters their opinion or opinions, dated the Time of
 Delivery and satisfactory in form and substance to the Underwriters and its
 counsel, with respect to certain matters relating to the transfer of the
 Receivables to the Trust, and the Financial Institutions Reform, Recovery and
 Enforcement Act with respect to the effect of receivership of the Bank and with
 respect to other

                                       18
<PAGE>
 
 related matters in a form previously approved by the Underwriters and its
 counsel;

          (g)  Mayer, Brown & Platt, special tax counsel for the Bank, shall
 have furnished to the Underwriters their opinion or opinions, dated the Time of
 Delivery and satisfactory in form and substance to the Underwriters, to the
 effect that for federal and New York State income tax purposes the Certificates
 will be characterized as indebtedness of the Bank that is secured by the
 Receivables, and that the Trust will be treated as a mere security device for
 Federal and New York State income tax purposes, and the statements set forth in
 the Prospectus under the headings "Prospectus Summary -- Tax Status,"
 "Prospectus Summary -- ERISA Considerations," "Certain Federal Income Tax
 Consequences" and "Certain Employee Benefit Plan Considerations" are a fair and
 accurate summary of the material tax consequences of the issuance and holding
 of the Certificates;

          (h)  Pullman & Comley, LLC, special Connecticut tax counsel for the
 Bank, shall have furnished to the Underwriters their opinion, dated the Time of
 Delivery and satisfactory in form and substance to the Underwriters and its
 counsel, to the effect that for Connecticut state income tax purposes the
 Certificates will be characterized as indebtedness of the Bank that is secured
 by the Receivables and that the Trust will be treated as a mere security device
 for Connecticut state tax purposes;

          (i)  Pullman & Comley, LLC, special Connecticut counsel for PSFC and
 the Bank, shall have furnished to the Underwriters their opinion or opinions,
 dated the Time of Delivery and satisfactory in form and substance to the
 Underwriter and its counsel, with respect to the perfection of the Trust's
 interest in the Receivables and with respect to the applicability of certain
 provisions of Connecticut state banking law with respect to the effect of
 receivership of the Bank and with respect to other related matters in a form
 previously approved by the Underwriters and its counsel;

          (j)  William T. Kosturko, general counsel of each of PSFC and the
 Bank, shall have furnished to the Underwriters his written opinion, addressed
 to the

                                       19
<PAGE>
 
 Underwriters and dated the Time of Delivery, in form and substance satisfactory
 to the Underwriters and their counsel, substantially to the effect that:

                    (i)  The Bank has been duly incorporated and is validly
          existing as a Connecticut stock savings bank in good standing under
          the laws of the State of Connecticut, with power, authority and legal
          right necessary to own its properties and to conduct its business as
          described in the Prospectus and to enter into and perform its
          obligations under the Underwriting Agreement, and the Pooling and
          Servicing Agreement and had at all relevant times, and now has, the
          power, authority and legal right to acquire, own and sell the
          Receivables, and is duly qualified to do business and is in good
          standing as a foreign corporation (or is exempt from such
          requirements), and has obtained all necessary licenses and approvals
          with respect to the Bank in each jurisdiction in which failure to
          qualify or to obtain such licenses or  approvals would render any
          retail installment sale contract or any Receivable unenforceable by
          the Bank or the Trust or would have a material adverse effect on the
          Certificateholders, or any Enhancement Provider;

                    (ii)  PSFC has been duly incorporated and is validly
          existing as a Connecticut corporation in good standing under the laws
          of the State of Connecticut, with all power, authority and legal right
          necessary to own its properties and conduct its business as described
          in the Prospectus, and to enter into and perform its obligations under
          the Underwriting Agreement and had at all relevant times, and now has,
          the power, authority and legal right to acquire, own and exchange the
          Exchangeable Seller Certificate, and is duly qualified to do business
          and is in good standing as a foreign corporation (or is exempt from
          such requirements), and has obtained all necessary licenses and
          approvals in each jurisdiction in which failure to qualify or to
          obtain such licenses or approvals would render any Receivable
          unenforceable by the Bank or the Trust or would have a material

                                       20
<PAGE>
 
          adverse effect on the Certificateholders, or any Enhancement Provider;

                    (iii)  The Underwriting Agreement, the Pooling and Servicing
          Agreement, the Certificates and the Assignment have been duly
          authorized, executed and delivered by the Bank;

                    (iv)  The Underwriting Agreement and the Assignment have
          been duly authorized, executed and delivered by PSFC;

                    (v)  No consent, approval, authorization or order of any
          governmental agency or body is required for (A) the performance by the
          Bank of its obligations under the Pooling and Servicing Agreement, or
          (B) the issuance by the Bank or sale of the Certificates by PSFC,
          except such as have been obtained under the Act and as may be required
          under state securities or Blue Sky laws in connection with the
          purchase and distribution of the Certificates by the Underwriters;

                    (vi)  Neither the execution and delivery of the Underwriting
          Agreement and the Assignment by PSFC and the Bank, the Certificates or
          the Pooling and Servicing Agreement by the Bank nor the performance by
          PSFC or the Bank of the transactions therein contemplated will result
          in any material violation of any statute or regulation or any order or
          decree known to such counsel of any court or governmental authority
          binding upon PSFC or the Bank, as applicable, or their respective
          property, or conflict with, or result in a breach or violation of any
          term or provision of, or result in a default under any of the terms
          and provisions, of the Certificate of Incorporation, Articles of
          Incorporation or By-laws or any material indenture, loan agreement or
          other material agreement of PSFC or the Bank known to such counsel by
          which PSFC or the Bank is bound, or result in a violation, or
          contravene the terms, of any statute or regulation or, to the
          knowledge of such counsel, order applicable to PSFC or the Bank of any
          court, regulatory body, administrative agency or gov-

                                       21
<PAGE>
 
          ernmental body having jurisdiction over PSFC or the Bank, except such
          counsel need express no opinion as to any statute, order or regulation
          the violation of which would not have any material adverse effect on
          PSFC or the Bank or their respective activities or to which PSFC or
          the Bank may be subject as a result of the legal or regulatory status
          of the addressees of the opinion or as a result of such Persons'
          involvement in the transactions contemplated by the Underwriting
          Agreement, or the Pooling and Servicing Agreement;

                    (vii)  There are no proceedings or investigations pending
          or, to the best knowledge of such counsel, threatened against PSFC or
          the Bank, before any governmental authority (i) asserting the
          invalidity of the Underwriting Agreement, the Pooling and Servicing
          Agreement, the Certificates or the Assignment, (ii) seeking to prevent
          the issuance of the Certificates or the consummation of any of the
          transactions contemplated by the Underwriting Agreement, the Pooling
          and Servicing Agreement, the Certificates or the Assignment, (iii)
          seeking any determination or ruling that would materially and
          adversely affect the performance by PSFC or the Bank of their
          respective obligations under the Underwriting Agreement, or the
          Pooling and Servicing Agreement, (iv) seeking any determination or
          ruling that would materially and adversely affect the validity or
          enforceability of the Underwriting Agreement, the Pooling and
          Servicing Agreement, the Certificates or the Assignment, or (v)
          seeking to assert any tax liability against the Trust under the United
          States Federal, New York State or Connecticut State income tax
          systems;

                    (viii)  The statements in the Prospectus concerning PSFC and
          the Bank and conduct of their respective business have been reviewed
          by such counsel and are correct in all material respects; and

                    (ix)  Such counsel has not independently verified and is not
          passing upon, and

                                       22
<PAGE>
 
          does not assume any responsibility for, the accuracy, completeness or
          fairness (except as set forth in paragraph (vii) above) of the
          information contained in the Registration Statement and Prospectus.
          Based upon the participation and discussions described in subsection
          7(e)(vi) above, no facts have come to such counsel's attention that
          cause him to believe that the Registration Statement, as of its
          effective date (except for the financial statements, financial
          schedules and other financial data included therein as to all of which
          such counsel expresses no view), contains any untrue statement of a
          material fact or omits to state a material fact required to be stated
          therein or necessary in order to make the statements therein not
          misleading, or that the Prospectus, as of its date and as of the
          Closing Date (except for the financial statements, financial
          schedules, and other financial data included therein as to which such
          counsel expresses no view) contains any untrue statement of a material
          fact or omits to state a material fact required to be stated therein
          or necessary in order to make the statements therein, in light of the
          circumstances under which they were made, not misleading.

          (k)  On the effective date of the Registration Statement and the
 effective date of the most recently filed post-effective amendment to the
 Registration Statement and also at the Time of Delivery, KPMG Peat Marwick
 shall have furnished to the Underwriters letters, dated the respective dates of
 delivery thereof, in form and substance satisfactory to the Underwriters,
 containing statements and information of the type customarily included in
 accountants' "comfort letters" and "specified procedures letters" to
 underwriters with respect to the financial statements and certain financial
 information contained in the Registration Statement and the Prospectus;

          (l)  At the Time of Delivery, the Underwriters shall have received an
 opinion of Seward & Kissel, counsel to the Trustee, dated the Time of Delivery,
 and satisfactory in form and substance to the Underwriters and their counsel,
 to the effect that:

                                       23
<PAGE>
 
                    (i) the Trustee is a banking corporation duly incorporated
          and validly existing under the laws of the State of New York;

                    (ii)  the Trustee has full power and authority to execute
          and deliver, and to perform its obligations under the Pooling and
          Servicing Agreement and to carry out the transactions contemplated by
          the Pooling and Servicing Agreement;

                    (iii)  each of the P&S Agreement, Assignment No. 1,
          Assignment No. 2, Assignment No. 3, the Amendment and the Series
          Supplement has been duly authorized, executed and delivered by the
          Trustee;

                    (iv)  assuming the due execution and delivery by the Bank of
          the Pooling and Servicing Agreement and that the Pooling and Servicing
          Agreement is the legal, valid and binding obligation of the Bank, the
          Pooling and Servicing Agreement constitutes a legal, valid and binding
          obligation of the Trustee, enforceable against the Trustee in
          accordance with its terms, except as the enforceability thereof may be
          limited by applicable bankruptcy, reorganization, insolvency,
          moratorium, liquidation and other similar laws affecting the
          enforceability of creditors' rights generally, and general principles
          of equity (regardless of whether the enforcement of such remedies is
          considered in a proceeding at law or in equity) as well as concepts of
          reasonableness, good faith and fair dealing;

                    (v)  the Certificates have been duly authenticated by the
          Trustee pursuant to the Pooling and Servicing Agreement;

                    (vi)  no approval, authorization or other action by or
          filing with, any governmental authority of the United States of
          America or the State of New York having jurisdiction over the banking
          or trust powers of the Trustee is required in connection with the
          execution and delivery by the Trustee of the Pooling and

                                       24
<PAGE>
 
          Servicing Agreement or the performance by the Trustee thereunder; and

                    (vii)  the execution and delivery of the Pooling and
          Servicing Agreement and the performance by the Trustee of their
          respective terms do not conflict with or result in a violation of (A)
          any United States of America or State of New York law or regulation
          governing the banking or trust powers of the Trustee or (B) the
          Articles of Incorporation or By-laws of the Trustee;

          (m)  At the Time of Delivery, the Underwriters shall have received an
 opinion of Dechert Price and Rhoades, counsel to the Cash Collateral Depositor,
 addressed to the Underwriters, dated the Closing Date, satisfactory to the
 Underwriters and their counsel and substantially to the effect that:

               (i) The Cash Collateral Depositor is licensed by the
          Superintendent of Banks of the State of New York and qualified to do
          business as a New York branch in accordance with the provisions of
          Article V of the Banking Law of the State of New York.

               (ii) The Cash Collateral Depositor has the power and authority
          under the banking laws of the State of New York to enter into the Loan
          Agreement and to make the loan provided for therein.
 
               (iii) No authorization, consent or approval of or by any
          governmental authority of the United States or the State of New York
          is necessary for the execution, delivery and performance by the Cash
          Collateral Depositor of the Loan Agreement, except such
          authorizations, consents and approvals as are in full force and
          effect.

               (iv) The Loan Agreement, including the obligation to make the
          loan in accordance with the terms thereof, constitutes a valid and
          legally binding obligation of the Cash Collateral Depositor,
          enforceable against the Cash Collat-

                                       25
<PAGE>
 
          eral Depositor in accordance with its terms, except as such
          enforceability may be limited by (x) insolvency, liquidation,
          reorganization, moratorium or other laws affecting the enforcement of
          creditors' rights in general, as such laws would apply in the event of
          the insolvency, liquidation, reorganization of, or other similar
          occurrence with respect to, the Cash Collateral Depositor, or in the
          event of any moratorium or similar occurrence affecting the Cash
          Collateral Depositor, (y) the commencement of an ancillary case
          relating to the Cash Collateral Depositor under Section 304 of the
          Bankruptcy Code and by courts in the United States of America giving
          effect to foreign laws or foreign governmental action affecting
          creditors' rights against the Cash Collateral Depositor and (z)
          general equitable principles (regardless of whether such
          enforceability is considered in a proceeding in equity or at law).

          (n)   At the Time of Delivery, the Underwriters shall have received an
 opinion of foreign counsel to the Cash Collateral Depositor and the Cash
 Collateral Depositor's principal office in ________ (the "Principal Bank"),
 addressed to the Underwriters, dated the Closing Date, satisfactory to the
 Underwriters and their counsel and substantially to the effect that:

               (i) The Principal Bank is a banking corporation duly organized
          and validly existing under the laws of ________ and has the corporate
          power under the laws of ________ to execute, deliver and perform its
          obligations under the Loan Agreement.

               (ii) The Loan Agreement has been duly authorized by the Principal
          Bank and, when duly executed and delivered by the Cash Collateral
          Depositor, will constitute the legal, valid and binding obligation of
          the Cash Collateral Depositor enforceable against the Principal Bank
          through the Cash Collateral Depositor in accordance with its terms.

                                       26
<PAGE>
 
               (iii) The Loan Agreement is enforceable in accordance with its
          terms against the Principal Bank's head office in ________ if the Cash
          Collateral Depositor defaults in its obligations under the Loan
          Agreement or the Principal Bank ceases to have a presence in New York
          City.

               (iv) The choice of the law of the State of  New York to govern
          the Loan Agreement is valid under the laws of ________ and a court in
          ________  would uphold such choice of law in a suit or other
          proceeding on the Loan Agreement brought in a court of ________,
          provided that the application of such law to the case would not result
          in a contravention of ________ public policy.

               (v) Any final and conclusive judgment for a fixed and definite
          sum obtained against the Cash Collateral Depositor in any competent
          United States Federal or State court having jurisdiction over the Cash
          Collateral Depositor in respect of any suit, action or proceeding
          against the branch for the enforcement of the Loan Agreement, will
          upon request, be declared valid and enforceable against the Principal
          Bank by the competent courts at the legal domicile of the Principal
          Bank in ________ without relitigation of the matters adjudicated,
          provided that the contents of such final judgment are not contrary to,
          and the judgment has not been rendered in violation of, Japan public
          policy and provided that due process was not denied and the same
          subject matter was not first brought or earlier adjudicated in another
          court.

               (vi) The opinions expressed in paragraphs (ii) and (iii) may be
          subject to the following qualification:  Such enforcement may be
          limited by bankruptcy, insolvency, liquidation, reorganization,
          moratorium or other similar laws affecting the rights of creditors
          against the Principal Bank generally, from time to time in effect, as
          the same would apply in the event of the bankruptcy, insolvency,
          liquidation or reorganization of, or other similar occurrence

                                       27
<PAGE>
 
          with respect to, the Principal Bank or in the event of a moratorium or
          similar occurrence affecting the Principal Bank.

               (vii) The obligations of the Principal Bank under the Loan
          Agreement rank pari passu with all deposits and other unsecured
                         ---- -----                                      
          obligations of the Principal Bank except that the bankruptcy law of
          ________ provides for a number of priorities, the most material of
          which are (a) employment wage claims and (b) claims for national and
          local taxes.

               (viii)  No license, consent or approval of, or registration with,
          any governmental department, agency, commission or regulatory
          authority of ________ is required in connection with the execution or
          performance of the Loan Agreement by the Cash Collateral Depositor, to
          make the Loan Agreement fully enforceable in accordance with its
          terms.

          (o)  The Underwriters shall have received evidence satisfactory to the
 Underwriters that the Class A Certificates have received the rating of AAA by
 Standard & Poor's Ratings Group and the rating of Aaa by Moody's Investors
 Service, Inc., the Class B Certificates shall have received the rating of A
 from Standard and Poor's Ratings Group and a rating of A2 from Moody's
 Investor's Service, Inc. and such ratings shall not have been rescinded or
 lowered, or at the Time of Delivery be under surveillance or review;

          (p) At the Time of Delivery, the Underwriters shall have received one
 or more opinions of counsel to _______________ (the "Interest Rate Cap
 Provider"), addressed to you, in form and substance satisfactory to the
 Underwriters and their counsel regarding the due authorization, execution,
 delivery and enforceability by or against the Interest Rate Cap Provider of the
 interest rate cap agreements, the first to be dated  June __, 1996, between
 People's Bank and the Interest Rate Cap Provider, and the second to be dated on
 or prior to June __, 1996, between the Trustee and the Interest Rate Cap
 Provider (the interest rate cap agreements are collectively referred to herein
 as the "Interest Rate Cap"), and such other matters as the

                                       28
<PAGE>
 
 Underwriters or their counsel may reasonably request regarding the Interest
 Rate Cap.

          (q)  On or after the date hereof there shall not have occurred any of
 the following:  (i) a suspension or material limitation in trading in
 securities generally on the New York Stock Exchange; (ii) a general moratorium
 on commercial banking activities in New York declared by either Federal or New
 York State authorities; or (iii) the outbreak or escalation of hostilities
 involving the United States or the declaration by the United States of a
 national emergency or war if the effect of any such event specified in this
 clause (iii) in the reasonable judgment of the Representatives makes it
 impracticable or inadvisable to proceed with the public offering or the
 delivery of the Certificates on the terms and in the manner contemplated in the
 Prospectus;

          (r)  The Underwriters shall have received evidence satisfactory to the
 Underwriters that, on or before the Time of Delivery, UCC-1 financing
 statements have been filed in the appropriate filing offices of the State of
 Connecticut and such other jurisdictions as counsel to PSFC and the Bank deems
 appropriate to reflect the interest of the Trustee in the Receivables;

          (s)  At the Time of Delivery, the Underwriters shall have received any
 and all opinions of counsel and other memoranda prepared by any such counsel to
 PSFC and the Bank which have been addressed to or supplied to each Rating
 Agency rating the Certificates relating to, among other things, the security
 interest of the Trustee in the Receivables and certain monies due or to become
 due with respect thereto, certain bankruptcy issues and certain matters with
 respect to the Certificates.  Any such opinions or memoranda shall be addressed
 to the Underwriters or shall indicate that the Underwriters may rely on such
 opinions as though they were addressed to the Underwriters, and shall be dated
 the Time of Delivery;

          (t)  No Pay Out Event or other event or condition, which event or
 condition with notice, the passage of time or both would result in a Pay Out
 Event, shall have occurred or shall exist with respect to the Certificates at
 the Time of Delivery; and

                                       29
<PAGE>
 
          (u) All proceedings in connection with the transactions contemplated
 by this Agreement and all documents incident hereto and thereto shall be
 satisfactory in form and substance to the Representatives and their counsel and
 the Underwriters and their counsel shall have received such information,
 certificates or documents as the Underwriters or their counsel may reasonably
 request.

          8.  (a)  PSFC and the Bank will jointly and severally indemnify and
 hold harmless the Underwriters against any losses, claims, damages or
 liabilities, joint or several, to which the Underwriters may become subject,
 under the Act or otherwise, insofar as such losses, claims, damages or
 liabilities (or actions in respect thereof) arise out of or are based upon an
 untrue statement or alleged untrue statement of a material fact contained in
 any Preliminary Prospectus, the Registration Statement or the Prospectus, or
 any amendment or supplement thereto, or arise out of or are based upon the
 omission or alleged omission to state therein a material fact required to be
 stated therein or necessary to make the statements therein not misleading, and
 will reimburse the Underwriters for any legal or other expenses reasonably
 incurred by the Underwriters in connection with investigating or defending any
 such action or claim as such expenses are incurred; provided, however, that
 neither PSFC nor the Bank shall be liable in any such case to the extent that
 any such loss, claim, damage or liability arises out of or is based upon an
 untrue statement or alleged untrue statement or omission or alleged omission
 made in any Preliminary Prospectus, the Registration Statement or the
 Prospectus or any such amendment or supplement in reliance upon and in
 conformity with written information furnished to either PSFC or the Bank by the
 Underwriters for use therein;  provided further that with respect to any untrue
 statement or omission or alleged untrue statement or omission made in any
 Preliminary Prospectus, or in the Prospectus, the indemnity agreement contained
 in this subsection (a) shall not inure to the benefit of any of the
 Underwriters to the extent that such loss, claim, damage or liability of such
 Underwriters results from the fact that such Underwriter sold Certificates to a
 person as to whom it shall be established that there was not sent or given to
 such person, at or prior to the written confirmation

                                       30
<PAGE>
 
 of the sale of such Securities to such person, a copy of the Prospectus or of
 the Prospectus as then amended or supplemented, if such delivery of such
 Prospectus or such amended or supplemented Prospectus was required under the
 Act, and if the Underwriters consented to and approved any such amendment or
 supplement to such Prospectus pursuant to Section 5(a) of this Agreement and if
 either PSFC or the Bank had previously furnished copies thereof to such
 Underwriters and the untrue statement or omission or alleged untrue statement
 or omission contained in such Preliminary Prospectus or the Prospectus was
 corrected in the Prospectus or the Prospectus as then amended or supplemented.

          (b)  The Underwriters will indemnify and hold harmless PSFC and the
 Bank against any losses, claims, damages or liabilities to which either PSFC or
 the Bank may become subject, under the Act or otherwise, insofar as such
 losses, claims, damages or liabilities (or actions in respect thereof) arise
 out of or are based upon an untrue statement or alleged untrue statement of a
 material fact contained in any Preliminary Prospectus, the Registration
 Statement or the Prospectus, or any amendment or supplement thereto, or arise
 out of or are based upon the omission or alleged omission to state therein a
 material fact required to be stated therein or necessary to make the statements
 therein not misleading, in each case to the extent, but only to the extent,
 that such untrue statement or alleged untrue statement or omission or alleged
 omission was made in any Preliminary Prospectus, the Registration Statement or
 the Prospectus, or any such amendment or supplement in reliance upon and in
 conformity with written information furnished to either PSFC or the Bank by the
 Underwriters expressly for use therein; and will reimburse PSFC and the Bank
 for any legal or other expenses reasonably incurred by PSFC or the Bank in
 connection with investigating or defending any such action or claim as such
 expenses are incurred.

          (c)  Promptly after receipt by an indemnified party under subsection
 (a) or (b) above of notice of the commencement of any action, such indemnified
 party shall, if a claim in respect thereof is to be made against the
 indemnifying party under such subsection, notify the indemnifying party in
 writing of the commencement thereof; but the omission so to notify the

                                       31
<PAGE>
 
 indemnifying party shall not relieve it from any liability which it may have to
 any indemnified party otherwise than under such subsection.  In case any such
 action shall be brought against any indemnified party and it shall notify the
 indemnifying party of the commencement thereof, the indemnifying party shall be
 entitled to participate therein and, to the extent that it shall wish, jointly
 with any other indemnifying party similarly notified, to assume the defense
 thereof, with counsel satisfactory to such indemnified party (who shall not,
 except with the consent of the indemnified party, be counsel to the
 indemnifying party), and, after notice from the indemnifying party to such
 indemnified party of its election so to assume the defense thereof, the
 indemnifying party shall not be liable to such indemnified party under such
 subsection for any legal expenses of other counsel or any other expenses, in
 each case subsequently incurred by such indemnified party, in connection with
 the defense thereof other than reasonable costs of investigation.  Any
 indemnifying party against whom indemnity may be sought shall not be liable to
 indemnify any indemnified party under this Section 8 if any settlement of any
 such action is effected without such indemnifying party's consent, which
 consent shall not be unreasonably withheld.

          (d)  If the indemnification provided for in this Section 8 is
 unavailable to or insufficient to hold harmless an indemnified party under
 subsection (a) or (b) above in respect of any losses, claims, damages or
 liabilities (or actions in respect thereof) referred to therein, then each
 indemnifying party shall contribute to the amount paid or payable by such
 indemnified party as a result of such losses, claims, damages or liabilities
 (or actions in respect thereof) in such proportion as is appropriate to reflect
 the relative benefits received by PSFC and the Bank on the one hand and the
 Underwriters on the other from the offering of the Certificates.  If, however,
 the allocation provided by the immediately preceding sentence is not permitted
 by applicable law or if the indemnified party failed to give the notice
 required under subsection (c) above, then each indemnifying party shall
 contribute to such amount paid or payable by such indemnified party in such
 proportion as is appropriate to reflect not only the relative benefits but also
 the relative fault of PSFC and the Bank on the one hand and the Underwriters

                                       32
<PAGE>
 
 on the other in connection with the statements or omissions which resulted in
 such losses, claims, damages or liabilities (or actions in respect thereof), as
 well as any other relevant equitable considerations.  The relative benefits
 received by PSFC and the Bank on the one hand and the Underwriters on the other
 shall be deemed to be in the same proportion as the total net proceeds from
 such offering (before deducting expenses) received by PSFC bear to the total
 underwriting discounts and commissions received by the Underwriters, in each
 case as set forth in the table on the cover page of the Prospectus.  The
 relative fault shall be determined by reference to, among other things, whether
 the untrue or alleged untrue statement of a material fact or the omission or
 alleged omission to state a material fact relates to information supplied by
 PSFC or the Bank on the one hand or the Underwriters on the other and the
 parties' relative intent, knowledge, access to information and opportunity to
 correct or prevent such statement or omission.  PSFC, the Bank and the
 Underwriters agree that it would not be just and equitable if contribution
 pursuant to this subsection (d) were determined by pro rata allocation or by
 any other method of allocation which does not take account of the equitable
 considerations referred to above in this subsection (d).  The amount paid or
 payable by an indemnified party as a result of the losses, claims, damages or
 liabilities (or actions in respect thereof) referred to above in this
 subsection (d) shall be deemed to include any legal or other expenses
 reasonably incurred by such indemnified party in connection with investigating
 or defending any such action or claim.  Notwithstanding the provisions of this
 subsection (d), the Underwriters shall not be required to contribute any amount
 in excess of the amount by which the total price at which the Certificates
 underwritten by it and distributed to the public were offered to the public
 exceeds the amount of any damages which the Underwriters has otherwise been
 required to pay by reason of such untrue or alleged untrue statement or
 omission or alleged omission.  No person guilty of fraudulent misrepresentation
 (within the meaning of Section 11(f) of the Act) shall be entitled to
 contribution from any person who was not guilty of such fraudulent
 misrepresentation.

                                       33
<PAGE>
 
          (e)  The obligations of PSFC and the Bank under this Section 8 shall
 be in addition to any liability which PSFC and the Bank may otherwise have and
 shall extend, upon the same terms and conditions, to each person, if any, who
 controls the Underwriters within the meaning of the Act; and the obligations of
 the Underwriters under this Section 8 shall be in addition to any liability
 which the Underwriters may otherwise have and shall extend, upon the same terms
 and conditions, to each officer and director of PSFC or the Bank and to each
 person, if any, who controls PSFC or the Bank within the meaning of the Act.

          9.  The respective indemnities, agreements, representations,
warranties and other statements of PSFC, the Bank and the Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of the Underwriters or any controlling person of the Underwriters, PSFC, or the
Bank, or any officer or director or controlling person of PSFC or the Bank, and
shall survive delivery of and payment for the Certificates.

Anything herein to the contrary notwithstanding, the indemnity agreement of PSFC
and the Bank in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (b) and (c) of Section 1 hereof and any representation
or warranty as to the accuracy of the Registration Statement or the Prospectus
contained in any certificate furnished by PSFC or the Bank pursuant to Section 7
hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by PSFC or the Bank of expenses incurred or paid
in the successful defense of any action, suit or proceeding) arising under the
Act, shall not extend to the extent of any interest therein of a controlling
person or partner of the Underwriters or a person who is a director, officer or
controlling person of PSFC or the Bank when the Registration Statement has
become effective, except in each case to the extent that an interest of such
character shall have been determined by a court of appropriate jurisdiction as
not against public policy as expressed in the Act.  Unless in the opinion of
counsel for PSFC and the Bank the matter has been settled by controlling
precedent, PSFC or the Bank, as applicable, will, if a

                                       34
<PAGE>
 
claim for such indemnification is asserted, submit to a court of appropriate
jurisdiction the question whether such interest is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

          10.  (a)  If any Underwriter shall default in its obligation to
purchase the Class A Certificates which it has agreed to purchase hereunder, the
non-defaulting Underwriters may in their discretion arrange for themselves as
they may agree or another party or other parties to purchase such Class A
Certificates on the terms contained herein.  If within thirty-six hours after
such default by any Underwriter the Underwriters do not arrange for the purchase
of such Class A Certificates, then PSFC shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to the Underwriters to purchase such Class A Certificates on such
terms.  In the event that, within the respective periods, the Underwriters
notify PSFC that the Underwriters have so arranged for the purchase of such
Class A Certificates or PSFC notifies the Underwriters that it has so arranged
for the purchase of such Certificates, the Underwriters or PSFC shall have the
right to postpone the Time of Delivery for a period of not more than seven days,
in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and PSFC and the Bank agree to file promptly any amendments to the
Registration Statement or the Prospectus which in the opinion of the
Underwriters may thereby be made necessary.  The term "Underwriter" as used in
this Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Class A Certificates.

          (b)  If, after giving effect to any arrangements for the purchase of
the Class A Certificates of a defaulting Underwriter by the non-defaulting
Underwriters and PSFC as provided in subsection (a) above, the aggregate
principal amount of such Class A Certificates which remains unpurchased does not
exceed one-eleventh of the aggregate principal amount of all the Class A
Certificates, then PSFC shall have the right to require each non-defaulting
Underwriter to purchase the principal amount of Class A Certificates which such
Underwriter

                                       35
<PAGE>
 
agreed to purchase hereunder and, in addition, to require each non-defaulting
Underwriter to purchase a pro rata portion of the Class A Certificates of the
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve the defaulting Underwriter from liability
for its default.

          (c)  If, after giving effect to any arrangements for the purchase of
the Class A Certificates of a defaulting Underwriter by the non-defaulting
Underwriters and PSFC as provided in subsection (a) above, the aggregate
principal amount of Class A Certificates which remains unpurchased exceeds one-
eleventh of the aggregate principal amount of all the Class A Certificates, or
if PSFC shall not exercise the right described in subsection (b) above to
require each non-defaulting Underwriter to purchase Securities of the defaulting
Underwriter, then this Agreement shall thereupon terminate, without liability on
the part of any non-defaulting Underwriter, PSFC  or the Bank, except for the
expenses to be borne by PSFC,  the Bank and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve the defaulting Underwriter from
liability for its default.

          11.  If either the Class A Certificates or the Class B Certificates
are not delivered by or on behalf of PSFC for any reason as provided herein,
PSFC  or the Bank will reimburse the Underwriters for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of such Certificates, but neither PSFC  nor the Bank shall
then have any further liability to the Underwriters except as provided in
Section 6 and Section 8 hereof.

          12.  All statements, requests, notices and agreements hereunder shall
be in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to Goldman, Sachs & Co., at 85 Broad Street, New
York, New York 10004, Attention:  Registration Department; if to PSFC  shall be
delivered or sent by mail, telex or facsimile transmission to
__________________, Attention:  _____________; and if to the Bank shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Bank set

                                       36
<PAGE>
 
forth in the Registration Statement, Attention:  William T. Kosturko, Esq.  Any
such statements, request notices or agreements shall take effect upon receipt
thereof.

          13.  This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, PSFC the Bank and, to the extent provided in
Section 8 and Section 9 hereof, the officers and directors of PSFC and the Bank
and each person who controls PSFC, the Bank or the Underwriters, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement.  No purchaser of any of the Certificates from the Underwriters shall
be deemed a successor or assign by reason merely of such purchase.

          14.  Time shall be of the essence in this Agreement.  As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

          15.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

          16.  This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.

          17.  Any covenant, provision, agreement or term of this Agreement that
is prohibited or is held to be void or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.

          18.  Each Underwriter represents and warrants to, and agrees with,
PSFC and the Bank that (w) it has complied and shall comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Certificates in, from or otherwise involving the United
Kingdom; (x) it has only issued or passed on and shall only issue or pass on in
the United Kingdom any document received by it in connection with the issue of
the Certificates to a person

                                       37
<PAGE>
 
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or who is a person to whom
the document may otherwise lawfully be issued or passed on; and (y) if that
Underwriter is an authorized person under  of the Financial Services Act 1986,
it has only promoted and shall only promote (as the 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 in
the Prospectus 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.

                                       38
<PAGE>
 
          If the foregoing is in accordance with your understanding, please sign
and return two counterparts hereof, and upon the acceptance hereof by you, this
letter and such acceptance hereof shall constitute a binding agreement between
the Underwriters and the Bank.



                              Very truly yours,


                              PEOPLE'S STRUCTURED FINANCE CORP.
                        
                        
                              By: _______________________
                                  Name:
                                  Title:
                        
                        
                              PEOPLE'S BANK
                        
                        
                              By: _______________________
                                  Name:
                                  Title:


Accepted as of the date hereof:


____________________________
 GOLDMAN, SACHS & CO.,
 as Representative on
 behalf of the Class A
 Underwriters and as
 Class B Underwriters

                                       39
<PAGE>
 
<TABLE>
<CAPTION>
                                                                      SCHEDULE A
                                                                      ----------

                                               Aggregate
                                               Principal
                                               Amount of the
                                               Class A
Underwriter                                    Certificates
- ----------------------                         -------------
                                       
Goldman, Sachs & Co.                           $
                                       
<S>                                            <C>
                                               -------------
                                               $
                                       
                                               Aggregate
                                               Principal
                                               Amount of
Underwriter                                    the
- ----------------------                         Class B
                                               Certificates
                                               -------------
Goldman, Sachs & Co.                           $
                                       
                                               -------------
                                               $
 
 
</TABLE>

                                       40

<PAGE>
 
                                                                     EXHIBIT 4.1



- --------------------------------------------------------------------------------
 
                                 PEOPLE'S BANK

                              Seller and Servicer


                                      and



                             BANKERS TRUST COMPANY

                                    Trustee

                      on behalf of the Certificateholders

                 of the People's Bank Credit Card Master Trust

                        -------------------------------

                        POOLING AND SERVICING AGREEMENT

                            Dated as of June 1, 1993


- --------------------------------------------------------------------------------
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                    ----
<S>                 <C>                                                            <C> 

ARTICLE I           DEFINITIONS..................................................      1

  Section 1.1          Definitions................................................     1
  Section 1.2          Other Definitional Provisions..............................    25

ARTICLE II          CONVEYANCE OF RECEIVABLES;
                    ISSUANCE OF CERTIFICATES......................................    27

  Section 2.1         Conveyance of Receivables...................................    27
  Section 2.2         Acceptance by Trustee.......................................    29
  Section 2.3         Representations and Warranties
                        of the Seller.............................................    30
  Section 2.4         Representations and Warranties
                        of the Seller Relating to
                        the Agreement and the
                      Receivables.................................................    33
  Section 2.5         Covenants of the Seller.....................................    45
  Section 2.6         Addition of Accounts........................................    51
  Section 2.7         Removal of Accounts.........................................    56

ARTICLE III         ADMINISTRATION AND SERVICING
                    OF RECEIVABLES................................................    59

  Section 3.1         Acceptance of Appointment and
                        Other Matters Relating to the
                        Servicer..................................................    59
  Section 3.2         Servicing Compensation......................................    62
  Section 3.3         Representations and Warranties
                        of the Servicer...........................................    63
  Section 3.4         Reports and Records for the
                        Trustee...................................................    67
  Section 3.5         Annual Servicer's Certificate...............................    69
  Section 3.6         Annual Independent Accountants'
                        Servicing Report..........................................    69
  Section 3.7         Tax Treatment...............................................    71
  Section 3.8         Notices to the Seller.......................................    71
</TABLE>

<PAGE>
 
<TABLE>
<CAPTION>

                                                                     Page
                                                                     ----
<S>            <C>                                                 <C>
ARTICLE IV      RIGHTS OF CERTIFICATEHOLDERS AND
                ALLOCATION AND APPLICATION OF
                COLLECTIONS.......................................      72

  Section 4.1     Establishment of Accounts and
                    Allocations with Respect to
                    the Exchangeable Seller
                    Certificate...................................      72
  Section 4.2     Collection and Allocations......................      75

ARTICLE V       [ARTICLE V IS RESERVED AND SHALL
                BE SPECIFIED IN ANY SUPPLEMENT
                WITH RESPECT TO ANY SERIES].......................      80

ARTICLE VI      THE CERTIFICATES..................................      81

  Section 6.1     The Certificates................................      81
  Section 6.2     Authentication of Certificates..................      82
  Section 6.3     Registration of Transfer and
                    Exchange of Certificates......................      83
  Section 6.4     Mutilated, Destroyed, Lost or
                    Stolen Certificates...........................      87
  Section 6.5     Persons Deemed Owners...........................      88
  Section 6.6     Appointment of Paying Agent.....................      89
  Section 6.7     Access to List of Certifi-
                    cateholders' Names and
                    Addresses.....................................      90
  Section 6.8     Authenticating Agent............................      91
  Section 6.9     Tender of Exchangeable Seller
                    Certificates..................................      93
  Section 6.10    Global Certificate; Euro-
                    Certificate Exchange Date.....................      96
  Section 6.11    Book-Entry Certificates.........................      96
  Section 6.12    Notices to Clearing Agency......................      98
  Section 6.13    Definitive Certificates.........................      98
  Section 6.14    Meetings of Certificateholders..................      99
</TABLE>

                                       ii
<PAGE>
 
<TABLE>
<CAPTION>

                                                                       Page
                                                                       ----
<S>               <C>                                                 <C>
ARTICLE VII       OTHER MATTERS RELATING TO THE SELLER                   100

  Section 7.1       Liability of the Seller...........................   100
  Section 7.2       Merger or Consolidation of, or
                      Assumption of the Obligation of,
                      the Seller......................................   100
  Section 7.3       Limitation on Liability of the
                      Seller..........................................   101

ARTICLE VIII      OTHER MATTERS RELATING
                  TO THE SERVICER.....................................   103

  Section 8.1       Liability of the Servicer.........................   103
  Section 8.2       Merger or Consolidation of, or
                      Assumption of the Obligations
                      of, the Servicer................................   103
  Section 8.3       Limitation on Liability of the
                      Servicer and Others.............................   104
  Section 8.4       Servicer Indemnification of the
                      Trust and the Trustee...........................   105
  Section 8.5       Resignation of the Servicer.......................   106
  Section 8.6       Access to Certain Documentation
                      and Information Regarding the
                      Receivables.....................................   107
  Section 8.7       Delegation of Duties..............................   107
  Section 8.8       Examination of Records............................   108

ARTICLE IX        PAY OUT EVENTS......................................   109

  Section 9.1       Pay Out Events....................................   109
  Section 9.2       Additional Rights Upon the
                      Occurrence of Certain Events....................   109

ARTICLE X         SERVICER DEFAULTS...................................   112

  Section 10.1      Servicer Defaults.................................   112
  Section 10.2      Trustee to Act; Appointment
                      of Successor ...................................   115
</TABLE>

                                      iii
<PAGE>
 
<TABLE>
<CAPTION>

                                                                                   Page
                                                                                   ----
<S>               <C>                                                              <C>
 Section 10.3         Notification to Certificate-
                        holders..................................................     118
 Section 10.4         Waiver of Past Defaults....................................     118

ARTICLE XI          THE TRUSTEE..................................................     120

  Section 11.1        Duties of Trustee..........................................     120
  Section 11.2        Certain Matters Affecting the
                        Trustee..................................................     122
  Section 11.3        Trustee Not Liable for Recitals
                        in Certificates..........................................     123
  Section 11.4        Trustee May Own Certificates...............................     124
  Section 11.5        The Servicer to Pay Trustee's
                        Fees and Expenses........................................     124
  Section 11.6          Eligibility Requirements for
                        Trustee..................................................     124
  Section 11.7        Resignation or Removal of Trustee..........................     125
  Section 11.8        Successor Trustee..........................................     126
  Section 11.9        Merger or Consolidation of
                        Trustee..................................................     126
  Section 11.10       Appointment of Co-Trustee or Separate
                        Trustee..................................................     127
  Section 11.11       Tax Returns................................................     129
  Section 11.12       Trustee May Enforce Claims
                        Without Possession of
                        Certificates.............................................     129
  Section 11.13       Suits for Enforcement......................................     129
  Section 11.14       Rights of Certificateholders
                        to Direct Trustee........................................     130
 Section 11.15        Representations and Warranties
                        of Trustee...............................................     130
  Section 11.16       Maintenance of Office or Agency............................     131

ARTICLE XII         TERMINATION..................................................     132

  Section 12.1        Termination of Trust.......................................     132
  Section 12.2        Optional Purchase and Final
                        Termination of Investor
                        Certificates of any Series...............................     133
  Section 12.3        Final Payment with Respect to
                        any Series...............................................     134
  Section 12.4        Seller's Termination Rights................................     136
</TABLE>

                                       iv
<PAGE>
 
<TABLE>
<CAPTION>

                                                                                        Page
                                                                                        ----

<S>                <C>                                                                  <C>
ARTICLE XIII       MISCELLANEOUS PROVISIONS...........................................     137

  Section 13.1       Amendment........................................................     137
  Section 13.2       Protection of Right, Title
                       and Interest to Trust..........................................     139
  Section 13.3       Limitation on Rights of
                       Certificateholders.............................................     140
  Section 13.4       GOVERNING LAW....................................................     142
  Section 13.5       Notices..........................................................     142
  Section 13.6       Severability of Provisions.......................................     143
  Section 13.7       Certificates Non-Assessable and
                       Fully Paid.....................................................     143
  Section 13.8       Further Assurances...............................................     143
  Section 13.9       No Waiver; Cumulative Remedies...................................     143
  Section 13.10      Counterparts.....................................................     144
  Section 13.11      Third-Party Beneficiaries........................................     144
  Section 13.12      Actions by Certificateholders....................................     144
  Section 13.13      Rule 144A Information............................................     144
  Section 13.14      Merger and Integration...........................................     145
  Section 13.15      Headings.........................................................     145

  Exhibit A        Form of Seller Certificate.........................................
  Exhibit B        Form of Assignment of Receiv-
                     ables in Additional Accounts.....................................
  Exhibit C        Form of Monthly Servicer's
                     Certificate......................................................
  Exhibit D        Form of Annual Servicer's
                     Certificate......................................................
</TABLE>

                                       v
<PAGE>
 
     POOLING AND SERVICING AGREEMENT, dated as of June 1, 1993 by and between
PEOPLE'S BANK, a Connecticut capital stock savings bank, as Seller and Servicer,
and BANKERS TRUST COMPANY, a banking corporation organized and existing under
the laws of the State of New York, as Trustee.

     In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the
Certificateholders:


                                   ARTICLE I

                                  DEFINITIONS

          Section 1.1  Definitions.  Whenever used in this Agreement, the
                       -----------                                       
following words and phrases shall have the following meanings:

     "Account" shall mean each VISA(R)/*/ and MasterCard(R)/*/ credit card
      -------                                                             
account (or other consumer revolving credit account to the extent provided
herein), which account is governed by a Credit Card Agreement between the Seller
and any Person identified by account number in each computer file or microfiche
list delivered to the Trustee by the Seller pursuant to Section 2.1 or 2.6.  The
definition of Account shall include each account into which an Account shall be
transferred (a "Transferred Account"); provided, that (i) such transfer was made
                                       --------                                 
in accordance with the Account Guidelines and (ii) such Transferred Account can
be traced or identified by reference to or by way of the computer files or
microfiche lists delivered to the Trustee pursuant to Section 2.1, 2.6, 2.7 or
3.4(c), as an account into which an Account has been transferred; provided,
                                                                  -------- 
further that to the extent that any Account shall be transferred into a premium
- -------                                                                        
account such Account shall not be treated as a Transferred Account and shall no
longer be an Account.

- -----------------------

/*/  VISA(R) and MasterCard(R) are registered trademarks of VISA USA, Inc. and
of MasterCard International Incorporated, respectively.
<PAGE>
 
The term "Account" shall be deemed to refer to an Additional Account or
Automatic Additional Account only from and after the Addition Date or Automatic
Addition Date, as the case may be, with respect thereto, and the term "Account"
shall be deemed to refer to any Removed Account only prior to the Removal Date
with respect thereto.



          "Account Guidelines" shall mean the Seller's policies and procedures
           ------------------                                                 
relating to the operation of its credit card business, including, without
limitation, the policies and procedures for determining the creditworthiness of
credit card customers, the extension of credit to credit card customers, and
relating to the maintenance of credit card accounts and collection of credit
card receivables, as such policies and procedures may be amended from time to
time.

          "Account Information" shall have the meaning specified in subsection
           -------------------                                                
2.2(b).

          "Accumulation Period" shall have the meaning specified in any
           -------------------                                         
applicable Supplement.

          "Addition Date" shall mean each date as of which Additional Accounts
           -------------                                                      
will be included as Accounts pursuant to Section 2.6.

          "Addition Notice Date" shall have the meaning specified in subsection
           --------------------                                                
2.6(g)(i).

          "Additional Accounts" shall mean additional credit card accounts added
           -------------------                                                  
as Accounts pursuant to subsections 2.6(e) and 2.6(f).

          "Affiliate" of any Person shall mean any other Person controlling,
           ---------                                                        
controlled by or under common control with such Person except that, for the
purposes of clause (f) of the definition of Eligible Account, "Affiliate" shall
not mean a natural person.

          "Affinity Program Account" shall mean an account originated by the
           ------------------------                                         
Seller through the solicitation of prospective cardholders from identifiable
groups with a common interest or a common cause, with the assistance of an
organization or the members of such group.

                                       2
<PAGE>
 
          "Agent Bank Account" shall mean an account originated by the Seller
           ------------------                                                
pursuant to an agreement between the Seller and a bank for which the Seller
issues VISA(R) and/or MasterCard(R) credit cards and acts as a sponsor with VISA
USA, Inc. and/or MasterCard International Incorporated.

          "Aggregate Finance Charge Receivables" shall mean, as of any date of
           ------------------------------------                               
determination, the aggregate amount of the Finance Charge Receivables as of the
end of the Monthly Period immediately preceding such date of determination.

          "Aggregate Investor Interest" shall mean, as of any date of
           ---------------------------                               
determination, the sum of the Investor Interests of each Series of Certificates
issued and outstanding on such date of determination.

          "Aggregate Investor Percentage" with respect to Principal Receivables,
           -----------------------------                                        
Finance Charge Receivables and Receivables in Defaulted Accounts, as the case
may be, shall mean, as of any date of determination, the sum of such Investor
Percentages of each Series of Certificates issued and outstanding on such date
of determination; provided, however, that the Aggregate Investor Percentage
                  --------  -------                                        
shall not exceed 100%.

          "Aggregate Principal Receivables" shall mean, as of any date of
           -------------------------------                               
determination, the aggregate amount of Principal Receivables as of the end of
the Monthly Period immediately preceding such date of determination and the
amount on deposit in the Excess Funding Account (exclusive of any investment
earnings on such amount).

          "Aggregate Receivables" shall mean, as of any date of determination,
           ---------------------                                              
the sum of Aggregate Principal Receivables plus Aggregate Finance Charge
Receivables.

          "Agreement" shall mean this Pooling and Servicing Agreement and all
           ---------                                                         
amendments hereof and supplements hereto, including any Supplement.

          "Amortization Period" shall mean, with respect to any Series, the
           -------------------                                             
period following the related Revolving Period, which shall be the Accumulation
Period, the Controlled Amortization Period, the early Amortization Period, the
Rapid Amortization Period, or other amorti-

                                       3
<PAGE>
 
zation or accumulation period, in each case as defined, if applicable, with
respect to such Series in the related Supplement.

          "Annual Membership Fee" shall have the meaning specified in the Credit
           ---------------------                                                
Card Agreement as it may, from time to time, be amended.

          "Applicants" shall have the meaning specified in Section 6.7.
           ----------                                                  

          "Appointment Day" shall have the meaning specified in Section 9.2.
           ---------------                                                  

          "Assignment" shall have the meaning specified in subsection
           ----------                                                
2.6(g)(ii).

          "Authorized Newspaper" shall mean a newspaper of general circulation
           --------------------                                               
in the Borough of Manhattan, The City of New York printed in the English
language (and, with respect to any Series, any additional city specified in the
Supplement for such Series) and customarily published on each Business Day,
whether or not published on Saturdays, Sundays and holidays.

          "Automatic Additional Accounts" shall mean those consumer revolving
           -----------------------------                                     
credit card accounts coming into existence after the Cut Off Date which meet the
following criteria:

          (a)  VISA Classic or standard MasterCard account which satisfies the
criteria set forth in the definition of "Eligible Account" originated through
applicant-initiated applications or through the Seller's branch system:

               (i)  which is originated during the normal operation of such
     Seller's credit card business and is not acquired by the Seller from
     another credit card issuer;

               (ii)  which was in existence and owned by the Seller on the date
     on which Receivables generated in such account are to be added to the Trust
     and is in existence at the close of business on the date of its designation
     for inclusion in the Trust;

                                       4
<PAGE>
 
               (iii)  which is payable in U.S. Dollars; and

               (iv)  the Receivables in which have not been charged off prior to
     the date of their designation for inclusion in the Trust; or

          (b)  any other consumer revolving credit card account which satisfies
the criteria set forth in the definition of "Eligible Account" without regard to
the requirement that such account be a VISA(R) or MasterCard(R) credit card
account; provided that the Seller shall have received notice from each Rating
         --------                                                            
Agency that the inclusion of such accounts as Automatic Additional Accounts
pursuant to this paragraph (b) will not result in the reduction or withdrawal of
its then existing rating of any Series of Investor Certificates then issued and
outstanding and shall have delivered such notice to the Trustee.

          "Automatic Addition Date" shall mean the date upon which the
           -----------------------                                    
Receivables in an Automatic Additional Account are first designated for
addition, and added to, the Trust.

          "Banking Commissioner" shall mean the Banking Commissioner of the
           --------------------                                            
State of Connecticut.

          "Base Rate" shall mean, with respect to any Series of Certificates,
           ---------                                                         
the percentage (or formula on the basis of which such rate shall be determined)
stated in the related Supplement.

          "Bearer Certificates" shall have the meaning specified in Section 6.1.
           -------------------                                                  

          "Bearer Rules" shall mean the provisions of the Internal Revenue Code,
           ------------                                                         
in effect from time to time, governing the treatment of bearer obligations,
including sections 163(f), 871, 881, 1441, 1442 and 4701, and any regulation
thereunder including, to the extent applicable to any Series, Proposed or
Temporary Regulations.

          "Billing Cycle" shall mean, with respect to any Account, the monthly
           -------------                                                      
billing cycle for such Account determined in accordance with the Account
Guidelines.

                                       5
<PAGE>
 
          "Book-Entry Certificates" shall mean certificates evidencing a
           -----------------------                                      
beneficial interest in the Investor Certificates, ownership and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 6.11; provided, that after the occurrence of a condition whereupon book-
              --------                                                         
entry registration and transfer are no longer authorized and Definitive
Certificates are to be issued to the Certificate Owners, such certificates shall
no longer be "Book-Entry Certificates."

          "Business Day" shall mean any day other than a Saturday, a Sunday or a
           ------------                                                         
day on which banking institutions in New York, New York or Bridgeport,
Connecticut (or, with respect to any Series, any additional city specified in
the related supplement) are authorized or obligated by law or executive order to
be closed.

          "Cash Advances" shall have the meaning specified in the Credit Card
           -------------                                                     
Agreement as it may, from time to time, be amended.

          "Cash Advance Fees" shall have the meaning specified in the Credit
           -----------------                                                
Card Agreement as it may, from time to time, be amended.

          "Certificate" shall mean any one of the Investor Certificates of any
           -----------                                                        
Series or the Exchangeable Seller Certificate.

          "Certificateholder" or "Holder" shall mean the Person in whose name a
           -----------------      ------                                       
Certificate is registered in the Certificate Register and, if applicable, the
bearer of any Bearer Certificate or Coupon, as the case may be.

          "Certificateholders' Interest" shall, with respect to any Series, have
           ----------------------------                                         
the meaning specified in Article IV of the Supplement for such Series.

          "Certificate Interest" shall mean interest payable in respect of the
           --------------------                                               
Investor Certificates of any Series pursuant to Article IV of the Supplement for
such Series.

          "Certificate Owner" shall mean, with respect to a Book-Entry
           -----------------                                          
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as may be

                                       6
<PAGE>
 
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).

          "Certificate Principal" shall mean principal payable in respect of the
           ---------------------                                                
Investor Certificates of any Series pursuant to Article IV of the Supplement for
such Series.

          "Certificate Rate" shall mean, with respect to any Series of
           ----------------                                           
Certificates, the percentage (or formula on the basis of which such rate shall
be determined) stated in the related Supplement; provided that, unless otherwise
provided in a Supplement, such rate shall be calculated on the basis of a 360-
day year consisting of twelve 30-day months.

          "Certificate Register" shall mean the register maintained pursuant to
           --------------------                                                
Section 6.3, providing for the registration of the Certificates and transfers
and exchanges thereof.

          "Class" shall mean, with respect to any Series, any one of the classes
           -----                                                                
of Certificates of that Series as specified in the related Supplement.

          "Clearing Agency" shall mean an organization registered as a "clearing
           ---------------                                                      
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.

          "Clearing Agency Participant" shall mean a broker, dealer, bank, other
           ---------------------------                                          
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.

          "Closing Date" shall mean, with respect to any Series, the date of
           ------------                                                     
issuance of such Series of Certificates, as specified in the related Supplement.

          "Collection Account" shall have the meaning specified in Section
           ------------------                                             
4.1(a).

          "Collections" shall mean all payments (including insurance proceeds on
           -----------                                                          
Accounts that are not Defaulted Accounts and all Recoveries but excluding
drawings on any

                                       7
<PAGE>
 
Enhancement) received by the Servicer in respect of the Receivables, in the form
of cash, checks, wire transfers, ATM transfers or other form of payment in
accordance with the Credit Card Agreement in effect from time to time on any
Receivables.  A Collection processed on an Account in excess of the aggregate
amount of Receivables in such Account as of the Date of Processing of such
Collection shall be deemed to be a payment in respect of Principal Receivables
to the extent of such excess.  Collections with respect to any Monthly Period
shall include the amount of Interchange and Recoveries allocable to the Trust
pursuant to subsections 2.5(k) and (l) with respect to such Monthly Period (to
the extent deposited into the Collection Account or, with respect to any Series,
the applicable Series Account, on the Transfer Date following such Monthly
Period), to be applied as if such Collections were Collections of Finance Charge
Receivables for all purposes.

          "Collection Subaccount" shall have the meaning specified in subsection
           ---------------------                                                
4.1(a).

          "Corporate Trust Office" shall mean the principal office of the
           ----------------------                                        
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Four Albany Street, New York, New York 10006, Attention:  Corporate
Trust and Agency Group, Structured Finance Team.

          "Coupon" shall have the meaning specified in Section 6.1.
           ------                                                  

          "Credit Adjustment" shall have the meaning specified in subsection
           -----------------                                                
4.2(d)(i).

          "Credit Card Agreement" shall mean, with respect to any VISA(R) or
           ---------------------                                            
MasterCard(R) credit card account (or other consumer credit accounts, to the
extent provided herein), the agreement between People's Bank and the Obligor
governing the terms and conditions of such account, as such agreement may be
amended, modified or otherwise changed from time to time.

                                       8
<PAGE>
 
          "Cut-Off Date" shall mean, with respect to each Account conveyed to
           ------------                                                      
the Trust pursuant to Section 2.1 on the Initial Closing Date, the close of
business on May 31, 1993.

          "Date of Processing" shall mean, with respect to any transaction, the
           ------------------                                                  
date (but if such date is not a Business Day, then the next Business Day) on
which such transaction is first recorded on the Servicer's computer master file
of VISA(R) and MasterCard(R) accounts or its computer master file of other
consumer revolving accounts, if any, in the Trust (without regard to the
effective date of such recordation.)

          "Default Amount" shall mean, with respect to any Defaulted Account,
           --------------                                                    
the amount of Principal Receivables in such Defaulted Account on the day such
Account became a Defaulted Account.

          "Default Percentage" shall mean on any Date of Processing a
           ------------------                                        
percentage, the numerator of which shall be the Seller Percentage of the Default
Amount on such day and the denominator of which shall be the Aggregate Principal
Receivables at the end of the preceding Date of Processing minus the Aggregate
                                                           -----              
Principal Receivables on the current Date of Processing prior to the deposit of
any amount in the Excess Funding Account.

          "Defaulted Account" shall mean each Account with respect to which, in
           -----------------                                                   
accordance with the Account Guidelines or the Servicer's customary and usual
servicing procedures for servicing credit card receivables comparable to the
Receivables (which as of the date hereof is more than 211 days delinquent from
the payment due date) the Servicer has charged off the Receivables in such
Account as uncollectible; an Account shall become a Defaulted Account on the day
on which such Receivables are recorded as charged off and as uncollectible on
the Servicer's computer master file of VISA(R) and MasterCard(R) accounts.

          "Definitive Bearer Certificate" shall mean any Definitive Certificate
           -----------------------------                                       
issued in bearer form with Coupons attached.

          "Definitive Certificate" shall have the meaning specified in Section
           ----------------------                                             
6.11.

                                       9
<PAGE>
 
          "Definitive Euro-Certificate" shall have the meaning specified in
           ---------------------------                                     
Section 6.10.

          "Definitive Registered Certificate" shall mean any Definitive
           ---------------------------------                           
Certificate issued in registered form.

          "Depository Agreement" shall mean, with respect to each Series, the
           --------------------                                              
agreement among the Seller, the Trustee and the Clearing Agency, in the form
attached hereto as Exhibit H, or as otherwise provided in the related
Supplement.

          "Determination Date" shall mean the 8th Business Day of each calendar
           ------------------                                                  
month but not later than the tenth calendar day of such month (and if such day
is not a Business Day, the preceding Business Day).

          "Distribution Date" shall mean, unless otherwise specified in any
           -----------------                                               
Supplement for the related Series, July 15, 1993 and the fifteenth day of each
calendar month thereafter, or, if such fifteenth day is not a Business Day, the
next succeeding Business Day.

          "Dollars", "$" or "U.S. $" shall mean United States dollars.
           -------    -      ------                                   

          "Eligible Account" shall mean a VISA(R) or MasterCard(R) credit card
           ----------------                                                   
account owned by the Seller which, as of the Cut-Off Date:

          (a) is payable in United States dollars;

          (b) has not been identified on the computer files of the Seller by the
     Seller as relating to a cardholder who has died or commenced action
     relating to bankruptcy or who is the subject of an involuntary bankruptcy,
     insolvency or similar action;

          (c) has not been classified on the Seller's computer files by the
     Seller as counterfeit, fraudulent, stolen or lost or as a corporate
     business card;

          (d) has not been charged off by the Seller in its customary and usual
     manner for charging off such Accounts as of the Cut-Off Date;

                                       10
<PAGE>
 
          (e) has not been (and no Receivables in such Account have been) sold
     or pledged to any other Person;

          (f) is not an Account on which the Seller or an Affiliate of the
     Seller is the Obligor; and


          (g) as of the date of origination of such Account, the obligor of
     which had a billing address in the United States, its territories or
     possessions.


          "Eligible Additional Account" shall mean as of any Addition Date, (a)
           ---------------------------                                         
a VISA(R) or MasterCard(R) credit card account owned by the Seller which
satisfies the criteria set forth in clauses (a) through (g) inclusive of the
definition of Eligible Account, or (b) any other consumer revolving credit
account (i) which satisfy the criteria set forth in clauses (a) through (g)
inclusive of the definition of Eligible Account, (ii) the addition of the
receivables of which would not cause the Rating Agency to indicate in writing
that such addition would result in the reduction or withdrawal of its then-
existing rating of the Investor Certificates of any Series of Certificates then
issued and outstanding and (iii) to which, to the extent provided in the related
Supplement, the Enhancement Provider with respect to any Series of Certificates
consents, which consent shall not be unreasonably withheld.

          "Eligible Receivable" shall mean each Receivable:
           -------------------                             

          (a)  which has arisen under an Eligible Account (in the case of
     Accounts conveyed to the Trust on the Initial Closing Date) or an Eligible
     Additional Account (in the case of Additional Accounts or Automatic
     Additional Accounts);

          (b)  which was created in compliance, in all material respects, with
     all Requirements of Law applicable to the Seller and pursuant to a Credit
     Card Agreement which complies, in all material respects, with all
     Requirements of Law applicable to the Seller;

                                       11
<PAGE>
 
          (c)  with respect to which all consents, licenses, approvals or
     authorizations of, or registrations or declarations with, any Governmental
     Authority required to be obtained, effected or given by the Seller in
     connection with the creation of such Receivable or the execution, delivery
     and performance by the Seller of the Credit Card Agreement pursuant to
     which such Receivable was created, have been duly obtained, effected or
     given and are in full force and effect as of such date of creation of such
     Receivable;

          (d)  as to which, at the time of and at all times after the creation
     of such Receivable, the Seller or the Trust had good and marketable title
     thereto free and clear of all Liens (other than Liens permitted pursuant to
     subsection 2.5(b));

          (e)  which is the legal, valid and binding payment obligation of the
     Obligor thereon, enforceable against such Obligor in accordance with its
     terms, except as such enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium or other similar laws,
     now or hereafter in effect, affecting the enforcement of creditors' rights
     in general and except as such enforceability may be limited by general
     principles of equity (whether considered in a suit at law or in equity);

          (f)  which constitutes an "account" or a "general intangible" under
     and as defined in Article 9 of the UCC as then in effect in the State of
     New York;

          (g)  as to which, at the time of its transfer to the Trust, the Seller
     has satisfied all material obligations on its part with respect to such
     Receivable required to be satisfied;

          (h)  which is not, at the time of its transfer to the Trust, subject
     to any right of rescission, setoff, counter-claim or defense (including the
     defense of usury), other than a defense arising out of applicable
     bankruptcy, insolvency, reorganization, moratorium or other similar laws
     affecting the enforcement of creditors' rights in general; and

                                       12
<PAGE>
 
     (i)  as to which the Seller has done nothing to impair, or omitted to take
     any action the omission of which would impair, the rights of the Trust or
     the Certificateholders therein.

          "Eligible Servicer" shall mean the Trustee or an entity which, at the
           -----------------                                                   
time of its appointment as Servicer, (a) is servicing a portfolio of consumer
revolving credit card accounts, (b) is legally qualified and has the capacity to
service the Accounts, (c) is qualified to use the software that People's Bank,
in its capacity as Servicer hereunder, is then currently using to service the
Accounts or obtains the right to use or has its own software which is adequate
to perform its duties under this Agreement and (d) has either a net worth on a
consolidated basis of at least $50,000,000 as of the end of its most recent
fiscal quarter or is an Affiliate of the Seller which has a net worth of at
least $20,000,000.

          "Enhancement" shall mean, with respect to any Series, the cash
           -----------                                                  
collateral account, surety bond, letter of credit, guaranteed rate agreement,
maturity guaranty facility, tax protection agreement, interest rate swap or any
other contract or agreement for the benefit of the Certificateholders of such
Series, as designated in the related supplement.

          "Enhancement Provider" shall mean, with respect to any Series, the
           --------------------                                             
Person, if any, designated as such in the related Supplement.

          "ERISA" shall mean the Employee Retirement Income Security Act of
           -----                                                           
1974, as amended from time to time.

          "Euro-Certificate Exchange Date" shall mean, with respect to any
           ------------------------------                                 
Series, the date, if any, specified in the related Supplement.

          "Euro-clear Operator" shall have the meaning, if applicable, specified
           -------------------                                                  
in the related Supplement.

          "Excess Funding Account" shall have the meaning specified in
           ----------------------                                     
subsection 4.1(b).

          "Exchange" shall mean either of the procedures described under Section
           --------                                                             
6.9.

                                       13
<PAGE>
 
          "Exchangeable Seller Certificate" shall mean the certificate which
           -------------------------------                                  
represents the Seller Interest executed by the Seller and authenticated by the
Trustee, substantially in the form of Exhibit A and exchangeable as provided in
Section 6.9; provided that at any time there shall be only one Exchangeable
Seller Certificate.

          "Exchange Date" shall have the meaning, with respect to any Series
           -------------                                                    
issued pursuant to an Exchange, specified in Section 6.9.

          "Exchange Notice" shall have the meaning, with respect to any Series
           ---------------                                                    
issued pursuant to an Exchange, specified in Section 6.9.

          "Extended Trust Termination Date" shall have the meaning specified in
           -------------------------------                                     
subsection 12.1(a).

          "FDIC" shall mean the Federal Deposit Insurance Corporation.
           ----                                                       

          "Finance Charge Receivables" shall mean Receivables created in respect
           --------------------------                                           
of the Periodic Finance Charges, Annual Membership Fees, Cash Advance Fees, Late
Fees, Returned Check Fees, Overlimit Fees, investment earnings on the Excess
Funding Account and Recoveries and Interchange allocable to the Trust.

          "Foreign Clearing Agency" shall have the meaning specified in the
           -----------------------                                         
applicable Supplement.

          "Fractional Undivided Interest" shall mean the fractional undivided
           -----------------------------                                     
interest in the Certificateholders' Interest evidenced by an Investor
Certificate.

          "Global Certificate" shall have the meaning specified in subsection
           ------------------                                                
6.10(a).

          "Governmental Authority" shall mean the United States of America, any
           ----------------------                                              
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

          "Ineligible Receivable" shall have the meaning specified in subsection
           ---------------------                                                
2.4 (d).

                                       14
<PAGE>
 
          "Initial Closing Date" shall mean July 9, 1993.
           --------------------                          

          "Initial Investor Interest" shall mean, with respect to any Series of
           -------------------------                                           
Certificates, the amount stated in the related Supplement.

          "Interchange" shall mean interchange fees or interchange reimbursement
           -----------                                                          
fees, paid or payable to the Seller, in its capacity as credit card issuer,
through VISA USA, Inc. and MasterCard International Incorporated in connection
with cardholder purchases for merchandise and services, minus, fees paid by the
                                                        -----                  
Seller to third parties in respect of interchange fees.

          "Interest Accrual Period" shall mean, unless otherwise specified in
           -----------------------                                           
any Supplement for the related Series, each Monthly Period.

          "Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
           ---------------------                                               
as amended from time to time.

          "Investment Company Act" shall mean the Investment Company Act of
           ----------------------                                          
1940, as amended from time to time.

          "Investor Certificate" shall mean any one of the certificates
           --------------------                                        
(including, without limitation, the Bearer Certificates, the Registered
Certificates or the Global Certificates) executed by the Seller and
authenticated by the Trustee substantially in the form of the investor
certificate attached to the related Supplement.

          "Investor Certificateholder" shall mean the holder of record of an
           --------------------------                                       
Investor Certificate.

          "Investor Default Amount" shall have, with respect to any Series of
           -----------------------                                           
Certificates, the meaning stated in the related Supplement.

          "Investor Interest" shall have, with respect to any Series of
           -----------------                                           
Certificates, the meaning stated in the related Supplement.

          "Investor Percentage" shall have, with respect to Principal
           -------------------                                       
Receivables, Finance Charge Receivables and Receivables in Defaulted Accounts,
and any Series of Certificates, the meaning stated in the related Supplement.

                                       15
<PAGE>
 
          "Late Fees" shall have the meaning specified in the Credit Card
           ---------                                                     
Agreement as it may, from time to time, be amended.

          "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
           ----                                                                
assignment, participation or equity interest, deposit arrangement, encumbrance,
lien (statutory or other), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
                                                                     -------- 
however, that any assignment pursuant to Section 7.2 shall not be deemed to
- -------                                                                    
constitute a Lien.

          "Minimum Aggregate Principal Receivables" shall mean, as of any date
           ---------------------------------------                            
of determination, the largest "Minimum Aggregate Principal Receivables"
specified in the Supplement with respect to any Series of Certificates issued
and outstanding at such date of determination.

          "Minimum Seller Interest" shall mean for any 30-day period 7% or such
           -----------------------                                             
higher percentage as may be specified in any Supplement of the average Aggregate
Principal Receivables for each day during such 30-day period.

          "Monthly Period" shall mean the period beginning on and including the
           --------------                                                      
first day of a calendar month to and including the last day of a calendar month.
The first Monthly Period shall begin on and include June 1, 1993, and shall end
on and include June 30, 1993.

          "Monthly Investor Servicing Fee" shall have the meaning specified in
           ------------------------------                                     
Section 3.2.

          "Monthly Seller Servicing Fee" shall have the meaning specified in
           ----------------------------                                     
Section 3.2.

          "Monthly Servicing Fee" shall have the meaning specified in Section
           ---------------------                                             
3.2.

                                       16
<PAGE>
 
          "Moody's" shall mean Moody's Investors Service, Inc.
           -------                                            

          "Obligor" shall mean, with respect to any Account, the Person or
           -------                                                        
Persons obligated to make payments with respect to such Account, including any
guarantor thereof.

          "Officer's Certificate" shall mean a certificate signed by any Vice
           ---------------------                                             
President of the Seller or Servicer and delivered to the Trustee.

          "Opinion of Counsel" shall mean a written opinion of counsel, who may
           ------------------                                                  
be counsel for or an employee of the Person providing the opinion and who shall
be reasonably acceptable to the Trustee.

          "Overlimit Fees" shall have the meaning specified in the Credit Card
           --------------                                                     
Agreement as it may, from time to time, be amended.

          "Paying Agent" shall have the meaning specified in Section 6.6 and
           ------------                                                     
shall initially be the Trustee.

          "Pay Out Commencement Date" shall mean, with respect to each Series,
           -------------------------                                          
(a) the date on which a Trust Pay Out Event is deemed to occur pursuant to
Section 9.1 or (b) a Series Pay Out Event is deemed to occur pursuant to the
Supplement for such Series.

          "Pay Out Event" shall mean, with respect to each Series, a Trust Pay
           -------------                                                      
Out Event or a Series Pay Out Event.

          "People's Bank" shall mean People's Bank, a Connecticut capital stock
           -------------                                                       
savings bank.

          "Periodic Finance Charges" shall have the meaning specified in the
           ------------------------                                         
Credit Card Agreement applicable to each Account for finance charges (monthly
periodic rate) or any similar term.

          "Permitted Investments" shall mean, unless otherwise provided in the
           ---------------------                                              
Supplement with respect to any Series (a) negotiable instruments or securities
represented by instruments in book-entry, bearer or registered form which
evidence (i) obligations of or fully guaran-

                                       17
<PAGE>
 
teed with respect to timely payment by the United States of America; (ii) demand
deposits, time deposits or certificates of deposit of, or bankers' acceptances
issued by, any depositary institution or trust company incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal or state banking or depositary
institution authorities; provided, however, that at the time of the Trust's
                         --------  -------                                 
investment or contractual commitment to invest therein, the certificates of
deposit or short-term deposits, if any, or long-term unsecured debt obligations
(other than such obligations whose rating is based on collateral or on the
credit of a Person other than such institution or trust company) of such
depositary institution or trust company shall have a credit rating from Moody's
and Standard & Poor's of P-1 and A-1+, respectively, in the case of the
certificates of deposit or short-term deposits, or a rating from Moody's of at
least Aa3, and from Standard & Poor's of AAA, in the case of the long-term
unsecured debt obligations, and the amount of such time deposits, demand
deposits or certificate of deposit are fully insured within the limits of
insurance set by the FDIC; (iii) certificates of deposit having, at the time of
the Trust's investment or contractual commitment to invest therein, a rating
from Moody's and Standard & Poor's of P-1 and A-1+, respectively; (iv)
commercial paper having, at the time of the Trust's investment or contractual
commitment to invest therein, a rating from Moody's and Standard & Poor's of P-1
and A-1+, respectively; and (v) investments in money market funds and certain
open end diversified investment companies rated AAA-m or AAA-mG by Standard &
Poor's and Aaa by Moody's, or otherwise approved in writing by the Rating
Agency; (b) demand deposits in the name of the Trust or the Trustee in any
depositary institution or trust company referred to in clause (a)(ii) above; and
(c) securities not represented by an instrument, which are registered in the
name of the Trustee, on behalf of the Trust, upon books maintained for that
purpose by or on behalf of the issuer thereof and identified on books maintained
for that purpose by the Trustee and held for the benefit of the Trust or the
Certificateholders, and consisting of shares of an open end diversified
investment company which is registered under the Investment Company Act and
which (i) invests its assets exclusively in obligations of or guaranteed by the
United States of America or any instrumentality or agency thereof having in each
instance

                                       18
<PAGE>
 
a final maturity date of less than one year from their date of purchase or other
Permitted Investments, (ii) seeks to maintain a constant net asset value per
share, (iii) has aggregate net assets of not less than $100,000,000 on the date
of purchase of such shares, (iv) which is acceptable to the Rating Agency
without causing a reduction in its rating of any Series of Certificates (as
confirmed in writing by such rating agency) and (v) which, to the extent
provided in any Supplement, is acceptable to the related Enhancement Provider.

          "Person" shall mean any legal person, including any individual,
           ------                                                        
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.

          "Pool Amount" shall have, with respect to any Series, the meaning
           -----------                                                     
specified in the related Supplement.

          "Pool Factor" shall mean, unless any Series is issued in more than one
           -----------                                                          
Class as stated in any related Supplement, with respect to any Series and with
respect to any Record Date, a number carried out to seven decimals representing
the ratio of the applicable Investor Interest as of the end of the last day of
the preceding Monthly Period to the Initial Investor Interest.

          "Portfolio Yield" shall mean, unless otherwise provided with respect
           ---------------                                                    
to any Series as specified in the related Supplement, with respect to any
Monthly Period, the annualized percentage equivalent of a fraction the numerator
of which is the Finance Charge Receivables billed during such Monthly Period and
allocable to the Aggregate Investor Interest or the Investor Interest with
respect to any Series, as the case may be, during such Monthly Period to be
calculated on a cash basis after subtracting an amount equal to the sum of the
Investor Default Amount with respect to each Series then issued and outstanding
or the Investor Default Amount with respect to the applicable Series, as the
case may be, for such Monthly Period, and the denominator of which is the
Aggregate Investor Interest or the Investor Interest with respect to any Series,
as the case may be, as of the last day of the preceding Monthly Period.

                                       19
<PAGE>
 
          "Principal Receivable" shall mean each Receivable other than (i)
           --------------------                                           
Finance Charge Receivables and (ii) Receivables in Defaulted Accounts.  A
Receivable shall be deemed to have been created at the end of the day on the
Date of Processing of such receivable.  In calculating the aggregate amount of
Principal Receivables on any day, the amount of Principal Receivables shall be
reduced by the aggregate amount of credit balances in the Accounts on such day.
Any Receivables which the Seller is unable to transfer as provided in subsection
2.5(e) shall not be included in calculating the aggregate amount of Principal
Receivables.

          "Principal Shortfalls" shall mean, with respect to a Distribution
           --------------------                                            
Date, the aggregate amount for all outstanding Series which the related
Supplements specify are "Principal Shortfalls" for such Distribution Date.

          "Principal Terms" shall have the meaning, with respect to any Series
           ---------------                                                    
issued pursuant to an Exchange, specified in Section 6.9.

          "Qualified Institution" shall have the meaning specified in subsection
           ---------------------                                                
4.1(a).

          "Qualified Trust Institution" shall mean a depository institution
           ---------------------------                                     
having corporate trust powers under applicable federal and state laws organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia; provided, however, that the long-term unsecured
debt obligations (other than such obligation whose rating is based on collateral
or on the credit of a Person other than such institution or trust company) of
such depository institution or trust company shall have a credit rating from
Moody's and Standard & Poor's of at least Baa3 and BBB-, respectively, and the
deposits in whose accounts are insured to the limits provided by law and as
required by the FDIC.

          "Rating Agency" shall mean, with respect to each Series, the rating
           -------------                                                     
agency or agencies, if any, specified in the related Supplement.

          "Reassignment" shall have the meaning set forth in subsection 2.7(b).
           ------------                                                        

                                       20
<PAGE>
 
          "Receivable" shall mean any amount owing by the Obligors including
           ----------                                                       
both Principal Receivables and Finance Charge Receivables.

          "Record Date" shall mean, with respect to any Distribution Date, (i)
           -----------                                                        
so long as the Trust has not issued Definitive Certificates, the last Business
Day preceding such Distribution Date and (ii) after the issuance of Definitive
Certificates, the last day of the calendar month preceding such Distribution
Date.

          "Recoveries" shall mean all net amounts received by the Servicer with
           ----------                                                          
respect to charged-off credit card receivables in the Seller's portfolio of VISA
and MasterCard accounts.

          "Registered Certificates" shall have the meaning specified in Section
           -----------------------                                             
6.1.

          "Removal Date" shall mean the date on which Receivables in certain
           ------------                                                     
designated Removed Accounts will be reassigned by the Trustee, on behalf of the
Trust, to the Seller.

          "Removal Notice Date" shall mean the fifth Business Day prior to a
           -------------------                                              
Removal Date.

          "Removed Accounts" shall have the meaning set forth in subsection
           ----------------                                                
2.7(a).

          "Repurchase Terms" shall mean, with respect to any Series, the terms
           ----------------                                                   
and conditions under which the Seller may repurchase such Series of Certificates
pursuant to Section 12.2(a) as provided in the related Supplement.

          "Requirements of Law" for any Person shall mean the certificate of
           -------------------                                              
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether federal, state or local (including, without limitation, usury laws, the
federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).

                                       21
<PAGE>
 
          "Responsible Officer" shall mean any officer within the Corporate
           -------------------                                             
Trust Office (or any successor group of the Trustee), including any Vice
President, any Assistant Vice President, any Assistant Secretary, any Assistant
Treasurer, or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above-designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.

          "Returned Check Fees" shall have the meaning specified in the Credit
           -------------------                                                
Card Agreement as it may, from time to time, be amended.

          "Revolving Period" shall have, with respect to each Series, the
           ----------------                                              
meaning specified in the related Supplement.

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           --------------                                                    

          "Seller" shall mean People's Bank, and any entity which purchases or
           ------                                                             
otherwise acquires the Accounts or any of them in accordance with the provisions
of Sections 7.2 and 13.1(a)(ii).

          "Seller Exchange" shall have the meaning specified in Section 6.9.
           ---------------                                                  

          "Seller Interest" shall mean, on any date of determination, the
           ---------------                                               
Aggregate Principal Receivables at the end of the day immediately prior to such
date of determination, minus the Aggregate Investor Interest at the end of such
                       -----                                                   
day.

          "Seller Percentage" shall mean, on any date of determination, when
           -----------------                                                
used with respect to Principal Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts, a percentage equal to 100% minus the
                                                              -----    
Aggregate Investor Percentage with respect to such categories of Receivables.

          "Series" shall mean any series of Investor Certificates.
           ------                                                 

                                       22
<PAGE>
 
          "Series Account" shall mean any account established pursuant to a
           --------------                                                  
Supplement for the benefit of such Series.

          "Series Pay Out Event" shall have, with respect to any Series, the
           --------------------                                             
meaning specified pursuant to the Supplement for the related Series.

          "Series Servicing Fee Percentage" shall mean, with respect to any
           -------------------------------                                 
Series, the amount specified in the related Supplement.

          "Series Termination Date" shall mean, with respect to any Series of
           -----------------------                                           
Certificates, the date stated in the related Supplement.

          "Servicer" shall mean initially People's Bank, and its permitted
           --------                                                       
successors and assigns and thereafter any Person appointed as successor as
herein provided to service the Receivables.

          "Servicer Default" shall have the meaning specified in Section 10.1.
           ----------------                                                   

          "Servicing Officer" shall mean any officer of the Servicer involved
           -----------------                                                 
in, or responsible for, the administration and servicing of the Receivables
whose name appears on a list of servicing officers furnished to the Trustee by
the Servicer, as such list may from time to time be amended.

          "Shared Finance Charge Collections" shall mean, with respect to any
           ---------------------------------                                 
Business Day, the aggregate amount of Finance Charge Collections allocable to
each Series in excess of the amounts necessary to make required payments
pursuant to the applicable supplement with respect to each such Series, if any,
and available to cover shortfalls with respect to other Series.

          "Shared Principal Collections" shall mean, with respect to a
           ----------------------------                               
Distribution Date, the aggregate amount of Collections of Principal Receivables
for all outstanding Series which the related Supplements specify are to be
treated as "Shared Principal Collections" for such Distribution Date.

                                       23
<PAGE>
 
          "Standard & Poor's" shall mean Standard & Poor's Corporation.
           -----------------                                           

          "Successor Servicer" shall have the meaning specified in Section 10.2.
           ------------------                                                   

          "Supplement" shall mean, with respect to any Series, a supplement to
           ----------                                                         
this Agreement complying with the terms of Section 6.9 of this Agreement,
executed in conjunction with any issuance of such Series of Certificates.

          "Termination Notice" shall have the meaning specified in Section 10.1.
           ------------------                                                   

          "Transfer Agent and Registrar" shall have the meaning specified in
           ----------------------------                                     
Section 6.3 and shall initially be the Trustee.

          "Transfer Date" shall mean, with respect to any Series, the Business
           -------------                                                      
Day immediately prior to each Distribution Date.

          "Transferred Account" shall have the meaning specified in the
           -------------------                                         
definition of "Account".

          "Trust" shall mean the People's Bank Credit Card Master Trust created
           -----                                                               
by this Agreement.

          "Trust Assets" shall have the meaning specified in Section 2.1.
           ------------                                                  

          "Trust Extension" shall have the meaning specified in subsection
           ---------------                                                
12.1(a).

          "Trust Pay Out Event" shall have, with respect to each Series, the
           -------------------                                              
meaning specified in Section 9.1.

          "Trust Termination Date" shall mean the earlier to occur of (i) unless
           ----------------------                                               
a Trust Extension shall have occurred, the day after the Distribution Date with
respect to any Series following the date on which funds shall have been
deposited in the Collection Account or the applicable Series Account for the
payment of (a) Investor Certificateholders of each Series then issued and
outstanding in an amount sufficient to pay the Aggregate Investor Interest plus
interest accrued at the

                                       24
<PAGE>
 
applicable Certificate Rate through the end of the related Interest Accrual
Period prior to the Distribution Date with respect to each such Series in full
and (b) each Enhancement Provider with respect to all amounts owed to such
Enhancement Provider as provided herein or in any Supplement, (ii) if a Trust
Extension shall have occurred, the Extended Trust Termination Date, and (iii)
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the father of the late President of the United
States, living on the date of this Agreement.

          "Trustee" shall mean the institution executing this Agreement as
           -------                                                        
Trustee, or its successor in interest, or any successor trustee appointed as
herein provided.

          "UCC" shall mean the Uniform Commercial Code, as amended from time to
           ---                                                                 
time, as in effect in any specified jurisdiction.

          "Undivided Interest" shall mean the undivided interest in the Trust of
           ------------------                                                   
any Certificateholder.

          Section 1.2  Other Definitional Provisions.
                       ----------------------------- 

          (a)  All terms defined in any Supplement or this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.

          (b)  As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partially defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting practices, as
applicable.  To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting practices, the definitions contained herein
shall control.

          (c)  The agreements, representations and warranties of People's Bank
in this Agreement and in any Supplement in each of its capacities as Seller and
Servicer shall be deemed to be the agreements, repre-

                                       25
<PAGE>
 
sentations and warranties of People's Bank solely in each such capacity for so
long as People's Bank acts in each such capacity under this Agreement.

          (d)  The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not to any particular provision of this Agreement or
any Supplement; and Section, subsection, Schedule and Exhibit references
contained in this Agreement or any Supplement are references to Sections,
subsections, Schedules and Exhibits in or to this Agreement or any Supplement
unless otherwise specified.  The Monthly Servicer Report shall be in
substantially the form of Exhibit C hereto, with such changes as the Servicer
may determine to be necessary or desirable; provided, however, that no such
                                            --------  -------              
change shall serve to exclude information required by the Agreement or any
Supplement.  The Servicer shall, upon making such determination, deliver to the
Trustee and the Rating Agency an Officer's Certificate to which shall be annexed
the form of the related Exhibit, as so changed.  Upon the delivery of such
Officer's Certificate to the Trustee, the related Exhibit, as so changed, shall
for all purposes of this Agreement constitute such Exhibit.  The Trustee may
conclusively rely upon such Officer's Certificate as to such changes conforming
to the requirements of this Agreement.


                               [End of Article I]

                                       26
<PAGE>
 
                                   ARTICLE II

                           CONVEYANCE OF RECEIVABLES;
                            ISSUANCE OF CERTIFICATES

          Section 2.1  Conveyance of Receivables.  By execution of this
                       -------------------------                       
Agreement, the Seller does hereby transfer, assign, set-over, and otherwise
convey (collectively the "Conveyance") to the Trust for the benefit of the
Certificateholders as of the close of business on the Cut-Off Date, without
recourse, all of its right, title and interest in and to (i) the Receivables now
existing and hereafter created and arising in connection with the Accounts and
in connection with any accounts that meet the definition of Automatic Additional
Accounts (other than Receivables in Additional Accounts), (ii) all monies and
investments due or to become due with respect thereto (including all Finance
Charge Receivables), (iii) all proceeds of such Receivables, (iv) Recoveries
allocated to the Trust pursuant to subsection 2.5(l), and (v) Interchange
allocable to the Trust pursuant to subsection 2.5(k) and all proceeds thereof,
which shall initially constitute the assets of the Trust.  Such property,
together with all monies and investments on deposit, from time to time, in the
Collection Account, the Excess Funding Account, the Series Accounts maintained
for the benefit of the Certificateholders of any Series of Certificates, any
Enhancement and all monies available under any Enhancement, to be provided for
any Series for payment to the Certificateholders of such Series, shall
constitute the assets of the Trust (collectively, the "Trust Assets").

In connection with such transfer, assignment, set-over and conveyance, the
Seller agrees to record and file, at its own expense, a financing statement
(including any continuation statements with respect to such financing statements
when applicable) with respect to the Receivables now existing and hereafter
created for the transfer of accounts (as defined in Section 9-106 of the UCC as
in effect in the State of New York or Connecticut) meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect the assignment of the Receivables to the Trust, and to deliver a 
file-stamped copy of such financing statement or continuation statement or other
evidence of such filing (which may, for purposes of this Section 2.1,

                                       27
<PAGE>
 
consist of telephone confirmation of such filing with the file-stamped copy to
be provided to the Trustee as soon as practicable after receipt thereof by the
Seller) to the Trustee on or prior to the date of issuance of the Certificates
and in the case of any continuation statements filed pursuant to this Section
2.1, as soon as practicable after receipt thereof by the Seller. The foregoing
transfer, assignment, set-over and conveyance to the Trust shall be made to the
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, set-over and conveyance shall be construed accordingly.
The Trustee, except when acting as Servicer, shall be under no obligation
whatsoever to file the financing statements or continuation statements referred
to herein, or to make any other filing under the UCC in connection with the
foregoing transfer, assignment, set-over and conveyance.

In connection with such transfer, the Selleragrees, at its own expense, on or
prior to the Initial Closing Date (i) to clearly mark its computer files to
indicate that Receivables created in connection with the Accounts (other than
any Additional Accounts) have been transferred to the Trust pursuant to this
Agreement for the benefit of the Certificateholders and (ii) to deliver to the
Trustee a computer file or microfiche list containing a true and complete list
of all such Accounts, identified by account number and setting forth the
Principal Receivable and Receivable balance as of the related Cut Off Date. Such
file or list shall be marked as Schedule 1 to this Agreement, delivered to the
Trustee as confidential and proprietary, and is hereby incorporated into and
made a part of this Agreement. The Seller further agrees not to alter the code
referenced in clause (i) of this paragraph with respect to any Account during
the term of this Agreement unless and until such Account becomes a Removed
Account.

The Seller intends that the transfer and assignment of Receivables hereunder
constitutes either a sale of such Receivables from the Seller to the Trust or
the grant of a security interest in the Trust Assets to the Trust. The Seller,
therefore, transfers and grants to the Trustee, on behalf of the Trust, a first
priority security interest in all of the Seller's right, title and interest in,
to and under the Trust Assets for the purpose of securing a loan in an amount
equal to the unpaid

                                       28
<PAGE>
 
principal amount of the Investor Certificates issued hereunder and pursuant to a
Supplement and the interest accrued at the related certificate rate and to
secure all of the Seller's and the Servicer's obligations hereunder, including
without limitation, the Seller's obligation to sell or transfer Receivables
hereafter created to the Trust. This Agreement shall constitute a security
agreement (as defined in the UCC as in effect in the State of New York).

Pursuant to the request of the Seller, the Trustee has caused Certificates in
authorized denominations evidencing the entire interest in the Trust to be duly
authenticated and delivered to or upon the order of the Seller pursuant to
Section 6.2.

                       Section 2.2  Acceptance by Trustee.
                                    --------------------- 

          (a)  The Trustee hereby acknowledges its acceptance, on behalf of the
Trust, of all right, title and interest previously held by the Seller in and to
(i) the Receivables now existing and hereafter created and arising in connection
with the Accounts and in connection with any accounts that meet the definition
of Automatic Additional Accounts (other than Receivables in Additional
Accounts), (ii) all monies due or to become due with respect thereto (including
all Finance Charge Receivables), (iii) all proceeds of such Receivables, (iv)
Recoveries allocable to the Trust pursuant to subsection 2.5(l) and (v)
Interchange allocable to the Trust pursuant to subsection 2.5(k) and the
proceeds thereof, and declares that it shall maintain such right, title and
interest, upon the Trust herein set forth, for the benefit of all
Certificateholders.  The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Seller
delivered to the Trustee the computer file or microfiche list described in the
third paragraph of Section 2.1.

          (b)  The Trustee hereby agrees not to disclose to any Person any of
the account numbers or other information contained in the computer files,
microfiche lists or notices delivered to the Trustee by the Seller pursuant to
Sections 2.1, 2.6, 2.7 and 3.4(c) (the "Account Information") except as is
required in connection with the performance of its duties hereunder or in
enforcing the rights of the Certificateholders or to a

                                       29
<PAGE>
 
Successor Servicer appointed pursuant to Section 10.2 and except as otherwise
provided in this subsection 2.2(b).  The Trustee agrees to take such measures as
shall be reasonably requested by the Seller to protect and maintain the security
and confidentiality of such information, and, in connection therewith, shall
allow the Seller to inspect the Trustee's security and confidentiality
arrangements from time to time during normal business hours.  In the event that
the Trustee is required by law to disclose any Account Information, the Trustee
shall provide the Seller with prompt written notice, unless such notice is
prohibited by law, of any such request or requirement so that the Seller may
request a protective order or other appropriate remedy.  In the event that such
protective order or other remedy is not obtained the Trustee may disclose such
information and will exercise its reasonable best efforts to obtain assurance
that confidential treatment will be afforded such information.  The Trustee
shall use its reasonable best efforts to provide the Seller with written notice
five days prior to any disclosure permitted by this subsection 2.2(b).

          (c)  The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.

          Section 2.3  Representations and Warranties of the Seller.  The Seller
                       --------------------------------------------             
hereby represents and warrants to the Trust and the Trustee as of the Initial
Closing Date:

          (a)    Organization and Good Standing.  The Seller is a Connecticut
                 ------------------------------                              
capital stock savings bank duly organized and validly existing in good standing
under the laws of the State of Connecticut and has full power, authority and
legal right to own its properties and conduct its business as such properties
are presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and to execute and
deliver to the Trustee the Certificates pursuant hereto.

          (b)  Due Qualification.  The Seller is duly qualified to do business
               -----------------                                              
and is in good standing (or is exempt from such requirement) in any state
required in

                                       30
<PAGE>
 
order to conduct business, and has obtained all necessary licenses and approvals
with respect to the Seller required under federal and state law; provided,
                                                                 -------- 
however, that no representation or warranty is made with respect to any
- -------                                                                
qualifications, licenses or approvals which the Trustee would have to obtain to
do business in any state in which the Trustee seeks to enforce any Receivable.

          (c)  Due Authorization.  The execution and delivery of this Agreement
               -----------------                                               
and the execution and delivery to the Trustee of the Certificates by the Seller
and the consummation of the transactions provided for in this Agreement have
been duly authorized by the Seller by all necessary corporate action on its
part, including due authorization and approval thereof by the board of directors
of the Seller, and this Agreement will remain, from the time of its execution,
an official record of the Seller.

          (d)  No Conflict.  The execution and delivery of this Agreement and
               -----------                                                   
the Certificates, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not conflict with, result
in any breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust, or other instrument to
which the Seller is a party or by which it or any of its properties are bound.

          (e)  No Violation.  The execution and delivery of this Agreement and
               ------------                                                   
the Certificates, the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not conflict with or
violate any Requirements of Law applicable to the Seller.

          (f)  No Proceedings.  There are no proceedings or investigations
               --------------                                             
pending or, to the best knowledge of the Seller, threatened against the Seller,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement or
the Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement or
the Certificates, (iii)

                                       31
<PAGE>
 
seeking any determination or ruling that, in the reasonable judgment of the
Seller, would materially and adversely affect the performance by the Seller of
its obligations under this Agreement, (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability of
this Agreement or the Certificates or (v) seeking to affect adversely the income
tax attributes of the Trust.

               (g)  Eligibility of Accounts.  As of the Cut-Off  Date, each
                    -----------------------                                
Account was an Eligible Account.

          (h)  Seller's Deposit Accounts.  As of the Initial Closing Date,
               -------------------------                                  
deposits in the Seller's deposit accounts were insured to the limits provided by
law and as required by the FDIC.

          (i)  All Consents Required.  All appraisals, authorizations, consents,
               ---------------------                                            
orders or other actions of any Person or of any governmental body or official
required in connection with the execution and delivery of this Agreement and the
Certificates, the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof, have been obtained.

          (j)  Account Selection.  As of the Cut-Off Date, the Accounts
               -----------------                                       
represented Eligible Accounts owned by the Seller that are VISA Classic or
standard MasterCard Accounts.  No such selection that will have an adverse
effect on the Certificateholders was used.

          (k)  Solvency.  The Seller is not insolvent and will not be insolvent
               --------                                                        
following the consummation on the Closing Date of the transactions contemplated
by this Agreement, including the transfer by the Seller to the Trust of the
property specified in Section 2.1.

          For the purposes of the representations and warranties contained in
this Section 2.3 and made by the Seller on the Initial Closing Date,
"Certificates" shall mean the Certificates issued on the Initial Closing Date.
The representations and warranties set forth in this Section 2.3 shall survive
the transfer and assignment of the Trust Assets to the Trust, and termination of
the rights and obligations of the Servicer pursuant to Section 10.1.  The Seller
hereby represents and warrants to the Trust and the Trustee, with respect to any
Series

                                       32
<PAGE>
 
of Certificates, as of its Closing Date, unless otherwise stated in such
Supplement, that the representations and warranties of the Seller set forth in
Section 2.3 other than as set forth in subsections 2.3(g), 2.3(h) and 2.3(j) are
true and correct as of such date (for the purposes of such representations and
warranties, "Certificates" shall mean the Certificates issued on the related
Closing Date).  Upon discovery by the Seller, the Servicer or the Trustee of a
breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others,
including the related Enhancement Provider.  The Trustee's obligations with
respect to such breach are limited as provided in subsection 11.2(g).

          Section 2.4  Representations and Warranties of the Seller Relating to
                       --------------------------------------------------------
the Agreement and the Receivables.
- --------------------------------- 

          (a)  Binding Obligation; Valid Transfer and Assignment.  The Seller
               -------------------------------------------------             
hereby represents and warrants to the Trust and the Trustee that, as of the
Initial Closing Date:

               (i)  This Agreement constitutes a legal, valid and binding
     obligation of the Seller, enforceable against the Seller in accordance with
     its terms, except (A) as such enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium or other similar laws
     now or hereafter in effect affecting the enforcement of creditors' rights
     in general and the rights of creditors of Connecticut capital stock savings
     banks, (B) as such enforceability may be limited by general principles of
     equity (whether considered in a suit at law or in equity), (C) subject to
     the unenforceability of provisions indemnifying a party against liability
     where such indemnification is contrary to public policy, (D) the effect of
     judicial decisions which have held that, subject to certain covenants and
     provisions of agreements, such agreements are unenforceable where (y) the
     breach of such covenants or provisions imposes restrictions or burdens
     where it cannot be demonstrated that such breach is a material breach of a
     material covenant or provisions, or (z) the creditor's

                                       33
<PAGE>
 
     enforcement of such covenants or provisions under the circumstances would
     violate the creditor's implied covenant of good faith and fair dealing, and
     (E) subject to the unenforceability of provisions herein to the effect that
     the failure to exercise or delay in exercising rights or remedies will not
     operate as a waiver of any such rights or remedies, or to the effect that
     provisions therein may only be waived in writing to the extent that an oral
     agreement modifying such provisions has been entered into.

               (ii)  This Agreement constitutes either (A) a valid transfer,
     assignment, set-over and conveyance to the Trust of all right, title and
     interest of the Seller in and to (i) the Receivables now existing and
     hereafter created and arising in connection with the Accounts (other than
     Receivables in Additional Accounts), (ii) all monies due or to become due
     with respect thereto (including all Finance Charge Receivables), (iii) all
     proceeds of such Receivables, (iv) Recoveries allocable to the Trust
     pursuant to subsection 2.5(l), (v) all funds deposited from time to time in
     any Series Account, including any cash collateral account or spread
     account, and (vi) Interchange allocable to the Trust pursuant to subsection
     2.5(k) and all proceeds thereof, which will be held by the Trust free and
     clear of any Lien of any Person except for (w) the interests of the Trustee
     and the Certificateholders, (x) Liens permitted under subsection 2.5(b) and
     subject to Section 9-306 of the UCC as in effect in the States of
     Connecticut or New York, whichever is applicable, (y) the interest of the
     Seller as Holder of the Exchangeable Seller Certificate and (z) the
     Seller's right, if any, to interest accruing on, and investment earnings,
     if any, in respect of the Collection Account, or any Series Account, as
     provided in this Agreement or the related Supplement, or (B) a grant of a
     security interest (as defined in the UCC as in effect in the State of New
     York) in such property to the Trust, which is enforceable with respect to
     the (i) Receivables now existing and

                                       34
<PAGE>
 
     hereafter created and arising in connection with the Accounts and in
     connection with any accounts that meet the definition of Automatic
     Additional Accounts (other than Receivables in Additional Accounts), (ii)
     all monies due or to become due with respect thereto (including all Finance
     Charge Receivables), (iii) all proceeds of such Receivables, (iv)
     Recoveries allocable to the Trust pursuant to subsection 2.5(l), (v) all
     funds deposited from time to time in any Series Account, including any cash
     collateral account or spread account and (vi) Interchange allocable to the
     Trust pursuant to subsection 2.5(k) and the proceeds thereof upon execution
     and delivery of this Agreement, and which will be enforceable with respect
     to such Receivables hereafter created, the proceeds thereof, Recoveries,
     funds deposited in a Series Account and Interchange allocable to the Trust
     pursuant to subsections 2.5(k) and (l), upon such creation.  If this
     Agreement constitutes the grant of a security interest to the Trust in such
     property, upon the filing of the financing statement described in Section
     2.1 and in the case of the Receivables hereafter created and proceeds
     thereof, Recoveries and Interchange allocable to the Trust pursuant to
     subsections 2.5(k) and (l), upon such creation, the Trustee, on behalf of
     the Trust, shall have a first priority perfected security interest in such
     property, except for Liens permitted under subsection 2.5(b) and subject to
     Section 9-306 of the UCC as in effect in the States of Connecticut or New
     York, whichever is applicable.  Neither the Seller nor any Person (other
     than the Trustee and the Certificateholders) claiming through or under the
     Seller shall have any claim to or interest in the Collection Account, the
     Excess Funding Account or any Series Account, and, if this Agreement
     constitutes the grant of a security interest in such property, the Seller
     will have an interest in such property as a debtor for purposes of the UCC
     as in effect in State of New York.

          (b)  Eligibility of Receivables.  The Seller hereby represents and
               --------------------------                                   
warrants to the Trust and

                                       35
<PAGE>
 
the Trustee as of the Initial Closing Date and as of each Addition Date and
Automatic Addition Date that:

               (i)  Each Receivable is an Eligible Receivable as of the Cut-Off
     Date, the Automatic Addition Date or the end of the related Monthly Period
     immediately preceding the Addition Date, as applicable.

               (ii)  Each Receivable then existing has been conveyed to the
     Trust free and clear of any Lien of any Person other than the Trustee and
     the Certificateholders (other than Liens permitted under subsection 2.5(b))
     and in compliance, in all material respects, with all Requirements of Law
     applicable to the Seller.

               (iii)  With respect to each Receivable then existing, all
     consents, licenses, approvals or authorizations of or registrations or
     declarations with any Governmental Authority required to be obtained,
     effected or given by the Seller in connection with the conveyance of such
     Receivable to the Trust have been duly obtained, effected or given and are
     in full force and effect.

               (iv)  On each day on which any new Receivable is created, the
     Seller shall be deemed to represent and warrant to the Trust and the
     Trustee that (A) each Receivable created on such day is an Eligible
     Receivable, (B) each Receivable created on such day has been conveyed to
     the Trust in compliance, in all material respects, with all Requirements of
     Law applicable to the Seller, (C) with respect to each such Receivable, all
     consents, licenses, approvals or authorizations of or registrations or
     declarations with, any Governmental Authority required to be obtained,
     effected or given by the Seller in connection with the conveyance of such
     Receivable to the Trust have been duly obtained, effected or given and are
     in full force and effect and (D) the representations and warranties set
     forth in subsection 2.4(a) are true and correct with respect to each Re-

                                       36
<PAGE>
 
     ceivable created on such day as if made on such day.

               (v)  As of the Initial Closing Date, Schedule 1 to this Agreement
     and, as of the last day of each Monthly Period during which Automatic
     Additional Accounts were added to the Trust or as of the applicable
     Addition Date with respect to Additional Accounts, as the case may be,
     added pursuant to Section 2.6, the related computer file or microfiche list
     referred to in Section 2.6, is an accurate and complete listing in all
     material respects of all the Accounts as of the Cut-Off Date, the end of
     the applicable Monthly Period or the end of the Monthly Period immediately
     preceding the applicable Addition Date and the information contained
     therein with respect to the identity of such Accounts and the Receivables
     existing thereunder is true and correct in all material respects as of the
     Cut-Off Date, the end of the applicable Monthly Period or such applicable
     Addition Date; as of the Cut-Off Date, the aggregate amount of Receivables
     in all the Accounts was $604,049,628.21.

          (c)  Notice of Breach.  The representations and warranties set forth
               ----------------                                               
in this Section 2.4 shall survive the transfer and assignment of the respective
Receivables to the Trust.  Upon discovery by the Seller, the Servicer or the
Trustee of a breach of any of the representations and warranties set forth in
this Section 2.4, the party discovering such breach shall give prompt written
notice to the others.  The Seller agrees to cooperate with the Servicer and the
Trustee in attempting to cure any such breach.  The Seller hereby acknowledges
that the Trustee intends to rely on the representations hereunder in connection
with representations made by the Trustee to secured parties, assignees or
subsequent transferees.  The Trustee's obligations with respect to the breach of
any of the representations and warranties contained in this Section 2.4 are
limited as provided in subsection 11.2(g).

                                       37
<PAGE>
 
               (d)  Transfer of Ineligible Receivables.
                    ---------------------------------- 

               (i)  Automatic Removal.  In the event of a breach with respect to
                    -----------------                                           
     a Receivable of any representations and warranties set forth in subsection
     2.4(b)(ii), or in the event that a Receivable is not an Eligible Receivable
     as a result of the failure to satisfy the conditions set forth in clause
     (b) or (d) of the definition of Eligible Receivable; then, upon the earlier
     to occur of the discovery of such breach or event by the Seller or the
     Servicer or receipt by the Seller of written notice of such breach or event
     given by the Trustee, each such Receivable shall be automatically removed
     from the Trust on the terms and conditions set forth in subsection
     2.4(d)(iii).

               (ii)  Removal After Cure Period.  In the event of a breach of any
                     -------------------------                                  
     of the representations and warranties set forth in subsection 2.4(b) other
     than a breach or event as set forth in clause (d)(i) above, and as a result
     of such breach the related Account becomes a Defaulted Account or the
     Trust's rights in, to or under the Receivable or its proceeds are impaired
     or the ability of the Servicer to collect such Ineligible Receivable is
     impaired or the proceeds of such Receivable are not available for any
     reason to the Trust free and clear of any Lien, then, upon the expiration
     of 60 days (or such longer period as may be agreed to by the Trustee but in
     no event longer than 120 days), from the earlier to occur of the discovery
     of any such event by either of the Seller or the Servicer, or receipt by
     the Seller of written notice of any such event given by the Trustee or the
     related Enhancement Provider, or, with respect to breaches relating to
     prior Liens, immediately upon the earlier to occur of such discovery or
     notice, each such Receivable shall be removed from the Trust on the terms
     and conditions set forth in subsection 2.4(d)(iii); provided, however, that
                                                         --------  -------      
     no such removal shall be required to be made if, on any day within such
     applicable period, such representations and warranties with respect to

                                       38
<PAGE>
 
     such Receivable shall then be true and correct in all material respects as
     if such Receivable had been created on such day and provided, further, that
                                                         --------  -------      
     if a defect in any list of Accounts referred to subsection 2.4(b)(v)
     results in the balance of Receivables in the Accounts being less than the
     amount specified in such subsection, the deficiency shall be deemed to be
     an Ineligible Receivable for purposes of this subsection 2.4(d).

               (iii)  Procedures for Removal.  When the provisions of subsection
                      ----------------------                                    
     2.4(d)(i) or subsection 2.4(d)(ii) above require removal of a Receivable,
     the Seller shall accept reassignment of the portion of such Receivable that
     is a Principal Receivable (an "Ineligible Receivable") by (i) directing the
     Servicer to deduct the portion of such Receivable that is a Principal
     Receivable from the aggregate amount of Principal Receivables in the Trust
     and to decrease the Seller Interest by such amount and (ii) depositing into
     the Collection Account an amount equal to the Finance Charge Receivables
     collected in respect of such Receivable through the date of such removal;
                                                                              
     provided, however, that if the exclusion of an Ineligible Receivable from
     --------  -------                                                        
     the calculation of the Seller Interest would cause the Seller Interest to
     be less than the Minimum Seller Interest or would otherwise not be
     permitted by law, such Ineligible Receivable shall not be automatically
     removed from the Trust, but shall be removed from the Trust only upon the
     making of the deposit to the Excess Funding Account referred to in the
     second following sentence.  On and after the date of such removal, each
     Ineligible Receivable shall be deducted from the aggregate amount of
     Principal Receivables used in the calculation of any Investor Percentage,
     the Seller Percentage or the Seller Interest; provided, however, that for
                                                   --------  -------          
     the purposes of subsection 2.6(a) and the calculation of the Seller
     Interest, each Ineligible Receivable shall, notwithstanding the proviso to
     the immediately preceding sentence, be deemed to have been automatically
     removed from the Trust.  In the

                                       39
<PAGE>
 
     event that the exclusion of an Ineligible Receivable from the calculation
     of the Seller Interest would cause the Seller Interest to be reduced below
     the Minimum Seller Interest, or would otherwise not be permitted by law,
     the Seller shall immediately, but in no event later than 10 days after such
     event, make a deposit in the Excess Funding Account (for allocation as a
     Principal Receivable pursuant to Article IV) in immediately available funds
     in an amount equal to the amount by which the Seller Interest (as
     determined above) would be reduced below the Minimum Seller Interest.  The
     portion of such deposit allocated to Investor Certificates of each Series
     shall be distributed to the Investor Certificateholders of each such Series
     in the manner specified in Article IV, if applicable, on the related
     Distribution Date in the Monthly Period following the Monthly Period in
     which such deposit is made.  Upon the reassignment to the Seller of an
     Ineligible Receivable, the Trust shall automatically and without further
     action be deemed to transfer, assign, set-over and otherwise convey to the
     Seller, without recourse, representation or warranty, all the right, title
     and interest of the Trust in and to such Ineligible Receivable, all monies
     due or to become due with respect thereto and all proceeds thereof,
     Recoveries and Interchange allocated to such Ineligible Receivable pursuant
     to subsections 2.5(k) and (l).  The Trustee shall execute such documents
     and instruments of transfer or assignment, on behalf of the Trust, and take
     other actions as shall reasonably be requested by the Seller to evidence
     the conveyance of such Ineligible Receivable pursuant to this subsection
     2.4(d)(iii).  In the event that on any day within 60 days of the date on
     which the removal of an Ineligible Receivable from the Trust pursuant to
     this Section 2.4 is effected, the applicable representations and warranties
     shall be true and correct in all material respects on such date, the Seller
     may, but shall not be required to, direct the Servicer to include such
     Receivable in the Trust by adding the portion of such Receivable which is a
     Principal

                                       40
<PAGE>
 
     Receivable to the Principal Receivables in the Trust.  Upon the addition of
     a Receivable to the Trust pursuant to this subsection 2.4(d)(iii), the
     Seller shall be deemed to have made the applicable representations and
     warranties in subsection 2.4(b) as of the date of such addition, as if the
     Receivable had been created on such date, and shall execute all such
     necessary documents and instruments of transfer or assignment and take such
     other actions as shall be necessary to effect and perfect the reconveyance
     of such Receivable to the Trust.  The obligation of the Seller set forth in
     this subsection 2.4(d)(iii), or the automatic removal of such Receivable
     from the Trust, as the case may be, shall constitute the sole remedy
     respecting any breach of the representations and warranties set forth in
     the above-referenced subsections with respect to such Receivable available
     to Certificateholders or the Trustee on behalf of Certificateholders.

               (iv)  For the purposes of subsections 2.4(d)(i) and 2.4(d)(ii)
     above, proceeds of a Receivable shall not be deemed to be impaired
     hereunder solely because such proceeds are held by the Servicer (if the
     Servicer is the Seller) for more than the applicable period under Section
     9-306(3) of the UCC as in effect in the State of New York.

          (e)  Reassignment of Trust Portfolio.  In the event of a breach of any
               -------------------------------                                  
of the representations and warranties set forth in subsection 2.4(a), either the
Trustee, or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Investor Interest, by notice then
given in writing to the Seller (and to the Trustee and the Servicer, if given by
the Investor Certificateholders), may direct the Seller to accept reassignment
of an amount of Principal Receivables (as specified below) within 60 days of
such notice, (or within such longer period as may be specified in such notice
but in no event later than 120 days), and the Seller shall be obligated to
accept reassignment of such Principal Receivables on a Distribution Date
specified by the Seller (such Distribution Date, the "Reassignment Date")
occurring within such

                                       41
<PAGE>
 
applicable period on the terms and conditions set forth below; provided,
                                                               -------- 
however, that no such reassignment shall be required to be made if, at any time
- -------                                                                        
during such applicable period, the representations and warranties contained in
subsection 2.4(a) shall then be true and correct in all material respects.  The
Seller shall deposit on the Transfer Date (in New York Clearing House, next day
funds) for the Reassignment Date an amount equal to the reassignment deposit
amount for such Receivables in the Collection Account or Series Account, as
provided in the related Supplement, for distribution to the Investor
Certificateholders pursuant to Article XII.  The reassignment deposit amount
with respect to each Series for such reassignment, unless otherwise stated in
the related Supplement, shall be equal to (i) the Investor Interest of such
Series at the end of the day on the last day of the Monthly Period preceding the
date on which the reassignment is scheduled to be made, less the amount, if any,
previously allocated (and on deposit in the applicable Series Account) for
payment of principal to such Certificateholders on the related Distribution Date
in the Monthly Period in which the date of reassignment occurs, plus (ii) an
                                                                ----        
amount equal to all interest accrued but unpaid on the Investor Certificates of
such Series at the applicable Certificate Rate for the related Interest Accrual
Period through the last day of such Interest Accrual Period, less the amount, if
any previously allocated for payment of interest to the Certificateholders of
such Series on the related Distribution Date in the Monthly Period in which the
date of reassignment occurs plus (iii) an amount sufficient to pay all
                            ----                                      
unreimbursed amounts owing to each Enhancement Provider (to the extent set forth
in the applicable Supplement).  The reassignment deposit amount with respect to
each Series shall be deposited in the Collection Account or any Series Account,
as provided in the related Supplement, for distribution to the Investor
Certificateholders of such Series pursuant to Section 12.3.  Payment of the
reassignment deposit amount with respect to each Series, and all other amounts
in the Collection Account or the applicable Series Account in respect of the
preceding Monthly Period shall be considered a prepayment in full of the
Receivables represented by the Investor Certificates.  On the Distribution Date
following the Transfer Date on which such amount has been deposited in full into
the Collection Account or the applicable Series Account, the Receivables and all
monies due or to become due with

                                       42
<PAGE>
 
respect thereto and all proceeds of the Receivables, Recoveries and Interchange
allocated to the Trust pursuant to subsections 2.5(k) and (l) shall be released
to the Seller, or its designee or assignee, and the Trustee shall execute and
deliver such instruments of transfer or assignment, on behalf of the Trust, in
each case without recourse, representation or warranty, as shall be reasonably
requested by the Seller to vest in the Seller, or its designee or assignee, all
right, title and interest of the Trust in and to the Receivables, all monies due
or to become due with respect thereto and all proceeds of the Receivables,
Recoveries and Interchange allocated to the Trust pursuant to subsections 2.5(k)
and (l).  If the Trustee or the Investor Certificateholders give notice
directing the Seller to accept reassignment as provided above, the obligation of
the Seller to accept reassignment of the Receivables and pay the reassignment
deposit amount pursuant to this subsection 2.4(e) shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
subsection 2.4(a) available to the Investor Certificateholders or the Trustee on
behalf of the Investor Certificateholders.

          (f)  Reassignment of Receivables in Additional Accounts.  In the event
               --------------------------------------------------               
of a breach of any of the representations and warranties set forth in
subsections 6(a) or 6(e) of any Assignment of Receivables in Additional
Accounts, in the form attached hereto as Exhibit B (each such assignment, an
"Assignment of Additional Receivables"), either the Trustee or the Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Aggregate Investor Interest, by notice then given in writing to the
Seller (and to the Trustee and the Servicer, if given by the Investor
Certificateholders), may direct the Seller to remove from the Trust each
Receivable then existing in an Account, the Receivables of which were conveyed
to the Trust pursuant to such Assignment of Additional Receivables, on the terms
and conditions set forth herein, on or prior to the first Distribution Date next
succeeding 60 days after such notice, and the Seller shall be obligated to
remove such Receivables on a Distribution Date occurring within such applicable
period on the terms and conditions set forth below; provided, however, that no
                                                    --------  -------         
such reassignment shall be required to be made if, at any time during such
applicable period the representations and warranties contained in subsections
6(a) or 6(e), as

                                       43
<PAGE>
 
the case may be, of such Assignment of Additional Receivables shall then be true
and correct in all material respects.  When the provisions of the preceding
sentence require removal of a Receivable, the Seller shall accept reassignment
of the portion of such Receivable that is a Principal Receivable by (i)
directing the Servicer to deduct the portion of such Receivable that is a
Principal Receivable of each such Ineligible Receivable from the aggregate
amount of Principal Receivables in the Trust and to decrease the Seller Interest
by such amount and (ii) depositing into the Collection Account an amount equal
to the Finance Charge Receivables collected through the date of such removal;
                                                                             
provided, however, that if the exclusion of any Receivable from the calculation
- --------  -------                                                              
of the Seller Interest would cause the Seller Interest to be less than the
Minimum Seller Interest or would otherwise not be permitted by law, such
Receivable shall not be automatically removed from the Trust, but shall be
removed from the Trust only upon the making of the deposit to the Excess Funding
Account referred to in the second following sentence.  On and after the date of
such removal, each such Receivable shall be deducted from the aggregate amount
of Principal Receivables used in the calculation of any Investor Percentage, the
Seller percentage or the Seller Interest; provided, however, that for the
                                          --------  -------              
purposes of subsection 2.6(a) and the calculation of the Seller Interest, each
Ineligible Receivable shall, notwithstanding the proviso to the immediately
preceding sentence, be deemed to have been automatically removed from the Trust.
In the event that the exclusion of such Receivable from the calculation of the
Seller Interest would cause the Seller Interest to be reduced below the Minimum
Seller Interest, or would otherwise not be permitted by law, the Seller shall
immediately, but in no event later than 10 days after such event, make a deposit
in the Excess Funding Account (for allocation as a Principal Receivable pursuant
to Article IV) in immediately available funds in an amount equal to the amount
by which the Seller Interest (as determined above) would be reduced below the
Minimum Seller Interest.  The portion of such deposit allocated to Investor
Certificates of each Series shall be distributed to the Investor
Certificateholders of each such Series in the manner specified in Article IV, if
applicable, on the related Distribution Date in the Monthly Period following the
Monthly Period in which such deposit is made.  Upon the reassignment to the
Seller of any such Receivable, the Trust shall auto-

                                       44
<PAGE>
 
matically and without further action be deemed to transfer, assign, set-over and
otherwise convey to the Seller, without recourse, representation or warranty,
all the right, title and interest of the Trust in and to such Ineligible
Receivable, all monies due or to become due with respect thereto and all
proceeds thereof, Recoveries and Interchange allocated to such Ineligible
Receivable pursuant to subsections 2.5(k) and (l).  The Trustee shall execute
such documents and instruments of transfer or assignment, on behalf of the
Trust, and take other actions as shall reasonably be requested by the Seller to
evidence the conveyance of such Ineligible Receivable pursuant to this
subsection 2.4(f).

          If the Trustee or the Investor Certificateholders give notice
directing the Seller to accept reassignment as provided above, the obligation of
the Seller to accept reassignment of the Receivables and pay the reassignment
deposit amount pursuant to this subsection 2.4(f) shall constitute the sole
remedy respecting a breach of the representations and warranties contained in
subsections 6(a) or 6(e) of any Assignment of Receivables in Additional Accounts
available to the Investor Certificateholders or the Trustee on behalf of the
Investor Certificateholders.

          Section 2.5  Covenants of the Seller.  The Seller hereby covenants
                       -----------------------                              
that:

          (a)  Receivables to be Accounts.  The Seller will take no action to
               --------------------------                                    
cause any Receivable to be evidenced by any instrument (as defined in the UCC as
in effect in the States of Connecticut and New York) except in connection with
the enforcement or collection of an Account in which event such Receivable shall
be an Ineligible Receivable subject to repurchase in accordance with Section
2.4(d)(ii).  Each Receivable shall be payable pursuant to a contract which does
not create a Lien on any goods purchased thereunder.  The Seller will take no
action to cause any Receivable to be anything other than an "account" or a
"general intangible" (as defined in the UCC as in effect in the States of
Connecticut and New York).

          (b)  Security Interests.  Except for the conveyances hereunder, the
               ------------------                                            
Seller will not sell, pledge, assign or transfer to any other Person, or grant,
create,

                                       45
<PAGE>
 
incur, assume or suffer to exist any Lien on any Receivable, whether now
existing or hereafter created, or any interest therein; the Seller will
immediately notify the Trustee of the existence of any Lien on any Receivable;
and the Seller shall defend the right, title and interest of the Trust in, to
and under the Receivables, whether now existing or hereafter created, against
all claims of third parties (other than the Trustee and the Certificateholders);
                                                                                
provided, however, that nothing in this subsection 2.5(b) shall prevent or be
- --------  -------                                                            
deemed to prohibit the Seller from suffering to exist upon any of the
Receivables any Liens for municipal or other local taxes if such taxes shall not
at the time be due and payable or if the Seller shall currently be contesting
the validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto.

          (c)  Periodic Finance Charges and Other Fees.  The Seller hereby
               ---------------------------------------                    
agrees that, except as otherwise required by any Requirement of Law, or as is
deemed by the Seller to be necessary in order for the Seller to maintain its
credit card business, based upon a good faith assessment by the Seller, in its
sole discretion, of the nature of the competition in the credit card business,
it shall not at any time reduce the Periodic Finance Charges assessed on any
Receivable or other fees on any Account if, as a result of such reduction, the
Seller's reasonable expectation of the Portfolio Yield as of such date would be
less than the weighted average of the Base Rates for all Series; provided,
                                                                 -------- 
however, that the Seller shall not, unless required by any Requirement of Law,
- -------                                                                       
reduce such Periodic Finance Charge if its reasonable expectation is that the
Portfolio Yield would be less than the highest Certificate Rate with respect to
any Series then issued and outstanding.

          (d)  Credit Card Agreements and Account Guidelines.  The Seller shall
               ---------------------------------------------                   
comply with and perform its obligations under the Credit Card Agreements
relating to the Accounts and the Account Guidelines and all applicable rules and
regulations of VISA USA, Inc. and MasterCard International Incorporated except
insofar as any failure so to comply or perform would not materially and
adversely affect the rights of the Trustee, on behalf of the Trust, or the
Certificateholders hereunder or under the Certificates.  The Seller may change
the terms

                                       46
<PAGE>
 
and provisions of the Credit Card Agreements or the Account Guidelines in any
respect (including, without limitation, the reduction of the required minimum
monthly payment, the calculation of the amount, or the timing, of charge offs
and the Periodic Finance Charges and other fees to be assessed thereon) with
respect to the Accounts only (i) if the Seller has a comparable segment of
consumer revolving credit card accounts (or consumer revolving accounts), if
such change is made applicable to the comparable segment of the consumer
revolving credit card accounts (or consumer revolving accounts) owned and
serviced by the Seller which have characteristics the same as, or substantially
similar to, the Accounts which are the subject of such change or (ii) if the
Seller does not own such a comparable segment of consumer revolving credit card
accounts (or consumer revolving accounts), if the Seller shall not make such
change with the intent to materially benefit the Seller over the
Certificateholders; provided, however, that the Seller will not increase the
                    --------  -------                                       
timing of charge offs beyond the time which the Seller deems to be necessary to
maintain its credit card business, based upon a good faith assessment of the
Seller, in its sole discretion, of the nature of the competition of the credit
card business (provided, further, that accounts purchased by the Seller from
               --------  -------                                            
other credit card issuers, or other consumer revolving credit accounts, shall
not be considered to be a comparable segment of revolving credit card accounts
for the purposes of this subsection 2.5(d) until such time as any of the
accounts purchased by the Seller from such issuer or consumer revolving credit
accounts, as the case may be, become Accounts pursuant to the provisions of
Section 2.6), except as otherwise restricted by the terms of the Credit Card
Agreements.

               (e)  Account Allocations.
                    ------------------- 

               (i)  In the event that the Seller is unable for any reason to
     transfer Receivables to the Trust in accordance with the provisions of this
     Agreement (including, without limitation, by reason of the application of
     the provisions of Section 9.2 or an order by any federal or state
     governmental agency having regulatory authority over the Seller or any
     court of competent jurisdiction that the Seller not transfer any additional
     Principal Receiv-

                                       47
<PAGE>
 
     ables to the Trust) then, in any such event, (A) the Seller agrees to
     allocate and pay to the Trust, after the date of such inability, all
     Collections with respect to Principal Receivables, and all amounts which
     would have constituted Collections with respect to Principal Receivables
     but for the Seller's inability to transfer such Receivables (up to an
     amount equal to the Aggregate Principal Receivables in the Trust on such
     date); (B) the Seller agrees to have such amounts applied as Collections in
     accordance with Article IV; and (C) for only so long as all Collections and
     all amounts which would have constituted Collections are allocated and
     applied in accordance with clauses (A) and (B) above, Principal Receivables
     (and all amounts which would have constituted Principal Receivables but for
     the Seller's inability to transfer Receivables to the Trust) which are
     written off as uncollectible in accordance with this Agreement shall
     continue to be allocated in accordance with Article IV, and all amounts
     which would have constituted Principal Receivables but for the Seller's
     inability to transfer Receivables to the Trust shall be deemed to be
     Principal Receivables for the purpose of calculating (i) the applicable
     Investor Percentage with respect to any Series and (ii) the Aggregate
     Investor Percentage thereunder. If the Seller is unable pursuant to any
     Requirement of Law to allocate Collections as described above, the Seller
     agrees that, solely for purposes of payments under this Agreement, it shall
     in any such event allocate, after the occurrence of such event, payments on
     each Account with respect to the principal balance of such Account first to
     the oldest principal balance of such Account (it being understood that the
     foregoing allocation does not affect, with respect to any Obligor, the
     priority of application of cardholder payments provided for in the related
     Credit Card Agreement(s)) and to have such payments applied as Collections
     in accordance with Article IV.  The parties hereto agree that Finance
     Charge Receivables, whenever created, accrued in respect of Principal
     Receivables which have been conveyed to the

                                       48
<PAGE>
 
     Trust, or which would have been conveyed to the Trust but for the above
     described inability to transfer such Receivables, shall continue to be a
     part of the Trust notwithstanding any cessation of the transfer of
     additional Principal Receivables to the Trust and Collections with respect
     thereto shall continue to be allocated and paid in accordance with Article
     IV.

               (ii)  In the event that, pursuant to subsection 2.4(d), the
     Seller accepts reassignment of an Ineligible Receivable as a result of a
     breach of the representations and warranties in subsection 2.4(b) relating
     to such Receivable, then, in any such event, the Seller agrees to account
     for payments received with respect to such Ineligible Receivable separately
     from its accounting for Collections on Principal Receivables retained by
     the Trust.  If payments received from or on behalf of an Obligor are not
     specifically applicable either to an Ineligible Receivable of such Obligor
     reassigned to the Seller or to the Receivables of such Obligor retained in
     the Trust, then the Seller agrees to allocate payments proportionately
     based on the total amount of Principal Receivables of such Obligor retained
     in the Trust and the total amount owing by such Obligor on any Ineligible
     Receivables reassigned to the Seller, and the portion allocable to any
     Principal Receivables retained in the Trust shall be treated as Collections
     and deposited in accordance with the provisions of Article IV.

          (f)  Delivery of Collections or Recoveries.  The Seller agrees to pay
               --------------------------------------                          
to the Servicer all payments received by the Seller in respect of the
Receivables as soon as practicable after receipt thereof by the Seller, but in
no event later than the second Business Day after the Date of Processing of such
payment.

          (g)  Conveyance of Accounts.  The Seller covenants and agrees that it
               -----------------------                                         
will not convey, assign, exchange or otherwise transfer the Accounts to any
Person prior to the termination of this Agreement pursuant to Article XII;
                                                                          
provided, however, that the Seller shall not
- --------  -------                           

                                       49
<PAGE>
 
be prohibited hereby from conveying, assigning, exchanging or otherwise
transferring the Accounts in connection with a transaction complying with the
provisions of Section 7.2.

          (h)  Notice of Liens.  The Seller shall notify the Trustee promptly
               ----------------                                              
after becoming aware of any Lien on any Receivable other than the conveyances
hereunder and Liens permitted under subsection 2.5(b) hereof.

          (i)  Status of Accounts and Receivables.  The Seller agrees to comply
               -----------------------------------                             
in all respects with all Requirements of Law applicable to the Seller, the
failure to comply with which would have a material adverse effect on the
Investor Certificateholders.

          (j)  VISA USA and MasterCard International.  The Seller shall use its
               --------------------------------------                          
best efforts to remain, either directly or indirectly, a member in good standing
of both the VISA USA, Inc. and the MasterCard International Incorporated
systems.

          (k)  Interchange.  On each Business Day, the Seller shall pay to the
               -----------                                                    
Servicer and the Servicer shall deposit into the Collection Account, for
allocation as collections of Finance Charge Receivables in the manner provided
in Article IV (in immediately available funds) the amount of Interchange
received with respect to the Accounts to be so included as Collections of
Finance Charge Receivables.

          (l)  Recoveries.  On or prior to each Determination Date, the Seller
               ----------                                                     
shall notify the Servicer of the amount of Recoveries to be included as
collections of Finance Charge Receivables with respect to the preceding Monthly
Period, which shall be equal to the product of (y) the total amount of
Recoveries received by the Seller in the preceding Monthly Period, and (z) a
fraction, the numerator of which is the Aggregate Principal Receivables and the
denominator of which is the aggregate principal amount of the credit card
receivables owned by the Seller with respect to such Monthly Period.  On each
Transfer Date, the Seller shall pay to the Servicer and the Servicer shall
deposit into the Collection Account, for allocation as collections of Finance
Charge Receivables in the manner provided in Article IV (in immediately
available funds) the amount of Recoveries to be so

                                       50
<PAGE>
 
included as Collections of Finance Charge Receivables with respect to the
preceding Monthly Period.

          Section 2.6  Addition of Accounts.
                       ---------------------

          (a)  All Accounts which meet the definition of Automatic Additional
Accounts which are Eligible Accounts shall be included as Accounts from and
after the date upon which such eligible Automatic Additional Accounts are
created and all Receivables in such Automatic Additional Accounts, whether such
Receivables are then existing or thereafter created, shall be transferred
automatically to the Trust upon origination by the Seller.  The Seller, at its
option, may, by providing written notice to the Trustee and the Servicer,
terminate or suspend the inclusion of Automatic Additional Accounts at any time.
For all purposes of this Agreement, all receivables of such Automatic Additional
Accounts shall be treated as Receivables upon their creation and shall be
subject to the eligibility criteria specified in the definitions of "Eligible
Receivable" and "Eligible Account".

          (b)  On any day Receivables in Automatic Additional Accounts are
created, the Seller will be deemed to have made the representations in Section
2.4.

          (c)  Receivables in Automatic Additional Accounts shall be transferred
to the Trust, as Accounts if, in addition to satisfying the requirements of
clauses (a) through (g) of the definition of Eligible Accounts, the following
conditions are met:  the number of Accounts the Receivables of which are
designated to be added to the Trust pursuant to subsection 2.6(a) since (i) the
first day of the eleventh preceding Monthly Period (or, in the case of any date
on which eligible Automatic Additional Accounts are to be added to the Trust
which occurs on or before May 31, 1994, the Cut-Off Date) minus the number of
                                                          -----              
Accounts of the type described in clause (b) of the definition of "Automatic
Additional Accounts" which have been added on the initial day of the addition of
such type of Account pursuant to such clause (b) since the first day of such
eleventh preceding Monthly Period (or the Cut-Off Date, as the case may be) plus
                                                                            ----
the number of Accounts, if any, the Receivables of which have been designated to
be added to the Trust since the first day of such eleventh preceding Monthly
Period (or the Cut-Off

                                       51
<PAGE>
 
Date, as the case may be) pursuant to subsection 2.6(e) minus any Removed
                                                        -----            
Accounts removed since the first day of such eleventh preceding Monthly Period
(or the Cut-Off Date, as the case may be) shall not exceed 15% of the number of
Accounts on the first day of such eleventh preceding Monthly Period (or the Cut-
Off Date, as the case may be), and (ii) the first day of the second preceding
Monthly Period (or, in the case of any date on which eligible Automatic
Additional Accounts are to be added to the Trust which occurs on or before
August 31, 1993, the Cut-Off Date) minus the number of Accounts of the type
                                   -----                                   
described in clause (b) of the definition of "Automatic Additional Accounts"
have been added on the initial day of the addition of such type of Account
pursuant to such clause (b) since the first day of such second preceding Monthly
Period (or the Cut-Off Date, as the case may be) plus the number of Accounts, if
                                                 ----                           
any, the Receivables of which have been designated to be added to the Trust
since the first day of such second preceding Monthly Period (or the Cut-Off
Date, as the case may be) pursuant to subsection 2.6(e) minus any Removed
                                                        -----            
Accounts removed since the first day of such second preceding Monthly Period (or
the Cut-Off Date, as the case may be) shall not exceed 10% of the number of
Accounts on the first day of such second preceding Monthly Period (or the Cut-
Off Date, as the case may be).

          (d)  The Seller shall provide to the Trustee on each Determination
Date, a list of Automatic Additional Accounts added during the preceding Monthly
Period.

          (e)  If (i) on any Record Date the Seller Interest for the related
Monthly Period, is less than the Minimum Seller Interest, the Seller shall
designate additional credit card accounts ("Additional Accounts") to be included
as Accounts in a sufficient amount such that the Seller Interest as a percentage
of the Aggregate Principal Receivables for such Monthly Period after giving
effect to such addition is at least equal to the Minimum Seller Interest, or
(ii) on any date of determination the Aggregate Principal Receivables is less
than the Minimum Aggregate Principal Receivables, the Seller shall designate
Additional Accounts to be included as Accounts in a sufficient amount such that
the aggregate amount of Principal Receivables will be equal to or greater than
the Minimum Aggregate Principal Receivables.

                                       52
<PAGE>
 
Receivables from such Additional Accounts shall be transferred to the Trust on
or before the tenth Business Day following such Record Date.

          (f)  In addition to its obligation under subsection 2.6(e), the Seller
may upon twenty Business Days' notice to the Trustee, any Enhancement Provider
if so provided in the applicable Supplement and each Rating Agency, but shall
not be obligated to, designate from time to time Additional Accounts of the
Seller to be included as Accounts.

          (g)  The Seller agrees that any such transfer of Receivables from
Additional Accounts, under subsection 2.6(e) or (f), shall satisfy the following
conditions (to the extent provided below):

               (i)  on or before (A) the twentieth Business Day prior to the
     Addition Date for Additional Accounts to be included as Accounts pursuant
     to subsection 2.6(f) or (B) the fifth Business Day prior to the Addition
     Date for Additional Accounts to be included as Accounts pursuant to
     subsection 2.6(e) (the "Addition Notice Date"), the Seller shall give the
     Trustee, the Rating Agency, any Enhancement Provider if so provided in the
     applicable Supplement and the Servicer written notice that such Additional
     Accounts will be included and specifying the approximate aggregate amount
     of the Receivables to be transferred;

               (ii)  on or before the Addition Date the Seller shall have
     delivered to the Trustee a written assignment (including an acceptance by
     the Trustee on behalf of the Trust for the benefit of the Investor
     Certificateholders) in substantially the form of Exhibit B (the
     "Assignment") and shall record and file a financing statement in accordance
     with the provisions for such filing set forth in Section 2.1 (a copy of
     which shall be delivered to the Trustee) and the Seller shall have
     indicated in its computer files that the Receivables created in connection
     with the Additional Accounts, have been transferred to the Trust and,
     within five Business Days thereafter, the

                                       53
<PAGE>
 
     Seller shall have delivered to the Trustee a computer file or microfiche
     list containing a true and complete list of all Additional Accounts,
     identified by account number, which computer file or microfiche list shall
     be as of the date of such Assignment incorporated into and made a part of
     such Assignment and this Agreement;

               (iii)  the Seller shall represent and warrant that (x) each
     Additional Account is, as of the end of the day immediately preceding the
     Addition Date, an Eligible Additional Account, (y) no selection procedures
     believed by the Seller to be materially adverse to the interests of the
     Investor Certificateholders (without regard to any Enhancement) were
     utilized in selecting the Additional Accounts from the available Eligible
     Additional Accounts, and (z) as of the Addition Date, the Seller is not
     insolvent;

               (iv)  the Seller shall represent and warrant that, as of the
     Addition Date, the Assignment constitutes either (x) a valid transfer and
     assignment to the Trustee, on behalf of the Trust, of all right, title and
     interest of the Seller in and to (A) the Receivables then existing and
     thereafter created in the Additional Accounts, (B) all monies due or to
     become due with respect thereto (including all Finance Charge Receivables),
     (C) all proceeds of such Receivables (as defined in the UCC as in effect in
     the State of New York), (D) Recoveries relating to such Receivables, and
     (E) Interchange allocated to the Trust pursuant to subsection 2.5(k) and
     proceeds thereof, Recoveries and Interchange allocated to the Trust
     pursuant to subsections 2.5(k) and (l) will be held by the Trust (other
     than the Trustee and the Certificateholders) free and clear of any Lien of
     any Person, except for (i) Liens permitted under subsection 2.5(b) and
     subject to Section 9-306 of the UCC as in effect in the States of
     Connecticut or New York, whichever is applicable, (ii) the interest of the
     Seller as Holder of the Exchangeable Seller

                                       54
<PAGE>
 
     Certificate and (iii) the Seller's right to receive interest accruing on,
     and investment earnings in respect of, the Collection Account, or any
     Series Account as provided in this Agreement and any related Supplement or
     (y) the grant of a security interest (as defined in the UCC as in effect in
     the State of New York) and in such property to the Trust, which is
     enforceable with respect to then existing Receivables of the Additional
     Accounts, the proceeds (as defined in the UCC as in effect in the State of
     New York) thereof, Recoveries and Interchange allocated to the Trust
     pursuant to subsections 2.5(k) and (l) upon the conveyance of such
     Receivables to the Trust, and which will be enforceable with respect to the
     Receivables thereafter created in respect of Additional Accounts conveyed
     on such Addition Date, the proceeds (as defined in the UCC as in effect in
     the State of New York) thereof, Recoveries and Interchange allocated to the
     Trust pursuant to subsections 2.5(k) and (l), upon such creation; and (z)
     if the Assignment constitutes the grant of a security interest to the Trust
     in such property, upon the filing of a financing statement as described in
     Section 2.1 with respect to such Additional Accounts and, in the case of
     the Receivables thereafter created in such Additional Accounts and the
     proceeds (as defined in the UCC as in effect in the State of New York)
     thereof, Recoveries and Interchange allocated to the Trust pursuant to
     subsections 2.5(k) and (l), upon such creation, the Trust shall have a
     first priority perfected security interest in such property, except for
     Liens permitted under subsection 2.5(b) and subject to Section 9-306 of the
     UCC as in effect on the States of Connecticut or New York, whichever is
     applicable;

               (v)  the Seller shall deliver a certificate of a Vice President
     or more senior officer to the Trustee confirming the items set forth in
     paragraphs (iii) and (iv) above and clause 6 of the Assignment;

                                       55
<PAGE>
 
               (vi)  the Seller shall deliver an Opinion of Counsel with respect
     to the Receivables in the Additional Accounts to the Trustee with a copy to
     the Rating Agency substantially in the form of Exhibit F; and

               (vii)  Standard & Poor's shall have confirmed in writing that the
     inclusion of such accounts as Additional Accounts pursuant to subsection
     2.6(e) or (f), as the case may be, and Moody's shall have confirmed in
     writing that the inclusion of such accounts as Additional Accounts pursuant
     to subsection 2.6(f) will not result in the reduction or withdrawal of its
     then existing rating of any Series of Investor Certificates then issued and
     outstanding and the Seller shall have delivered such confirmation to the
     Trustee and the related Enhancement Provider to the extent so provided in
     the applicable Supplement.

          Section 2.7  Removal of Accounts.
                       ------------------- 

          (a)  If on any Determination Date the Seller Interest exceeds 10% of
the Aggregate Principal Receivables on such Determination Date, the Seller may,
but shall not be obligated to, designate Receivables from Accounts for deletion
and removal ("Removed Accounts") from the Trust; provided, however, that the
                                                 --------  -------          
Seller shall not make more than one such designation in any Monthly Period.  On
or before the fifth Business Day (the "Removal Notice Date") prior to the date
on which the designated Removed Accounts will be reassigned by the Trustee to
the Seller (the "Removal Date"), the Seller shall give the Trustee and the
Servicer written notice that the Receivables from such Removed Accounts are to
be reassigned to the Seller and specifying the approximate aggregate amount of
the Receivables to be reassigned.

          (b)  The Seller shall be permitted to designate and require
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions:

                       (i)  [reserved];

                       (ii)  [reserved];

                                       56
<PAGE>
 
               (iii)  the removal of any Receivables of any Removed Accounts on
     any Removal Date shall not, in the reasonable belief of the Seller, (a)
     cause a Pay Out Event to occur; provided, however, that for the purposes of
                                     --------  -------                          
     this subsection 2.7(b)(iii), the Receivables of each Removed Account shall
     be considered to have been removed as of the Removal Date, (b) cause the
     Seller Interest as a percentage of Aggregate Principal Receivables to be
     less than 10% on such Removal Date or (c) result in the failure to make any
     payment specified in the related Supplement with respect to any Series;

               (iv)  on or prior to the Removal Date, the Seller shall have
     delivered to the Trustee for execution a written assignment in
     substantially the form of Exhibit I (the "Reassignment") and, within five
     Business Days thereafter, the Seller shall have delivered to the Trustee 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 Principal Receivables in such Removed Accounts as of the Removal Date,
     which computer file or microfiche list shall as of the Removal Date modify
     and amend and be made a part of this Agreement;

               (v)  the Seller shall represent and warrant that no selection
     procedures believed by the Seller to be materially adverse to the interests
     of the Investor Certificateholders without regard to any Enhancement were
     utilized in selecting the Removed Accounts to be removed from the Trust;

               (vi)  the Seller shall have delivered to the Trustee an Officer's
     Certificate confirming the items set forth in clauses (iii), (iv), (v)
     above and (vii) and (viii) below.  The Trustee may conclusively rely on
     such Officer's Certificate, shall have no duty to make inquiries with
     regard to the matters set forth therein and shall incur no liability in so
     relying; and

                                       57
<PAGE>
 
               (vii)  on or before the twentieth Business Day prior to the
     Removal Date the Rating Agency shall have received notice of such proposed
     removal of Accounts; and

               (viii)  the Seller and the Trustee shall have received notice
     from the Rating Agency that such proposed removal of Accounts  will not
     result in the reduction or withdrawal of its then existing rating of any
     Series of Certificates then issued and outstanding; and

               (ix)  the Seller, the Trustee and the Rating Agencies shall have
     received an Opinion of Counsel that the proposed removal shall not
     adversely effect the federal income tax characterization of the Trust.

          Upon satisfaction of the above conditions, the Trustee shall execute
and deliver the Reassignment, on behalf of the Trust, to the Seller, and the
Receivables from the Removed Accounts shall no longer constitute a part of the
Trust.


                              [End of Article II)

                                       58
<PAGE>
 
                                  ARTICLE III


                          ADMINISTRATION AND SERVICING
                                 OF RECEIVABLES

          Section 3.1  Acceptance of Appointment and Other Matters Relating to
                       -------------------------------------------------------
the Servicer.
- ------------ 

          (a)  The Seller agrees to act as the Servicer under this Agreement.
The Investor Certificateholders by their acceptance of the Certificates consent
to the Seller acting as Servicer.

          (b)  The Servicer shall service and administer the Receivables and
shall collect payments due under the Receivables in accordance with its
customary and usual servicing procedures for servicing credit card receivables
comparable to the Receivables and in accordance with the Account Guidelines and
shall have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable.  Without
limiting the generality of the foregoing and subject to Section 10.1, the
Servicer is hereby authorized and empowered, (i) unless such power and authority
is revoked by the Trustee on account of the occurrence of a Servicer Default
pursuant to Section 10.1, to make withdrawals and payments, or to instruct the
Trustee to make withdrawals and payments, from the Collection Account, the
Excess Funding Account and any Series Account, in accordance with such
instructions as set forth in this Agreement, (ii) unless such power and
authority is revoked by the Trustee on account of the occurrence of a Servicer
Default pursuant to Section 10.1, to instruct the Trustee in writing, as set
forth in this Agreement, (iii) to execute and deliver, on behalf of the Trust
for the benefit of the Certificateholders, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables and (iv) to make any filings,
reports, notices, applications, registrations with, and to

                                       59
<PAGE>
 
seek any consents or authorizations from the Securities and Exchange Commission
and any state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any federal or state securities or reporting
requirements laws.  The Trustee agrees that it shall promptly follow the
instructions of the Servicer to withdraw funds from the Collection Account, the
Excess Funding Account or any Series Account and to take any action required
under any Enhancement at such time as required under this Agreement.  The
Trustee shall furnish the Servicer with any documents necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties
hereunder.

          (c)  In the event that the Seller is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this Agreement
(including, without limitation, by reason of the application of the provisions
of Section 9.2 or the order of any federal governmental agency having regulatory
authority over the Seller or any court of competent jurisdiction that the Seller
not transfer any additional Principal Receivables to the Trust) then, in any
such event, (A) the Servicer agrees to allocate, after such date, all
Collections with respect to Principal Receivables, and all amounts which would
have constituted Collections with respect to Principal Receivables but for the
Seller's inability to transfer such Receivables (up to an aggregate amount equal
to the Aggregate Principal Receivables in the Trust as of such date) in
accordance with subsection 2.5(e); (B) the Servicer agrees to apply such amounts
as Collections in accordance with Article IV, and (C) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clauses (A) and (B) above, Principal
Receivables and all amounts which would have constituted Principal Receivables
but for the Seller's inability to transfer Receivables to the Trust which are
written off as uncollectible in accordance with the Agreement shall continue to
be allocated in accordance with Article IV and all amounts which would have
constituted Principal Receivables but for the Seller's inability to transfer
Receivables to the Trust shall be deemed to be Principal Receivables for the
purpose of calculating the applicable Investor Percentage thereunder.  If the
Servicer is unable pursuant to any Requirement of Law to allocate payments on
the Accounts as described above,

                                       60
<PAGE>
 
the Servicer agrees that, solely for the purposes of payments under this
Agreement, it shall in any such event allocate, after the occurrence of such
event, payments on each Account with respect to the principal balance of such
Account first to the oldest principal balance of such Account (it being
understood that the foregoing allocation does not affect, with respect to any
Obligor, application of cardholder payments provided for in the related Credit
Card Agreement) and to have such payments applied as Collections in accordance
with Article IV.  The parties hereto agree that Finance Charge Receivables,
whenever created, accrued in respect of Principal Receivables which have been
conveyed to the Trust, or which would have been conveyed to the Trust but for
the above described inability to transfer such Receivables, shall continue to be
a part of the Trust notwithstanding any cessation of the transfer of additional
Principal Receivables to the Trust and Collections with respect thereto shall
continue to be allocated and paid in accordance with Article IV.

          (d)  In the event that, pursuant to subsection 2.4(d), the Seller
accepts reassignment of an Ineligible Receivable as a result of a breach of the
representations and warranties in subsection 2.4(b) relating to such Receivable,
then, in any such event, the Servicer agrees to account for payments received
with respect to such Ineligible Receivable separately from its accounting for
Collections on Principal Receivables retained by the Trust.  If payments
received from or on behalf of an Obligor are not specifically applicable either
to an Ineligible Receivable of such Obligor reassigned to the Seller or to
Receivables of such Obligor retained in the Trust, then the Servicer agrees to
allocate payments proportionately based on the total amount of Principal
Receivables of such Obligor retained in the Trust and the total amount owing by
such Obligor on any Ineligible Receivables purchased by the Seller, and the
portion allocable to any Principal Receivables retained in the Trust shall be
treated as Collections and deposited in accordance with the provisions of
Article IV.

          (e)  The Servicer shall not be obligated to use servicing procedures,
offices, employees or accounts for servicing the Receivables which are separate
from the procedures, offices, employees and accounts used

                                       61
<PAGE>
 
by the Servicer in connection with servicing other credit card receivables.

          (f)  The Servicer shall maintain blanket 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.

          Section 3.2  Servicing Compensation.  As compensation for its
                       ----------------------                          
servicing activities hereunder and reimbursement for its expenses as set forth
in the immediately following paragraph, the Servicer shall be entitled to
receive a monthly servicing fee in respect of any Monthly Period prior to the
termination of the Trust pursuant to Section 12.1 (with respect to each Monthly
Period, the "Monthly Servicing Fee").  The share of the Monthly Servicing Fee
allocable to each Series of Investor Certificateholders with respect to any
Monthly Period (or portion thereof) shall be payable on the related Transfer
Date and, with respect to each Series (unless otherwise provided in the related
Supplement), shall be equal to one-twelfth of the product of (A) the applicable
Series Servicing Fee Percentage per annum and (B) the Investor Interest of such
Series as of the last day of the Monthly Period preceding such Transfer Date
(the "Monthly Investor Servicing Fee") and shall be paid to the Servicer
pursuant to Article IV.  The servicing fee payable by the Holder of the
Exchangeable Seller Certificate shall be equal to the product of one-twelfth of
the product of (A) the Seller Interest and (B) the lesser of 2% and the
weighted average Series Servicing Fee Percentage with respect to any Series of
Investor Certificates then outstanding (the "Monthly Seller Servicing Fee").
The Monthly Servicing Fee shall equal the sum of (x) the aggregate amount of
Monthly Investor Servicing Fees with respect to each Series then outstanding and
(y) the Monthly Seller Servicing Fee.  The Monthly Investor Servicing Fee with
respect to any Series is payable in arrears on the related Transfer Date (unless
otherwise provided in the related Supplement) and the Monthly Seller Servicing
Fee is payable in arrears no later than the last Transfer Date with respect to
any Series occurring in a Monthly Period.  The Monthly Seller Servicing Fee and,
unless otherwise provided in a Supplement, each Monthly Investor Servicing Fee
shall be calculated on the

                                       62
<PAGE>
 
basis of a 360-day year consisting of twelve 30-day months.

          The Servicer's expenses include the amounts due to the Trustee
pursuant to Section 11.5 and of the Paying Agent, Transfer Agent and Registrar
and the reasonable fees and disbursements of independent public accountants and
all other expenses incurred by the Servicer in connection with its activities
hereunder; provided, that the Servicer shall not be liable for any liabilities,
           --------                                                            
costs or expenses of the Trust, the Investor Certificateholders or the
Certificate Owners arising under any tax law, including without limitation any
federal, state or local income or franchise taxes 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).  The Servicer shall be required to pay such
expenses for its own account and shall not be entitled to any payment therefor
other than the Monthly Servicing Fee.

          Section 3.3  Representations and Warranties of the Servicer.  People's
                       ----------------------------------------------           
Bank, as initial Servicer, hereby makes, and any Successor Servicer by its
appointment hereunder shall make the following representations and warranties on
which the Trustee has relied in accepting the Receivables in trust and in
authenticating the Certificates issued on the Closing Date:

          (a)  Organization and Good Standing.  The Servicer is duly organized,
               ------------------------------                                  
validly existing and in good standing under the laws of the State of its
organization and has full power, authority and legal right to own its properties
and conduct its credit card business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement.

          (b)  Due Qualification.  The Servicer is not required to qualify nor
               -----------------                                              
register as a foreign corporation in any state in order to service the
Receivables as required by this Agreement and has obtained all licenses and
approvals necessary in order to so service the Receivables as required under
federal law and the law of the State of its organization.  If the Servicer shall
be required by any Requirement of Law to so qualify or

                                       63
<PAGE>
 
register or obtain such license or approval, then it shall do so.

          (c)  Due Authorization.  The execution, delivery, and performance of
               -----------------                                              
this Agreement have been duly authorized by the Servicer by all necessary
corporate action on the part of the Servicer and this Agreement will remain,
from the time of its execution, an official record of the Servicer.

          (d)  Binding Obligation.  This Agreement constitutes a legal, valid
               ------------------                                            
and binding obligation of the Servicer, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights in general.

          (e)  No Violation.  The execution and delivery of this Agreement by
               ------------                                                  
the Servicer, and the performance of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof applicable to the Servicer,
will not conflict with, violate, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any Requirement of Law applicable to the Servicer or
any indenture, contract, agreement, mortgage, deed of trust or other instrument
to which the Servicer is a party or by which it is bound.

          (f)  No Proceedings.  There are no proceedings or investigations
               --------------                                             
pending or, to the best knowledge of the Servicer threatened against the
Servicer before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, seeking any determination or ruling that, in the reasonable judgment
of the Servicer, would materially and adversely affect the performance by the
Servicer of its obligations under this Agreement, or seeking any determination
or ruling that would materially and adversely affect the validity or
enforceability of this Agreement.

                                       64
<PAGE>
 
          (g)  Compliance with Requirements of Law.  The Servicer shall duly
               -----------------------------------                          
satisfy all obligations on its part to be fulfilled under or in connection with
each Receivable and the related Account, will maintain in effect all
qualifications required under Requirements of Law in order to properly service
each Receivable and the related Account and will comply in all material respects
with all other Requirements of Law in connection with servicing each Receivable
and the related Account the failure to comply with which would have a material
adverse effect on the Certificateholders.

          (h)  Servicer's Deposit Accounts.  As of the Initial Closing Date,
               ---------------------------                                  
deposits in the Servicer's deposit accounts were insured to the limits provided
by law and as required by the FDIC.

          (i)  All Consents Required.  All approvals, authorizations, consents,
               ---------------------                                           
orders or other actions of any Person or of any Governmental Authority or
official required in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated by this Agreement
and the fulfillment of the terms hereof have been obtained.

          (j)  Status of Accounts and Receivables.  The Servicer hereby agrees
               ----------------------------------                             
to comply in all material respects with all Requirements of Law applicable to
the Servicer the failure to comply with which would have a material adverse
effect on the Investor Certificateholders.

          (k)  No Rescission or Cancellation.  The Servicer shall not permit any
               -----------------------------                                    
rescission or cancellation of any Receivable except in accordance with the
Account Guidelines or as ordered by a court of competent jurisdiction or other
Governmental Authority.

          (l)  Protection of Certificateholder's Rights.  The Servicer shall
               ----------------------------------------                     
take no action which, nor omit to take any action the omission of which, would
impair the rights of Certificateholders in any Receivable or the related
Account, nor shall it reschedule, revise or defer payments due on any Receivable
except in accordance with the Account Guidelines.

                                       65
<PAGE>
 
          (m)  Receivables Not To Be Evidenced by Promissory Notes.  The
               ---------------------------------------------------      
Servicer will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the State of New York) except
in connection with its enforcement or collection of an Account, in which event
such Receivable shall be reassigned or assigned and transferred to the Servicer
as provided in the following paragraph.

          In the event (x) any of the representations and warranties or
covenants of the Servicer contained in subsections (g), (j), (k), (l) and (m)
with respect to any Receivable or the related Account is breached, and such
breach has a material adverse effect on the Certificateholders' interest in such
Receivable and is not cured within 60 days (or such longer period, not in excess
of 120 days, as may be agreed to by the Trustee) of the earlier to occur of the
discovery of such event by the Servicer, or receipt by the Servicer of written
notice of such event given by the Trustee or any Enhancement Provider (to the
extent so provided in the applicable Supplement), or (y) it is so provided in
subsection 3.3(m) with respect to any Receivable, all Receivables in the Account
or Accounts as to which such event relates shall be reassigned to the Seller (if
the Seller is the Servicer) or assigned and transferred (if the Seller is not
the Servicer) to the Servicer on the terms and conditions set forth below.

          If the Holder of the Exchangeable Seller Certificate is the Servicer,
such assignment or reassignment shall be accomplished in the manner set forth in
subsection 2.4(d)(iii) as if the reassigned or assigned Receivables were
Ineligible Receivables (including the requirement, if applicable to reduce the
Seller Interest, the Seller Percentage or the Investor Percentage and to make
deposits into the Excess Funding Account) and any amounts deposited in the
Excess Funding Account to be applied in accordance with Section 4.2(e).

          If the Holder of the Exchangeable Seller Certificate is not the
Servicer, the Servicer shall effect such assignment and transfer by making a
deposit into the Collection Account for allocation pursuant to Article IV in
immediately available funds no later than the Transfer Date following the
Monthly Period in which

                                       66
<PAGE>
 
such assignment and transfer obligation arises in an amount equal to the amount
of such Receivable.

          Upon each such reassignment or assignment and transfer to the Servicer
of an Ineligible Receivable, the Trust shall automatically and without further
action be deemed to transfer, assign, set-over and otherwise convey to the
Servicer, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to such Ineligible Receivable, all monies due or to
become due with respect thereto and all proceeds thereof, Recoveries and
Interchange allocated to such Ineligible Receivable pursuant to subsections
2.5(k) and (l).  The Trustee shall execute such documents and instruments of
transfer or assignment, on behalf of the Trust, and take other actions as shall
reasonably be requested by the Seller to evidence the conveyance of such
Ineligible Receivable pursuant to this Section 3.3.  Notwithstanding any other
provision of this Section 3.3, a reassignment of an Ineligible Receivable to the
Seller in excess of the amount that would cause the Seller Interest to be less
than the Minimum Seller Interest shall not occur if the Seller fails to make any
deposit required by this Section 3.3 with respect to such Ineligible Receivable.
The obligation of the Servicer set forth in this Section 3.3 to accept
reassignment or assignment and transfer of such Ineligible Receivable, as the
case may be, shall constitute the sole remedy respecting any breach of the
representations and warranties set forth in the above-referenced subsections
with respect to such Receivable available to Certificateholders or the Trustee
on behalf of Certificateholders.

          Section 3.4  Reports and Records for the Trustee.
                       ----------------------------------- 

          (a)  Daily Reports.  On each Business Day, the Servicer, with prior
               -------------                                                 
notice, shall prepare and make available at the office of the Servicer for
inspection by the Trustee a record setting forth (i) the aggregate amount of
Collections processed by the Servicer on the preceding Business Day, (ii) the
Aggregate Receivables as of the close of business on the second preceding
Business Day, and (iii) in the event Additional Accounts or Automatic Additional
Accounts were added during the Monthly Period immediately preceding the day such
Collections were processed, the aggregate amount of Principal Receiv-

                                       67
<PAGE>
 
ables in such Additional Accounts or Automatic Additional Accounts.  The
Servicer shall at all times maintain its computer files with respect to the
Accounts in such a manner so that the Accounts may be specifically identified
and, upon prior request of the Trustee, shall make available to the Trustee at
the servicing center of the Servicer selected by the Servicer on any Business
Day during the Servicer's normal business hours any computer programs necessary
to make such identification.

          (b)  Monthly Servicer's Certificate.  Unless otherwise stated in the
               ------------------------------                                 
related Supplement with respect to any Series, on each Determination Date the
Servicer shall forward, as provided in Section 13.5, to the Trustee, the Paying
Agent, and the Rating Agency, a certificate of a Servicing Officer in the form
of Exhibit C (which includes the Schedule thereto specified as such in each
Supplement) setting forth (i) the aggregate amount of Collections processed
during the preceding Monthly Period, (ii) the aggregate amount of the applicable
Investor Percentage of Collections of Principal Receivables processed by the
Servicer pursuant to Article IV during the preceding Monthly Period with respect
to each Series then outstanding, (iii) the aggregate amount of the applicable
Investor Percentage of Collections allocated to Finance Charge Receivables
processed by the Servicer pursuant to Article IV during the preceding Monthly
Period with respect to each Series then outstanding, (iv) the aggregate amount
of Receivables as of the end of the last day of the preceding Monthly Period,
(v) the balance on deposit in the Collection Account (or Collection Subaccount)
or any Series Account applicable to any Series then outstanding with respect to
collections processed, as of the end of the last day of the preceding Monthly
Period, (vi) the aggregate amount, if any, of withdrawals, drawings or payments
under any Enhancement, if any, for each Series then outstanding required to be
made with respect to the previous Monthly Period in the manner provided in the
related Supplement, (vii) the statement required by Article V in the form
indicated in the Supplement for each Series then outstanding, (viii) the sum of
all amounts payable to the Certificateholders of each Series on the succeeding
Distribution Date with respect to each Series in respect of certificate interest
and certificate principal, (ix) the excess, if any, of the Aggregate Principal
Receivables over the Aggregate Principal Receivables required

                                       68
<PAGE>
 
to be maintained pursuant to this Agreement and any Supplement as of such
Determination Date, (x) whether, with respect to each Series then outstanding, a
Series Pay Out Event or a Trust Pay Out Event has occurred or other similar
event is deemed to have occurred and (xi) such other matters as are set forth in
Exhibit C.

          (c)  Transferred Accounts.  The Servicer covenants and agrees hereby
               --------------------                                           
to deliver to the Trustee, within a reasonable time period after any Transferred
Account is created, but in any event not later than thirty (30) days after the
end of the Monthly Period within which the Transferred Account is created, a
notice specifying the new account number for any Transferred Account and the
replaced account number.

          Section 3.5  Annual Servicer's Certificate.  On or before March 31 of
                       -----------------------------                           
each calendar year, beginning with March 31, 1994 the Servicer will deliver, as
provided in Section 13.5, to the Trustee, the Rating Agency, and any Certificate
Owner, upon the written request of such Certificate Owner, an Officer's
Certificate substantially in the form of Exhibit D stating that (a) a review of
the activities of the Servicer during the twelve-month period ending on December
31 of such year, or for the initial period, from the Closing Date until December
31, 1993, and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to the best of such
officer's knowledge, based on such review, the Servicer has fully performed all
its obligations under this Agreement throughout such period, or, if there has
been a default in the performance of any such obligation, specifying each such
default known to such officer and the nature and status thereof.  A copy of such
certificate may be obtained by any Investor Certificateholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.

          Section 3.6  Annual Independent Accountants' Servicing Report.
                       ------------------------------------------------ 

          (a)  On or before March 31 of each calendar year, beginning with March
31, 1994, the Servicer shall cause a firm of nationally recognized independent
accountants (who may also render other services to the Servicer or the Seller)
to furnish, as provided in Section 13.5, a report to the Trustee, the Servicer,
the

                                       69
<PAGE>
 
Rating Agency, and any Certificate Owner, upon the written request of such
Certificate Owner, to the effect that such firm has made a study and evaluation
of the Servicer's internal accounting controls relative to the servicing of
Accounts under this Agreement, and that, on the basis of such study and
evaluation, such firm is of the opinion (assuming the accuracy of any reports
generated by the Servicer's third party agents) that the system of internal
accounting controls in effect on the date set forth in such report, relating to
servicing procedures performed by the Servicer pursuant to Article IV of this
Agreement, taken as a whole, was sufficient for the prevention and detection of
errors and irregularities in amounts that would be material to the financial
statements of the Servicer and that such servicing was conducted in compliance
with Article IV of this Agreement, except for such exceptions, errors or
irregularities as such firm shall believe to be immaterial to the financial
statements of the Servicer and such other exceptions, errors or irregularities
as shall be set forth in such report.  Unless otherwise provided with respect to
any Series in the related Supplement, a copy of such report may be obtained by
any Investor Certificateholder by a request in writing to the Trustee addressed
to the Corporate Trust Office.

          (b)  On or before March 31 of each calendar year, beginning with March
31, 1994, the Servicer shall cause a firm of nationally recognized independent
accountants (who may also render other services to the Servicer or the Seller)
to furnish, as provided in Section 13.5, a report to the Trustee, Servicer, the
Rating Agency and any Certificate Owner, upon the written request of such
Certificate Owner, to the effect that they have compared the amounts set forth
in the monthly statements and certificates forwarded by the Servicer pursuant to
subsection 3.4(b) during the period covered by such report (which shall be the
period from January 1 of the preceding calendar year to and including December
31 of such calendar year, or for the initial period, from the Closing Date until
December 31, 1993) with the Servicer's computer reports and statements of any
agents engaged by the Servicer to perform servicing activities which were the
source of such amounts and that on the basis of such comparison, such amounts
are in agreement, except for such exceptions as it believes to be immaterial to
the financial statements of the Servicer and such other

                                       70
<PAGE>
 
exceptions as shall be set forth in such report.  A copy of such report may be
obtained by any Investor Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.

          Section 3.7  Tax Treatment.  The Seller has structured this Agreement
                       -------------                                           
and the Certificates with the intention that the Certificates will qualify under
applicable federal, state, local and foreign tax law as indebtedness of the
Seller.  The Seller, the Servicer, the Holder of the Exchangeable Seller
Certificate, each Investor Certificateholder, and each Certificate Owner, agree
to treat and to take no action inconsistent with the treatment of the Investor
Certificates (or beneficial interest therein) as indebtedness for purposes of
federal, state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income.  Each Investor Certificateholder and the
Holder of the Exchangeable Seller Certificate, by acceptance of its Certificate
and each Certificate Owner, by acquisition of a beneficial interest in a
Certificate, agree to be bound by the provisions of this Section 3.7.  Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with this Agreement as to
treatment as indebtedness under applicable tax law, as described in this Section
3.7.

          Section 3.8  Notices to the Seller.  In the event that the Seller is
                       ---------------------                                  
no longer acting as Servicer, any Successor Servicer appointed pursuant to
Section 10.2 shall deliver or make available to the Seller each certificate and
report required to be prepared, forwarded or delivered thereafter pursuant to
Sections 3.4, 3.5 and 3.6.

                              [End of Article III]

                                       71
<PAGE>
 
                                   ARTICLE IV

                  RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
                         AND APPLICATION OF COLLECTIONS

          Section 4.1  Establishment of Accounts and Allocations with Respect to
                       ---------------------------------------------------------
the Exchangeable Seller Certificate.
- ----------------------------------- 

          (a)  The Collection Account.  The Servicer, for the benefit of the
               ----------------------                                       
Certificateholders, shall establish and maintain in the name of the Trustee, on
behalf of the Trust, or cause to be established and maintained, a non-interest
bearing segregated trust account (the "Collection Account") bearing a
designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Certificateholders, with an office or branch
located in the State of Connecticut or New York, of (i) the corporate trust
department of a Qualified Trust Institution or (ii) a depository institution or
trust company (which may include the Servicer, the Trustee or an Affiliate of
the Servicer) having corporate trust powers under applicable federal and state
laws organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia; provided, however, that at all times
                                            --------  -------                   
the certificates of deposit, short-term deposits or commercial paper or the
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depository institution or trust company shall have a
credit rating from Moody's and Standard & Poor's of P-1 and A-1+, respectively,
in the case of the certificates of deposit, or a rating from Moody's, of at
least Aa3 and from Standard & Poor's of at least AAA in the case of the long-
term unsecured debt obligations and the deposits in whose accounts are insured
to the limits provided by law and by the FDIC (each entity referred to in
clauses (i) and (ii) a "Qualified Institution"); provided further, that upon the
                                                 -------- -------               
insolvency of the Servicer, the Collection Account shall not be permitted to be
maintained with the Servicer.  The Supplement for a Series may require the
Trustee to establish and maintain a subaccount of the Collection Account for
such a Series (such subaccount, a "Collection Subaccount") bearing a designation
clearly

                                       72
<PAGE>
 
indicating that the funds deposited therein are held in trust for the benefit of
the Certificateholders of such Series with a depository institution or trust
company meeting the criteria provided in the related Supplement.  The Collection
Account or any Collection Subaccount may not be invested except as provided in
the related Supplement.  The funds on deposit in such Collection Subaccount may
be invested in the manner provided in the related Supplement, and any earnings
resulting from such investment shall be applied as provided in such Supplement.
Pursuant to authority granted to it pursuant to subsection 3.1(b), the Servicer
shall have the power, revocable by the Trustee, to withdraw funds from the
Collection Account or any Collection Subaccount for the purposes of carrying out
its duties hereunder.

          Each Series of Investor Certificates shall represent interests in the
Trust, including the benefits of any Enhancement to be provided by an
Enhancement Provider issued with respect to such Series as indicated in the
Supplement relating to such Series, and the right to receive Collections and
other amounts at the times and in the amounts specified in this Article IV to be
deposited in the Collection Account and any Series Accounts maintained for the
benefit of the Certificateholders of such Series or paid to the
Certificateholders of such Series.  The Exchangeable Seller Certificate shall
represent the interest in the Trust not represented by any Series of Investor
Certificates then outstanding, including the right to receive Collections and
other amounts at the time and in the amounts specified in this Article IV to be
paid to the Seller (the "Seller Interest"); provided, however, that such
                                            --------  -------           
certificate shall not represent any interest in the Collection Account or any
Series Accounts maintained for the benefit of the Certificateholders of any
Series or the benefits of any Enhancement to be provided by an Enhancement
Provider issued with respect to any Series, except as specifically provided in
this Article IV.

          (b)  Establishment of the Excess Funding Account.  The Servicer, for
               -------------------------------------------                    
the benefit of the Investor Certificateholders and the Holder of the
Exchangeable Seller Certificate, shall establish and maintain or cause to be
established and maintained in the name of the Trustee, on behalf of the Trust,
with a Qualified Institution and held in trust by such Qualified Institution

                                       73
<PAGE>
 
designated by the Servicer, a segregated trust account within the corporate
trust department of such Qualified Institution (the "Excess Funding Account"),
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Investor Certificateholders and the holder
of the Exchangeable Seller Certificate.  The Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Excess
Funding Account and in all proceeds thereof.  Pursuant to the authority granted
to it pursuant to subsection 3.1(b), the Servicer shall have the power,
revocable by the Trustee, to withdraw funds and to instruct the Trustee to
withdraw funds from the Excess Funding Account for the purposes of carrying out
its duties hereunder.

          (c)  If the entity with which any of the accounts established pursuant
to this Section 4.1 ceases to be a "Qualified Institution", then (i) such entity
shall provide the Trustee, each Enhancement Provider and the Servicer with
prompt written notice that it is no longer a "Qualified Institution" and (ii)
transfer the funds deposited in each of the accounts in the manner directed by
the Servicer within 10 Business Days of the day on which such entity ceased to
be a "Qualified Institution".

          (d)  Allocations for the Exchangeable Seller Certificate.  Throughout
               ---------------------------------------------------             
the existence of the Trust, the Servicer shall, prior to the close of business
on the day any Collections are deposited in the Collection Account, allocate to
the Holder of the Exchangeable Seller Certificate an amount equal to the product
of (A) the Seller Percentage for the current Monthly Period and (B) the
aggregate amount of such Collections allocated to Principal Receivables and
Finance Charge Receivables, respectively.  The Servicer need not deposit this
amount, and other amounts so allocated to the Exchangeable Seller Certificate
pursuant to any Supplement, into the Collection Account, and shall pay, or be
deemed to pay, to the extent the Servicer is the holder of the Exchangeable
Seller Certificate, such amounts as collected to the Holder of the Exchangeable
Seller Certificate; provided, however, that such payments shall not be made to
                    --------  -------                                         
the Holder of the Exchangeable Seller Certificate if the Seller Interest is less
than the Minimum Seller Interest or if and to the extent that such payment would
cause the

                                       74
<PAGE>
 
Seller Interest to be less than the Minimum Seller Interest but such amounts
shall be treated as Shared Principal Collections.

          Section 4.2  Collection and Allocations
                       --------------------------

          (a)  Collections.  The Servicer shall, subject to subsection 4.1(d),
               -----------                                                    
deposit all Collections in the Collection Account as promptly as possible after
the Date of Processing of such Collections, but in no event later than the
second Business Day following such Date of Processing.  In the event of the
insolvency of the Servicer, then, immediately upon the occurrence of such event
and thereafter the Servicer shall deposit all Collections into the Collection
Account which shall be established and maintained with a Qualified Institution
other than the Servicer in accordance with subsection 4.1(a), and in no such
event shall the Servicer deposit any Collections thereafter into any account
established, held or maintained with the Servicer.

          Interchange shall be allocated, and deposited or paid, on the second
Business Day following the Business Day on which the Servicer receives the same
in the manner provided in subsection 2.5(k).  Recoveries shall be allocated and
deposited or paid, on each Transfer Date in the manner provided in subsection
2.5(1).  The Servicer shall notify the Trustee as to the amount of Recoveries
allocable to the Trust on each Determination Date and transfer such amount into
the Collection Account on the Transfer Date.

          The Servicer shall allocate such amounts to each Series of Investor
Certificates and to the Holder of the Exchangeable Seller Certificate in
accordance with Article IV and shall withdraw the required amounts from the
Collection Account or pay such amounts to the Holder of the Exchangeable Seller
Certificate in accordance with Article IV.  The Servicer shall make such
deposits or payments on the date indicated therein by wire transfer or as
otherwise provided in the Supplement for any Series of Certificates with respect
to such Series.

          Notwithstanding anything in this Agreement to the contrary, for so
long as, and only so long as, the Seller shall remain the Servicer hereunder and
(a)(i) the Servicer provides to the Trustee a letter of credit or

                                       75
<PAGE>
 
other arrangement covering risk of collection of the Servicer acceptable to the
Rating Agency (as evidenced by letters from the Rating Agency) and (ii) the
Seller and the Trustee shall have received a notice from the Rating Agency that
such letter of credit or other arrangement would not result in the lowering or
withdrawal of such Rating Agency's then-existing rating of any Series of
Investor Certificates or (b) the Servicer, or for so long as the Seller is the
Servicer and an Affiliate of Peoples' Bank, People's Bank (unless Moody's or
Standard & Poor's shall have notified the Servicer that making monthly deposits
will result in the reduction or withdrawal of its then-existing rating of the
Certificates) shall have and maintain a certificate of deposit or short-term
deposit rating of P-1 by Moody's and of at least A-1 by Standard & Poor's and
deposit insurance as required by law and by the FDIC, the Servicer need not
deposit Collections to the Collection Account in the manner provided in this
Article IV or make payments to the Holder of the Exchangeable Seller Certificate
prior to the close of business on the day any Collections are deposited in the
Collection Account as provided in Article IV, but may make such deposits,
payments and withdrawals on the Transfer Date in the Monthly Period following
the Monthly Period in which such amounts were collected in an amount equal to
the net amount of such deposits, payments and withdrawals which would have been
made but for the provisions of this paragraph.

          (b)  Allocation of Collections Between Finance Charge Receivables and
               ----------------------------------------------------------------
Principal Receivables.  On each Business Day, the Servicer shall allocate
- ---------------------                                                    
Collections processed on the Accounts to Finance Charge Receivables to the
extent of the sum of (i) the amount of Finance Charge Receivables billed on such
Accounts on such day and (ii) the amount of any Finance Charge Receivables for
prior days which were not covered by Collections for such prior days or by
Collections thereafter allocated to Finance Charge Receivables; provided,
                                                                -------- 
however, that all Collections which constitute Recoveries and Interchange shall
- -------                                                                        
be allocated to Finance Charge Receivables as shall investment earnings with
respect to amounts on deposit in the Excess Funding Account.  The balance of the
Collections processed on any Account for any Monthly Period shall be allocated
to Principal Receivables.

                                       76
<PAGE>
 
               (c)  Allocation of Collections of Recoveries and Defaulted
                    -----------------------------------------------------
Accounts.
- -------- 

               (i)  On the date on which an Account becomes a Defaulted Account,
     the Trust shall automatically and without further action or consideration
     be deemed to transfer, set over, and otherwise convey to the Seller,
     without recourse, representation or warranty, all the right, title and
     interest of the Trust in and to the Receivables in such Defaulted Account,
     all monies due or to become due with respect thereto, all proceeds of such
     Receivables and Interchange allocable to the Trust with respect to such
     Receivable, excluding  Recoveries relating thereto, which shall remain a
     part of the Trust Assets.

               (ii)  On each Determination Date, the Servicer shall calculate
     the Aggregate Investor Default Amount for the preceding Monthly Period with
     respect to each Series.

               (d)  Adjustments for Miscellaneous Credits and Fraudulent
                    ----------------------------------------------------
Charges.

               (i)  The Servicer shall be obligated to reduce or adjust, as the
     case may be, on a net basis the aggregate amount of Principal Receivables
     as provided in this subsection 4.2(d) (a "Credit Adjustment") with respect
     to any Principal Receivable (i) which was created in respect of merchandise
     refused or returned by the obligor thereunder or as to which the Obligor
     thereunder has asserted a counterclaim or defense, (ii) which is reduced by
     the Servicer by any charge-back or adjustment, (iii) which was created as a
     result of a fraudulent or counterfeit charge, (iv) which results from
     adjustments relating to returned or dishonored checks, or (v) which results
     from Servicer error.

               (ii)  In the event that the exclusion of the amount of a Credit
     Adjustment from the calculation of the Seller Interest would cause the
     Seller Interest to be an amount

                                       77
<PAGE>
 
     less than the Minimum Seller Interest the Seller shall make a deposit, no
     later than the Business Day following the Date of Processing of such Credit
     Adjustment, in the Excess Funding Account (for allocation as a Principal
     Receivable pursuant to Article IV) in immediately available funds in an
     amount equal to the amount by which such Credit Adjustment would have
     reduced the Seller Interest below the Minimum Seller Interest.

          (e)  Unallocated Principal Collections; Excess Funding Account.  On
               ---------------------------------------------------------     
each Business Day, Shared Principal Collections shall be allocated to
outstanding Series pro rata based on the Principal Shortfall, if any, for each
such Series.  The Servicer shall pay any remaining Shared Principal Collections
on such Business Day to the holder of the Exchangeable Seller Certificate;
                                                                          
provided, that to the extent that the Seller Interest as determined on such
- --------                                                                   
Business Day does not exceed the Minimum Seller Interest, such Shared Principal
Collections shall be deposited in the Excess Funding Account, or, on and after
the first day of the Amortization Period with respect to any Series, such Shared
Principal Collections shall be deposited in the principal funding account of
such Series to the extent specified in the related Supplement until the
principal funding account of such Series has been funded in full or the Holders
of the Investor Certificates of such Series have been paid in full; provided,
                                                                    -------- 
further, that if an Amortization Period has commenced and is continuing with
- -------                                                                     
respect to more than one outstanding Series, such Shared Principal Collections
shall be allocated to such Series pro rata based on the Investor Percentage for
Principal Receivables applicable for such Series.

          (f)  Amounts in Excess Funding Account.  Amounts on deposit in the
               ---------------------------------                            
Excess Funding Account on any Business Day will be invested by the Seller (or,
at the direction on the Seller, by the Servicer or the Trustee on behalf of the
Seller) in Permitted Investments maturing on the next Business Day.  Earnings
from such investments received shall be deposited in the Collection Account and
treated as Collections of Finance Charge Receivables.  Any investment
instructions to the Trustee shall be in writing and shall include a
certification that the proposed investment is a Permitted Investment

                                       78
<PAGE>
 
that matures at or prior to the date required by this Agreement.  If on any
Business Day the Seller Interest is greater than the Minimum Seller Interest,
amounts on deposit in the Excess Funding Account shall be released to the Holder
of the Exchangeable Seller Certificate.  On each Business Day, amounts on
deposit in the Excess Funding Account (other than investment earnings thereon)
shall be allocated to each outstanding series in an Amortization Period pro rata
based on the aggregate outstanding principal amount of such series on the last
day of the applicable Revolving Period.


               [THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL BE SPECIFIED
               IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]

                                       79
<PAGE>
 
                                   ARTICLE V

                        [ARTICLE V IS RESERVED AND SHALL
                         BE SPECIFIED IN ANY SUPPLEMENT
                          WITH RESPECT TO ANY SERIES]

                                       80
<PAGE>
 
                                   ARTICLE VI


                                THE CERTIFICATES

          Section 6.1  The Certificates.  Subject to Sections 6.10 and 6.11, the
                       ----------------                                         
Investor Certificates of each Series and any class thereof may be issued in
bearer form (the "Bearer Certificates") with attached interest coupons and a
special coupon (collectively, the "Coupons") or in fully registered form (the
"Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the related Supplement.  The
Exchangeable Seller Certificate shall be substantially in the form of Exhibit A.
The Investor Certificates and the Exchangeable Seller Certificate shall, upon
issuance pursuant hereto or to Section 6.9 or Section 6.11, be executed and
delivered by the Seller to the Trustee for authentication and redelivery as
provided in Section 2.8 and 6.2.  The Investor Certificates shall be issuable in
a minimum denomination of $1,000 and integral multiples thereof unless otherwise
specified in any Supplement.  If specified in the related Supplement for any
Series, the Investor Certificates shall be issued upon initial issuance as a
single certificate in an original principal amount equal to the Initial Investor
Interest as described in Section 6.10.  The Exchangeable Seller Certificate
shall also be issued as a single certificate.  Each Certificate shall be
executed by manual or facsimile signature on behalf of the Seller by its
President or any Vice President.  Certificates bearing the manual or facsimile
signature of the individual who was, at the time when such signature was
affixed, authorized to sign on behalf of the Seller or the Trustee shall not be
rendered invalid, notwithstanding that such individual has ceased to be so
authorized prior to the authentication and delivery of such Certificates or does
not hold such office at the date of such Certificates.  No Certificate shall be
entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Certificate a certificate of authentication
substantially in the form provided for herein, executed by or on behalf of the
Trustee by the manual signature of a Responsible Officer of the Trustee, and
such certificate upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder.  All

                                       81
<PAGE>
 
Certificates shall be dated the date of their authentication except Bearer
Certificates which shall be dated the applicable Issuance Date as provided in
the related Supplement.

          Section 6.2  Authentication of Certificates.  Contemporaneously with
                       ------------------------------                         
the initial assignment and transfer of the Receivables, whether now existing or
hereafter created and the other components of the Trust Assets to the Trust, the
Trustee shall authenticate and deliver the initial Series of Investor
Certificates, upon the order of the Seller, to the underwriters for the sale of
the Book-Entry Certificates evidenced by such Investor Certificates, and against
payment to the Seller of the Initial Investor Interest (net of any purchase
discount or underwriting discounts).  Upon the receipt of such payment and the
issuance of the Investor Certificates, such Investor Certificates shall be fully
paid and non-assessable.  The Trustee shall authenticate and deliver the
Exchangeable Seller Certificate to the Seller simultaneously with its delivery
to the Seller of the initial Series of Investor Certificates.  Upon an Exchange
as provided in Section 6.9 and the satisfaction of certain other conditions
specified therein, the Trustee shall authenticate and deliver the Investor
Certificates of additional Series (with the designation provided in the related
Supplement), upon the order of the Seller, to the persons designated in such
Supplement.  Upon the order of the Seller, the Certificates of any Series shall
be duly authenticated by or on behalf of the Trustee, in authorized
denominations equal to (in the aggregate) the Initial Investor Interest of such
Series of Investor Certificates.  If specified in the related Supplement for any
Series, the Trustee shall authenticate and deliver outside the United States the
Global Certificate that is issued upon original issuance thereof, upon the
written order of the Seller, to the Depository as provided in Section 6.10
against payment of the purchase price therefor.  If specified in the related
Supplement for any Series, the Trustee shall authenticate Book-Entry
Certificates that are issued upon original issuance thereof, upon the written
order of the Seller, to a Clearing Agency or its nominee as provided in Section
6.11 against payment of the purchase price thereof.

                                       82
<PAGE>
 
          Section 6.3  Registration of Transfer and Exchange of Certificates.
                       ----------------------------------------------------- 

          (a)  The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (the "Transfer Agent and
Registrar"), in accordance with the provisions of Section 11.16, a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Investor Certificates of each Series (unless otherwise
provided in the related Supplement) and of transfers and exchanges of the
Investor Certificates as herein provided.  Bankers Trust Company is hereby
initially appointed Transfer Agent and Registrar for the purposes of registering
the Investor Certificates and transfers and exchanges of the Investor
Certificates as herein provided.  In the event that Bankers Trust Company shall
no longer be the Transfer Agent and Registrar, the Trustee shall appoint a
successor Transfer Agent and Registrar reasonably acceptable to the Seller and
the Servicer.

          The Trustee may revoke such appointment and remove Bankers Trust
Company as Transfer Agent and Registrar if the Trustee determines in its sole
discretion that Bankers Trust Company failed to perform its obligations under
this Agreement in any material respect.  Bankers Trust Company shall be
permitted to resign as Transfer Agent and Registrar upon 30 days' written notice
to the Seller and the Servicer; provided, however, that such resignation shall
                                --------  -------                             
not be effective and Bankers Trust Company shall continue to perform its duties
as Transfer Agent and Registrar until the Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to the Seller and the
Servicer.

          Upon surrender for registration of transfer of any Certificate at any
office or agency of the Transfer Agent and Registrar, the Seller shall execute
subject to the provisions of subsection 6.3(d), and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of like
aggregate fractional Undivided Interests; provided, however, that the provisions
                                          --------  -------                     
of this paragraph shall not apply to Bearer Certificates.

                                       83
<PAGE>
 
          At the option of an Investor Certificateholder, Investor Certificates
may be exchanged for other Investor Certificates of the same Series in
authorized denominations of like aggregate fractional Undivided Interests, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency.  At the option of any Registered Certificateholder, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Register maintained for such purpose.
At the option of a Bearer Certificateholder, subject to applicable laws and
regulations, Bearer Certificates may be exchanged for other Bearer Certificates
or Registered Certificates of the same Series in authorized denominations of
like aggregate Undivided Interests in the Trust, in the manner specified in the
Supplement for such Series upon surrender of the Bearer Certificates to be
exchanged at an office or agency of the Transfer Agent and Registrar located
outside the United States.  Each Bearer Certificate surrendered pursuant to this
Section 6.3 shall have attached thereto (or be accompanied by) all unmatured
coupons, provided that any Bearer Certificate so surrendered after the close of
business on the Record Date preceding the relevant Distribution Date after the
related Series Termination Date need not have attached the Coupons related to
such Distribution Date.

          The preceding provisions of this Section 6.3 notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not be
required to register the transfer of or exchange any Investor Certificate of any
Series for a period of 15 days preceding the due date for any payment with
respect to the Investor Certificate of such Series.

          Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Seller shall execute, and the Trustee shall authenticate and
(unless the Transfer Agent and Registrar is different than the Trustee, in which
case the Transfer Agent and Registrar shall) deliver, the Investor Certificates
of such Series which the Certificateholder making the exchange is entitled to
receive.  Every Investor Certificate presented or surrendered for registration
of transfer or exchange

                                       84
<PAGE>
 
shall be accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the
Certificateholder thereof or his attorney-in-fact duly authorized in writing.

          Unless otherwise provided in the related Supplement, no service charge
shall be made for any registration of transfer or exchange of Investor
Certificates, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Investor Certificates.

          All Investor Certificates (together with any Coupons attached to
Bearer Certificates) surrendered for registration of transfer or exchange shall
be cancelled by the Transfer Agent and Registrar and disposed of in the
Trustee's normal and customary manner.  The Trustee shall cancel and destroy the
Global Certificate upon its exchange in full for Definitive Certificates and
shall deliver a certificate of destruction to the Seller.  Such certificates
shall also state that a certificate or certificates of each Foreign Clearing
Agency was received with respect to each portion of the Global Certificate
exchanged for Definitive Certificates.

          The Seller shall execute and deliver to the Trustee or the Transfer
Agent and Registrar as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.

          (b)  Except as provided in Section 6.9 or 7.2, in no event shall the
Exchangeable Seller Certificate or any interest therein be transferred
hereunder, in whole or in part, unless the Seller shall have consented in
writing to such transfer and unless the Trustee shall have received (i) a
Supplement specifying the Principal Terms of such Series, (ii) if required by
the Supplement, the form of Enhancement, (iii) if an Enhancement is required by
the Supplement, an appropriate Enhancement Agreement, (iv) the existing
Exchangeable Seller Certificate and, if applicable, the certificates
representing the Series to be exchanged, (v) an Officer's Certificate of the
Seller that on the date the Exchange

                                       85
<PAGE>
 
occurs, after giving effect to such Exchange, the Seller Interest will be at
least equal to the Minimum Seller Interest, (vi) confirmation in writing from
the Rating Agency that such transfer will not result in a reduction or
withdrawal of its then-existing rating of any Series of Investor Certificates,
(vii) an Opinion of Counsel that such transfer (x) does not adversely affect the
Federal or state income tax characterization of any class of Investor
Certificates as indebtedness of the Seller, (y) will not result in the Trust
being classified as an association taxable as a corporation for Federal income
tax purposes, or as a taxable entity for applicable state income tax purposes
and (z) will not be treated as an exchange to any outstanding class of Investor
Certificateholders, and (viii) in the case of the transfer of the Exchangeable
Seller Certificate as a whole, an agreement supplemental hereto, executed and
delivered to the Trustee in form satisfactory to the Trustee, in which the
transferee of the Exchangeable Seller Certificate expressly assumes the
performance of every covenant and obligation of the Seller, as Holder of the
Exchangeable Seller Certificate, as applicable hereunder, and pursuant to which
such transferee shall benefit from all the rights granted to the Seller, as
Holder of the Exchangeable Seller Certificate, applicable hereunder; provided
that a transfer of the Exchangeable Seller Certificate shall not release the
Seller from any of its obligations under this Agreement unless effected pursuant
to Section 7.2(b).

          The Holder of the Exchangeable Seller Certificate, by its acceptance
of the Exchangeable Seller Certificate, acknowledges that its obligation to make
the payments required by Section 4.2(b)(ii) is a full recourse obligation.

          (c)  The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, the City of New York (and subject to Section 6.3, if
specified in the related Supplement for any Series, any other city designated in
such Supplemental) an office or offices or an agency or agencies where Investor
Certificates of such Series may be surrendered for registration of transfer or
exchange (except that Bearer Certificates may not be surrendered for exchange at
any such office or agency in the United States).

                                       86
<PAGE>
 
          (d)  Unless otherwise provided in the related Supplement, registration
of transfer of Registered Certificates containing a legend relating to the
restrictions on transfer of such Registered Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates) shall be
effected only if the conditions set forth in such related Supplement are
satisfied.

          Whenever a Registered Certificate containing the legend set forth in
the related Supplement is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall promptly seek
instructions from the Servicer regarding such transfer.  The Transfer Agent and
Registrar and the Trustee shall be entitled to receive written instructions
signed by a Servicing Officer prior to registering any such transfer or
authenticating new Registered Certificates, as the case may be.  The Servicer
hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and
to hold each of them harmless against any loss, liability or expense incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by them in reliance on any such written
instructions furnished pursuant to subsection 6.3(d).

          Section 6.4  Mutilated, Destroyed, Lost or Stolen Certificates.  If
                       -------------------------------------------------     
(a) any mutilated Certificate (together, in the case of Bearer Certificates,
with all unmatured Coupons, if any, pertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of a bona fide purchaser, the Seller
shall execute and the Trustee shall authenticate and (unless the Transfer Agent
and Registrar is different from the Trustee, in which case the Transfer Agent
and Registrar shall) deliver (in compliance with applicable law), in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and aggregate Undivided Interest.  In connection
with the issuance of any new Certificate under this Section 6.4, the Trustee or
the Transfer Agent and

                                       87
<PAGE>
 
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Transfer Agent
and Registrar) connected therewith.  Any duplicate Certificate issued pursuant
to this Section 6.4 shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.

          Section 6.5  Persons Deemed Owners.  Prior to due presentation of a
                       ---------------------                                 
Certificate (other than a Bearer Certificate) for registration of transfer, the
Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any
of them may treat the Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions pursuant to
Article V and for all other purposes whatsoever, and none of the Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary; provided, however, that in
                                                 --------  -------         
determining whether the holders of Investor Certificates evidencing the
requisite Undivided Interests have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Investor Certificates owned by
the Seller, the Servicer or any Affiliate thereof shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Investor Certificates which a
Responsible Officer in the Corporate Trust Office of the Trustee knows to be so
owned shall be so disregarded.

          In the case of a Bearer Certificate, the Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat the
bearer of a Bearer Certificate or Coupon as the owner of such Bearer Certificate
or Coupon for the purpose of receiving distributions pursuant to Article IV and
Article XII and for all other purposes whatsoever, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary.  Certificates so owned which
have been pledged in good faith shall not be disregarded and may be regarded as
outstanding, if the pledgee establishes to

                                       88
<PAGE>
 
the satisfaction of the Trustee the pledgee's right so to act with respect to
such Investor Certificates and that the pledgee is not the Seller, the Servicer
or an Affiliate thereof.

          Section 6.6  Appointment of Paying Agent.
                       --------------------------- 

          (a)  The Paying Agent shall make distributions to Investor
Certificateholders from the appropriate account or accounts maintained for the
benefit of Certificateholders as specified in the related Supplement for any
Series pursuant to Articles IV and V hereof.  Any Paying Agent shall have the
revocable power to withdraw funds from such appropriate account or accounts for
the purpose of making distributions referred to above.  The Trustee may revoke
such power and remove the Paying Agent, if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect or for other good cause.  The
Paying Agent, unless the Supplement with respect to any Series states otherwise,
shall initially be Bankers Trust Company.  Bankers Trust Company shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Servicer
effective only upon the appointment of another Paying Agent.  In the event that
Bankers Trust Company shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).  The Trustee shall cause such successor Paying Agent or any additional
Paying Agent appointed by the Trustee to execute and deliver to the Trustee an
instrument in which such successor Paying Agent or additional Paying Agent shall
agree with the Trustee that as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment to
the Investor Certificateholders in trust for the benefit of the Investor
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders.  The Paying Agent shall return all unclaimed funds to the
Collection Account or such other Series Account established pursuant to the
Supplement with respect to any Series in the manner provided in the related
Supplement and upon removal of a Paying Agent, such Paying Agent shall return
all funds in its possession to the Collection Account or such other account
established pursuant to the Supplement with respect to any Series in the manner
provided in the related Supple-

                                       89
<PAGE>
 
ment.  The provisions of Sections 11.1, 11.2 and 11.3 shall apply to the Trustee
also in its role as Paying Agent for so long as the Trustee shall act as Paying
Agent.  Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.

          If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding, the Seller shall maintain
a co-paying agent in New York City (for Registered Certificates only) or any
other city designated in such Supplement which, if and so long as any Series of
Investor Certificates is listed on the Luxembourg Stock Exchange or other stock
exchange and such exchange so requires, shall be in Luxembourg or the location
required by such other stock exchange.

          (b)  The Trustee shall cause the Paying Agent (other than itself) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree, and if the Trustee is the Paying Agent it
hereby agrees, that it shall comply with all requirements of the Internal
Revenue Code regarding the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate Owners.

          Section 6.7  Access to List of Certificateholders' Names and
                       -----------------------------------------------
Addresses.  The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Servicer or the Paying Agent, within five Business
Days after receipt by the Trustee of a request therefor from the Servicer or the
Paying Agent, respectively, in writing, a list of the names and addresses of the
Investor Certificateholders (other than Bearer Certificateholders) as of the
most recent Record Date for payment of distributions to Investor
Certificateholders.  Unless otherwise provided in the related Supplement,
holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 10% of the Investor Interest of the Investor Certificates of any
Series (the "Applicants") apply in writing to the Trust-

                                       90
<PAGE>
 
ee, and such application states that the Applicants desire to communicate with
other Investor Certificateholders of any Series with respect to their rights
under this Agreement or under the Investor Certificates and is accompanied by a
copy of the communication which such Applicants propose to transmit, then the
Trustee, after having been adequately indemnified by such Applicants for its
costs and expenses, shall afford or shall cause the Transfer Agent and Registrar
to afford such Applicants access during normal business hours to the most recent
list of Certificateholders (other than Bearer Certificateholders) held by the
Trustee and shall give the Servicer notice that such request has been made,
within a reasonable time but in any event not to exceed ten Business Days after
the receipt of such application.  Such list shall be as of a date no more than
45 days prior to the date of receipt of such Applicants' request.  Every
Certificateholder, by receiving and holding a Certificate, agrees with the
Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of
their respective agents shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was obtained.

          Section 6.8  Authenticating Agent.
                       -------------------- 

          (a)  The Trustee may appoint one or more authenticating agents with
respect to the Certificates which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent.  Each authenticating agent must be
acceptable to the Seller.

          (b)  Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the

                                       91
<PAGE>
 
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.

          (c)  An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Seller.  The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Seller.  Upon receiving such
a notice of resignation or upon such a termination, or in case at any time an
authenticating agent shall cease to be acceptable to the Trustee or the Seller,
the Trustee promptly may appoint a successor authenticating agent.  Any
successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No  successor authenticating agent shall be appointed unless acceptable to the
Trustee and the Seller.

          (d)  The Trustee agrees to pay each authenticating agent from time to
time reasonable compensation for its services under this Section 6.8, and the
Trustee shall be entitled to be reimbursed and the Servicer shall reimburse the
Trustee for such reasonable payments actually made, subject to the provisions of
Section 11.5.

               (e)  The provisions of Sections 11.1, 11.2 and 11.3 shall be
applicable to any authenticating agent.

          (f)  Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:

          This is one of the certificates described in the Pooling and Servicing
Agreement.


                      _____________________________
                      as Authenticating Agent
                           for the Trustee,
   
                 By:  _____________________________
                      Authorized Officer

                                       92
<PAGE>
 
          Section 6.9  Tender of Exchangeable Seller Certificates.
                       ------------------------------------------ 

          (a)  Upon any Exchange, the Trustee shall issue to the Holder of the
Exchangeable Seller Certificate under Section 6.1, for execution and redelivery
to the Trustee for authentication under Section 6.2, one or more new Series of
Investor Certificates.  Any such Series of Investor Certificates shall be
substantially in the form specified in the related Supplement and shall bear,
upon its face, the designation for such Series to which it belongs so selected
by the Seller.  Except as specified in any Supplement for a related Series, all
Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof (except that the Enhancement provided for
any Series shall not be available for any other Series) without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Agreement
and the related Supplement.

          (b)  The Holder of the Exchangeable Seller Certificate may tender the
Exchangeable Seller Certificate to the Trustee in exchange for (i) one or more
newly issued Series of Investor Certificates and (ii) a reissued Exchangeable
Seller Certificate (any such tender, a "Seller Exchange").  In addition, to the
extent permitted for any Series of Investor Certificates as specified in the
related Supplement, the Seller may tender the Investor Certificates of such
Series owned by the Seller and the Holder of the Exchangeable Seller certificate
may tender the Exchangeable Seller Certificate to the Trustee pursuant to the
terms and conditions set forth in such Supplement in exchange for (i) one or
more newly issued Series of Investor Certificates and (ii) a reissued
Exchangeable Seller Certificate (an "Investor Exchange").  The Seller Exchange
and Investor Exchange are referred to collectively herein as an "Exchange."  The
Holder of the Exchangeable Seller Certificate may perform and Exchange by
notifying the Trustee, in writing at least three days in advance (an "Exchange
Notice") of the date upon which the Exchange is to occur (an "Exchange Date").
Any Exchange Notice shall state the designation of any Series to be issued on
the Exchange Date and, with respect to each such Series: (a) its Initial
Investor Interest (or the method for calculating such Initial Investor Inter-

                                       93
<PAGE>
 
est), which at any time, may not be greater than the current principal amount of
the Exchangeable Seller Certificate at such time (or in the case of an Investor
Exchange, the sum of the Investor Interest of the Series of Investor
Certificates to be exchanged plus the current principal amount of the
Exchangeable Seller Certificate), (b) its Certificate Rate (or the method for
allocating interest payments or other cash flow to such Series), if any, and (c)
the provider or providers of the Enhancement, if any, with respect to such
Series.  On the Exchange Date, the Trustee shall only authenticate and deliver
any such Series of Investor Certificates upon delivery to it of the following:
(a) a Supplement satisfying the criteria set forth in subsection 6.9(c) executed
by the Seller and specifying the Principal Terms of such Series, (b) the
applicable Enhancement, if any, (c) the agreement, if any, pursuant to which the
Enhancement Provider agrees to provide the Enhancement, if any, (d) an Opinion
of Counsel to the effect that, unless otherwise stated in the related
Supplement, the newly issued Series of Investor Certificates will be treated as
debt of the Seller for Federal, New York and Connecticut income tax purposes,
that the issuance of the newly issued Series of Investor Certificates will not
adversely affect the Federal, New York and Connecticut income tax
characterization of the Holder of any outstanding Series of Investor
Certificates or any Certificate Owner or result in the trust being subject to
Federal, New York or Connecticut tax at the entity level, (e) written
confirmation from the Rating Agency that the Exchange will not result in the
Rating Agency's reducing or withdrawing its rating on any then outstanding
Series rated by it, (f) an Officer's Certificate signed by a Vice President (or
any more senior officer) of the Seller, that on the Exchange Date (i) the
Seller, after giving effect to such Exchange, would not be required to add
Additional Accounts pursuant to subsection 2.6(e) and (ii) after giving effect
to such Exchange, the Seller Interest would be at least equal to the Minimum
Seller Interest, and (g) the existing Exchangeable Seller Certificate or
applicable Investor Certificates, as the case may be.  Upon satisfaction of such
conditions, the Trustee shall cancel the existing Exchangeable Seller
Certificate or applicable Investor Certificates, as the case may be, and issue,
as provided above, such Series of Investor Certificates and a new Exchangeable
Seller Certificate, dated the

                                       94
<PAGE>
 
Exchange Date.  There is no limit to the number of Exchanges that may be
performed under this Agreement.

          (c)  In conjunction with an Exchange, the parties hereto shall execute
a Supplement, which shall specify the relevant terms with respect to any Series
of Investor Certificates, which may include without limitation:  (i) its name or
designation, (ii) an Initial Investor Interest or the method of calculating the
Initial Investor Interest, (iii) the Certificate Rate (or formula for the
determination thereof), (iv) the Closing Date, (v) the rating agency or agencies
rating such Series, (vi) the interest payment date or dates and the date or
dates from which interest shall accrue, including the Interest Accrual Period,
(vii) the name of the Clearing Agency, if any, (viii) the rights, if any, of the
Holder of the Exchangeable Seller Certificate that have been transferred to the
Holders of such Series pursuant to such Exchange (including any rights to
allocations of Collections of Finance Charge Receivables and Principal
Receivables), (ix) the interest payment date or dates and the date or dates from
which interest shall accrue, (x) the method of allocating Collections with
respect to Principal Receivables for such Series and, if applicable, with
respect to other Series and the method by which the principal amount of Investor
Certificates of such Series shall amortize or accrete and the method for
allocating Collections with respect to Finance Charge Receivables and
Receivables in Defaulted Accounts, (xi) the names of any accounts to be used by
such Series and the terms governing the operation of any such account, (xii) the
Series Servicing Fee Percentage, (xiii) the Minimum Seller Interest, (xiv) the
Minimum Aggregate Principal Receivables, (xv) the Series Termination Date, (xvi)
the terms or any Enhancement with respect to such Series, (xvii) the Enhancement
Provider, if applicable, (xviii) the Base Rate applicable to such Series, (xix)
the Repurchase Terms or the terms on which the Certificates of such Series may
be remarketed to other investors, (xx) any deposit into any account maintained
for the benefit of the Certificateholders of such Series, (xxi) the number of
Classes of such Series, and if more than one Class, the rights and priorities of
each such Class, (xxii) the extent to which the Investor Certificates will be
issuable in temporary or permanent global form, and in such case, the depositary
for such global certificate or certificates, the terms and conditions, if any,
upon

                                       95
<PAGE>
 
which such global certificate may be exchanged in whole or in part for
Definitive Certificates, and the manner in which any interest payable on a
temporary or global certificate will be paid, (xxiii) whether the Certificates
may be issued in bearer form and any limitations imposed thereon, (xxiv) whether
Interchange or other fees will be included in the funds available to be paid for
such Series, (xxv) the priority of any Series with respect to any other Series,
(xxvi) the Pool Factor, (xxvii) the Pool Amount and (xxviii) any other relevant
terms of such Series (all such terms, the "Principal Terms" of such Series).  If
on the date of the issuance of such Series there is issued and outstanding one
or more Series of Investor Certificates and no Series of Investor Certificates
is currently rated by a Rating Agency, then as a condition to such Exchange a
nationally recognized investment banking firm or commercial bank shall also
deliver to the Trustee an officer's certificate stating, in substance, that the
Exchange will not have an adverse effect on the timing or distribution of
payments to such other Series of Investor Certificates then issued and
outstanding.

          Section 6.10  Global Certificate; Euro-Certificate Exchange Date.  If
                        --------------------------------------------------     
specified in the related Supplement for any Series, the Investor Certificates
may be initially issued in the form of a single temporary Global Certificate
(the "Global Certificate") in bearer form, without interest coupons, in the
denomination of the Initial Investor Interest and substantially in the form
attached to the related Supplement.  Unless otherwise specified in the related
Supplement, the provisions of this Section 6.10 shall apply to such Global
Certificate.  The Global Certificate will be authenticated by the Trustee upon
the same conditions, in substantially the same manner and with the same effect
as the Definitive Certificates.  The Global Certificate may be exchanged in the
manner described in the related Supplement for Registered and/or Bearer
Certificates in definitive form (the "Definitive Euro-Certificates").

          Section 6.11  Book-Entry Certificates.  Unless otherwise provided in
                        -----------------------                               
any related Supplement, the Investor Certificates, upon original issuance, shall
be issued in the form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the depository specified in such Supplement
(the "Depository") which

                                       96
<PAGE>
 
shall be the Clearing Agency, by or on behalf of such Series.  The Investor
Certificates of each Series shall unless otherwise provided in the related
Supplement initially be registered on the Certificate Register in the name of
the nominee of the Clearing Agency.  No Certificate Owner will receive a
definitive certificate representing such Certificate Owner's interest in the
related Series of Investor Certificates, except as provided in Section 6.13.
Unless and until definitive, fully registered Investor Certificates of any
Series ("Definitive Certificates") have been issued to Certificate Owners
pursuant to Section 6.13:

               (i)  the provision of this Section 6.11 shall be in full force
     and effect with respect to each such Series;

               (ii)  the Seller, the Servicer, the Paying Agent, the Transfer
     Agent and Registrar and the Trustee may deal with the Clearing Agency and
     the Clearing Agency Participants for all purposes (including the making of
     distributions on the Investor Certificates of each such Series) as the
     authorized representatives of the Certificate Owners;

               (iii)  to the extent that the provisions of this Section 6.11
     conflict with any other provisions of this Agreement, the provisions of
     this Section 6.11 shall control with respect to each such Series; and

               (iv)  the rights of Certificate Owners of each such Series shall
     be exercised only through the Clearing Agency and the applicable Clearing
     Agency Participants and shall be limited to those established by law and
     agreements between such Certificate Owners and the Clearing Agency and/or
     the Clearing Agency Participants.  Pursuant to the Depository Agreement
     applicable to a Series, unless and until Definitive Certificates of such
     Series are issued pursuant to Section 6.13, the initial Clearing Agency
     will make book-entry transfers among the Clearing Agency Participants and
     receive and transmit distributions of

                                       97
<PAGE>
 
     principal and interest on the Investor Certificates to such Clearing Agency
     Participants.

          Section 6.12  Notices to Clearing Agency.  Whenever notice or other
                        --------------------------                           
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 6.13, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Investor
Certificates to the Clearing Agency for distribution to Holders of Investor
Certificates.

          Section 6.13  Definitive Certificates.  If (i) (A) the Seller advises
                        -----------------------                                
the Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities under the applicable Depository
Agreement, and (B) the Trustee or the Seller is unable to locate a qualified
successor, (ii) the Seller, at its option, advises the Trustee in writing that
it elects to terminate the book-entry system through the Clearing Agency with
respect to any Series of Certificates or (iii) after the occurrence of a
Servicer Default, Certificate Owners of a Series representing beneficial
interests aggregating not less than 50% of the Investor Interest of such Series
advise the Trustee and the applicable Clearing Agency through the applicable
Clearing Agency Participants in writing that the continuation of a book-entry
system through the applicable Clearing Agency is no longer in the best interests
of the Certificate Owners, the Clearing Agency shall notify all Certificate
Owners of such Series, through the applicable Clearing Agency Participants, of
the occurrence of any such event and of the availability of Definitive
Certificates to Certificate Owners of such Series requesting the same.  Upon
surrender to the Trustee of the Investor Certificates of such Series by the
applicable Clearing Agency, accompanied by written registration instructions
from the applicable Clearing Agency for registration, the Trustee shall issue
the Definitive Certificates of such Series.  Neither the Seller nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates of such Series all references
herein to obligations imposed upon or to be performed by the applicable Clearing
Agency shall be deemed to be

                                       98
<PAGE>
 
imposed upon and performed by the Trustee, to the extent applicable with respect
to such Definitive Certificates, and the Trustee shall recognize the Holders of
the Definitive Certificates of such Series as Certificateholders of such Series
hereunder.

          Section 6.14  Meetings of Certificateholders.  To the extent provided
                        ------------------------------                         
by the Supplement for any Series issued in whole or in part in Bearer
Certificates, the Servicer or the Trustee may at any time call a meeting of the
Certificateholders of such Series, to be held at such time and at such place as
the Servicer or the Trustee, as the case may be, shall determine, for the
purpose of approving a modification of or amendment to, or obtaining a waiver
of, any covenant or condition set forth in this Agreement with respect to such
Series or in the Certificates of such Series, subject to Section 13.1 of the
Agreement.

                              [End of Article VI]

                                       99
<PAGE>
 
                                  ARTICLE VII

                      OTHER MATTERS RELATING TO THE SELLER
          Section 7.1  Liability of the Seller.  The Seller shall be liable in
                       -----------------------                                
accordance herewith to the extent of the obligations specifically undertaken by
the Seller.

          Section 7.2  Merger or Consolidation of, or Assumption of the
                       ------------------------------------------------
Obligation of, the Seller.
- ------------------------- 

          (a)  The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:

               (i)  the corporation formed by such consolidation or into which
     the Seller is merged or the Person which acquires by conveyance or
     transfers the properties and assets of the Seller substantially as an
     entirety shall be, if the Seller is not the surviving entity, organized and
     existing under the laws of the United States of America or any State or the
     District of Columbia, and shall be a state or national banking association
     that is not subject to the Bankruptcy Code of 1978, as amended from time to
     time, or to any successor statute, if the Seller is not the surviving
     entity, and shall expressly assume, by an agreement supplemental hereto,
     executed and delivered to the Trustee and the Enhancement Provider, to the
     extent so provided in the applicable Supplement, in form satisfactory to
     the Trustee, the performance of every covenant and obligation of the
     Seller, as applicable hereunder and shall benefit from all the rights
     granted to the Seller, as applicable hereunder (to the extent that any
     right, covenant or obligation of the Seller, as applicable hereunder, is
     inapplicable to the successor entity (because such successor entity is not
     a Connecticut capital stock savings bank), such successor entity shall be
     subject to such covenant or obligation, or benefit from such right, as
     would

                                      100
<PAGE>
 
     apply, to the extent practicable, to such successor entity); and

               (ii)  the Seller has delivered to the Trustee and the Rating
     Agencies an Officer's Certificate signed by a Vice President (or any more
     senior officer) of the Seller stating that such consolidation, merger,
     conveyance or transfer and such supplemental agreement comply with this
     Section 7.2 and that all conditions precedent herein provided for relating
     to such transaction have been complied with and an Opinion of Counsel that
     such supplemental agreement is legal, valid and binding.

          (b)  The obligations of the Seller hereunder shall not be assignable
nor shall any Person succeed to the obligations of the Seller hereunder except
(i) for mergers, consolidations, assumptions or transfers in accordance with the
provisions of the foregoing paragraph or (ii) other sales, transfers, or pledges
including transfers of the Accounts, or other mergers, assumptions or
consolidations other than those permitted by subsection 7.2(a) (A) which the
Seller and the Servicer determine will not be adverse to the Interests of the
Certificateholders of any Series, (B) which the Rating Agency has advised the
Seller and the Trustee in writing will not result in the reduction or withdrawal
of its then-existing rating of the Certificates of any Series, (C) for which
such purchaser, transferee, pledgee or entity shall expressly assume, in an
agreement supplemental hereto, executed and delivered to the Trustee in writing
in form satisfactory to the Trustee, the performance of every covenant and
obligation of the Seller, as applicable hereunder, and shall benefit from all
the rights granted to the Seller, as applicable hereunder and, (D) for which the
Enhancement Provider, if provided in the related Supplement, has given its
consent, which consent shall not be unreasonably withheld.

          Section 7.3  Limitation on Liability of the Seller.  Subject to
                       -------------------------------------             
Section 7.1, neither the Seller nor any of its directors, officers, employees or
agents shall be under any liability to the Trust, the Trustee, the
Certificateholders or any other Person for any action taken or for refraining
from the taking of any action

                                      101
<PAGE>
 
pursuant to this Agreement whether arising from express or implied duties under
this Agreement; provided, however, that this provision shall not protect the
                --------  -------                                           
Seller or any such Person against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder.  The Seller and any director, officer, employee or agent may
rely in good faith on any document of any kind prima facie properly executed and
                                               ----- -----                      
submitted by any Person respecting any matters arising hereunder.


                              [End of Article VII]

                                      102
<PAGE>
 
                                  ARTICLE VIII

                             OTHER MATTERS RELATING
                                TO THE SERVICER

          Section 8.1  Liability of the Servicer.  The Servicer shall be liable
                       -------------------------                               
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.

          Section 8.2  Merger or Consolidation of, or Assumption of the
                       ------------------------------------------------
Obligations of, the Servicer.  (a)  The Servicer shall not consolidate with or
- ----------------------------                                                  
merge into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:

               (i)  the corporation formed by such consolidation or into which
     the Servicer is merged or the Person which acquires by conveyance or
     transfers the properties and assets of the Servicer substantially as an
     entirety shall be a corporation organized and existing under the laws of
     the United States of America or any State or the District of Columbia, and
     shall be a state or national banking association that is not subject to the
     Bankruptcy Code of 1978, as amended from time to time, or to any successor
     statute or other entity which is not subject to the bankruptcy laws of the
     United States of America and shall be an Eligible Servicer, and, if the
     Servicer is not the surviving entity, shall expressly assume, by an
     agreement supplemental hereto, executed and delivered to the Trustee and
     the Enhancement Provider, to the extent so provided in the applicable
     Supplement, in form satisfactory to the Trustee, the performance of every
     covenant and obligation of the Servicer hereunder (to the extent that any
     right, covenant or obligation of the Servicer, as applicable hereunder, is
     inapplicable (because such successor entity is not a Connecticut capital
     stock savings bank corporation) to the successor entity, such successor
     entity shall be subject to such covenant or obligation, or benefit from
     such right,

                                      103
<PAGE>
 
     as would apply, to the extent practicable, to such successor entity); and

               (ii)  the Servicer has delivered to the Trustee and the Rating
     Agencies (A) an Officer's Certificate stating that such consolidation,
     merger, conveyance or transfer and such supplemental agreement comply with
     this Section 8.2 and that all conditions precedent herein provided for
     relating to such transaction have been complied with and (B) an Opinion of
     Counsel that such supplemental agreement is legal, valid and binding.

          (b)  the obligations or duties of the Servicer hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Servicer
hereunder except for (i) mergers, consolidations, assumptions or transfers in
accordance with the foregoing paragraph; (ii) transfers pursuant to Section 8.5
and delegations pursuant to Section 8.7; (iii) the appointment of a Successor
Servicer pursuant to Section 10.2; and (iv) other sales, transfers, pledges or
other mergers, assumptions or consolidations (A) which the Seller and the
Servicer determine will not be adverse to the interests of the
Certificateholders of any Series, (B) which the Rating Agency has advised the
Servicer and the Trustee in writing will not result in the reduction or
withdrawal of its then-existing rating of the Certificates of any Series, (C)
for which such purchaser, transferee, pledgee or entity shall expressly assume,
in an agreement supplemental hereto, executed and delivered to the Trustee in
writing in form satisfactory to the Trustee, the performance of every covenant
and obligation of the Servicer, as applicable to it hereunder, and shall benefit
from all rights granted to the Servicer, as applicable hereunder and (D) for
which the Enhancement Provider, if so provided in the related Supplement has
given its consent, which consent shall not be unreasonably withheld.

          Section 8.3  Limitation on Liability of the Servicer and Others.
                       --------------------------------------------------  
Except as provided in Section 8.4 with respect to the Trust and the Trustee,
neither the Servicer nor any of its directors, officers, employees or agents
shall be under any liability to the Trust, the Trustee, the Certificateholders
or any other Person for any action taken or for refraining from the taking of
any

                                      104
<PAGE>
 
action in its capacity as Servicer pursuant to this Agreement; provided,
                                                               -------- 
however, that this provision shall not protect the Servicer or any such Person
- -------                                                                       
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of its reckless disregard of its obligations and duties hereunder.  The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
                                          ----- -----                      
submitted by any Person respecting any matters arising hereunder.  The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Receivables in
accordance with this Agreement which in its reasonable opinion may involve it in
any expense or liability.

          Section 8.4  Servicer Indemnification of the Trust and the Trustee.
                       -----------------------------------------------------  
The Servicer shall indemnify and hold harmless 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 activities of the Trust or of the Trustee pursuant
to this Agreement, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Servicer shall not indemnify the Trustee for
       --------  -------                                                       
any acts, omissions or alleged acts or omissions which constitute or are caused
by fraud, negligence, breach of fiduciary duty or willful misconduct by the
Trustee; provided further, that the Servicer shall not indemnify the Trust, the
         -------- -------                                                      
Investor Certificate-holders or the Certificate Owners for any liabilities,
costs or expenses of the Trust with respect to any action taken by the Trustee
at the request of the Investor Certificateholders; provided further, that the
                                                   -------- -------          
Servicer shall not indemnify the Trust, the Investor Certificateholders or the
Certificate Owners as to any losses, claims or damages incurred by any of them
in their capacities as investors, including without limitation losses incurred
as a result of Defaulted Accounts or Receivables which are written off as
uncollectible; and provided further, that the Servicer shall not indemnify the
                   -------- -------                                           
Trust, the Investor Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of

                                      105
<PAGE>
 
the Trust, the Investor Certificateholders or the Certificate Owners arising
under any tax law, including without limitation any Federal, state, local or
foreign income or franchise taxes 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 Investor
Certificateholders or the Certificate Owners in connection herewith to any
taxing authority (except to the extent that such liabilities, taxes or expenses
arose as a result of the breach by the Servicer of its obligations under Section
11.11).  Any such indemnification shall not be payable from the assets of the
Trust.  The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof.  The
obligations of the Servicer under this Section 8.4 shall survive the termination
of the Trust and the resignation or removal of the Trustee.

          Section 8.5  Resignation of the Servicer.  The Servicer shall not
                       ---------------------------                         
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law or (b) upon the assumption, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, of the obligations and duties of the Servicer hereunder by any
of its Affiliates that is a wholly owned subsidiary of People's Bank or any
other entity as to which (i) the Rating Agency has given written notice that
such substitution will not result in a reduction or withdrawal of the then
existing ratings of the Investor Certificates and (ii) the Enhancement Provider,
where applicable, has given its consent which consent shall not be unreasonably
withheld and, in either case, that qualifies as an Eligible Servicer.  Any
determination permitting the resignation of the Servicer shall be evidenced as
to clause(a) above by an Opinion of Counsel to such effect delivered to the
Trustee.  No resignation shall become effective until the Trustee or a Successor
Servicer shall have assumed the responsibilities and obligations of the Servicer
in accordance with Section 10.2 hereof.  If within 120 days of the date of the
determination that the Servicer may no longer act as Servicer hereunder under

                                      106
<PAGE>
 
clause(a) above the Trustee is unable to appoint a Successor Servicer, the
Trustee shall serve as Successor Servicer hereunder.  Notwithstanding the
foregoing, the Trustee shall, if it is legally unable so to act, petition a
court of competent jurisdiction to appoint any established institution
qualifying as an Eligible Servicer as the Successor Servicer hereunder.  The
Trustee shall give prompt notice to the Rating Agency and the Enhancement
Provider, if so provided in the related Supplement upon the appointment of a
Successor Servicer.

          Section 8.6  Access to Certain Documentation and Information Regarding
                       ---------------------------------------------------------
the Receivables.  The Servicer shall provide to the Trustee access to the
- ---------------                                                          
documentation regarding the Accounts and the Receivables in such cases where the
Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer.  Nothing in this Section 8.6 shall derogate from the
obligation of the Seller, the Trustee or the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access as provided in this Section 8.6 as a result of
such obligations shall not constitute a breach of this Section 8.6.

          Section 8.7  Delegation of Duties.  It is understood and agreed by the
                       --------------------                                     
parties hereto that the Servicer may delegate certain of its duties hereunder to
any Affiliate of People's Bank.  In the ordinary course of business, the
Servicer may at any time delegate any duties hereunder to any Person who agrees
to conduct such duties in accordance with the Account Guidelines.  Any such
delegations shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 8.5 hereof.  If any such delegation is to a party other than
an Affiliate of People's Bank, notification thereof shall be given to the Rating
Agency.

                                      107
<PAGE>
 
          Section 8.8  Examination of Records.  The Servicer shall clearly and
                       ----------------------                                 
unambiguously identify each Account (including any Additional Account or
Automatic Additional Account designated pursuant to Section 2.6) in its computer
or other records to reflect that the Receivables arising in such Account have
been conveyed to the Trust pursuant to this Agreement.  The Servicer shall,
prior to the sale or transfer to a third party of any receivable held in its
custody, examine its computer and other records to determine that such
receivable is not a Receivable.

                             [End of Article VIII]

                                      108
<PAGE>
 
                                   ARTICLE IX

                                 PAY OUT EVENTS

          Section 9.1  Pay Out Events.  If any one of the following events shall
                       --------------                                           
occur:

          (a)  the Seller shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to all or
substantially all of its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the
Seller; or the Seller shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations; or
the Seller  shall become unable for any reason to transfer Receivables to the
Trust in accordance with the provisions of this Agreement; or

          (b)  the Trust shall become subject to regulation by the Securities
and Exchange Commission as an "investment company" within the meaning of the
Investment Company Act;

then a Pay Out Event with respect to all Series of Certificates (each, a "Trust
Pay Out Event") shall occur without any notice or other action on the part of
the Trustee or the Investor Certificateholders immediately upon the occurrence
of such event and notice of such Trust Pay Out Event shall be sent by the
Servicer to the Rating Agencies.

          Section 9.2  Additional Rights Upon the Occurrence of Certain Events.
                       ------------------------------------------------------- 

          (a)  If the Seller shall consent to the appointment of a conservator,
receiver or liquidator for

                                      109
<PAGE>
 
the winding-up or liquidation of its affairs, or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator or receiver or liquidator for the winding-up or
liquidation of its affairs shall have been entered against the Seller (an
"Insolvency Event"), the Seller shall on the day of such Insolvency Event (the
"Appointment Day") immediately cease to transfer Principal Receivables to the
Trust and shall promptly give notice to the Trustee of such appointment or
voluntary liquidation.  Notwithstanding any cessation of the transfer to the
Trust of additional Principal Receivables, Finance Charge Receivables, whenever
created, accrued in respect of Principal Receivables which have been transferred
to the Trust shall continue to be a part of the Trust, and Collections with
respect thereto shall continue to be allocated and paid in accordance with
Article IV.  Within 15 days of the Appointment Day, the Trustee shall (i)
publish a notice in an Authorized Newspaper that an Insolvency Event has
occurred and that the Trustee intends to sell, dispose of or otherwise liquidate
the Receivables in a commercially reasonable manner and (ii) send written notice
to the Investor Certificateholders describing the provisions of this Section 9.2
and requesting instructions from such Holders.  Unless within 90 days from the
day notice pursuant to clause (i) above is first published (the "Publication
Date"), the Trustee shall have received written instructions of Holders of
Investor Certificates representing Undivided Interests aggregating in excess of
50% of the related Invested Amount of each Series (or in the case of a Series
having more than one Class, each Class of such Series) to the effect that the
Trustee shall not instruct the Servicer to sell, dispose of, or otherwise
liquidate the Receivables, the Trustee shall instruct the Servicer to proceed to
sell, dispose of, or otherwise liquidate the portion of Receivables allocable to
any Series that did not vote to disapprove of the liquidation of the Receivables
in accordance with this Agreement in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids and the Servicer shall proceed to consummate the sale,
liquidation or disposition of the Receivables allocable to any outstanding
Series, unless the holders of more than 50% of the principal amount of each
Class of such Series instruct the Trustee not to sell the portion of the
Receivables allocable to such Series, in which case the

                                      110
<PAGE>
 
Trust shall continue with respect  to such Series pursuant to the terms of the
Agreement and the Supplement.  The portion of the Receivables allocable to any
Series shall be equal to the sum of (1) the product of (A) the Seller
Percentage, (B) the aggregate outstanding Principal Receivables and (C) a
fraction the numerator of which is the related Investor Percentage of
Collections of Finance Charge Receivables and the denominator of which is the
sum of all Investor Percentages with respect to Collections of Finance Charge
Receivables for all Series outstanding and (2) the Investor Interest of such
Series.  The Seller or any of its Affiliates shall be permitted to bid for the
Receivables.  In addition, the Seller or any of its Affiliates shall have the
right to match any bid by a third person and be granted the right to purchase
the Receivables at such matched bid price.  The Trustee may obtain a prior
determination from any such bankruptcy trustee, receiver or liquidator that the
terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable.  The provisions of Sections 9.1 and 9.2 shall not be
deemed to be mutually exclusive.

          (b)  The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; provided, however that the proceeds for any such sale,
                          --------  -------                                     
disposition or liquidation of Receivables with respect to a Series but not all
of the outstanding Series shall be applied solely to make payments to such
Series; provided, further that the Trustee shall determine conclusively the
        --------  -------                                                  
amount of such proceeds which are allocable to Finance Charge Receivables and
the amount of such proceeds which are allocable to Principal Receivables.  On
the day following the last Distribution Date in the Monthly Period during which
such proceeds are distributed to the Investor Certificateholders of each Series,
the Trust shall terminate.

                              [End of Article IX]

                                      111
<PAGE>
 
                                   ARTICLE X

                               SERVICER DEFAULTS

          Section 10.1  Servicer Defaults.  If any one of the following events
                        -----------------                                     
(a "Servicer Default") shall occur and be continuing:

          (a)  any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee pursuant to Article IV
or to instruct the Trustee to make any required drawing, withdrawal, or payment
under any Enhancement on or before the date occurring five Business Days after
the date such payment, transfer, deposit withdrawal or drawing or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement;

          (b)  failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer set forth in this
Agreement, which has a material adverse effect on the Certificateholders of any
Series (which determination shall be made without regard to whether funds are
available to the Certificateholders of any Series under any applicable
Enhancement) and which continues unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by (i) the Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 50% of the Investor Interest of any Series
adversely affected thereby or (ii) to the extent provided in any Supplement by
the related Enhancement Provider, and continues to materially adversely affect
such Investor Certificateholders for such period; or the Servicer shall delegate
its duties under this Agreement, except as permitted by Section 8.7;

          (c)  any representation, warranty or certification made by the
Servicer in this Agreement or in any certificate delivered pursuant to this
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Certificateholders of any Series (which determination
shall be made without regard to whether funds are available to the
Certificateholders of any Series under any applicable Enhancement) and which

                                      112
<PAGE>
 
continues to be incorrect in any material respect for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by (i) the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 50% of the Investor Interest of
any Series adversely affected thereby or (ii) to the extent provided in any
Supplement by the related Enhancement Provider, and continues to materially
adversely affect such Investor Certificateholders for such period; or

          (d)  the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of its property, or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer, and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations;

then, so long as such Servicer Default shall not have been remedied, either the
Trustee, or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Investor Interest, by notice then
given in writing to the Servicer (and to the Trustee if given by the Investor
Certificateholders) (a "Termination Notice"), may terminate all of the rights
and obligations of the Servicer as Servicer under this Agreement.  After receipt
by the Servicer of such Termination Notice, and on the date that a Successor
Servicer shall have been appointed by the Trustee pursuant to Section 10.2, all
authority and power of the Servicer under this Agreement shall pass to and be
vested in a Successor Servicer; and, without limitation, the

                                      113
<PAGE>
 
Trustee is hereby authorized and empowered (upon the failure of the Servicer to
cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-
fact or otherwise, all documents and other instruments upon the failure of the
Servicer to execute or deliver such documents or instruments, and to do and
accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights and obligations.  The Servicer
agrees to cooperate with the Trustee and such Successor Servicer in effecting
the termination of the responsibilities and rights of the Servicer to conduct
servicing hereunder including, without limitation, the transfer to such
Successor Servicer of all authority of the Servicer to service the Receivables
provided for under this Agreement, including, without limitation, all authority
over all Collections which shall on the date of transfer be held by the Servicer
for deposit, or which have been deposited by the Servicer, in the Collection
Account, the Excess Funding Account, and any Series Account, or which shall
thereafter be received with respect to the Receivables, and in assisting the
Successor Servicer and in enforcing all rights to Recoveries and Interchange
allocable to the Trust.  The Servicer shall promptly transfer its electronic
records relating to the Receivables to the Successor Servicer in such electronic
form as the Successor Servicer may reasonably request and shall promptly
transfer to the Successor Servicer all other records, correspondence and
documents necessary for the continued servicing of the Receivables in the manner
and at such times as the Successor Servicer shall reasonably request.  To the
extent that compliance with this Section 10.1 shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
reasonably deems to be confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interests.  Subject to the
immediately preceding sentence, the Servicer agrees to grant to the Successor
Servicer an exclusive, non-transferrable, non-assignable license to utilize the
software which is owned by the Servicer and which is used by the Servicer in
connection with the servicing of the Accounts and the Receivables; provided,
however, that such software shall be used by the Successor Servicer solely for
the purposes of servicing the Accounts and the Receivables.  The Servicer shall,
on the date of any

                                      114
<PAGE>
 
servicing transfer, transfer all of its rights and obligations under the
Enhancement with respect to any Series to the Successor Servicer.

          Section 10.2  Trustee to Act; Appointment of Successor.
                        -----------------------------------------

          (a)  On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 10.1, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice, or otherwise specified by the Trustee,
until a date mutually agreed upon by the Servicer and Trustee.  The Trustee
shall notify the Rating Agency of such removal of the Servicer.  The Trustee
shall, as promptly as possible after the giving of a Termination Notice appoint
an Eligible Servicer as successor servicer (the "Successor Servicer"), and such
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to the Trustee.  The Trustee may obtain bids from any potential
successor servicer.  If the Trustee is unable to obtain any bids from any
potential successor servicer and the Servicer delivers an Officer's Certificate
to the effect that they 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 offer the Servicer, for so long
as People's Bank is the Servicer, the right to accept reassignment of all of the
Receivables and the Seller may accept reassignment of all the Receivables on a
date designated by the Seller (the "Reassignment Date"); provided, however, that
                                                         --------  -------      
if the short-term deposits or long-term unsecured debt obligations of the Seller
are not rated at the time of such purchase at least P-3 or Baa-3, respectively,
by Moody's, no such purchase by the Seller shall occur unless the Seller shall
deliver an Opinion of Counsel reasonably acceptable to the Trustee that such
purchase would not constitute a fraudulent conveyance of the Seller.  The
reassignment deposit amount with respect to each Series for such reassignment
shall be equal to the sum of (A) the higher of (x) the sum of (i) the Investor
Interest of such Series as of the end of the Monthly Period preceding the
Reassignment Date less the amount, if any, previously accumulated for the
payment of princi-

                                      115
<PAGE>
 
pal with respect to such Series as provided in the related Supplement on the
related Transfer Date following the date of such reassignment, plus (ii) an
amount equal to all interest accrued but unpaid on the Investor Certificates
less the amount, if any, accumulated to pay interest with respect to such Series
as provided in the related Supplement on the Transfer Date following the date of
such reassignment, accrued at the applicable Certificate Rate through the date
of reassignment and (y) the average bid price quoted by two recognized dealers
for a security similar to the Investor Certificates of each such Series and
rated in the highest rating category by the Rating Agency and having a remaining
maturity approximately equal to the remaining maturity of such Series and (B)
if, as provided in the related Supplement, certain unpaid amounts to the
Enhancement Provider with respect to such Series.  The reassignment deposit
amount with respect to each Series shall be deposited in the Collection
Subaccount or any Series Account, as provided in the related Supplement, for
distribution to the Investor Certificateholders of such Series pursuant to
Section 12.3 of the Agreement.  Any payment with respect to the Enhancement
Provider of any Series shall be made in the manner provided in the Supplement
with respect to such Series.  In the event that a Successor Servicer has not
been appointed or has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Trustee without further action shall
automatically be appointed the Successor Servicer.  The Trustee may delegate any
of its servicing obligations to an agent in accordance with the provisions of
subsection 3.1(b).  Notwithstanding the above, the Trustee shall, if it is
legally unable so to act, petition a court of competent jurisdiction to appoint
any established financial institution having a net worth of not less than
$50,000,000 and whose regular business includes the servicer of VISA or
MasterCard credit card receivables as the Successor Servicer hereunder.

          (b)  Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer; provided,
                                           -------- 

                                      116
<PAGE>
 
however, that the references to Servicer contained in Sections 8.4 and 11.5
- -------                                                                    
shall be deemed to refer to the Servicer with respect to responsibilities,
duties and liabilities arising during or with respect to such time that the
Servicer was Servicer under this Agreement and shall be deemed to refer to the
Successor Servicer with respect to responsibilities, duties and liabilities
arising during or with respect to such time that the Successor Servicer acts as
Servicer under this Agreement.  Any Successor Servicer, by its acceptance of its
appointment, will automatically agree to be bound by the terms and provisions of
each Enhancement.

          (c)  In connection with such appointment and assumption, the Trustee
shall be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no such compensation
                                --------  -------                           
shall be in excess of the Monthly Servicing Fee permitted to the Servicer
pursuant to Section 3.2.  The Seller agrees that if the Servicer is terminated
hereunder, it will agree, at the request of the Trustee or any Successor
Servicer, to deposit a portion of the Collections in respect of Finance Charge
Receivables that it is entitled to receive pursuant to Article IV to pay its
share of the compensation of the Successor Servicer.

          (d)  All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.1 and shall pass to and be vested in the Seller
and, without limitation, the Seller is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights.  The Successor Servicer agrees to cooperate with
the Seller in effecting the termination of the responsibilities and rights of
the Successor Servicer to conduct servicing on the Receivables.  The Successor
Servicer shall transfer its electronic records relating to the Receivables to
the Seller in such electronic form as the Seller may reasonably request and
shall transfer all other records, correspondence and documents to the Seller in
the manner and at such times

                                      117
<PAGE>
 
as the Seller shall reasonably request.  To the extent that compliance with this
Section 10.2 shall require the Successor Servicer to disclose to the Seller
information of any kind which the Successor Servicer deems to be confidential,
the Seller shall be required to enter into such customary licensing and
confidentiality agreements as the Successor Servicer shall deem necessary to
protect its interests.

          Section 10.3  Notification to Certificateholders.  Within three
                        ----------------------------------               
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give prompt written notice thereof to the Trustee and the Trustee
shall give notice to the Investor Certificateholders (other than Bearer
Certificateholders) at their respective addresses appearing in the Certificate
Register.  Upon any termination or appointment of a Successor Servicer pursuant
to this Article X, the Trustee shall give prompt written notice thereof to
Investor Certificateholders (other than Bearer Certificateholders) at their
respective addresses appearing in the Certificate Register.

          Section 10.4  Waiver of Past Defaults.  The Holders of Investor
                        -----------------------                          
Certificates evidencing Undivided Interests aggregating not less than 50% of the
Investor Interest of each Series adversely affected by any default by the
Servicer may, on behalf of all Holders of Certificates of such Series, waive any
default by the Servicer or Seller in the performance of its obligations
hereunder and its consequences, except a default in the failure to make any
required deposits or payments of interest or principal relating to such Series
pursuant to Article IV which default does not result from the failure of the
Paying Agent to perform its obligations to make any required deposits or
payments of interest and principal in accordance with Article IV.  Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied to every purpose of this
Agreement and the Rating Agencies shall be sent notice of any such waiver.  No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.

                               [End of Article X]

                                      118
<PAGE>
 
                                   ARTICLE XI

                                  THE TRUSTEE

          Section 11.1  Duties of Trustee.
                        ----------------- 

          (a)  The Trustee, prior to the occurrence of any Servicer Default of
which a Responsible Officer of the Trustee has actual knowledge and after the
curing of all Servicer Defaults which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement.  If a Servicer Default of which a Responsible Officer of the Trustee
has actual knowledge has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

          (b)  The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement.  The Trustee shall
give prompt written notice to any Enhancement Provider affected thereby and the
Certificateholders (or, in the case of the Holders of Bearer Certificates,
notice by publication in the manner described in the related Supplement) of any
material lack of conformity of any such instrument to the applicable
requirements of this Agreement discovered by the Trustee which would entitle
such Enhancement Provider or a specified percentage of the Certificateholders,
as the case may be, to take any action pursuant to this Agreement.

          (c)  Subject to subsection 11.1(a), no provision of this Agreement
shall be construed to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct;
                                                                       
provided, however, that:
- --------  -------       

               (i)  the Trustee shall not be personally liable for an error of
     judgment made in good faith, unless it shall be proved that

                                      119
<PAGE>
 
     the Trustee was negligent in ascertaining the pertinent facts;

               (ii)  the Trustee shall not be personally liable with respect to
     any action taken, suffered or omitted to be taken by it in good faith in
     accordance with the direction of the Holders of Investor Certificates
     evidencing Undivided Interests aggregating more than 50% of the Investor
     Interest of any Series relating to the time, method and place of conducting
     any proceeding for any remedy available to the Trustee, or exercising any
     trust or power conferred upon the Trustee, under this Agreement;

               (iii)  the Trustee shall not be charged with knowledge of any
     failure by the Servicer referred to in clauses (a) and (b) of Section 10.1
     unless a Responsible Officer of the Trustee obtains actual knowledge of
     such failure or the Trustee receives written notice of such failure from
     the Servicer, any Enhancement Provider or any Holders of Investor
     Certificates evidencing Undivided Interests aggregating not less than 10%
     of the Investor Interest of any Series adversely affected thereby; and

               (iv)  in the event that the Trustee is acting as Successor
     Servicer, its liability as Servicer shall be limited as specified in
     Section 8.3.

          (d)  The Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties,

                                      120
<PAGE>
 
powers and privileges of, the Servicer in accordance with the terms of this
Agreement.

          (e)  Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the interests of the
Trust in any Receivable now existing or hereafter created or to impair the value
of any Receivable now existing or hereafter created.

          (f)  Except as provided in this subsection 11.1(f), the Trustee shall
have no power to vary the corpus of the Trust including, without limitation, the
power to (i) accept any substitute obligation for a Receivable initially
assigned to the Trust under Section 2.1 or 2.6 hereof, (ii) add any other
investment, obligation or security to the Trust, except for an addition
permitted under Section 2.6 or (iii) withdraw from the Trust any Receivables,
except for withdrawal permitted under Sections 2.7, 9.2, 10.2, 12.1 or 12.2 or
subsections 2.4(d), 2.4(e) or Article IV.

          (g)  In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the manner
or on the day required to be performed by the Paying Agent or the Transfer Agent
and Registrar, as the case may be, under this Agreement, the Trustee shall be
obligated promptly upon a Responsible Officer's obtaining actual knowledge
thereof to perform such obligation, duty or agreement in the manner so required.

          (h)  If the Seller has agreed to transfer any of its credit card
receivables (other than the Receivables) to another Person, upon the written
request of the Seller, the Trustee will enter into such intercreditor agreements
(which shall be in form and substance satisfactory to the Trustee) with the
transferee of such receivables as are customary and necessary to separately
identify the rights, if any, of the Trustee, the Trust and such other Person in
the Seller's credit card receivables; provided, that the Trustee, on behalf of
                                      --------                                
the Trust, shall not enter into any intercreditor agreement which could
adversely affect the interests of the Certificateholders, any Enhancement
Provider or the Trustee and, upon the request of the Trustee, the Seller will
deliver an Opinion of Counsel on any matters relat-

                                      121
<PAGE>
 
ing to such intercreditor agreement reasonably requested by the Trustee.

          Section 11.2  Certain Matters Affecting the Trustee. Except as
                        -------------------------------------           
otherwise provided in Section 11.1:

          (a)  the Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and to
have been signed or presented to it pursuant to this Agreement by the proper
party or parties;

          (b)  the Trustee may consult with counsel, and any Opinion of Counsel
or written advice of counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such Opinion of Counsel or written advice
of counsel;

          (c)  the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Enhancement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligations, upon
the occurrence of any Servicer Default of which a Responsible Officer has actual
knowledge (which has not been cured), to exercise such of the rights and powers
vested in it by this Agreement or any Enhancement, and to use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of his own affairs;

          (d)  the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;

                                      122
<PAGE>
 
          (e)  the Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing so to do by (i) any Enhancement
Provider who, or (ii) Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Investor Interest of any Series
which, could be adversely affected if the Trustee does not perform such acts;
                                                                             
provided, however, that the Enhancement Provider shall reimburse the Trustee for
- --------  -------                                                               
any reasonable out-of-pocket expenses resulting from any such investigation
requested by it;

          (f)  the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, nominees,
custodians or attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, nominee, custodian or
attorney appointed with due care by it hereunder; and

          (g)  except as may be required by subsection 11.1(a) hereof, the
Trustee shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables or the Accounts for the purpose
of establishing the presence or absence of defects, the compliance by the Seller
or the Servicer with its respective representations and warranties or for any
other purpose.

          Section 11.3  Trustee Not Liable for Recitals in Certificates.  The
                        -----------------------------------------------      
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates).  Except as set forth in Section 11.15, the Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificates of authentication on the Certificates)
or of any Receivable or related document.  The Trustee shall not be accountable
for the use or application by the Seller of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Seller in respect of the Receivables or deposited in or

                                      123
<PAGE>
 
withdrawn from the Collection Account, the Excess Funding Account, or any Series
Account by the Servicer.

          Section 11.4  Trustee May Own Certificates.  The Trustee in its
                        ----------------------------                     
individual or any other capacity may become the owner or pledgee of Investor
Certificates with the same rights as it would have if it were not the Trustee.

          Section 11.5  The Servicer to Pay Trustee's Fees and Expenses.  The
                        -----------------------------------------------      
Servicer covenants and agrees to pay the Trustee from time to time, and the
Trustee shall be entitled to receive reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the Trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and the Servicer will pay or reimburse the
Trustee (without reimbursement from the Collection Account, the Excess Funding
Account, any Series Account or otherwise) upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Agreement (including the
reasonable fees and expenses of its agents, any co-Trustees and counsel) except
any such expense, disbursement or advance as may arise from its own negligence
or bad faith and except as provided in the following sentence.  If the Trustee
is appointed Successor Servicer pursuant to Section 10.2, the provisions of this
Section 11.5 shall not apply to expenses, disbursements and advances made or
incurred by the Trustee in its capacity as Successor Servicer.

          The obligations of the Servicer under this Section 11.5 shall survive
the termination of the Trust and the resignation or removal of the Trustee.

          Section 11.6  Eligibility Requirements for Trustee.  The Trustee
                        ------------------------------------              
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority and rated at least Baa-3.  If such corporation
publishes reports of condition at least

                                      124
<PAGE>
 
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section 11.6, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.  In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 11.7.

          Section 11.7  Resignation or Removal of Trustee.
                        --------------------------------- 

          (a)  The Trustee may at any time resign and be discharged from the
Trust hereby created by giving written notice thereof to the Servicer with a
copy to the Enhancement Provider.  Upon receiving such notice of resignation,
the Servicer shall promptly appoint a successor trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee, subject to the consent of the
Enhancement Provider of any Series (if the Supplement relating to such Series so
requires) which shall not be unreasonably withheld.  In addition, the Servicer
shall notify the Rating Agency of the removal or discharge of the Trustee.  If
no successor trustee shall have been so appointed and have accepted within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.

          (b)  If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 hereof and shall fail to resign
after written request therefor by the Seller, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Seller may remove the Trustee and promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.

                                      125
<PAGE>
 
          (c)  Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8 hereof and any liability of the Trustee arising
hereunder shall survive such appointment of a successor trustee.  Notice of any
action under this Section 11.7 shall be sent to the Rating Agencies.

          Section 11.8  Successor Trustee.
                        ----------------- 

          (a)  Any successor trustee appointed as provided in Section 11.7
hereof shall execute, acknowledge and deliver to the Seller and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee herein.  The predecessor Trustee shall deliver to the successor
trustee all documents and statements held by it hereunder, and the Seller and
the predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.

          (b)  No successor trustee shall accept appointment as provided in this
Section 11.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.6 hereof.

          (c)  Upon acceptance of appointment by a successor trustee as provided
in this Section 11.8, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.  Notice to Bearer Certificateholders shall be given in
the manner provided in the related Supplement.

          Section 11.9  Merger or Consolidation of Trustee.  Any Person into
                        ----------------------------------                  
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or consoli-

                                      126
<PAGE>
 
dation to which the Trustee shall be a party, or any Person succeeding to the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 11.6 hereof, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

          Section 11.10  Appointment of Co-Trustee or Separate Trustee.
                         --------------------------------------------- 

          (a)  Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, or all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Certificateholders, such
title to the trust, or any part thereof, and, subject to the other provisions of
this Section 11.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable.  No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 11.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 11.8 hereof.

          (b)  Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

               (i)  all rights, powers, duties and obligations conferred or
     imposed upon the Trustee shall be conferred or imposed upon and exercised
     or performed by the Trustee and such separate trustee or co-trustee jointly
     (it being understood that such separate trustee or co-trustee is not
     authorized to act separately without the Trustee joining in such act),
     except to the extent that under any laws of any jurisdiction in which any
     particular act or acts are to be performed (whether as Trustee

                                      127
<PAGE>
 
     hereunder or as successor to the Servicer hereunder), the Trustee shall be
     incompetent or unqualified to perform such act or acts, in which event such
     rights, powers, duties and obligations (including the holding of title to
     the Trust or any portion thereof in any such jurisdiction) shall be
     exercised and performed singly by such separate trustee or co-trustee, but
     solely at the direction of the Trustee;

               (ii)  no trustee hereunder shall be personally liable by reason
     of any act or omission of any other trustee hereunder; and

               (iii)  the Trustee may at any time accept the resignation of or
     remove any separate trustee or co-trustee.

          (c)  Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them.  Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI.  Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee.  Every such instrument shall be filed with the Trustee and a
copy thereof given to the Servicer.

          (d)  Any separate trustee or co-trustee may at any time constitute the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name.  If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

                                      128
<PAGE>
 
          Section 11.11  Tax Returns.  In the event the Trust shall be required
                         -----------                                           
to file tax returns, the Servicer, as soon as practicable after it is made aware
of such requirement, shall prepare or cause to be prepared any tax returns
required to be filed by the Trust and, to the extent possible, shall remit such
returns to the Trustee for a signature at least five days before such returns
are due to be filed.  The Servicer shall prepare or shall cause to be prepared
all tax information required by law to be distributed to Certificateholders and
shall deliver such information to the Trustee at least five days prior to the
date it is required by law to be distributed to Certificateholders.  The
Trustee, upon request, will furnish the Servicer with all such information known
to the Trustee as may be reasonably required in connection with the preparation
of all tax returns of the Trust and shall, upon request, execute such returns.
In no event shall the Trustee or the Servicer be liable for any liabilities,
costs or expenses of the Trust, the Investor Certificateholders or the
Certificate Owners arising under any tax law, including without limitation
federal, state, local or foreign income or excise taxes or any other tax imposed
on or measured by income (or any interest or penalty with respect thereto or
arising from a failure to comply therewith).

          Section 11.12  Trustee May Enforce Claims Without Possession of
                         ------------------------------------------------
Certificates.  All rights of action and claims under this Agreement or any
- ------------                                                              
Series of Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee.  Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of any Series of Certificateholders in respect of which such
judgment has been obtained.

          Section 11.13  Suits for Enforcement.  If a Servicer Default shall
                         ---------------------                              
occur and be continuing, the Trustee, in its discretion may, subject to the
provisions of Section 10.1, proceed to protect and enforce its rights and the
rights of any Series of Certificateholders under this Agreement by a suit,
action or proceeding in

                                      129
<PAGE>
 
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or any
Series of Certificateholders.

          Section 11.14  Rights of Certificateholders to Direct Trustee.
                         ----------------------------------------------  
Holders of Investor Certificates evidencing Undivided Interests evidencing more
than 50% of the Aggregate Investor Interest (or, with respect to any remedy,
trust or power that does not relate to all Series, 50% of the aggregate unpaid
principal amount of the Investor Certificates of all Series to which such
remedy, trust or power relates) shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided, however,
                                                           --------  ------- 
that, subject to Section 11.1, the Trustee shall have the right to decline to
follow any such direction if the Trustee being advised by counsel determines
that the action so directed may not lawfully be taken, or if the Trustee in good
faith shall, by a Responsible Officer or Responsible Officers of the Trustee,
determine that the proceedings so directed would be illegal or involve it in
personal liability or be unduly prejudicial to the rights of Certificateholders
not parties to such direction; and provided further that nothing in this
                                   -------- -------                     
Agreement shall impair the right of the Trustee to take any action deemed proper
by the Trustee and which is not inconsistent with such direction of such Holders
of Investor Certificates.

          Section 11.15  Representations and Warranties of Trustee.  The Trustee
                         -----------------------------------------              
represents and warrants that:

               (i)  the Trustee is a banking corporation organized, existing and
     in good standing under the laws of the State of New York;

               (ii)  the Trustee has full power and authority to execute,
     deliver and perform this Agreement, and has taken all necessary action to
     authorize the execution, delivery and performance by it of this Agreement;
     and

                                      130
<PAGE>
 
               (iii)  this Agreement has been duly executed and delivered by the
     Trustee.

          Section 11.16  Maintenance of Office or Agency.  The Trustee will
                         -------------------------------                   
maintain at its expense in the Borough of Manhattan, the City of New York an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served.  The
Trustee initially appoints its Corporate Trust Office as its office for such
purposes in New York.  The Trustee will give prompt written notice to the
Servicer, each Enhancement Provider and to Certificateholders (or in the case of
Bearer Certificates, in the manner provided in the related Supplement) of any
change in the location of the Certificate Register or any such office or agency.

                              [End of Article XI]

                                      131
<PAGE>
 
                                  ARTICLE XII

                                  TERMINATION

          Section 12.1  Termination of Trust.
                        -------------------- 

          (a)  The respective obligations and responsibilities of the Seller,
the Servicer and the Trustee created hereby (other than the obligation of the
Trustee to make payments to Certificateholders as hereafter set forth) shall
terminate, except with respect to the duties described in Section 11.5 and
subsection 12.3(b), on the Trust Termination Date; provided, however, that the
                                                   --------  -------          
Trust shall not terminate on the date specified in clause (i) of the definition
of "Trust Termination Date" if each of the Servicer and the Holder of the
Exchangeable Seller Certificate notify the Trustee in writing, not later than
five Business Days preceding such date, that they desire that the Trust not
terminate on such date, which notice (such notice, a "Trust Extension") shall
specify the date on which the Trust shall terminate (such date, the "Extended
Trust Termination Date"); provided, however, that the Extended Trust Termination
                          --------  -------                                     
Date shall be not later than the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the father of the late
President of the United States, living on the date of the Agreement.  The
Servicer and the Holder of the Seller Certificate may, on any date following the
Trust Extension, so long as no Series of Certificates is outstanding, deliver a
notice in writing to the Trustee changing the Extended Trust Termination Date.

          (b)  In the event that (i) the Trust has not terminated by the last
Distribution Date occurring in the second month preceding the Trust Termination
Date, and (ii) the Investor Interest of any Series (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on the related
Distribution Date during such month pursuant to Article IV) would be greater
than zero, the Servicer shall sell within 30 days after such Transfer Date all
the Receivables.  The Seller shall have the right of first refusal to purchase
the Receivables on terms equivalent to the best purchase offer as determined by
the Trustee.  The proceeds of any such sale shall be treated

                                      132
<PAGE>
 
as Collections on the Receivables and shall be allocated and deposited in
accordance with Article IV; provided, however, that the Trustee shall determine
                            --------  -------                                  
conclusively the amount of such proceeds which are allocable to Finance Charge
Receivables and the amount of such proceeds which are allocable to Principal
Receivables.  During such period, the Servicer shall continue to collect
payments on the Receivables and allocate and deposit such payments in accordance
with the provisions of Article IV.

          Section 12.2  Optional Purchase and Final Termination of Investor
                        ---------------------------------------------------
Certificates of any Series.
- -------------------------- 

          (a)  If so provided in any Supplement, the Seller may, but shall not
be obligated to, cause a final distribution to be made in respect of the related
Series of Certificates on a Distribution Date specified in such Supplement by
depositing into the Collection Account or the applicable Series Account, not
later than the Transfer Date preceding such Distribution Date, for application
in accordance with Article IV, the amount specified in such Supplement;
                                                                       
provided, however that if the short-term deposits or long-term unsecured debt
- --------  -------                                                            
obligations of the Seller are not rated at the time of such purchase of
Receivables at least P-3 or Baa-3, respectively, by Moody's no such event shall
occur unless the Seller shall deliver an Opinion of Counsel reasonably
acceptable to the Trustee that such deposit into the Collection Account or any
Series Account as provided in the related Supplement would not constitute a
fraudulent conveyance of the Seller.

          (b)  The amount deposited pursuant to subsection 12.2(a) shall be paid
to the Investor Certificateholders of the related Series (and the Enhancement
Provider if so provided in the related Supplement) pursuant to Article IV on the
related Distribution Date following the date of such deposit.  All Certificates
of a Series which are purchased by the Seller pursuant to subsection 12.2(a)
shall be delivered by the Seller upon such purchase to, and be cancelled by, the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Seller.  The Investor Interest of each Series which is purchased
by the Seller pursuant to subsection 12.2(a) shall, for the purposes of the
definition of "Seller Interest", be deemed to be equal to zero on the
Distribution Date following the making of the

                                      133
<PAGE>
 
deposit, and the Seller Interest shall thereupon be deemed to have been
increased by the Investor Interest of such Series.

          Section 12.3  Final Payment with Respect to any Series.
                        ---------------------------------------- 

          (a)  Written notice of any termination, specifying the Distribution
Date upon which the Investor Certificateholders of any Series may surrender
their Certificates for payment of the final distribution with respect to such
Series and cancellation, shall be given (subject to at least 2 Business Days'
prior notice from the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series (and the Enhancement Provider if so provided
in the related Supplement) mailed not later than the fifth day of the month of
such final distribution (or in the manner provided by the Supplement relating to
such Series) specifying (a) the Distribution Date (which shall be the
Distribution Date in the month (x) in which the deposit is made pursuant to
Section 3.4(e), 9.2, 10.2, or, if applicable, subsection 12.2(a) of the
Agreement or such other section as may be specified in the related Supplement,
or (y) in which the related Series Termination Date occurs) upon which final
payment of such Investor Certificates will be made upon presentation and
surrender of such Investor Certificates at the office or offices therein
designated (which, in the case of Bearer Certificates, shall be outside the
United States), (b) the amount of any such final payment and (c) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Investor Certificates at
the office or offices therein specified.  The Servicer's notice to the Trustee
in accordance with the preceding sentence shall be accompanied by an Officer's
Certificate setting forth the information specified in Article V of the
Agreement covering the period during the then current calendar year through the
date of such notice and setting forth the date of such final distribution.  The
Trustee shall give such notice to the Transfer Agent and Registrar and the
Paying Agent at the time such notice is given to such Investor
Certificateholders.

                                      134
<PAGE>
 
          (b)  Notwithstanding the termination of the Trust pursuant to
subsection 12.1(a) or the occurrence of the Series Termination Date with respect
to any Series, all funds then on deposit in the Collection Account or any Series
Account shall continue to be held in trust for the benefit of the
Certificateholders of the related Series and the Paying Agent or the Trustee
shall pay such funds to the Certificateholders of the related Series upon
surrender of their Certificates (which surrenders and payments, in the case of
Bearer Certificates, shall be made only outside the United States).  In the
event that all of the Investor Certificateholders of any Series shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned notice, the Trustee shall give a second written
notice (in the case of Bearer Certificates, publication notice) to the remaining
Investor Certificateholders of such Series upon receipt of the appropriate
records from the Transfer Agent and Registrar to surrender their Certificates
for cancellation and receive the final distribution with respect thereto.  If
within one and one-half years after the second notice with respect to a Series,
all the Investor Certificates of such Series shall not have been surrendered for
cancellation, the Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining Investor Certificateholders of
such Series concerning surrender of their Certificates, and the cost thereof
shall be paid out of the funds in the Collection Account or any Series Account
held for the benefit of such Investor Certificateholders.  The Trustee and the
Paying Agent shall pay to the Seller upon request any monies held by them for
the payment of the principal or interest which remains unclaimed for two years.
After payment to the Seller, Investor Certificateholders entitled to the money
must look solely to the Seller for payment as general creditors unless an
applicable abandoned property law designates another Person.

          (c)  All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Seller.

                                      135
<PAGE>
 
          Section 12.4  Seller's Termination Rights.  Upon the termination of
                        ---------------------------                          
the Trust pursuant to Section 12.1 of the Agreement and the surrender of the
Exchangeable Seller Certificate, the Trustee shall return to the Holder of the
Exchangeable Seller Certificate (without recourse, representation or warranty)
all right, title and interest of the Trust in the Receivables, whether then
existing or thereafter created, all monies due or to become due with respect
thereto and all proceeds thereof and Recoveries and the Interchange allocable to
the Trust pursuant to subsections 2.5(k) and (l) except for amounts held by the
Trustee pursuant to subsection 12.3(b) of the Agreement.  The Trustee shall
execute and deliver such instruments of transfer and assignment, on behalf of
the Trust, in each case without recourse, as shall be reasonably requested by
the Seller to vest in the Seller all right, title and interest which the Trust
had in the Receivables.

                              [End of Article XII]

                                      136
<PAGE>
 
                                  ARTICLE XIII

                            MISCELLANEOUS PROVISIONS

          Section 13.1  Amendment.  (a)  (i)  This Agreement may be amended from
                        ---------                                               
time to time by the Servicer, the Seller and the Trustee, without the consent of
any holder of any outstanding Certificate, to cure any ambiguity, to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein, to add any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided, however, that such action shall not
                              --------  -------                            
adversely affect in any material respect the interests of any Investor
Certificateholders.  The Trustee may request an Officer's Certificate and/or an
Opinion of Counsel on these matters, prior to executing an amendment.  The
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustee's rights, duties or immunities under this Agreement or
otherwise.

               (ii)  This Agreement may be amended from time to time by the
     Seller, the Servicer and the Trustee, with the consent of the Trustee (and
     the Enhancement Provider, if so provided in the related Supplement) and
     without the consent of the Certificateholders, to (A) provide for the
     transfer by the Seller of its interest in and to all or part of the
     Accounts in accordance with the provisions of Section 7.2 hereof, (B)
     provide for the purchase of Principal Receivables by the Trust at a price
     which is less than 100% of the outstanding balance thereof, and to provide
     thereafter for the treatment of Collections of Principal Receivables, in an
     amount up to the aggregate amount by which the purchase price of Principal
     Receivables sold thereafter is less than 100%, as Collections of Finance
     Charge Receivables; provided, however, that any such action shall not
                         --------  -------                                
     adversely affect in any material respect the interests of the
     Certificateholders; further provided that the Servicer and the Trustee
     shall have received notice from the Rating Agency that such amendment
     pursuant to this Section 13.1(a)(ii) will not result in the

                                      137
<PAGE>
 
     reduction or withdrawal of its then-existing rating of the Certificates of
     any Series.

          (b)  This Agreement and any Supplement may also be amended from time
to time by the Servicer, the Seller and the Trustee with the consent of the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 66-2/3% of the Investor Interest of each outstanding Series adversely
affected by such amendment (and, to the extent provided in any Supplement, with
the consent of the related Enhancement Provider, which consent shall not be
unreasonably withheld) for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of holders of any Series then issued and
outstanding (provided, however, that the right of any Enhancement Provider to
consent pursuant to any Supplement to any such amendment shall be limited to
matters involving (i) the provisions of this Agreement which affect such
Enhancement Provider, (ii) the provisions of the related Supplement, and (iii)
the rights of holders of the related Series); provided, however, that no such
                                              --------  -------              
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate without
the consent of each Investor Certificateholder of such Series, (ii) change the
definition of or the manner of calculating the Undivided Interest of any
Investor Certificateholder of such Series without the consent of each Investor
Certificateholder of such Series, (iii) reduce the aforesaid percentage required
to consent to any such amendment, without the consent of each Investor
Certificateholder of all Series adversely affected (and, to the extent provided
in any Supplement, with the consent of the related Enhancement Provider, which
consent shall not be unreasonably withheld) or (iv) result in any withdrawal or
downgrade of the rating of the Certificates.

          (c)  Notwithstanding anything in this Section 13.1 to the contrary the
Series Supplement with respect to any Series may be amended on the items and in
accordance with the procedures provided in such Series Supplement.

                                      138
<PAGE>
 
          (d)  Promptly after the execution of any amendment the Trustee shall
furnish such amendment to any related Enhancement Provider and to the Rating
Agency; provided, however, that the Trustee shall furnish a copy of each such
        --------  -------                                                    
amendment pursuant to subsection 13.1(a)(ii) to the Rating Agency prior to the
execution of such amendment.

          (e)  It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof.  The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.

          Section 13.2  Protection of Right, Title and Interest to Trust.
                        ------------------------------------------------ 

          (a)  The Servicer shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders and, the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the Trustee, as the case
may be, hereunder to all property comprising the Trust.  The Servicer shall
deliver to the Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing.  The Seller shall cooperate
fully with the Servicer in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this subsection 13.2(a).

          (b)  Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with paragraph (a) above materially
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
State of New York,

                                      139
<PAGE>
 
the Seller shall give the Trustee notice of any such change and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the Trust's security interest in the Receivables and the proceeds
thereof.

          (c)  Each of the Seller and the Servicer will give the Trustee prompt
written notice of any relocation of any office from which it services
Receivables or keeps records concerning the Receivables (including the
establishment of any office from which it services the Receivables or keeps
records concerning the Receivables) or of its principal executive office and
whether, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall file such
financing statements or amendments as may be necessary to continue the
perfection of the Trust's security interest in the Receivables and the proceeds
thereof.  Each of the Seller and the Servicer will at all times maintain each
office from which it services Receivables and its principal executive office
within the United States of America.

          (d)  The Servicer will deliver to the Trustee:  (i) upon the execution
and delivery of each amendment of Articles I, II, III or IV hereto (or, with
respect to Article IV, as incorporated in the related Supplement; provided,
                                                                  -------- 
however, that the adoption of a Supplement pursuant to Section 6.9 of the
- -------                                                                  
Agreement which supplements or modifies Article IV for a particular new Series
shall not be considered an amendment), other than amendments pursuant to
subsection 13.1(a), and upon each date that any Additional Accounts or Automatic
Additional Accounts are to be included in the Accounts pursuant to Section 2.6
hereof, an Opinion of Counsel substantially in the form of Exhibit F; and (ii)
on or before March 31 of each year, beginning with March 31, 1994 an Opinion of
Counsel, substantially in the form of Exhibit G.

          Section 13.3  Limitation on Rights of Certificateholders.
                        ------------------------------------------ 

          (a)  The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or

                                      140
<PAGE>
 
heirs to claim an accounting or to take any action or commence any proceeding in
any court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.

          (b)  No Certificateholder shall have any right to vote (except with
respect to the Investor Certificateholders as provided in Section 13.1 hereof)
or in any manner otherwise control the operation and management of the Trust, or
the obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.

          (c)  No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee, and unless the
Holders of Certificates evidencing Undivided Interests aggregating more than 50%
of the Investor Interest of any Series which may be adversely affected but for
the institution of such suit, action or proceeding, shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Certificateholders shall
have the right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Certificateholders of any other of the Certificates, or to
obtain or seek to obtain priority over or preference to any other such
Certificateholder, or to enforce any right under this Agreement, except in

                                      141
<PAGE>
 
the manner herein provided and for the equal, ratable and common benefit of all
Certificateholders.  For the protection and enforcement of the provisions of
this Section 13.3, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.

          Section 13.4  GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN
                        -------------                                       
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

          Section 13.5  Notices.  All demands, notices, instructions and
                        -------                                         
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered at or sent by first class mail, facsimile or
courier to (a) in the case of the Seller and the Servicer, to People's Bank, 850
Main Street, Bridgeport, Connecticut 06604, Attention: William T. Kosturko,
Esq., (b) in the case of the Trustee, Four Albany Street, 10th Floor, New York,
New York 10006, Attention: Corporate Trust and Agency Group, Structured Finance
Team and (c) in the case of the Enhancement Provider for a particular Series,
the address, if any, specified in the Supplement relating to such Series; or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party.  Unless otherwise provided with respect to
any Series in the related Supplement any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Certificateholder as shown in the Certificate
Register or, with respect to any notice required or permitted to be made to the
Holders of Bearer Certificates, by publication in the manner provided in the
related Supplement.  Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder receives such notice.  Any notice required to be delivered
hereunder to Certificateholders, any report delivered by Servicer or independent
certified public accountants under Article III, any amendment or supplement
delivered pursuant to Section 13.1, and any opinion delivered hereunder shall be
given by first class mail, postage prepaid, to Moody's at Moody's Investors
Service, Inc., 99 Church Street, New

                                      142
<PAGE>
 
York, New York 10007, Attention:  ABS Monitoring Department, 4th Floor and to
Standard & Poor's at Standard and Poor's Corporation, 26 Broadway, New York, New
York 10004, Attention:  Asset-Backed Surveillance Group or with respect to any
other Rating Agency, the address supplied by such Rating Agency in writing to
the Servicer.  The Seller and the Servicer, as the case may be, shall provide 60
days prior written notice to the Investor Certificateholders of any sale of
Accounts pursuant to Section 7.2(b) or any transfer of Servicing pursuant to
Sections 8.2(b) or 8.5.

          Section 13.6  Severability of Provisions.  If any one or more of the
                        --------------------------                            
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.

          Section 13.7  Certificates Non-Assessable and Fully Paid.  It is the
                        ------------------------------------------            
intention of the parties to this Agreement that the Certificateholders shall not
be personally liable for obligations of the Trust, that the Undivided Interests
represented by the Certificates shall be non-assessable for any losses or
expenses of the Trust or for any reason whatsoever, and that Certificates upon
authentication thereof by the Trustee pursuant to Sections 2.1 and 6.2 are and
shall be deemed fully paid.

          Section 13.8  Further Assurances.  The Seller and the Servicer agree
                        ------------------                                    
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement, including, without limitation,
the execution of any financing statements or continuation statements relating to
the Receivables for filing under the provisions of the UCC of any applicable
jurisdiction.

          Section 13.9  No Waiver; Cumulative Remedies.  No failure to exercise
                        ------------------------------                         
and no delay in exercising, on the part of the Trustee, any Enhancement Provider
or the Investor Certificateholders, any right, remedy, power or

                                      143
<PAGE>
 
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.  The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.

          Section 13.10  Counterparts.  This Agreement may be executed in two or
                         ------------                                           
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

          Section 13.11  Third-Party Beneficiaries.  This Agreement will inure
                         -------------------------                            
to the benefit of and be binding upon the parties hereto, the Certificateholders
and, to the extent provided in the related Supplement, the Enhancement Provider
named therein, and their respective successors and permitted assigns.  Except as
otherwise provided in this Article XIII, no other Person will have any right or
obligation hereunder.

          Section 13.12  Actions by Certificateholders.
                         ----------------------------- 

          (a)  Wherever in this Agreement a provision is made that an action may
be taken or a notice, demand or instruction given by Investor Certificate-
holders, such action, notice or instruction may be taken or given by any
Investor Certificateholder, unless such provision requires a specific percentage
of Investor Certificateholders.

          (b)  Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.

          Section 13.13  Rule 144A Information.  For so long as any of the
                         ---------------------                            
Investor Certificates of any Series or any Class are "restricted securities"
within the meaning

                                      144
<PAGE>
 
of Rule 144(a)(3) under the Securities Act of 1933 each of the Seller, the
Servicer, the Trustee and the Enhancement Provider for such Series agree to
cooperate with each other to provide to any Investor Certificateholders of such
Series or Class and to any prospective purchaser of Certificates designated by
such an Investor Certificateholder upon the request of such Investor
Certificateholder or prospective purchaser, any information required to be
provided to such holder or prospective purchaser to satisfy the condition set
forth in Rule 144 A(d)(4) under the Act.

          Section 13.14  Merger and Integration.  Except as specifically stated
                         ----------------------                                
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement.  This Agreement may not be
modified, amended, waived or supplemented except as provided herein.

          Section 13.15  Headings.  The headings herein are for purposes of
                         --------                                          
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

                              [End of Article XIII

                                      145
<PAGE>
 
          IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.


                         PEOPLE'S BANK,
                            Seller and Servicer
 
 
                         By:/s/ Ronald Urquart
                            ------------------------------
                            Name: Ronald Urquart
                            Title: FIRST VICE PRESIDENT


                         BANKERS TRUST COMPANY,
                            Not in its individual
                            capacity but solely as
                            Trustee


                         By:/s/ Mellissa J. Kaye
                            -------------------------------
                            Name: Mellissa J. Kaye
                            Title: ASSISTANT VICE PRESIDENT

                                      146
<PAGE>
 
                                                                       Exhibit A
                                                                       ---------


                    FORM OF EXCHANGEABLE SELLER CERTIFICATE
                    ---------------------------------------

No. 1                                                                One Unit

                     PEOPLE'S BANK CREDIT CARD MASTER TRUST
                        EXCHANGEABLE SELLER CERTIFICATE

THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE
AGREEMENT REFERRED TO HEREIN.  A COPY OF THE AGREEMENT WILL BE FURNISHED TO THE
HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN REQUEST.

                 This Certificate represents Seller Interest in
                 ----------------------------------------------
                     People's Bank Credit Card Master Trust
                     --------------------------------------

Evidencing an interest in a trust, the Corpus of which consists of a portfolio
of VISA/*/ and MasterCard/*/ credit card receivables generated or to be
generated by  People's Bank.



                    (Not an interest in or an obligation of
                                 People's Bank
                           or any Affiliate thereof.)

          This certifies that PEOPLE'S BANK (the "Holder") is the registered
owner of an undivided interest in People's Bank Credit Card Master Trust (the
"Trust") not represented by any Series of Investor Certificates issued pursuant
to the Pooling and Servicing Agreement dated as of June 1, 1993 and the Series
1993-1 Supplement or any other Series Supplement (the "Agreement", such term to
include any Series Supplement thereto).  The corpus of the Trust (a) as of June
1, 1993 consists of (i) a portfolio of receivables (the "Receivables") (other
than Receivables in Additional Accounts) then existing or thereafter created
under certain VISA and MasterCard credit card accounts (the "Accounts") of
People's Bank (the "Seller"), a Connecticut stock savings bank (ii) all monies
due or to become due with respect thereto in payment of the Receivables
(including all Finance Charge Receivables), (iii) all proceeds of such
Receivables,

- ------------------------

/*/  VISA and Mastercard are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
<PAGE>
 
(iv) Recoveries allocable to the trust, (v) Interchange relating to the
Receivables, (vi) all monies on deposit in certain accounts of the trust, and
(b) will from time to time consist of (vii) the Series Accounts maintained for
the benefit of the Certificateholders of any Series of Investor Certificates,
(viii) any  Enhancement and all monies available under any Enhancement, to be
provided for any Series of Certificates for payment to the Certificateholders of
such Series (including, without limiting the generality of the foregoing, the
funds and securities on deposit in an account (the "Cash Collateral Account")
for the benefit of the holders of the Investor Certificates issued on the
Initial Closing Date) shall constitute the assets of the Trust (collectively,
the "Trust Assets").

          Although a summary of certain provisions of the Agreement is set forth
below, this Certificate does not purport to summarize the Agreement and
reference is made to that Agreement for information with respect to the
interests, rights, benefits, obligations, proceed and duties evidenced hereby.
A copy of the Agreement, may be requested from the Trustee by writing to the
Trustee at Four Albany Street, New York, NY 10006; Attention:  Corporate Trust
Office.  To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement.  This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the Holder by virtue of the
acceptance hereof assents and by which the Holder is bound.

          THE AGREEMENT AND THE CERTIFICATES CREATED THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGAITONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

          This Certificate has not been registered or qualified under the
Securities Act of 1933, as amended, and any state securities law.  No sale,
transfer or other disposition of this Certificate shall be permitted other than
in accordance with the provisions of Sections 6.3 or 6.9 of the Agreement.

          The Receivables consist of Principal Receivables which arise generally
from the purchase of goods, services and cash advances and of Finance Charges
and

                                      A-2
<PAGE>
 
other fees and charges, as more fully specified in the Agreement.

          This Certificate is the Exchangeable Seller Certificate (the
"Certificate"), which represents an interest in the Trust, including the right
to receive the Collections and other amounts at the times and in the amounts
specified in the Agreement to be paid to the Holder of the Exchangeable Seller
Certificate.  The aggregate interest represented by this Certificate at any time
in the Receivables in the Trust shall not exceed the Seller Interest at such
time.  In addition to this Certificate, Investor Certificates will be issued to
investors from time to time pursuant to the Agreement, each of which will
represent the interests of Investor Certificateholders of a specific Series in
the Trust.  This Certificate shall not represent any interest in the Collection
Account, any Series Account, or any Enhancement.  The Seller Interest on any
date of determination will generally be an amount equal to the aggregate amount
of Principal Receivables at the end of the day immediately prior to such date of
determination minus the Aggregate Investor Interest at the end of such day.
              -----                                                        

          This Certificate does not represent an obligation of, or any interest
in, the Seller or the Servicer, and neither the Certificates nor the Accounts or
Receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.  This Certificate has a limited
right of payment to certain Collections respecting the Receivables, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.

          Subject to prior termination of the Trust, the Agreement, the
obligations created by the Agreement and the Trust shall terminate on the
earlier to occur of (i) the day after the Distribution Date with respect to any
Series following the date on which funds shall have been deposited in the
Collection Account or the applicable Series Account for the payment of Investor
Certificateholders of each Series then issued and outstanding sufficient to pay
the Aggregate Investor Interest plus interest accrued at the applicable
Certificate Rate through the end of the related Interest Accrual Period prior to
the Distribution Date with respect to each such Series in full (unless a Trust
Extension shall have occurred pursuant to Section 12.1 of the Agreement), (ii)
if a Trust Extension shall have occurred, the Extended Trust Termi-

                                      A-3
<PAGE>
 
nation Date, and (iii) the expiration of 21 years from the death of the last
survivor of the descendents of Joseph P. Kennedy, the father of the late
President of the United States, living on the date of the Agreement.  Upon the
termination of the Trust pursuant to Section 12.1 of the Agreement, the Trustee
shall assign and convey to the Holder of the Seller Certificate (without
recourse, representation or warranty) all right, title and interest of the Trust
in the Receivables, whether then existing or thereafter created, and all
proceeds thereof and Interchange relating thereto and Recoveries allocable to
the Trust and the proceeds thereof.  The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as shall
be reasonably requested by the Holder of the Seller Certificate to vest in such
Holder all right, title and interest which the Trustee had in the Receivables.

          Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.

          IN WITNESS WHEREOF, People's Bank, has caused this Certificate to be
duly executed by its duly authorized officer.


                                             PEOPLE'S BANK

                                             By:____________________________

Dated ____________, 199_

                                      A-4
<PAGE>
 
                Form of Trustee's Certificate of Authentication
                -----------------------------------------------


        This is the Seller Certificate referred to in the within-mentioned
Pooling and Servicing Agreement.


                                         BANKERS TRUST COMPANY

                                         By:___________________________________
                                              Authorized Officer

                                      A-5
<PAGE>
 
                                                                       EXHIBIT B
                                                                       ---------



                      FORM OF ASSIGNMENT OF RECEIVABLES IN
                      ------------------------------------
                              ADDITIONAL ACCOUNTS
                              -------------------


          ASSIGNMENT No. ___ OF RECEIVABLES IN ADDITIONAL ACCOUNTS, dated as of
________, ____ by and between PEOPLE'S BANK, a Connecticut stock savings bank
(the "Seller"), to Bankers Trust Company, a New York banking corporation, not in
its individual capacity but solely as trustee (the "Trustee"), pursuant to the
Pooling and Servicing Agreement referred to below.

                                 W I T N E S S
                                 - - - - - - -

          WHEREAS, the Seller and the Trustee are parties to the Pooling and
Servicing Agreement, dated as of June l, 1993 (hereinafter as such agreement may
have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Pooling and Servicing Agreement");

          WHEREAS, pursuant to the Pooling and Servicing Agreement the Seller
wishes to designate Additional Accounts of the Seller to be included as Accounts
and to convey the Receivables of such Additional Accounts, whether now existing
hereinafter created, to the Trust as part of the corpus of the Trust (as each
such term is defined in the Pooling and Servicing Agreement); and

          WHEREAS, the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;

          NOW, THEREFORE, the Seller and the Trustee hereby agree as follows:

               1.  Defined Terms.  All terms defined in the Pooling and
                   -------------                                       
     Servicing Agreement and used herein shall have such defined meanings when
     used herein, unless otherwise defined herein.

               "Addition Date" shall mean, with respect to the Additional
                -------------                                            
     Accounts designated hereby, _____, _________________.

                                       1
<PAGE>
 
          "Addition Notice Date" shall mean, with respect the Additonal Accounts
           --------------------                                                 
     designated hereby, ____________, (which shall be a date on or prior to the
     fifth Business Day with respect to Accounts added pursuant to Section
     2.6(a) prior to the twentieth Business Day pursuant to Section 2.6(a)(i)
     prior to the Addition Date.)

          2.  Designation of Additional Accounts.  The Seller shall deliver to
              ----------------------------------                              
the Trustee, on behalf of the Trust, not later than three Business Days after
the Addition Date, a computer file or microfiche list containing a true and
complete list of each VISA and MasterCard account which as of the  Addition Date
shall be deemed to be an Additional Account, [such accounts being identified by
account number as of the close of business on the Additional Date by including
in such computer file or microfiche list code "__" with respect to the first
addition of Accounts; "_____________" with respect to the second addition of
Accounts, and so on in sequence, in the dependent number field.  Such list shall
be marked as Schedule 1 to this Agreement and, as of the Addition Date, shall be
incorporated into and made a part of this Assignment.]

          3.  Deposits into the Collection Acccount.
              ------------------------------------- 

          (a)  Not later than the second Business Day following the completion
of each Billing Cycle in which the Addition Date occurs, the Servicer shall
deposit into the Collection Account any amounts received from the Obligors
relating to the Additional Accounts to which such Billing Cycle relates during
such Billing Cycle to the extent not so deposited pursuant to subsection 3(b)
below and Article IV of the Agreement.

          (b)  On or before the second Business Day following the end of each
Billing Cycle which occurs during the 30-days immediately following such
Addition Date, the Seller shall deposit into the Collection Account an amount
equal to, with respect to Receivables in the Additional Accounts in each Billing
Cycle in which the Addition Date occurs, the Collections of Finance Charge
Receivables and Principal Receivables processed on each Date of Processing from
and including the first Date of Processing in such Billing Cycle through and
including

                                       2
<PAGE>
 
the Date of Processing immediate1y preceding the Addition Date.

          4.  Conveyance of Receivables.
              ------------------------- 

          (a)  The Seller does hereby transfer, assign, set-over and otherwise
convey to the Trustee, on behalf of the Trust, for the benefit of the
Certificateholders, without recourse on and after the Addition Date, all right,
title and interest of the Transferor in and to (i) the Receivables now existing
and hereafter created in the Additional Accounts designated hereby, (ii) all
monies due or to become due with respect thereto (including all Finance Charge
Receivables), (iii) all proceeds of such Receivables, (iv) Insurance proceeds
relating to the Receivables, (v) Recoveries allocable to the Trust and (vi)
Interchange related to such Receivables pursuant to Subsection 2.5(k) of the
Pooling and Servicing Agreement.

          (b)  In connection with such transfer, the Seller agrees to record and
file, at its own expense, a financing statement with respect to the Receivables
now existing and hereafter created in the Automatic Additional Accounts
designated hereby (which may be a single financing statement with respect to all
such Receivables) for the transfer of accounts as defined in Section 9-106 of
the UCC as in effect in the State of New York meeting the requirements of
applicable state law in such manner and such jurisdictions as are necessary to
perfect the assignment of such Receivables to the Trust, and to deliver a file-
stamped copy of such financing statement or other evidence of such filing (which
may, for purposes of this Section 4, consist of telephone confirmation of such
filing) to the Trustee on or prior to the date of this Assignment.

          (c)  In connection with such transfer, the Seller further agrees, at
its own expense, on or prior to the date of this Assignment to indicate in its
computer files by including in such computer file or microfiche list the code
"___"  with respect to the first addition of Accounts, "___" with respect to the
second addition of Accounts, and so on in sequence, in the dependent number
field that Receivables created in connection with the Additional Accounts
designated hereby have been transferred to the Trust pursuant to this Assignment
for the benefit of the Certificateholders.

                                       3
<PAGE>
 
          5.  Acceptance by Trustee.  The Trustee hereby acknowledges its
              ---------------------                                      
acceptance on behalf of the Trust of all right, title and interest previously
held by the Seller in and to (i) the Receivables now existing and hereafter
created in the Additional Accounts designated hereby, (ii) all monies to be due
with respect thereto (including all Finance Charge Receivables), (iii) all
proceeds of such Receivables, (iv) Insurance Proceeds relating to the
Receivables, (v) Recoveries allocated to the Trust and (vi) Interchange relating
to such Receivables pursuant to Subsection 2.5(k) of the Pooling and Servicing
Agreement, and declares that it shall maintain such right, title and interest,
upon the trust set forth in the Pooling and Servicing Agreement, for the benefit
of all Certificateholders.

          6.  Representations and Warranties of the Seller.  The Seller hereby
              --------------------------------------------                    
represents and warrants to the Trustee and the Trust as of the Addition Date:

          (a)  Legal Valid and Binding Obligation.  This Assignment constitutes
               ----------------------------------                              
a legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its terms, except (A) such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and the rights of creditors of Connecticut stock
savings banks, (B) as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity), (C) subject to the
unenforceability of provisions indemnifying a party against liability where such
indemnification is contrary to public policy, (D) subject to the effect of
judicial decisions which have held that certain covenants and provisions of
agreements are unenforceable where (y) the breach of such covenants or
provisions imposes restrictions or burdens where it cannot be demonstrated that
such breach is a material breach of a material covenant or provision, or (z) the
creditor's enforcement of such covenants or provisions under the circumstances
would violate the creditor's implied covenant of good faith and fair dealing,
and (E) subject to the unenforceability of provisions herein to the effect that
the failure to exercise or delay in exercising rights or remedies will not
operate as a waiver of any such rights or remedies, or to the effect that
provisions

                                       4
<PAGE>
 
therein may only be waived in writing to the extent that an oral agreement
modifying such provisions has been entered into.

          (b)  Eligibility of Accounts.  Each Additional Account designated
               -----------------------                                     
hereby is, as of the end of the related Billing Cycle immediately preceding the
Addition Date, an Eligible Additional Account.

          (c)  Selection Procedures.  No selection procedures believed by the
               --------------------                                          
Seller to be materially adverse to the interests of the Investor
Certificateholders were utilized in selecting the Additional Accounts designated
hereby from the available Eligible Additional Accounts owned by the Seller.

          (d)  Insolvency.  As of the Addition Date, the Seller is not insolvent
               ----------                                                       
and, after giving effect to the conveyance set forth in Section 4 of this
Assignment, will not be insolvent.

          (e)  Security Interest.  This Assignment constitutes either (i) a
               -----------------                                           
valid transfer and assignment to the Trust of all right, title and interest of
the Seller in and to Receivables now existing and hereafter created in the
Additional Accounts designated hereby, and all proceeds (as defined in the UCC
as in effect in the state of New York) of such Receivables and Insurance
Proceeds and Recoveries relating thereto, and such Receivables and any proceeds
thereof and Recoveries allocable to the Trust and the Interchange relating to
such Receivables pursuant to Section 2.5(k) of the Agreement will be held by the
Trust free and clear of any Lien of any Person claiming through or under Seller
or any of its Affiliates except for (x) Liens permitted under subsection 2.3(b)
of the Pooling and Servicing Agreement and subject to Section 9.306 of the UCC
in effect in the States of New York, (y) the interest of the Holder of the
Seller Certificate and (z) the Seller's right to interest accruing on, and
investment earnings in respect of, the Collection Account, the Retention Account
or any Series Account as provided in the Pooling and Servicing Agreement; or
(ii) it constitutes a grant of a security interest (as defined in the UCC as in
effect in the State of New York) in such property to the Trust, which is
enforceable with respect to the existing Receivables of the Additional Accounts
[Automatic] Additional Accounts designated hereby, the

                                       5
<PAGE>
 
proceeds (as defined in the UCC as in effect in the State of New York) thereof
and Insurance Proceeds relating thereto upon the conveyance of such Receivables
to the Trust, and which will be enforceable with respect to the Receivables
thereafter created in respect of Additional Accounts designated hereby, the
proceeds (as defined in the UCC as in effect in the State of New York) thereof,
Recoveries allocable to the Trust and Interchange with respect to such
Receivables pursuant to subsection 2.5(k) of the Pooling and Servicing Agreement
upon such creation; and (iii) if this Assignment constitutes the grant of a
security interest to the Trust in such property, upon the filing of a financing
statement described in Section 4 of this Assignment with respect to the
Additional Accounts designated hereby and, in the case of Receivables hereafter
created in such Additional Accounts and the proceeds (as defined in the UCC as
in effect in the State of New York) thereof, Insurance Proceeds relating to such
Receivables, Recoveries allocable to the Trust and Interchange with respect to
such Receivables pursuant to subsection 2.5(k) of the Pooling and Servicing
Agreement, upon such creation, the Trust shall have a first priority perfected
security interest in such property, except for Liens permitted under subsection
2.5(b) of the Pooling and Servicing Agreement or as provided in Section 9-306 of
the UCC as in effect in the State of New York.

          7.  Conditions Precedent.  The acceptance of the Trustee set forth in
              --------------------                                             
Section 5 and the amendment of the Pooling and Servicing Agreement set forth in
Section 8 are subject to the satisfaction, on or prior to the Addition Date, of
the following conditions precedent:

          (a)  Officer's Certificate.  The Seller shall have delivered to the
               ---------------------                                         
Trustee a certificate of a Vice President or more senior officer, certifying
that (i) all requirements set forth in Section 2.6 of the Pooling and Servicing
Agreement for designating Additional Accounts and conveying the Principal
Receivables of such Accounts, whether now existing or hereafter created, have
been satisfied and (ii) each of the representations and warranties made by the
Seller in Section 6 is true and correct as of the Addition Date.  The Trustee
may conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set

                                       6
<PAGE>
 
forth therein, and shall incur no liability in so relying.

          (b)   Opinion of Counsel.  The Seller shall have delivered to the
                ------------------                                         
Trustee an Opinion of Counsel with respect to the Additional Accounts designated
hereby substantially in the form of Exhibit F to the Pooling and Servicing
Agreement.

          (c)  Additional Information.  The Seller shall have delivered to the
               ----------------------                                         
Trustee such information as was reasonably requested by the Trustee to satisfy
itself as to the accuracy of the representation and warranty set forth in
subsection 6(d) to this Agreement.

          (d)  Notice of Addition of Accounts.  The Seller (i) shall have
               ------------------------------                            
provided the Rating Agency, the Servicer and the Enhancement Provider, if so
provided in the Supplement with respect to any Series, with the notice specified
provided in subsections 2.6(f) of the Pooling and Servicing Agreement, at the
time specified therein.

          8.  Amendment of the Pooling and Servicing Agreement.  The Pooling and
              ------------------------------------------------                  
Servicing Agreement is hereby amended to provide that all references thcrein to
the "Pooling and Servicing Agreement," to "this Agreement" and "herein" shall be
deemed from and after the Addition Date to be a dual reference to the Pooling
and Servicing Agreement as supplemented by this Assignment.  Except as expressly
amended hereby, all of the representations, warranties, terms, covenants and
conditions of the Pooling and Servicing Agreement shall remain unamended and
shall continue to be, and shall remain, in full force and effect in accordance
with its terms and except as expressly provided herein shall not constitute or
be deemed to constitute a waiver of compliance with or a consent to
noncompliance with any term or provision of the Pooling and Servicing Agreement.

          9.  Counterparts.  This Assignment may be executed in two or more
              ------------                                                 
counterparts (and by different parties or separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.

          10.  GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
               -------------                                                  
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       7
<PAGE>
 
          IN WITNESS WHEREOF, the undersigned have caused this Assignment of
Receivables in Additional Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.


                       PEOPLE'S BANK



                       By: _________________________________
                       Name:
                       Title:



                       BANKERS TRUST COMPANY, not in its
                         individual capacity, but solely as
                         Trustee



                       By: ________________________________
                       Name:
                       Title

                                       8
<PAGE>
 
                                         Schedule 1
                                         to Assignment of
                                         Receivables in
                                         Additional Accounts
                                         -------------------


                              ADDITIONAL ACCOUNTS

                             [Deemed Incorporated]

                                       9
<PAGE>
 
                                                                       EXHIBIT C
                                                                       ---------

                     FORM OF MONTHLY SERVICER'S CERTIFICATE
                     --------------------------------------

                                 PEOPLE'S BANK

                         _____________________________

              People's Bank Credit Card Master Trust, Series ____
                         _____________________________

                     For the __________ Determination Date

                       For the __________ Monthly Period


          The undersigned, a duly authorized representative of The People's
Bank, as Servicer pursuant to the Pooling and Servicing Agreement dated as of
June 1, 1991 (the "Pooling and Servicing Agreement") by and between People's
Bank and Bankers Trust Company, as Trustee, does hereby certify as follows:

          1.  Capitalized terms used in this Certificate have their respective
     meanings set forth in the Pooling and Servicing Agreement; provided, that
                                                                --------      
     the "preceding Monthly Period" shall mean the Monthly Period immediately
     preceding the calendar month in which this Certificate is delivered.  This
     Certificate is delivered pursuant to subsection 3.4(b) of the Pooling and
     Servicing Agreement.  References herein to certain sections and subsections
     are references to the respective sections and subsections of the Pooling
     and Servicing Agreement, as amended by the applicable Series Supplement.

          2.  People's Bank is Servicer under the Pooling and Servicing
     Agreement.

          3.  The undersigned is a Servicing Officer.

          4.  The date of this Certificate is __________, 199_ which is a
     Determination Date under the Pooling and Servicing Agreement.

          5.  The aggregate amount of Collections processed during the preceding
     Monthly Period (equal to 5(a) plus 5(b)) was equal to   $ __________

               (a)  The aggregate amount of Collections of Finance Charge
     Receivables collected during the preceding Monthly Period (the "Collections
     of Finance Charge Receivables") was equal to   $ __________

               (b)  The aggregate amount of Collections of Principal Receivables
     collected during the preceding Monthly Period (the "Collections of
     Principal Receivables") was equal to   $ __________
<PAGE>
 
          6.  The aggregate amount of Receivables as of the end of the last day
     of the preceding Monthly Period was equal to   $ __________


          7.  Attached hereto is a true and correct copy of the statements
     required to be delivered by the Servicer on the date of this Certificate to
     the Paying Agent pursuant to Article V.

          8.  To the knowledge of the undersigned, there are no Liens on any
     Receivables in the Trust except as described below:

                        [If applicable, insert "None".]

          9.  The amount by which the Aggregate Principal Receivables exceeds
     the Aggregate Principal Receivables required to be maintained pursuant to
     the Pooling and Servicing Agreement, is equal to   $ __________
<PAGE>
 
          IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this certificate this __ day of __________, ____.

                         PEOPLE'S BANK
                           Servicer



                         By:___________________________________
                            Name:
                            Title:
<PAGE>
 
                                    Schedule - to Monthly
                                    Servicer's Certificate/*/
                                    ----------------------   



                                 PEOPLE'S BANK

                         _____________________________

              People's Bank Credit Card Master Trust, Series ____
                         _____________________________

                     For the __________ Determination Date

                       For the __________ Monthly Period


          1.  The aggregate amount of Collections processed during the preceding
     Monthly Period (equal to 1(a) plus 1(b)) was equal to   $ __________

               (a)  The aggregate amount of Collections of Finance Charge
     Receivables collected during the preceding Monthly Period (the "Collections
     of Finance Charge Receivables") allocated to Series __ was equal to  $
     __________

               (b)  The aggregate amount of Collections of Principal Receivables
     collected during the preceding Monthly Period (the "Collections of
     Principal Receivables" allocated to Series __ was equal to   $ __________

          2.  The aggregate amount of funds on deposit in the [Collection
     Account applicable to Series __] [Collection Subaccount with respect to
     Series __] [Series Account with respect to Series __] with respect to
     Collections processed during the preceding Monthly Period, and applicable
     to Series ____ as of the Closing Date relating to the preceding Monthly
     Period was equal

     to                                         $ __________

          3.  (a)  The aggregate amount of funds on deposit in the [Principal
     Account] with respect to Collections processed during the preceding Monthly
     Period and allocated to Series __, as of the end of

     the last day of the preceding Monthly Period was
     equal to                                   $ __________

               (b) The aggregate amount of funds which will be on deposit in the
     [Principal Account] on the Transfer Date following this Determination Date,
     will be $__________.
          4.  The aggregate amount to funds on deposit in the Retention
     Subaccount relating to Series __ as of the 

- ---------------------

/*/  A separate schedule is to be attached for each Series, with appropriate
- ---                                                                         
changes to reflect the specifics of the related Series Supplement.
<PAGE>
 
     end of the last day of the preceding Monthly Period was equal to
     $__________

               5.  The aggregate amount of [drawings] [withdrawals] [payments]
     required to be made under the [Letter of Credit] [Cash Collateral Account]
     [other form of Enhancement] pursuant to Section ____ or ____ on the
     __________ Date in the current calendar month is equal to   $__________

               6. (a) The aggregate amount of Interchange to be deposited to the
     Collection Account and allocated to Series __ on the [next succeeding
     Transfer Date] is
     equal to      $__________

               (b)  The amount of earnings (net of losses and investment
     expenses) on funds on deposit in the Principal Funding Account to be
     transferred from the Principal Funding Account to the [Finance Charge
     Account] on the [next succeeding Transfer Date] is equal to   $__________

          7.  The sum of all amounts payable to the Investor Certificateholders
     of Series __ on the Distribution Date in the current Monthly Period is
     equal to:
<PAGE>
 
               Payable in respect of
               principal __________ ..........  $ __________
               Payable in respect of
               interest __________  ..........  $ __________
               Total..........................  $ __________

          8.  [No Series Pay Out Event or Trust Pay Out Event has occurred.]
     [The following [Series Pay Out Event] [Trust Pay Out Event] has occurred:
     __________.]
<PAGE>
 
                                               Schedule 2 to Exhibit C
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------
Assumptions
- -----------

        Transaction Size
        Revolving Period Length
        Servicing Fee
        Credit Enhancement Fee
        Credit Enhancement Level
        Initial Deposit in Cash Collateral Account
        Coupon
        Spread Account Cap
        Amortization Event (1=Yes 0=No)
        
Information From Stat Reports
- -----------------------------

        Prior Month Ending Balance 0407
        Prior Month Ending Balance Total Bank
        Bank 0407 Percentage
        Interchange
        Finance Charge Purchases
        Finance Charge Cash Advances
        Total Finance Charges
        Late Fees
        Overlimit Fees
        Cash Advance Fees
        Returned Check Fees
        Insurance Code 1
        Insurance Code 2
        Insurance Code 3
        Insurance Code 4
        Insurance Code 5
        Total Credit Life
        Annual Membership Fee
        Cash Advances
        Purchases
        Payments
        Total Credits
        Principal Credits
        Interest Credits
        Total Bank Refund Finance Charge
        Total Bank Refund Late Charge
        Total Bank Refund Overlimit Fees
        Total BankRefund Membership Fees
        0407 Refund Finance Charge
        0407 Refund Late Charge
        0407 Refund Overlimit Fees

Page 1
<PAGE>
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------
        0407 Refund Membership Fees
        Charge-offs (net of reinstatments)
        Charge-off Debits
        Charge-off Credits
        Total Bank Recoveries
        0407 Recoveries

        Ending Balance
        Ending No. of Accts
        Check
Other Inputs
- ------------

        Repurchases
        Reinvestment Rate
        Shared Finance Charge Collections Available to Series 1993-1
        Aggregate Master Trust Shortfall

        Number of Additional Accounts
        Number of Removed Accounts
        Number of Automatic Additional Accounts

        1-5 dpd         Dollars
        1-5 dpd         Number of Accts
        6-30 dpd        Dollars
        6-30 dpd        Number of Accts
        31-60 dpd       Dollars
        31-60 dpd       Number of Accts
        61-90 dpd       Dollars
        61-90 dpd       Number of Accts
        91-120 dpd      Dollars
        91-120 dpd      Number of Accts
        121-150 dpd     Dollars
        121-150 dpd     Number of Accts
        151-180 dpd     Dollars
        151-180 dpd     Number of Accts
        181 +           Dollars
        181 +           Number of Accts

Page 2
<PAGE>
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------

1.      Trust Activity
- --      --------------

        Begining of Month - Aggregate Principal Receivables



        Principal Collections on the Receivables

        Finance Charge Receivables

        Receivables in Defaulted Accounts


        End of Month - Aggregate Principal Receivables


        Investor Interest

        Seller Principal Receivables


        Investor Percentage with respect to...
                        Finance Charges
                        Charged-Off Accounts
                        Principal Receivables


        Seller Percentage with respect to...
                        Finance Charges
                        Charged-Off Accounts
                        Principal Receivables



2.  Allocation of Funds in Collection Account
- ---------------------------------------------

        Available Finance Charge Collections

        Available Principal Collections

        Investor Default Amount


Page 3
<PAGE>
 
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                  End of
                                                   Date                   Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993
- --------------------------------------------------------------------------------
Aggregate collections allocated to Certificateholders

Monthly Investor Servicing Fee (see
"Calculation of Monthly Servicing Fee") #6

Monthly Certificate Interest Payable to Certificate Holders (see
"Calculation of Certificate Interest #3

Monthly Certificate Insurer Fee

Monthly Principal Payable to Certificateholders (see "Calculation of Monthly 
Principal") #4

Monthly Principal Reinvested in Receivables (see "Calculation of Monthly 
Principal") #4

Collections Available to Reimburse Investor Charge offs

Aggregate Investor Charge Offs

Excess Servicing (dollars)
Excess Servicing (percentage of investor interest)

Withdrawal from Cash Collateral Account

Surety Bond Claim

Certificate Insurer Fee Shortfall

Servicing Fee Shortfall

Investor Charge Offs

Investor Certificate Interest Shortfall (Deficiency Amounts)

Payments to Certificate Insurer

Deposits in Cash Collateral Account

Available Shared Finance Charge Collections



Page 4

<PAGE>
 
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------
3. Calculation of Certificate Interest
- --------------------------------------

        Certificate Rate

        This Month Certificate Interest

        Previous Month's Deficiency Amount
        
        Interest at the Investor Certificate Rate on
        Deficiency Amount

        Total Certificate Interest Distributable to
        Certificateholders

4. Calculation of Monthly Principal
- -----------------------------------

        Beginning Investor Interest

        Avaialable Principal Collections

        Investor Default Amount



        Total Investor Monthly Principal

        Investor Monthly Principal Reinvested in Receivables



        Controlled Amortization Amount
        
        Deficit Controlled Amortization Amount

        Monthly Principal Payable to Certificateholders

        Ending Investor Interest






Page 5

<PAGE>
 
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------
5. Calculation of Pool Factor
- -----------------------------

        Pool Factor (Ending Certificate Balance 
        divided by initial Principal Amount to 
        7 decimal places

6. Calculation of Monthly Servicing Fee
- ---------------------------------------

        Series Servicing Fee Percentage

        Beginning Investor Interest

          MONTHLY SERVICING FEE

7. Calculation of Remaining Surety Bond Amount
- ----------------------------------------------

        Available Surety Bond Amount on Previous payment Date

        Stated Surety Bond Amount

        Unreimbursed Claims on Surety Bond

        Reimbursements of Claims on Surety Bond

        Available Surety Bond Amount

8. Cash Collateral Account Activity
- -----------------------------------

          BEGINNING BALANCE

        Required Cash Collateral Account Amount

        Cash Collateral Account Deposits

        Reinvestment Income Received on Cash Collateral Account


        Aggregate Cash Collateral Account Draws



        AVAILABLE CASH COLLATERAL ACCOUNT

IX.

Page 6

<PAGE>
 
 
- --------------------------------------------------------------------------------
08-Jul-93                                       L                      N
                                                Cut-Off                 End of
                                                   Date                  Month
                                                   Date                       1
                                           May 31, 1993           June 30, 1993

- --------------------------------------------------------------------------------
9. Past Due Statistics
- ----------------------
  (past due on a contractual basis)


1-30 days past due                Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
                                                 
31-60 days past due               Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
                                                 
61-90 days past due               Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
91-120 days past due              Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
                                                 
121-150 days past due             Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
                                                 
151-180 days past due             Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers
                                                 
                                                 
180 + days past due               Dollars        
                                  Percent Dollars
                                  Numbers        
                                  Percent Numbers 

10. Base Rate Calculation
- -------------------------

        Base Rate
        Portolio Yield (net of losses)
        Excess of Portfolio Yield over Base Rate



Page 7

<PAGE>
 
                                                                       EXHIBIT D
                                                                       ---------


                     FORM OF ANNUAL SERVICER'S CERTIFICATE
                     -------------------------------------

                                 PEOPLE'S BANK

                         _____________________________

              People's Bank Credit Card Master Trust Series 1993-__
                         _____________________________

          The undersigned, a duly authorized representative of People's Bank, as
Servicer pursuant to the Pooling and Servicing Agreement dated as of June 1,
1993 (the "Pooling and Servicing Agreement") by and between People's Bank and
Bankers Trust Company, as trustee (the "Trustee"), does hereby certify that:

          1.  People's Bank is Servicer under the Pooling and Servicing
     Agreement.

          2.  The undersigned is duly authorized pursuant to the Pooling and
     Servicing Agreement to execute and deliver this Certificate to the Trustee.

          3.  This Certificate is delivered pursuant to Section 3.5 of the
     Pooling and Servicing Agreement.

          4.  A review of the activities of the Servicer during [the period from
     the Closing Date until] [the calendar year ended] December 31, _____ was
     conducted under my supervision.

          5.  Based on such review, the Servicer has, to the best of my
     knowledge, fully performed all its obligations under the Pooling and
     Servicing Agreement throughout such [period] [calendar year] and no default
     in the performance of such obligations has occurred or is continuing except
     as set forth in paragraph 6 below.

          6.  The following is a description of each default in the performance
     of the Servicer's obligations under the provisions of the Pooling and
     Servicing Agreement including any Supplement known to me to have been made
     during [such period] [the calendar year ended __________, _____,] which
     sets forth in detail (i) the nature of each such default, (ii) the action
     taken by the Servicer, if any, to remedy each such default and (iii) the
     current status of each such default:

                        [If applicable, insert "None."]
<PAGE>
 
        IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused
this Agreement to be duly executed by their respective officers as of the day 
and year first above written.

                                PEOPLE'S BANK,
                                  Seller and Servicer

                                By: /s/ Ronald Urquart
                                    -----------------------------
                                    Name: Ronald Urquart
                                    Title:  FIRST VICE PRESIDENT


                                BANKERS TRUST COMPANY,
                                  Not in its individual
                                  capacity but solely as
                                  Trustee

                                By: /s/ Mellissa J. Kaye
                                    ------------------------------
                                    Name: Mellissa J.Kaye
                                    Title: ASSISTANT PRESIDENT


<PAGE>
 
                                                                     EXHIBIT 4.2

================================================================================


                                 PEOPLE'S BANK

                            Transferor and Servicer

                                      and

                             BANKERS TRUST COMPANY

                                    Trustee

               on behalf of the Series 1996-1 Certificateholders



                            SERIES 1996-1 SUPPLEMENT

                           Dated as of June __, 1996

                                       to

                        POOLING AND SERVICING AGREEMENT

                            Dated as of June 1, 1993



                                 $____________

                     PEOPLE'S BANK CREDIT CARD MASTER TRUST

                        $_______  Floating Rate Class A
                    Asset Backed Certificates, Series 1996-1

                        $ _______ Floating Rate Class B
                    Asset Backed Certificates, Series 1996-1


================================================================================
<PAGE>
 
                      TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                        Page
                                                        ----
<S>            <C>                                       <C>
 SECTION 1.    Designation...............................  1
 SECTION 2.    Definitions...............................  1
 SECTION 2.1   Other Definitional Provisions............. 20
 SECTION 3.    Conveyance of Interest in Cash Collateral
               Account................................... 20
 SECTION 4.    Minimum Seller Interest, Minimum Aggre
               gate Principal Receivables and Removal of
               Accounts.................................. 20
 SECTION 5.    Reassignment and Transfer Terms........... 21
 SECTION 6.    Delivery and Payment for the Series
               1996-1 Certificates....................... 21
 SECTION 7.    Depositary; Form of Delivery of Series
               1996-1 Certificates....................... 22
 SECTION 8.    Enhancement............................... 22
 SECTION 9.    Article IV of Agreement................... 22

                         ARTICLE IV

              RIGHTS OF CERTIFICATEHOLDERS AND
         ALLOCATION AND APPLICATION OF COLLECTIONS

 SECTION 4.2A  Rights of Investor Certificateholders..... 22
 SECTION 4.2B  The Series 1996-1 Collection Subaccount... 23
 SECTION 4.3   Establishment of Series 1996-1 Investor
               Accounts.................................. 25
 SECTION 4.4   Allocations............................... 27
 SECTION 4.5   Defaulted Accounts and Charge-Offs........ 30
 SECTION 4.6   Monthly Payments.......................... 31
 SECTION 4.7   Payment of Certificate Interest........... 41
 SECTION 4.8   Payment of Certificate Principal.......... 41
 SECTION 4.9   Establishment of the Cash Collateral
               Account................................... 43
 SECTION 4.10  Transferor's or Servicer's Failure to
               Make a Deposit or Payment................. 45
 SECTION 4.11  Interest Rate Caps........................ 48
 SECTION 4.12  Reallocated Principal Collections......... 52
 SECTION 4.13  Determination of LIBOR.................... 52
 SECTION 4.14  Discount Option........................... 53

                            ARTICLE V

               DISTRIBUTIONS AND REPORTS TO INVESTOR
                       CERTIFICATEHOLDERS

 SECTION 5.1   Distributions............................. 54
 SECTION 5.2   Monthly Certificateholders' Statement..... 55

</TABLE> 
<PAGE>
 
<TABLE>
<S>            <C>
 SECTION 9.A.  Series 1996-1 Pay Out Events.............. 57
 SECTION 10.   Series 1996-1 Termination................. 60
 SECTION 11.   Ratification and Reaffirmation of Pooling
               and Servicing Agreement................... 61
 SECTION 12.   Ratification and Reaffirmation of
               Representations and Warranties............ 61
 SECTION 13.   [RESERVED]................................ 62
 SECTION 14.   No Subordination.......................... 62
 SECTION 15.   Repurchase of the Series 1996-1
               Certificates.............................. 62
 SECTION 16.   Counterparts.............................. 63
 SECTION 17.   Additional Covenants of Transferor........ 63
 SECTION 18.   Series 1996-1 Investor Exchange........... 64
 SECTION 19.   Governing Law............................. 64
</TABLE>

                                       ii
<PAGE>
 
          SERIES 1996-1 SUPPLEMENT, dated as of June __, 1996 (this "Series
Supplement") by and between PEOPLE'S BANK, a Connecticut capital stock savings
bank, as Transferor and Servicer, and BANKERS TRUST COMPANY, a banking
corporation organized and existing under the laws of the State of New York, not
in its individual capacity but solely as Trustee under the Pooling and Servicing
Agreement dated as of June 1, 1993 between PEOPLE'S BANK and the Trustee, as 
amended (the "Pooling and Servicing Agreement").


                                   RECITALS:
                                   -------- 

          1.  Section 6.9(b) of the Pooling and Servicing Agreement provides,
among other things, that the Transferor and the Trustee may at any time and from
time to time enter into a supplement to the Pooling and Servicing Agreement for
the purpose of authorizing the delivery by the Trustee to the Transferor for the
execution and redelivery to the Trustee for authentication of one or more Series
of Certificates.

          2.  Pursuant to this Series Supplement, the Transferor and the Trustee
on behalf of the Trust shall create a new Series of Investor Certificates and
shall specify the principal terms thereof.

          SECTION 1.  Designation.  The Certificates authorized hereby shall be
                      -----------                                              
designated generally as the "Series 1996-1 Certificates."  The Series 1996-1
Certificates shall be issued in two Classes, which shall be designated generally
as the Floating Rate Class A Asset Backed Certificates, Series 1996-1 (the
"Class A Certificates") and the Floating Rate Class B Asset Backed Certificates,
Series 1996-1 (the "Class B Certificates").

          SECTION 2.  Definitions.  In the event that any term or provision
                      -----------                                          
contained herein shall conflict with or be inconsistent with any provision
contained in the Pooling and Servicing Agreement, the terms and provisions of
this Series Supplement shall govern.  All capitalized terms not otherwise
defined herein are defined in the Pooling and Servicing Agreement.  All Article,
Section or subsection references herein shall mean Article, Section or
subsections of the Pooling and Servicing Agreement except as otherwise provided
herein.  Each capitalized term used or defined herein shall relate only to the
Series 1996-1 Certificates and to no other Series of Certificates issued by the
Trust.

          "Agreement" shall mean the Pooling and Servicing Agreement as
           ---------                                                   
supplemented by this Series Supplement.

                                       1
<PAGE>
 
          "Amortization Period" shall mean the period following the Revolving
           -------------------                                               
Period which shall be either the Controlled Amortization Period or the Rapid
Amortization Period.

          "Available Cash Collateral Amount" shall mean, with respect to any
           --------------------------------                                 
date of determination, the lesser of (i) the amount on deposit in the Cash
Collateral Account and (ii) the Required Cash Collateral Amount.

          "Available Finance Charge Collections" shall mean, with respect to any
           ------------------------------------                                 
given Monthly Period, Collections of Finance Charge Receivables (other than the
proceeds of the sale of any Interest Rate Cap pursuant to subsection 4.11(g))
processed on any Date of Processing during such Monthly Period, which are
allocated to the Investor Interest and deposited in the Finance Charge Account
pursuant to Article IV.

          "Available Principal Collections" shall mean, with respect to any
           -------------------------------                                 
given Monthly Period, Collections of Principal Receivables processed on any Date
of Processing during such Monthly Period, which were allocated to the Investor
Interest and were deposited in the Principal Account pursuant to subsection
4.4(d)(ii) or 4.4(e)(ii) (or which will be deposited in the Collection Account
on the Transfer Date following such Monthly Period pursuant to the fourth
paragraph of subsection 4.2(a)).

          "Available Shared Principal Collections" shall mean, with respect to
           --------------------------------------                             
any Monthly Period, Shared Principal Collections available to be allocated to
the Certificates from each other Series that has a controlled or scheduled
amortization or accumulation period beginning after the Class B Expected Final
Distribution Date.

          "Base Rate" shall mean, with respect to any Monthly Period, the
           ---------                                                     
weighted average of (i) the lesser of the Class A Certificate Rate and the Class
A Cap Rate and (ii) the lesser of the Class B Certificate Rate and the Class B
Cap Rate (weighted based on the Class A Investor Interest and the Class B
Investor Interest, respectively, as of the last day of the preceding Monthly
Period) plus 2.00% per annum.

          "Calculation Period" shall have the meaning specified in the
           ------------------                                         
applicable Interest Rate Cap.

          "Cash Collateral Account" shall have the meaning specified in Section
           -----------------------                                             
4.9.

                                       2
<PAGE>
 
          "Cash Collateral Account Surplus" shall mean, on any date of
           -------------------------------                            
determination, the amount, if any, by which the amount on deposit in the Cash
Collateral Account exceeds the Required Cash Collateral Amount.

          "Cash Collateral Depositor" shall mean the bank or banks (other than
           -------------------------                                          
the Transferor or the Trustee) which are parties to the Loan Agreement on the
Closing Date, such bank or banks to be selected by the Transferor on or prior to
the Closing Date to make the deposit of a portion of the Initial Cash Collateral
Amount in the Cash Collateral Account on the Closing Date, or any successors
thereto or assignees thereof appointed as provided in the Loan Agreement.

          "Certificate Rate" for purposes of Section 17 hereof shall mean the
           ----------------                                                  
weighted average of the lesser of (i) the Class A Certificate Rate and (ii) the
Class A Cap Rate and the lesser of (i) the Class B Certificate Rate and (ii) the
Class B Cap Rate.

          "Class A Available Finance Charge Collections" shall mean, with
           --------------------------------------------                  
respect to any given Monthly Period, the sum of (a) the Class A Investor
Percentage of Available Finance Charge Collections and (b) the proceeds of the
sale of any Class A Interest Rate Cap deposited into the Collection Account
during the related Monthly Period pursuant to subsection 4.11(g).

          "Class A Cap Rate" shall mean __% per annum.
           ----------------                           

          "Class A Certificate Rate" shall mean __% per annum from June 30, 1996
           ------------------------                                             
through July 15, 1996, and with respect to each Interest Accrual Period
thereafter, a per annum rate 0.20% in excess of LIBOR as determined on the
related LIBOR Determination Date.

          "Class A Certificateholder" shall mean the Person in whose name a
           -------------------------                                       
Class A Certificate is registered in the Certificate Register.

          "Class A Certificateholders' Interest" shall mean the portion of the
           ------------------------------------                               
Investor Interest evidenced by the Class A Certificates.

          "Class A Certificates" shall mean any of the certificates executed by
           --------------------                                                
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit 1-A hereto.

          "Class A Controlled Amortization Amount" shall mean $__________;
           --------------------------------------                         
provided, however, that such amount shall be
- --------  -------                           

                                       3
<PAGE>
 
reduced following a Series 1996-1 Investor Exchange to an amount equal to the
product of (i) $__________ and (ii) a fraction the numerator of which is the
Class A Investor Interest following such Series 1996-1 Investor Exchange and the
denominator of which is the Class A Initial Investor Interest.

          "Class A Excess Interest" shall mean on any date of determination, an
           -----------------------                                             
amount equal to the product of (a) the amount by which the Class A Certificate
Rate exceeds __% per annum, (b) the Class A Excess Principal, if any, and (c)
the actual number of days in the related Interest Accrual Period divided by 360.
                                                                 -------        

          "Class A Excess Principal" shall mean on any date of determination the
           ------------------------                                             
amount by which the Class A Investor Interest exceeds the Expected Class A
                    -------------------------             ----------------
Principal after giving effect to all payments, deposits and withdrawals on such
- ---------                                                                      
date.

          "Class A Expected Final Distribution Date" shall mean the October 2000
           ----------------------------------------                             
Distribution Date.

          "Class A Initial Investor Interest" shall mean the aggregate initial
           ---------------------------------                                  
principal amount of the Class A Certificates on the Closing Date, which is
$_________, less the portion of such amount represented by Class A Certificates
tendered and canceled pursuant to any Series 1996-1 Investor Exchange.

          "Class A Interest Rate Cap" shall mean the master agreement dated as
           -------------------------                                          
of June __, 1996 between the Trustee and the Interest Rate Cap Provider, as
supplemented by the schedule attached thereto and the confirmation dated on or
prior to June __, 1996 between the Trustee and the Interest Rate Cap Provider,
relating to the Class A Certificates and for the exclusive benefit of the Class
A Certificateholders, or any Replacement Interest Rate Cap or Qualified
Substitute Arrangement.

          "Class A Investor Charge-Offs" shall have the meaning specified in
           ----------------------------                                     
subsection 4.5(a).

          "Class A Investor Default Amount" shall mean, with respect to any
           -------------------------------                                 
Distribution Date, the Class A Investor Percentage of the Investor Default
Amount.

          "Class A Investor Interest" shall mean, on any date of determination,
           -------------------------                                           
an amount equal to (a) the Class A Initial Investor Interest, minus (b) the
                                                              -----        
aggregate amount of payments of principal paid to the Class A Certificateholders
pursuant to Section 4.8 prior to such date of

                                       4
<PAGE>
 
determination, minus (c) the excess, if any, of the aggregate amount of Class A
               -----                                                           
Investor Charge-Offs over Class A Investor Charge-Offs reimbursed pursuant to
                     ----                                                    
subsections 4.6(a)(iv), 4.6(c)(i) and 4.6(d) prior to such date of
determination; provided, however, that upon the tender and cancellation of any
               --------  -------                                              
Class A Certificates pursuant to a Series 1996-1 Investor Exchange, the amounts
stated in clauses (b) and (c) shall be computed with respect to the Class A
Certificates not tendered or canceled pursuant to such Series 1996-1 Investor
Exchange.

          "Class A Investor Percentage" shall mean, with respect to any date of
           ---------------------------                                         
determination, the percentage equivalent of a fraction, the numerator of which
is the Class A Investor Interest determined as of the last day of the Monthly
Period immediately preceding such date of determination and the denominator of
which is the sum of the Class A Investor Interest and the Class B Investor
Interest determined as of the last day of the Monthly Period immediately
preceding such date of determination.

          "Class A Monthly Cap Rate Interest" shall mean, with respect to any
           ---------------------------------                                 
Distribution Date, an amount equal to the product of (a) the lesser of the Class
A Certificate Rate and the Class A Cap Rate, (b) the Class A Investor Interest
as determined as of the preceding Distribution Date or, for the initial Interest
Accrual Period, the Closing Date (after giving effect to all payments, deposits
and withdrawals on such Distribution Date or Closing Date as applicable) and (c)
the actual number of days in the related Interest Accrual Period divided by 360.

          "Class A Monthly Interest" shall mean, with respect to any
           ------------------------                                 
Distribution Date, an amount equal to the sum of (a) the product of (i) the
Class A Certificate Rate and, (ii) the lesser of the Class A Investor Interest
as of the preceding Distribution Date or, for the initial Interest Accrual
Period, the Closing Date (after giving effect to all payments, deposits and
withdrawals on such Distribution Date or Closing Date), and the Expected Class A
Principal as of the preceding Distribution Date and (iii) the actual number of
days in the related Interest Accrual Period divided by 360 and (b) the product
of (i) the Class A Excess Principal, (ii) the lesser of the Class A Certificate
Rate and __% and (iii) the actual number of days in the related Interest Accrual
Period divided by 360.

          "Class A Monthly Servicing Fee" shall mean, with respect to the first
           -----------------------------                                       
Distribution Date, $_________, and with respect to any subsequent Distribution
Date, one-

                                       5
<PAGE>
 
twelfth of the product of 2.00% and the Class A Investor Interest on the last
day of the preceding Monthly Period.

          "Class A Notional Amount" shall mean, on any date of determination, an
           -----------------------                                              
amount equal to the Expected Class A Principal.

          "Class A Pool Factor" shall mean, with respect to any Record Date, a
           -------------------                                                
number carried out to seven decimal places representing the ratio of the Class A
Investor Interest as of the end of the last day of the preceding Monthly Period
(determined after taking into account any increases or decreases in the Class A
Investor Interest which will occur on the following Distribution Date) to the
Class A Initial Investor Interest.

          "Class A Required Amount" shall have the meaning specified in
           -----------------------                                     
subsection 4.6(d).

          "Class B Available Finance Charge Collections" shall mean, with
           --------------------------------------------                  
respect to any given Monthly Period, the sum of (a)) the Class B Investor
Percentage of Available Finance Charge Collections and (b) the proceeds of the
sale of any Class B Interest Rate Cap deposited into the Collection Account
during the related Monthly Period pursuant to subsection 4.11(g).

          "Class B Cap Rate" shall mean __% per annum.
           ----------------                           

          "Class B Certificate Rate" shall mean __% per annum from June 30, 1996
           ------------------------                                             
through July 16, 1996, and with respect to each Interest Accrual Period
thereafter, a per annum rate 0.__% in excess of LIBOR, as determined on the
related LIBOR Determination Date.

          "Class B Certificateholder" shall mean the Person in whose name a
           -------------------------                                       
Class B Certificate is registered in the Certificate Register.

          "Class B Certificateholders' Interest" shall mean the portion of the
           ------------------------------------                               
Investor Interest evidenced by the Class B Certificates.

          "Class B Certificates" shall mean any of the certificates executed by
           --------------------                                                
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit 1-B hereto.

          "Class B Controlled Amortization Amount" shall mean $___________;
           --------------------------------------                          
provided, however, that such amount shall be reduced following a Series 1996-1
- --------  -------                                                             
Investor Exchange to

                                       6
<PAGE>
 
an amount equal to the Class B Investor Interest following such Series 1996-1
Investor Exchange.

          "Class B Excess Interest" shall mean, on any date of determination, an
           -----------------------                                              
amount equal to the product of (a) the amount by which the Class B Certificate
Rate exceeds __% per annum, (b) the Class B Excess Principal, if any, and (c)
the actual number of days in the related Interest Accrual Period divided by 360.
                                                                 -------        

          "Class B Excess Principal" shall mean on any date of determination the
           ------------------------                                             
amount by which the Class B Investor Interest exceeds the Expected Class B
Principal after giving effect to all payments, deposits and withdrawals on such
date.

          "Class B Expected Final Distribution Date" shall mean the November
           ----------------------------------------                         
2000 Distribution Date.

          "Class B Initial Investor Interest" shall mean the aggregate initial
           ---------------------------------                                  
principal amount of the Class B Certificates on the Closing Date, which is
$_________, less the portion of such amount represented by Class B Certificates
tendered and canceled pursuant to any Series 1996-1 Investor Exchange.

          "Class B Interest Rate Cap" shall mean the master agreement dated as
           -------------------------                                          
of June __ 1996, between the Trustee and the Interest Rate Cap Provider, as
supplemented by the schedule attached thereto and the confirmation dated on or
prior to June __, 1996 between the Trustee and the Interest Rate Cap Provider,
relating to the Class B Certificates and for the exclusive benefit of the Class
B Certificateholders, or any Replacement Interest Rate Cap or Qualified
Substitute Arrangement.

          "Class B Investor Charge-Offs" shall have the meaning specified in
           ----------------------------                                     
subsection 4.5(b).

          "Class B Investor Default Amount" shall mean, for any Distribution
           -------------------------------                                  
Date, the Class B Investor Percentage of the Investor Default Amount.

          "Class B Investor Interest" shall mean, on any date of determination,
           -------------------------                                           
an amount equal to (a) the Class B Initial Investor Interest, minus (b) the
                                                              -----        
aggregate amount of payments of principal paid to the Class B Certificateholders
pursuant to Section 4.8 prior to such date of determination, minus (c) the
                                                             -----        
amount of Reallocated Principal Collections allocated on all prior Distribution
Dates pursuant to Section 4.12, minus (d) the aggregate amount of Class B
                                -----                                    
Investor Charge-Offs, minus (e) the
                      -----        

                                       7
<PAGE>
 
amount by which the Class B Investor Interest has been reduced on all prior
Distribution Dates pursuant to the second sentence of subsection 4.5(a) plus (f)
                                                                        ----    
the aggregate amount allocated and available on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided, however, that upon the tender and cancellation of
                  --------  -------                                          
any Class B Certificates pursuant to a Series 1996-1 Investor Exchange, the
amounts stated in clauses (b), (c), (d), (e) and (f) shall be computed with
respect to the Class B Certificates not tendered or canceled pursuant to such
Series 1996-1 Investor Exchange.

          "Class B Investor Percentage" shall mean, with respect to any date of
           ---------------------------                                         
determination, the percentage equivalent of a fraction, the numerator of which
is the Class B Investor Interest determined as of the last day of the Monthly
Period immediately preceding such date of determination and the denominator of
which is the sum of the Class A Investor Interest and the Class B Investor
Interest determined as of the last day of the Monthly Period immediately
preceding such date of determination.

          "Class B Monthly Cap Rate Interest" shall mean, with respect to any
           ---------------------------------                                 
Distribution Date, an amount equal to the product of (a) the lesser of the Class
B Certificate Rate and the Class B Cap Rate, (b) the Class B Investor Interest
as determined as of the preceding Distribution Date or, for the initial Interest
Accrual Period, the Closing Date (after giving effect to all payments, deposits
and withdrawals on such Distribution Date or Closing Date) and (c) the actual
number of days in the related Interest Accrual Period divided by 360.

          "Class B Monthly Interest" shall mean, with respect to any
           ------------------------                                 
Distribution Date, an amount equal to the sum of (a) the product of (i) the
Class B Certificate Rate, (ii) the lesser of the Class B Investor Interest as of
the preceding Distribution Date or, for the initial Interest Accrual Period, the
Closing Date (after giving effect to all payments, deposits and withdrawals on
such Distribution Date or Closing Date) and the Expected Class B Principal as of
the preceding Distribution Date and (iii) the actual number of days in the
related Interest Accrual Period divided by 360 and (b) the product of (i) the
Class B Excess Principal, (ii) the lesser of the Class B Certificate Rate and
__% and (iii) the actual number of days in the related Interest Accrual Period
divided by 360.

          "Class B Monthly Servicing Fee" shall mean, with respect to the first
           -----------------------------                                       
Distribution Date, $__________, and

                                       8
<PAGE>
 
with respect to any subsequent Distribution Date, one-twelfth of the product of
2.00% and the Class B Investor Interest on the last day of the preceding Monthly
Period.

          "Class B Notional Amount" shall mean, on any date of determination, an
           -----------------------                                              
amount equal to the Expected Class B Principal.

          "Class B Payment Commencement Date" shall mean either the Distribution
           ---------------------------------                                    
Date on which the Class A Investor Interest is reduced to zero or, if the Class
A Investor Interest is paid in full on the Class A Expected Final Distribution
Date and the Rapid Amortization Period has not commenced, the Distribution Date
following the Class A Expected Final Distribution Date.

          "Class B Pool Factor" shall mean, with respect to any Record Date, a
           -------------------                                                
number carried out to seven decimal places representing the ratio of the Class B
Investor Interest as of the end of the last day of the preceding Monthly Period
(determined after taking into account any increases or decreases in the Class B
Investor Interest which will occur on the following Distribution Date) to the
Class B Initial Investor Interest.

          "Class B Required Amount" shall have the meaning specified in
           -----------------------                                     
subsection 4.6(e).

          "Closing Date" shall mean June __, 1996.
           ------------                           

          "Controlled Amortization Date" shall mean the first day of the Monthly
           ----------------------------                                         
Period relating to the September 1999 Distribution Date.

          "Controlled Amortization Period" shall mean unless a Pay Out Event
           ------------------------------                                   
shall have occurred prior to such date an amortization period commencing on the
first day of the August 1999 Monthly Period and continuing to, but not
including, a Pay Out Commencement Date or to, and including, (i) the date of
termination of the Trust pursuant to Section 12.1 of the Agreement or (ii) the
Series 1996-1 Termination Date.

          "Controlled Distribution Amount" shall have the meaning specified in
           ------------------------------                                     
subsection 4.4(d)(ii).

          "Controlled Excess Amount" shall have the meaning specified in
           ------------------------                                     
subsection 4.4(d)(ii).

          "Deficit Controlled Amortization Amount" shall initially mean zero and
           --------------------------------------                               
shall change as provided in subsection 4.8(a).

                                       9
<PAGE>
 
          "Definitive Certificates" shall have the meaning specified in Section
           -----------------------                                             
6.11.

          "Discount Option" shall have the meaning specified in Section 4.14.
           ---------------                                                   

          "Discount Percentage" shall have the meaning specified in Section
           -------------------                                             
4.14.

          "Distribution Account" shall have the meaning specified in subsection
           --------------------                                                
4.3(b).

          "Distribution Date" shall mean July 15, 1996 and the fifteenth day of
           -----------------                                                   
each calendar month thereafter, or, if such fifteenth day is not a Business Day,
the next succeeding Business Day; provided, however, that no Distribution Date
shall occur after the earliest to occur of (x) the Distribution Date on which
the Investor Interest has been paid in full, (y) the date of termination of the
Trust pursuant to Section 12.1 of the Agreement, and (z) the Series 1996-1
Termination Date.

          "Enhancement" shall mean the funds and securities on deposit in the
           -----------                                                       
Cash Collateral Account, up to the Available Cash Collateral Amount and, with
respect to the Class A Certificates, the subordination of the Class B
Certificates to the extent provided herein.

          "Enhancement Provider" shall mean, with respect to the Series 1996-1
           --------------------                                               
Certificates, the Cash Collateral Depositor and with respect to any other
Series, the applicable provider of credit enhancement, if any.

          "Excess Spread" shall mean the sum of the amounts specified pursuant
           -------------                                                      
to subsections 4.6(a)(v) and 4.6(b)(v).

          "Expected Class A Principal" shall mean, with respect to any date of
           --------------------------                                         
determination, the amount of the Class A Investor Interest that is equal to (a)
on each date through but not including the Distribution Date related to the
Controlled Amortization Date, the Class A Initial Investor Interest, (b) on each
date thereafter through but not including the Class A Expected Final
Distribution Date, the Class A Initial Investor Interest less the product of (i)
                                                         ----                   
the Class A Controlled Amortization Amount, and (ii) the number of Distribution
Dates occurring since the second Distribution Date after the Controlled
Amortization Date, and (c) on each date thereafter, zero.

                                       10
<PAGE>
 
          "Expected Class B Principal" shall mean, with respect to any date of
           --------------------------                                         
determination, the amount of Class B Investor Interest that is equal to (a) the
Class B Initial Investor Interest on each date through but not including the
Distribution Date related to the Class B Expected Final Distribution Date, and
(b) on each date thereafter, zero.

          "Finance Charge Account" shall have the meaning specified in Section
           ----------------------                                             
4.3(a).

          "Finance Charge Collections" shall mean Collections in respect of
           --------------------------                                      
Finance Charge Receivables.

          "Floating Rate" shall have the meaning specified in the applicable
           -------------                                                    
Interest Rate Cap.

          "Initial Cash Collateral Amount" shall mean $____________.
           ------------------------------                           

          "Initial Investor Interest" shall mean the sum of the Class A Initial
           -------------------------                                           
Investor Interest and the Class B Initial Investor Interest.

          "Interest Accrual Period" shall mean, with respect to any Distribution
           -----------------------                                              
Date, the period beginning on and including the Distribution Date occurring in
the preceding calendar month (or, in the case of the first Distribution Date,
from and including the Closing Date) to and including the day preceding the
current Distribution Date.

          "Interest Rate Cap Payment" shall mean, with respect to any
           -------------------------                                 
Distribution Date, any payment required to be made by an Interest Rate Cap
Provider to the Trust pursuant to an Interest Rate Cap with respect to such
Distribution Date.

          "Interest Rate Cap Provider" shall mean ________________, in its
           --------------------------                                     
capacity as obligor under the Interest Rate Caps, or if any Replacement Interest
Rate Cap or Qualified Substitute Arrangement is obtained pursuant to Section
4.11, any obligor with respect to such Replacement Interest Rate Cap or
Qualified Substitute Arrangement.

          "Interest Rate Cap" shall mean either the Class A Interest Rate Cap or
           -----------------                                                    
the Class B Interest Rate Cap.

          "Interest Rate Caps" shall mean the Class A Interest Rate Cap and the
           ------------------                                                  
Class B Interest Rate Cap.

                                       11
<PAGE>
 
          "Investor Accounts" shall mean the Finance Charge Account, the
           -----------------                                            
Distribution Account and the Principal Account.

          "Investor Default Amount" shall mean, with respect to any Distribution
           -----------------------                                              
Date, an amount equal to the product of (a) the sum of the Default Amounts for
all Defaulted Accounts during the immediately preceding Monthly Period and (b)
the Investor Percentage for such Monthly Period.

          "Investor Interest" shall mean for any date of determination, the sum
           -----------------                                                   
of the Class A Investor Interest and the Class B Investor Interest.

          "Investor Percentage" shall mean, for any date of determination:
           -------------------                                            

          (a) when used with respect to Principal Receivables on any date of
     determination during the Revolving Period, the percentage equivalent of a
     fraction, the numerator of which shall be (x) for any date of determination
     occurring other than during the Paired Amortization Period, the Investor
     Interest at the close of business on the last day of the prior Monthly
     Period and (y) for any date of determination occurring during the Paired
     Amortization Period, the excess of the amount in the foregoing clause (x)
                                                                    ----------
     over the numerator used to calculate the investor percentage for such date
     of determination with respect to Principal Receivables for the Paired
     Certificates pursuant to the related Supplement, and the denominator of
     which shall be the greater of (a) the Aggregate Principal Receivables
     determined as of the close of business on the last day of the prior Monthly
     Period (or with respect to any date of determination occurring on or before
     June 30, 1996, determined as of the Closing Date) and (b) the sum of the
     numerators used to calculate the investor percentages with respect to
     Principal Receivables for such date of determination for all Series
     outstanding;

          (b) when used with respect to Principal Receivables on any date of
     determination during the Controlled Amortization Period or the Rapid
     Amortization Period, the percentage equivalent of a fraction, the numerator
     of which shall be (x) for any date of determination occurring other than
     during the Paired Amortization Period, the Investor Interest at the end of
     the last day of the Revolving Period (or, if there has been a Series 1996-1
     Investor Exchange after the end of the Revolving Period,

                                       12
<PAGE>
 
     such Investor Interest will be reduced ratably to reflect the amount of
     Series 1996-1 Certificates tendered and cancelled pursuant to any Series
     1996-1 Investor Exchange) and (y) for any date of determination in the
     Rapid Amortization Period occurring during the Paired Amortization Period,
     the excess of the amount in the foregoing clause (x) over the numerator
                                               ----------                   
     used to calculate the investor percentage for such date of determination
     with respect to Principal Receivables for the Paired Certificates pursuant
     to the related Supplement, and the denominator of which shall be the
     greater of (i) the Aggregate Principal Receivables determined at the close
     of business on the last day of the prior Monthly Period (or with respect to
     any date of determination occurring on or before June __, 1996, determined
     as of the Closing Date) and (ii) the sum of the numerators used to
     calculate the investor percentages for such date of determination with
     respect to Principal Receivables for all Series outstanding; provided,
                                                                  -------- 
     however, that during the Controlled Amortization Period, the Investor
     -------                                                              
     Percentage of Principal Receivables may be reset by and at the option of
     the Servicer (and any such reset Investor Percentage will (except in
     connection with a Paired Amortization Period) in any Rapid Amortization
     Period following the Controlled Amortization Period) on the date of
     issuance of any new Series of certificates to a fixed percentage equivalent
     of a fraction which shall not be greater than the fraction described above
     in this clause (b) and shall not be less than the greater of (i) a
     fraction, the numerator of which is the Investor Interest, determined as of
     the close of business on the last day of the Monthly Period immediately
     preceding the date of determination, and the denominator of which is the
     greater of (a) the Aggregate Principal Receivables, determined as of the
     end of the last day of the Monthly Period immediately preceding such date
     of determination, and (b) the sum of the numerators used to calculate the
     Investor Percentages for such date of determination with respect to
     Principal Receivables for all Series of certificates outstanding and (ii) a
     fraction that when multiplied by the amount of collections of Principal
     Receivables for the preceding Monthly Period will equal (x) the Controlled
     Distribution Amount for such Monthly Period plus [10%] of the greater of
     the Class A Controlled Amortization Amount (so long as the Class A
     Certificates remain outstanding) and the Class B Controlled Amortization
     Amount minus (y) the amount of any Available Shared

                                       13
<PAGE>
 
     Principal Collections with respect to such Monthly Period;

          (c) when used with respect to Finance Charge Receivables and
     Receivables in Defaulted Accounts on any date of determination, the
     percentage equivalent of a fraction, the numerator of which shall be the
     Investor Interest at the close of business on the last day of the prior
     Monthly Period (or with respect to any date of determination occurring on
     or before June 30, 1996, determined as of the Closing Date) and the
     denominator of which shall be the Aggregate Principal Receivables at the
     close of business on the last day of the prior Monthly Period; and

          (d) in no event shall any Investor Percentage be greater than 100%.

     "LIBOR" shall mean, for any Interest Accrual Period, the London interbank
      -----                                                                   
offered quotations for one-month Dollar deposits determined for each Interest
Accrual Period in accordance with the provisions of Section 4.13.

     "LIBOR Determination Date" shall mean June __. 1996 and the second London
      ------------------------                                                
Banking Day prior to the commencement of the second and each subsequent Interest
Accrual Period.

     "Loan Agreement" shall mean the agreement among the Transferor, the
      --------------                                                    
Servicer, the Trustee and the Cash Collateral Depositor, dated as of June __,
1996, as amended from time to time.

     "London Banking Day" shall mean any day on which commercial banks are open
      ------------------                                                       
for business (including dealings in foreign exchange and deposits in U.S.
dollars) in London.

     "Minimum Aggregate Principal Receivables" shall have the meaning specified
      ---------------------------------------                                  
in Section 4 hereof.

     "Minimum Seller Interest" shall have the meaning specified in Section 4
      -----------------------                                               
hereof.

     "Monthly Investor Servicing Fee" shall mean, with respect to the first
      ------------------------------                                       
Monthly Period, $________, and with respect to each subsequent Monthly Period,
an amount equal to one twelfth of the product of 2.00% and the Investor Interest
as of the last day of the preceding Monthly Period.

                                       14
<PAGE>
 
     "Monthly Total Principal Allocation" shall mean with respect to any day in
      ----------------------------------                                       
a Monthly Period the Principal Allocation for such day plus the sum of all
Principal Allocations on each prior day of such Monthly Period or with respect
to a Monthly Period shall mean the Principal Allocation, if any, for the last
day of such Monthly Period plus the sum of all Principal Allocations on each
prior day of such Monthly Period.

     "Paired Amortization Period" shall mean the period from and including the
      --------------------------                                              
Closing Date to and including the date on which the investor interest of Paired
Certificates.

     "Paired Certificates" shall mean the Series 1993-1 4.8% Asset Backed
      -------------------                                                
Certificates of the Trust.

     "Pay Out Commencement Date" shall mean, with respect to the Series 1996-1
      -------------------------                                               
Certificates, the date on which a Trust Pay Out Event is deemed to occur or
occurs pursuant to Section 9.1 of the Agreement or a Series 1996-1 Pay Out Event
is deemed to occur or occurs pursuant to Section 9A hereof.

     "Permitted Investments" shall mean with respect to the Series 1996-1
      ---------------------                                              
Collection Subaccount, the Investor Accounts and the Cash Collateral Account (a)
negotiable instruments or securities either represented by instruments in bearer
or registered form or book-entry form at a federal reserve bank or held by a
clearing corporation which are registered in the name of the Trustee upon books
maintained for that purpose by or on behalf of the issuer thereof and identified
on books maintained for that purpose by the Trustee and held for the benefit of
the Trust or the Certificateholders and which evidence (i) direct obligations of
the United States of America or any agency or instrumentality thereof the full
and timely payment of which is guaranteed by the full faith and credit of the
United States of America; (ii) demand deposits, time deposits or certificates of
deposit of, or bankers' acceptances issued by, any depositary institution or
trust company incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking or depositary institution authorities; provided, however, that at the
                                               --------  -------             
time of the Trust's investment or contractual commitment to invest therein, the
certificates of deposit or short-term deposits, if any, of such depositary
institution or trust company shall have a credit rating from Standard & Poor's
of A-1+, and either such certificates of deposit or short-term deposits shall
have a credit rating from Moody's of P-1 or the long-term

                                       15
<PAGE>
 
unsecured debt obligations of such depositary institution or trust company
(other than such obligations whose rating is based on collateral or on the
credit of a Person other than such institution or trust company) shall have a
rating from Moody's of at least Aa3, and the amount of such time deposits,
demand deposits or certificates of deposit are fully insured within the limits
of insurance set by the FDIC and the combined capital, surplus and undivided
profits of such depositary institution or trust company is not less than $3
million; (iii) certificates of deposit having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating from Moody's
and Standard & Poor's of P-1 and A-1+, respectively; (iv) commercial paper
having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating from Moody's and Standard & Poor's of P-1 and A-1+,
respectively; and (v) investments in money market funds registered under the
Investment Company Act rated in each case in the highest investment category by
Standard & Poor's and Moody's, or otherwise approved in writing by the Rating
Agency and acceptable to the Enhancement Provider; and (b) demand deposits in
the name of the Trust or the Trustee, on behalf of the Trust, in any depositary
institution or trust company referred to in clause (a)(ii) above; provided,
                                                                  -------- 
however, that with respect to any of the Permitted Investments referred to
- -------                                                                   
herein, if requested by the Enhancement Provider, the Servicer shall furnish to
the Enhancement Provider an Opinion of Counsel, in form and substance
satisfactory to the Enhancement Provider and from counsel reasonably acceptable
to it, to the effect that, upon conveyance of possession or registered ownership
to the Trustee or its agent, nominee or custodian, on behalf of the Trust, of
such Permitted Investment, the Trustee, on behalf of the Trust, will have a
perfected first priority security interest in and to such Permitted Investment
for the benefit of the Series 1996-1 Certificateholders.  Such opinion will be
required only with respect to Permitted Investments of a type that have not
previously been the subject of such an opinion or that have been the subject of
a change in law.  Notwithstanding the foregoing, if the Rating Agency rating the
Investor Certificates is not Standard & Poor's or Moody's, any investments
specified in this definition of "Permitted Investments" as requiring a specific
credit rating from Standard & Poor's or Moody's must also have a comparable
credit rating from, or otherwise be acceptable to, the Rating Agency rating the
Investor Certificates, as confirmed to the Trustee in writing by such Rating
Agency, and any investments specified in this definition of "Permitted
Investments" as requiring written approval from

                                       16
<PAGE>
 
Standard & Poor's or Moody's must also receive written approval from such other
Rating Agency.

     "Pool Amount" shall mean, with respect to any date of determination, an
      -----------                                                           
amount equal to the product of (x) a fraction, the numerator of which is the
Investor Interest on such date of determination, and the denominator of which is
the Aggregate Investor Interest on such date of determination and (y) the
Aggregate Principal Receivables as of the end of the day immediately prior to
such date of determination.

     "Portfolio Yield" shall mean, with respect to Series 1996-1 and with
      ---------------                                                    
respect to any Monthly Period, the annualized percentage equivalent of a
fraction the numerator of which is the Finance Charge Receivables allocable to
the Investor Interest for such Monthly Period, calculated on a billed basis,
after subtracting an amount equal to the lesser of (x) the aggregate amount of
Collections with respect to such monthly period and (y) the Investor Default
Amount with respect to such Monthly Period, and the denominator of which is the
Investor Interest as of the last day of the preceding Monthly Period.

     "Principal Account" shall have the meaning specified in subsection 4.3(a).
      -----------------                                                        

     "Principal Allocation" shall have the meaning specified in subsection
      --------------------                                                
4.4(d)(ii).

     "Principal Shortfall" shall mean (x) on any Date of Processing for the
      -------------------                                                  
Series 1996-1 Certificates, the excess of the Controlled Distribution Amount
over the aggregate Principal Allocation for such Date of Processing and for each
prior Date of Processing in such Monthly Period or (y) for any other Series the
amounts specified as such in the Supplement for such other Series.

     "Qualified Substitute Arrangement" shall have the meaning specified in
      --------------------------------                                     
subsection 4.11(b).

     "Qualified Trust Institution" shall mean a depository institution or trust
      ---------------------------                                              
company having corporate trust powers under applicable federal and state laws
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia; provided, however, that the long-
                                            --------  -------               
term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depository institution or trust company shall have a
credit rating from Moody's and Standard & Poor's of at least Baa3 and

                                       17
<PAGE>
 
BBB-, respectively, and the deposits in whose accounts are insured to the limits
provided by law and as required by the FDIC.

     "Rapid Amortization Period" shall mean an Amortization Period commencing on
      -------------------------                                                 
the Pay Out Commencement Date and ending on the earlier to occur of (i) the date
of termination of the Trust pursuant to Section 12.1 or (ii) the Series 1996-1
Termination Date.

     "Rating Agency" shall mean, with respect to the Series 1996-1 Certificates,
      -------------                                                             
each of Moody's and Standard & Poor's.

     "Reallocated Principal Collections" shall have the meaning specified in
      ---------------------------------                                     
subsection 4.12(a).

     "Reference Banks" shall mean four major banks in the London interbank
      ---------------                                                     
market selected by the Trustee.

     "Replacement Interest Rate Cap" shall mean any interest rate cap having
      -----------------------------                                         
substantially the same terms and conditions as the Class A Interest Rate Cap or
the Class B Interest Rate Cap, as the case may be, and otherwise satisfying the
conditions set forth in Section 4.11.

     "Required Cash Collateral Amount" means (a) initially $________ and (b) on
      -------------------------------                                          
any Transfer Date, the product of (i) the Investor Interest as of the last day
of the Monthly Period preceding such date and (ii) %, but in no event less than
the lesser of $________ and the Investor Interest as of the last day of the
related Monthly Period; provided, however, that if either (a) there are any
                        --------  -------                                  
withdrawals from the Cash Collateral Account pursuant to subsection 4.6(d) or
4.6(e) during the Controlled Amortization Period or (b) a Pay Out Event has
occurred, the Required Cash Collateral Amount for any Transfer Date shall be the
lesser of the Required Cash Collateral Amount for the Transfer Date immediately
preceding such withdrawal or Pay Out Event and the unpaid principal amount of
the Certificates.

     "Revolving Period" shall mean the period from and including the Closing
      ----------------                                                      
Date to, but not including, the earlier to occur of the close of business on the
last day of the July 1999 Monthly Period or the Pay Out Commencement Date.

     "Scheduled Series 1996-1 Termination Date" shall mean the August 2003
      ----------------------------------------                            
Distribution Date.

                                       18
<PAGE>
 
     "Series 1996-1" shall mean the Series represented by the Series 1996-1
      -------------                                                        
Certificates.

     "Series 1996-1 Certificateholder" shall mean the holder of record of any
      -------------------------------                                        
Series 1996-1 Certificate.

     "Series 1996-1 Certificates" shall have the meaning specified in Section 1
      --------------------------                                               
of this Series Supplement.

     "Series 1996-1 Collection Subaccount" shall have the meaning specified in
      -----------------------------------                                     
Section 4.2B.

     "Series 1996-1 Investor Exchange" shall mean an Investor Exchange pursuant
      -------------------------------                                          
to Section 6.9(b) of the Agreement and Section 18 hereof.

     "Series 1996-1 Pay Out Event" shall have the meaning specified in Section
      ---------------------------                                             
9A hereof.

     "Series Supplement" shall have the meaning specified on the first page of
      -----------------                                                       
this document.

     "Series 1996-1 Termination Date" shall mean the earlier to occur of (i) the
      ------------------------------                                            
day after the Distribution Date on which the Series 1996-1 Certificates are paid
in full or (ii) the Scheduled Series 1996-1 Termination Date.

     "Series Servicing Fee Percentage" shall mean 2.0%.
      -------------------------------                  

     "Shared Finance Charge Collections" shall mean, with respect to any
      ---------------------------------                                 
Business Day, as the context requires, either (a) the amount described in
subsection 4.6(c)(xii) allocated to the Series 1996-1 Certificates but available
to cover shortfalls in amounts paid from Finance Charge Collections for other
Series, if any, or (b) the aggregate amount of Finance Charge Collections
allocable to other Series in excess of the amounts necessary to make required
payments with respect to such Series, if any, and available to cover shortfalls
with respect to the Series 1996-1 Certificates.

     "Shared Principal Collections" shall mean, as the context requires, either
      ----------------------------                                             
(a) the amounts allocated to the Series 1996-1 Certificates which, in accordance
with subsections 4.4(c)(ii), 4.4(d)(ii) and 4.4(e)(ii), may be applied to
Principal Shortfalls with respect to other outstanding Series or (b) the amounts
allocated to the investor certificates (which are not retained by the
Transferor) of other Series which the applicable Supplements for such Series
specify are to be treated as "Shared Principal Collections" and which may be
applied

                                       19
<PAGE>
 
to cover Principal Shortfalls with respect to the Series 1996-1 Certificates.

     "Telerate Page 3750" shall mean 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).

     "Transferor" shall mean People's Bank, a Connecticut capital stock savings
      ----------                                                               
bank, the Seller under the Agreement.

     SECTION 2.1  Other Definitional Provisions.  Whenever a determination is to
                  -----------------------------                                 
be made under the Agreement as to whether a given action, course of conduct or
set of facts or circumstances could or would have a material adverse effect on
the Trust or the Investor Certificateholders (or any similar or analogous
determination), such determination shall be made without giving effect to the
Enhancement.

     SECTION 3.  Conveyance of Interest in Cash Collateral Account.  The
                 -------------------------------------------------      
Transferor and the Trustee intend that the Cash Collateral Account and all
property credited thereto be the property of the Trust.  If and to the extent
the Cash Collateral Account and the property credited thereto are characterized
as property of the Transferor, the Transferor hereby assigns, sets-over,
conveys, pledges and grants a security interest and lien (free and clear of all
other Liens) to the Trustee for the benefit of the Series 1996-1
Certificateholders, in all of the Transferor's right, title and interest (if
any) in and to the Cash Collateral Account and the amounts on deposit in the
Cash Collateral Account and all property now or hereafter credited thereto,
including but not limited to Permitted Investments, together with all proceeds
thereof, as collateral security for the amounts payable from time to time to the
Trustee, for the benefit of the Series 1996-1 Certificateholders.

     SECTION 4.  Minimum Seller Interest, Minimum Aggregate Principal
                 ----------------------------------------------------
Receivables and Removal of Accounts.  (a)  The Minimum Seller Interest
- -----------------------------------                                   
applicable to the Series 1996-1 Certificates shall be 7%.  The Minimum Aggregate
Principal Receivables shall be the sum of the numerators used to calculate the
Investor Percentage with respect to Principal Receivables for all Series then
outstanding.  Upon final payment of the Series 1996-1 Certificates, the Minimum
Aggregate Principal Receivables shall be computed in a manner consistent with
the Agreement or any future Supplement, as appropriate.

                                       20
<PAGE>
 
     (b) In addition to the requirements contained in subsections 2.7(a) and (b)
of the Agreement with respect to the removal of Accounts, pursuant to subsection
2.7(b)(iii)(c) of the Agreement, the removal of any Receivables of any Removed
Accounts on any Removal Date shall not, in the reasonable belief of the
Transferor, result in the failure to make a Controlled Distribution Amount
payment.

     SECTION 5.  Reassignment and Transfer Terms.  The Series 1996-1
                 -------------------------------                    
Certificates shall be subject to transfer to the Transferor at its option, in
accordance with the terms specified in subsection 12.2(a) of the Agreement, on
any Distribution Date on or after the Distribution Date on which the Investor
Interest is reduced to an amount less than or equal to 5% of the Initial
Investor Interest.  The Series 1996-1 Certificates shall be subject to mandatory
transfer to the Transferor, in accordance with the terms specified in
subsection 12.2(a) of the Agreement, on the Distribution Date immediately
preceding the Scheduled Series 1996-1 Termination Date if the Investor Interest
is reduced to an amount less than or equal to 5% of the Initial Investor
Interest and the conditions specified in the proviso to Section 12.2(a) shall
have been satisfied.  The deposit required in connection with any such
purchase shall be equal to (a) the Investor Interest, plus (b) accrued and
                                                      ----                
unpaid interest (other than Class A Excess Interest or Class B Excess Interest,
as the case may be) on the Series 1996-1 Certificates through and including the
day preceding the day on which such purchase occurs, plus (c) all amounts then
                                                     ----                     
due and payable to the Cash Collateral Depositor, less (d) the amount on deposit
                                                  ----                          
in the Finance Charge Account which will be transferred to the Distribution
Account pursuant to Section 4.6 on the related Transfer Date, less (e) the
                                                              ----        
amount on deposit in the Principal Account which will be transferred to the
Distribution Account pursuant to the second paragraph of Subsection 4.8(a) on
the related Transfer Date.  The mandatory purchase requirement is in addition
to any other provisions and remedies provided by the Agreement and shall not
serve to relieve any party of obligations it may otherwise have or waive any
remedy that is otherwise provided in the Agreement.

     SECTION 6.  Delivery and Payment for the Series 1996-1 Certificates.  The
                 -------------------------------------------------------      
Transferor shall execute and deliver the Series 1996-1 Certificates to the
Trustee for authentication in accordance with Section 6.1 of the Agreement.  The
Trustee shall deliver the Series 1996-1 Certificates when authenticated in
accordance with Section 6.2 of the Agreement.

                                       21
<PAGE>
 
     SECTION 7.  Depositary; Form of Delivery of Series 1996-1 Certificates.
                 ----------------------------------------------------------  
(a)  The Certificates shall be delivered as Book-Entry Certificates as provided
in Sections 6.1, 6.2, 6.9 and 6.11 of the Agreement.

     (b)  The depositary for Series 1996-1 shall be The Depository Trust
Company, and the Class A Certificates and the Class B Certificates shall be
initially registered in the name of CEDE & Co., its nominee.

     (c)  For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Holders of
Series 1996-1 Certificates, Class A Certificates or Class B Certificates having
Undivided Interests aggregating a specified percentage, such direction or
consent may be given by Certificate Owners having interests in the requisite
percentage of Series 1996-1 Certificates, Class A Certificates or Class B
Certificates, acting through the Clearing Agency and the Clearing Agency
Participants; provided, however that the Trustee shall only be obligated to
              --------  -------                                            
follow such directions or consents from the depositary or Clearing Agency.

     SECTION 8.  Enhancement.  Enhancement for the Series 1996-1 Certificates
                 -----------                                                 
shall be all funds and securities on deposit in the Cash Collateral Account up
to the Available Cash Collateral Amount and, with respect to the Class A
Certificates, the subordination of the Class B Certificates to the extent
provided herein.

     SECTION 9.  Article IV of Agreement.  Any provision of Article IV of the
                 -----------------------                                     
Agreement which distributes Collections to the Holder of the Exchangeable Seller
Certificate on the basis of the Seller Percentage shall continue to apply
irrespective of the issuance of the Series 1996-1 Certificates.  Sections 4.1
and 4.2 of the Agreement shall be read in their entirety as provided in the
Agreement.  Article IV of the Agreement (except for Sections 4.1 and 4.2
thereof) shall read in its entirety as follows and shall be applicable only to
the Series 1996-1 Certificates:


                                   ARTICLE IV

                        RIGHTS OF CERTIFICATEHOLDERS AND
                   ALLOCATION AND APPLICATION OF COLLECTIONS


     SECTION 4.2A  Rights of Investor Certificateholders.  The Series 1996-1
                   -------------------------------------                    
Certificates shall represent fractional

                                       22
<PAGE>
 
Undivided Interests in the Trust, consisting of the right to receive, to the
extent necessary to make the required payments with respect to such Series 1996-
1 Certificates at the times and in the amount specified in this Agreement, (a)
the related Investor Percentage of Collections received with respect to the
Receivables, (b) funds on deposit in the Collection Account and the Excess
Funding Account allocable to the Series 1996-1 Certificates, (c) funds on
deposit in the Finance Charge Account, the Principal Account, the Distribution
Account and the Series 1996-1 Collection Subaccount, (d) funds on deposit in the
Cash Collateral Account up to the Available Cash Collateral Amount and (e) the
right to receive payments pursuant to the Interest Rate Caps in accordance with
Section 4.11.  The Exchangeable Seller Certificate shall represent the ownership
interest in the Trust Assets not allocated to the Series 1996-1 Certificates and
any other Series outstanding; provided, however, the ownership interest
                              --------  -------                        
represented by the Exchangeable Seller Certificate and any other Series
outstanding shall not represent any interest in the Series 1996-1 Collection
Subaccount, the Cash Collateral Account or the Interest Rate Caps, except as
specifically provided in this Article IV.

     SECTION 4.2B  The Series 1996-1 Collection Subaccount.  Pursuant to Section
                   ---------------------------------------                      
4.1 of the Agreement, the Servicer, on behalf of the Trustee, shall establish
and maintain a subaccount of the Collection Account to be maintained with a
Qualified Trust Institution, which shall initially be Bankers Trust Company, for
the benefit of the Series 1996-1 Certificateholders, bearing a designation
clearly indicating that the funds therein are held in trust for the benefit of
the Series 1996-1 Certificateholders (the "Series 1996-1 Collection
Subaccount").  Funds allocable to Series 1996-1 which are deposited into the
Collection Account will be transferred to the Series 1996-1 Collection
Subaccount prior to further application.  References in this Series Supplement
to deposits of such funds into the Collection Account should be read to include
such transfers.  The Servicer, on behalf of the Trustee, at all times shall
maintain accurate records reflecting each transaction in the Series 1996-1
Collection Subaccount and that funds held therein shall at all times be held in
trust for the benefit of the Series 1996-1 Certificateholders.  Pursuant to the
authority granted to it pursuant to subsection 3.1(b), the Servicer shall have
the power, revocable by the Trustee, to withdraw funds, and to instruct the
Trustee to withdraw funds, from the Series 1996-1 Collection Subaccount for the
purpose of carrying out its duties hereunder.  All such instructions from the
Servicer to the Trustee shall be in writing; provided, however, that the
                                             --------  -------          
Servicer is

                                       23
<PAGE>
 
entitled to give instructions to the Trustee by facsimile.  Funds on deposit in
the Series 1996-1 Collection Subaccount (not required to be deposited in the
Finance Charge Account or the Principal Account pursuant to Section 4.4 hereof)
shall at all times be invested by the Trustee, at the direction of the Servicer,
in Permitted Investments.  Any such investment shall mature and such funds shall
be available for withdrawal, on the Transfer Date following the Record Date
occurring in the Monthly Period in which such funds were processed for
collection; provided, however, that any Permitted Investment in short term U.S.
            --------  -------                                                  
treasury securities may mature one day after such Transfer Date and may be sold
on such Transfer Date.  All interest and earnings (net of losses and investment
expenses) on funds on deposit in the Series 1996-1 Collection Subaccount shall
be deposited by the Trustee in a separate deposit account with a Qualified Trust
Institution in the name of the Transferor, which shall not constitute a part of
the Trust, or shall otherwise be turned over to the Transferor or, as
applicable, the Person designated in Section 2.9(b)(ii) of the Loan Agreement,
not less frequently than monthly; provided, however, that following the failure
                                  --------  -------                            
of the Servicer to make a payment or deposit, which failure results in the
occurrence of a Servicer Default with respect to the Series 1996-1 Certificates,
such interest and earnings shall not be paid to the Transferor or deposited in
such separate deposit account during the period such Servicer Default is
continuing, but shall be retained in, or deposited into, the Finance Charge
Account and shall be treated as Collections of Finance Charge Receivables
allocable to the Series 1996-1 Certificateholders.  The Qualified Trust
Institution shall maintain, either on its own or through its nominee or
custodian for the benefit of the Series 1996-1 Certificateholders, possession of
any certificated negotiable instrument or security (other than certificated
securities held by a clearing corporation) evidencing the Permitted Investments
described in clause (a) of the definition thereof relating to the Collection
Account from the time of purchase thereof until the time of maturity.  Subject
to the restrictions set forth above, the Servicer, or a Person designated in
writing by the Servicer, shall instruct the Trustee in writing with respect to
the investment of funds on deposit in the Series 1996-1 Collection Subaccount.
For purposes of determining the availability of funds or the balances in the
Series 1996-1 Collection Subaccount for any reason under this Agreement, all
investment earnings on such funds (net of losses and expenses) shall be deemed
not to be available or on deposit so long as a Servicer Default shall not be
continuing pursuant to this Section 4.2B.  Permitted Investments shall not be
disposed of prior to

                                       24
<PAGE>
 
their maturity other than as provided above with respect to short term U.S.
treasury securities.

     SECTION 4.3  Establishment of Series 1996-1 Investor Accounts.
                  ------------------------------------------------ 

          (a)  The Finance Charge Account and Principal Account.  The Servicer,
               ------------------------------------------------                
     for the benefit of the Series 1996-1 Certificateholders, shall establish
     and maintain with a Qualified Trust Institution, initially Bankers Trust
     Company, in the name of the Trustee, on behalf of the Trust, two segregated
     trust accounts maintained in the corporate trust department of such
     Qualified Trust Institution, and held in trust by such Qualified Trust
     Institution (the "Finance Charge Account" and the "Principal Account,"
     respectively), bearing a designation clearly indicating that the funds
     therein are held in trust for the benefit of the Series 1996-1
     Certificateholders.  The Servicer, on behalf of the Trustee, (or the
     Trustee so long as the Finance Charge Account or the Principal Account are
     established with the Trustee) at all times shall maintain accurate records
     reflecting each transaction in the Principal Account and the Finance Charge
     Account and that funds held therein shall at all times be held in trust for
     the benefit of the Series 1996-1 Certificateholders.  Pursuant to the
     authority granted to it pursuant to subsection 3.1(b), the Servicer shall
     have the power, revocable by the Trustee, to withdraw funds, and to
     instruct the Trustee to withdraw funds, from the Finance Charge Account and
     Principal Account for the purpose of carrying out its duties hereunder.
     All such instructions from the Servicer to the Trustee shall be in writing;
                                                                                
     provided, however, that the Servicer is entitled to give instructions to
     --------  -------                                                       
     the Trustee by facsimile.

          (b)  The Distribution Account.  The Servicer, for the benefit of the
               ------------------------                                       
     Series 1996-1 Certificateholders, shall cause to be established and
     maintained in the name of the Trustee, on behalf of the Trust, with an
     office or branch of a Qualified Trust Institution (other than the
     Transferor), initially Bankers Trust Company, a non-interest bearing
     segregated demand deposit account maintained in the corporate trust
     department of such Qualified Trust Institution, and held in trust by such
     Qualified Trust Institution (the "Distribution Account") bearing a
     designation clearly indicating that the funds deposited therein are held in
     trust for the benefit of the Series 1996-1 Certificateholders.

                                       25
<PAGE>
 
     The Paying Agent shall have the revocable authority to make withdrawals
     from the Distribution Account.  Funds on deposit in the Distribution
     Account shall not be invested.

          (c)  Administration of the Finance Charge Account and Principal
               ----------------------------------------------------------
     Account.  Funds on deposit in the Principal Account and the Finance Charge
     -------                                                                   
     Account shall at all times be invested by the Trustee at the direction of
     the Servicer in Permitted Investments.  Any such investment shall mature
     and such funds shall be available for withdrawal on or prior to the
     Transfer Date following the Record Date occurring in the Monthly Period in
     which such funds were processed for collection.  The Qualified Trust
     Institution which holds the Principal Account and the Finance Charge
     Account shall maintain either on its own or through its nominee or
     custodian for the benefit of the Series 1996-1 Certificateholders,
     possession of any certificated negotiable instrument or security (other
     than certificated securities held by a clearing corporation) evidencing the
     Permitted Investments relating to the Principal Account or the Finance
     Charge Account, as the case may be, described in clause (a) of the
     definition of Permitted Investments from the time of purchase thereof until
     the time of maturity; provided, however, that any Permitted Investment in
                           --------  -------                                  
     short term U.S. treasury securities may mature one day after such Transfer
     Date and may be sold on such Transfer Date.  At the end of each month, all
     interest and earnings (net of losses and investment expenses) on funds on
     deposit in the Principal Account and the Finance Charge Account shall be
     deposited by the Trustee in a separate deposit account with a Qualified
     Trust Institution in the name of the Transferor, or a Person designated in
     writing by the Transferor, which shall not constitute a part of the Trust,
     or shall otherwise be turned over by the Trustee to the Transferor not less
     frequently than monthly.  Subject to the restrictions set forth above, the
     Servicer, or a Person designated in writing by the Servicer, shall instruct
     the Qualified Trust Institution which holds the Principal Account and the
     Finance Charge Account in writing with respect to the investment of funds
     on deposit in the Principal Account and the Finance Charge Account.  For
     purposes of determining the availability of funds or the balances in the
     Principal Account or the Finance Charge Account for any reason under this
     Agreement, all investment earnings on such funds (net of losses and
     expenses) shall be deemed not to be available or

                                       26
<PAGE>
 
     on deposit.  Permitted Investments shall not be disposed of prior to their
     maturity other than as provided above with respect to short term U.S.
     treasury securities.

          (d)  Termination of Qualified Trust Institution.  If the entity with
               ------------------------------------------                     
     which any of the accounts established pursuant to this Section 4.3 ceases
     to be a "Qualified Trust Institution," then (i) such entity shall provide
     the Trustee and the Servicer with prompt written notice that it is no
     longer a "Qualified Trust Institution" and (ii) transfer the funds
     deposited in each of the accounts in the manner directed by the Servicer
     within 10 Business Days of the day on which such entity ceased to be a
     "Qualified Trust Institution."

     SECTION 4.4  Allocations.
                  ----------- 

          (a)  [Reserved]

          (b)  [Reserved]

          (c)  Allocations During the Revolving Period.  During the Revolving
               ---------------------------------------                       
     Period, the Servicer shall, prior to the close of business on the day any
     Collections are deposited in the Collection Account, direct the Trustee to
     transfer from the Collection Account (or, if applicable, the Principal
     Account) the following amounts as set forth below:

               (i)  Deposit in the Finance Charge Account an amount equal to the
          sum of (x) the product of (A) the applicable Investor Percentage on
          the Date of Processing of such Collections and (B) the aggregate
          amount of Collections processed in respect of Finance Charge
          Receivables on such Date of Processing and (y) the proceeds of the
          sale of any Interest Rate Cap pursuant to subsection 4.11(g) on such
          Date of Processing.

               (ii)  Treat as Shared Principal Collections allocable to other
          Series, after giving effect to reallocation of principal collections
          under Section 4.12 of this Agreement, and apply in accordance with
          Section 4.2(e) of the Agreement an amount equal to the product of (A)
          the applicable Investor Percentage on the Date of Processing of such
          Collections and (B) the aggregate amount of such Collections processed

                                       27
<PAGE>
 
          in respect of Principal Receivables on such Date of Processing.

          (d)  Allocations During the Controlled Amortization Period.  During
               -----------------------------------------------------         
     the Controlled Amortization Period, the Servicer shall, prior to the close
     of business on the day any Collections are deposited in the Collection
     Account, direct the Trustee to transfer from the Collection Account (or, if
     applicable, the Principal Account) the following amounts as set forth
     below:

               (i)  Deposit in the Finance Charge Account an amount equal to the
          sum of (x) the product of (A) the applicable Investor Percentage on
          the Date of Processing of such Collections and (B) the aggregate
          amount of Collections processed in respect of Finance Charge
          Receivables on such Date of Processing and (y) the proceeds of the
          sale of any Interest Rate Cap pursuant to subsection 4.11(g) on such
          Date of Processing .

               (ii) Deposit in the Distribution Account an amount, if any, equal
          to the sum of (x) the product of (A) the applicable Investor
          Percentage on the Date of Processing of such Collections and (B) the
          aggregate amount of such Collections processed in respect of Principal
          Receivables on such Date of Processing, (y) any amount withdrawn from
          the Excess Funding Account pursuant to subsection 4.1(b) and (z) the
          sum of amounts allocated to Investor Default Amounts, Class A Investor
          Charge Offs and Class B Investor Charge Offs pursuant to subsections
          4.6(a)(iii), 4.6(a)(iv), 4.6(b)(iii), 4.6(b)(iv), 4.6(c)(i),
          4.6(c)(ii) and 4.12, as applicable (for any such Date of Processing,
          the amounts in the foregoing clauses (x), (y) and (z) collectively,
          a "Principal Allocation"); provided, however, that if the Monthly
                                     --------  ------- 
          Total Principal Allocation on such Date of Processing exceeds the sum
          of the Class A Controlled Amortization Amount, if such Date of
          Processing is during the Controlled Amortization Period prior to the
          beginning of the Monthly Period in which the Class A Expected Final
          Distribution Date occurs, or the Class B Controlled Amortization
          Amount if such Date of Processing is in the Controlled Amortization
          Period thereafter, and the Deficit Controlled Amortization Amount for
          such Monthly Period (the "Controlled Distribution Amount"), then such
          excess (the "Controlled Excess Amount") shall not be treated as a
          Principal Allocation and shall be treated as Shared Principal
          Collections and applied in accordance with Section 4.2(e) of the
          Agreement; provided, further, that if on any Date of Processing the
                     --------  ------- 
          aggregate

                                       28
<PAGE>
 
          Principal Allocation for such Date of Processing and for each prior
          Date of Processing in such Monthly Period is less than the Controlled
          Distribution Amount, then Shared Principal Collections from other
          Series, if any, allocable to the Certificates will be deposited to the
          Principal Account in accordance with Section 4.2(e) of the Agreement
          to the extent of such shortfall.

          (e)  Allocations During the Rapid Amortization Period.  During the
               ------------------------------------------------             
     Rapid Amortization Period, the Servicer shall, prior to the close of
     business on the day any Collections are deposited in the Collection
     Account, direct the Trustee to transfer from the Collection Account the
     following amounts as set forth below:

               (i)  Deposit in the Finance Charge Account an amount equal to the
          sum of (x) the product of (A) the applicable Investor Percentage on
          the Date of Processing of such Collections and (B) the aggregate
          amount of such Collections processed in respect of Finance Charge
          Receivables on such Date of Processing and (y) the proceeds of the
          sale of any Interest Rate Cap pursuant to subsection 4.11(g).

               (ii)  Deposit in the Distribution Account an amount equal to the 
          Principal Allocation; provided, however, that after the date on which 
                                --------  -------            
          the Investor Interest has been reduced to zero, the amount determined
          in accordance with this subparagraph (ii) shall be treated as Shared
          Principal Collections allocable to other Series and applied in 
          accordance with Section 4.2(e) of the Agreement; provided, further, 
                                                           --------  -------
          that if on any Date of Processing the aggregate Principal Allocation
          for such Date of Processing in such Monthly Period is less than the
          aggregate outstanding principal amount of the Certificates, then
          Shared Principal Collections from other Series, if any, allocable to
          the Certificates pursuant to Section 4.2(e) of the Agreement will be
          depos-

                                       29
<PAGE>
 
          ited in the Principal Account to the extent of such shortfall.

     SECTION 4.5  Defaulted Accounts and Charge-Offs.
                  ---------------------------------- 

          (a)  On each Determination Date, the Servicer shall calculate the
     Class A Investor Default Amount for the preceding Monthly Period.  If on
     any Determination Date, the Class A Investor Default Amount for such
     Determination Date exceeds the sum of the amounts allocated with respect
     thereto pursuant to subsections 4.6(a)(iii), 4.6(c)(i), 4.6(d) and 4.12(a)
     with respect to the Monthly Period immediately preceding such Determination
     Date, the Class B Investor Interest will be reduced by the amount of such
     excess, but not more than the lesser of the Class A Investor Default Amount
     for the related Distribution Date and the Class B Investor Interest for
     such Determination Date.  In the event that such reduction would cause the
     Class B Investor Interest to be a negative number, the Class B Investor
     Interest will be reduced to zero, and the Class A Investor Interest will be
     reduced by the amount by which the Class B Investor Interest would have
     been reduced below zero, but not more than the Class A Investor Default
     Amount for such Distribution Date (a "Class A Investor Charge-Off").  If
     the Class A Investor Interest has been reduced by the amount of any Class A
     Investor Charge-Offs, it will be reimbursed on any Distribution Date (but
     not by an amount in excess of the aggregate Class A Investor Charge-Offs)
     by the amounts allocated and available for such purpose pursuant to
     subsections 4.6(a)(iv), 4.6(c)(i), 4.6(d) and 4.12(a).

          (b)  On each Determination Date, the Servicer shall calculate the
     Class B Investor Default Amount for the preceding Monthly Period.  If on
     any Determination Date, the Class B Investor Default Amount for such
     Determination Date exceeds the amount allocated and available to fund such
     amount pursuant to subsections 4.6(b)(iii), 4.6(c)(ii) and 4.6(e), the
     Class B Investor Interest shall be reduced by such amount, but not more
     than the Class B Investor Default Amount for such Distribution Date (a
     "Class B Investor Charge-Off").  The Class B Investor Interest will also be
     reduced by the amount of Reallocated Principal Collections pursuant to
     Section 4.12 and the amount of any portion of the Class B Investor Interest
     allocated to the Class A Certificates to avoid a reduction in the Class A
     Investor Interest pursuant to subsection 4.5(a).  The

                                       30
<PAGE>
 
     Class B Investor Interest will thereafter be reimbursed (but not in the
     excess of the unpaid principal balance of the Class B Certificates) on any
     Distribution Date by amounts allocated and available for that purpose as
     described under subsections 4.6(b)(iv), 4.6(c)(ii) and (v) and 4.6(e).

     SECTION 4.6  Monthly Payments.  On each Determination Date, the Servicer
                  ----------------                                           
shall notify the Trustee that the Servicer will withdraw, or shall instruct the
Trustee to withdraw, and the Trustee acting in accordance with such instructions
shall withdraw, on the succeeding Transfer Date, the amounts required to be
withdrawn from the Finance Charge Account pursuant to subsections 4.6(a), (b),
(c), (d) and (e).  On each Determination Date, the Servicer shall also notify
the Trustee of the amounts to be withdrawn by the Trustee, acting on
instructions from the Servicer, from the Cash Collateral Account, pursuant to
subsections 4.6(d) and (e).  Any such withdrawal from the Cash Collateral
Account shall be made on the date provided in this Section 4.6 with respect to
such withdrawal.

          (a)  On each Transfer Date, an amount equal to the Class A Available
     Finance Charge Collections will be distributed in the following priority:

               (i)  Class A Monthly Cap Rate Interest.  On each Transfer Date,
                    ---------------------------------                         
          the Servicer or the Trustee, acting in accordance with instructions
          from the Servicer, shall withdraw from the Finance Charge Account and
          deposit to the Distribution Account, to the extent funds are available
          from Class A Available Finance Charge Collections, (i) first, an
          amount equal to the Class A Monthly Cap Rate Interest for the related
          Distribution Date; and (ii) then, an amount equal to the amount of any
          overdue Class A Monthly Cap Rate Interest, for which a payment has not
          been made under this subsection 4.6(a)(i) or otherwise pursuant to
          this Agreement; provided, however, that with respect to the first
                          --------  -------                                
          Distribution Date relating to the Series 1996-1 Certificates, the
          amount referred to in (i) above shall be $[      ] (reflecting an
          initial period of [  ] days).

               (ii)  Class A Monthly Servicing Fee.  On each Transfer Date, the
                     -----------------------------                             
          Servicer or the Trustee, acting in accordance with instructions from
          the Servicer, shall withdraw from the Finance Charge Account, to the
          extent funds are avail-

                                       31
<PAGE>
 
          able from Class A Available Finance Charge Collections after giving
          effect to the withdrawals pursuant to subsection 4.6(a)(i), an amount
          equal to the Class A Monthly Servicing Fee accrued in respect of the
          preceding Monthly Period, plus all accrued and unpaid Class A Monthly
          Servicing Fees in respect of previous Monthly Periods, and the
          Servicer or the Trustee, as the case may be, shall pay such amount to
          the Servicer.

               (iii)  Class A Investor Default Amount.  On each Transfer Date,
                      -------------------------------                         
          the Servicer or the Trustee, acting in accordance with instructions
          from the Servicer, shall withdraw from the Finance Charge Account, to
          the extent funds are available from Class A Available Finance Charge
          Collections after giving effect to the withdrawal pursuant to
          subsections 4.6(a)(i)and (ii), an amount equal to the Class A Investor
          Default Amount, if any, for the preceding Monthly Period, and the
          Servicer or the Trustee, as the case may be, shall (A) during the
          Revolving Period, apply such amount in accordance with subsection
                                                                           
          4.4(c)(ii), and (B) during the Controlled Amortization Period or the
          ----------                                                          
          Rapid Amortization Period, deposit such amount in the Distribution
          Account and apply such amount in accordance with subsections
                                                                      
          4.4(d)(ii) and 4.4(e)(ii), respectively, in each case as if such
          ----------     ----------                                       
          amount were Collections of Principal Receivables.

               (iv)  Reimbursement of Class A Investor Charge Offs.  On each
                     ---------------------------------------------          
          Transfer Date, the Servicer or the Trustee, acting in accordance with
          instructions of the Servicer, shall withdraw from the Finance Charge
          Account, to the extent funds are available from Class A Available
          Finance Charge Collections after giving effect to the withdrawals and
          transfers pursuant to subsections 4.6(a)(i) through (iii), an amount
          equal to the aggregate amount of Class A Investor Charge Offs, if any,
          which have not theretofore been reimbursed pursuant to this subsection
          4.6(a)(iv) or otherwise pursuant to the Agreement and shall (x) during
          the Revolving Period, apply such amount in accordance with subsection
          4.4(c)(ii) and (y) during the Controlled Amortization Period or the
          Rapid Amortization Period, deposit such amount in accordance with
          subsections 4.4(d)(ii) and

                                       32
<PAGE>
 
          4.4(e)(ii), respectively, as if such amounts were Collections of
          Principal Receivables.  On the date of any such reimbursement, the
          Class A Investor Interest shall be increased by the amount of such
          reimbursement of Class A Investor Charge Offs.

               (v)  Excess Spread.  The remaining Class A Available Finance
                    -------------                                          
          Charge Collections, if any, shall constitute Excess Spread and shall
          be allocated and distributed as set forth in subsection 4.6(c).

          (b)  On each Transfer Date, an amount equal to Class B Available
     Finance Charge Collections will be distributed in the following priority:

               (i)  Class B Monthly Cap Rate Interest.  On each Transfer Date,
                    ---------------------------------                         
          the Servicer or the Trustee, acting in accordance with instructions
          from the Servicer, shall withdraw from the Finance Charge Account and
          deposit to the Distribution Account, to the extent funds are available
          from Class B Available Finance Charge Collections, (i) first, an
          amount equal to the Class B Monthly Cap Rate Interest for the related
          Distribution Date; and (ii) then, an amount equal to the amount of any
          overdue Class B Monthly Cap Rate Interest, for which a payment has not
          been made under this subsection 4.6(b)(i) or otherwise pursuant to the
          Agreement; provided, however, that with respect to the first
                     --------  -------                                
          Distribution Date relating to the Series 1996-1 Certificates, the
          amount referred to in (i) above shall be $[     ] (reflecting an
          initial period of [  ] days).

               (ii)  Class B Monthly Servicing Fee.  On each Transfer Date, the
                     -----------------------------                             
          Servicer or the Trustee, acting in accordance with instructions from
          the Servicer, shall withdraw from the Finance Charge Account, to the
          extent funds are available from Class B Available Finance Charge
          Collections after giving effect to the withdrawals pursuant to
          subsection 4.6(b)(i), an amount equal to the Class B Monthly Servicing
          Fee accrued in respect of the preceding Monthly Period, plus all
          accrued and unpaid Class B Monthly Servicing Fees in respect of
          previous Monthly Periods, and the Servicer or the Trustee, as the case
          may be, shall pay such amount to the Servicer.

                                       33
<PAGE>
 
     (iii)  Class B Investor Default Amount.  On each Transfer Date, the
            -------------------------------                             
          Servicer or the Trustee, acting in accordance with instructions from
          the Servicer, shall withdraw from the Finance Charge Account, to the
          extent funds are available from Class B Available Finance Charge
          Collections after giving effect to the withdrawal pursuant to
          subsections 4.6(b)(i) and (ii) an amount equal to the Class B Investor
          Default Amount, if any, for the preceding Monthly Period, and the
          Servicer or the Trustee, as the case may be, shall apply such amount
          in accordance with Section 4.12 as if such amount were Collections of
          Principal Receivables allocable to the Class B Investor Interest.

               (iv)  Reimbursement of Class B Investor Charge Offs.  On each
                     ---------------------------------------------          
          Transfer Date, the Servicer or the Trustee, acting in accordance with
          instructions of the Servicer, shall withdraw from the Finance Charge
          Account, to the extent funds are available from Class B Available
          Finance Charge Collections after giving effect to the withdrawals and
          transfers pursuant to subsections 4.6(b)(i) through (iii), an amount
          equal to the aggregate amount of Class B Investor Charge Offs, if any,
          which have not theretofore been reimbursed pursuant to this subsection
          4.6(b)(iv) or otherwise pursuant to this Agreement and shall apply
          such amount in accordance with Section 4.12 as if such amounts were
          Collections of Principal Receivables allocable to the Class B Investor
          Interest.  On the date of any such reimbursement, the Class B Investor
          Interest shall be increased by the amount of such reimbursement of
          Class B Investor Charge Offs.

               (v)  Excess Spread.  The remaining Class B Available Finance
                    -------------                                          
          Charge Collections, if any, shall constitute Excess Spread and shall
          be allocated and distributed as set forth in subsection 4.6(c).

          (c)  On each Transfer Date, an amount equal to Excess Spread will be
     distributed in the following priority:

               (i)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw

                                       34
<PAGE>
 
          from the Finance Charge Account, to the extent funds are available
          from Excess Spread, an amount equal to the Class A Required Amount, if
          any, with respect to the related Monthly Period, to be applied, with
          respect to each of the components thereof, in accordance with Section
          4.6(a).

               (ii)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread, after giving effect to the withdrawal pursuant to
          subsection 4.6(c)(i), an amount equal to the Class B Required Amount,
          if any, with respect to the related Monthly Period, to be applied,
          with respect to each of the components thereof, in accordance with
          Section 4.6(b).

               (iii)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) and (ii), an amount equal to the amount of any
          accrued and unpaid interest on any overdue Class A Monthly Interest,
          calculated on the basis of (x) a default rate of interest equal to the
          Class A Certificate Rate plus 0.5% and (y) the actual number of days
          such Class A Monthly Interest is or was at any time overdue, divided
          by 360.

               (iv)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (iii), an amount equal to the amount of
          any accrued and unpaid interest on any overdue Class B Monthly
          Interest, calculated on the basis of (x) a default rate of interest
          equal to the Class B Certificate Rate plus 0.5% and (y) the actual
          number of days such Class B Monthly Interest is or was at any time
          overdue, divided by 360.

               (v)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with in-

                                       35
<PAGE>
 
          structions from the Servicer, shall withdraw from the Finance Charge
          Account, to the extent funds are available from Excess Spread after
          giving effect to the withdrawals pursuant to subsections 4.6(c)(i)
          through (iv), an amount equal to any reductions in the Class B
          Investor Interest in connection with the payment of the Class A
          Required Amount, to reinstate the Class B Investor Interest to the
          extent of any such reduction and shall be applied in accordance with
          Section 4.12 as if such amounts were Collections of Principal
          Receivables allocable to the Class B Investor Interest.

               (vi)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (v), and shall deposit in the Cash
          Collateral Account, an amount equal to the excess of the Required Cash
          Collateral Amount for such Transfer Date over the amount of funds on
          deposit in the Cash Collateral Account (without giving effect to any
          deposit made on such date hereunder).

               (vii)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (vi), an amount equal to the amount by
          which the Class A Monthly Interest for the related Interest Accrual
          Period exceeds the Class A Monthly Cap Rate Interest (other than Class
          A Excess Interest), to the extent such amount is not paid by the
          Interest Rate Cap Provider pursuant to the Class A Interest Rate Cap
          in accordance with Section 4.11(a), plus any such amounts accrued and
          unpaid for prior Interest Accrual Periods.

               (viii)  On each Transfer Date, the Servicer or the Trustee,
          acting in accordance with instructions from the Servicer, shall
          withdraw from the Finance Charge Account, to the extent funds are
          available from Excess Spread after giving effect to the withdrawals
          pursuant to subsections 4.6(c)(i) through

                                       36
<PAGE>
 
          (vii), an amount equal to the amount by which the Class B Monthly
          Interest for the related Interest Accrual Period exceeds the Class B
          Monthly Cap Rate Interest (other than Class B Excess Interest), to the
          extent such amount is not paid by the Interest Rate Cap Provider
          pursuant to the Class B Interest Rate Cap in accordance with Section
          4.11(a), plus any such amounts accrued and unpaid for prior Interest
          Accrual Periods.

               (ix)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account an amount equal to the amount of any Excess
          Spread remaining after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (viii), and apply any such amount to the
          extent specified in accordance with the Loan Agreement.

               (x)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (ix), an amount equal to the amount of
          any Class A Excess Interest which accrued during the related Interest
          Accrual Period, which shall be deposited in the Distribution Account.

               (xi)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (x), an amount equal to the amount of
          any Class B Excess Interest which accrued during the related Interest
          Accrual Period, which shall be deposited in the Distribution Account.

               (xii)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, to the extent funds are available from
          Excess Spread after giving effect to the withdrawals pursuant to
          subsections 4.6(c)(i) through (xi), and shall

                                       37
<PAGE>
 
          deposit such amounts in the Collection Account and make such amounts
          available to be applied as Shared Finance Charge Collections to pay to
          Certificateholders of other Series to the extent of shortfalls, if
          any, in amounts payable to such Certificateholders from Finance Charge
          Collections allocated to such other Series in accordance with the
          related Supplements.

               (xiii)  On each Transfer Date, the Servicer or the Trustee,
          acting in accordance with instructions from the Servicer, shall
          withdraw from the Finance Charge Account, to the extent funds are
          available from Excess Spread after giving effect to the withdrawals
          pursuant to subsections 4.6(c)(i) through (xii), and shall make such
          amounts available to the Trustee to pay any accrued and unpaid
          expenses of the Trust, if any, not otherwise paid pursuant to this
          Section 4.6.

               (xiv)  On each Transfer Date, the Servicer or the Trustee, acting
          in accordance with instructions from the Servicer, shall withdraw from
          the Finance Charge Account, the remaining Excess Spread after giving
          effect to the withdrawals pursuant to subsections 4.6(c)(i) through
          (xiii), and shall pay such amount to the holder of the Exchangeable
          Seller Certificate.

          (d) With respect to each Distribution Date, on the related
     Determination Date, the Servicer shall determine the amount (the "Class A
     Required Amount"), if any, by which the sum of (i) Class A Monthly Cap Rate
     Interest for such Distribution Date, (ii) any Class A Monthly Cap Rate
     Interest previously due but not paid to the Class A Certificateholders on a
     prior Distribution Date, (iii) the Class A Monthly Servicing Fee for the
     related Distribution Date and any accrued and unpaid Class A Monthly
     Servicing Fees from prior Monthly Periods, (iv) the Class A Investor
     Default Amount, if any, for such Distribution Date and (v) the unreimbursed
     Class A Investor Charge Offs, exceeds the Class A Available Finance Charge
     Collections deposited in the Finance Charge Account for the related Monthly
     Period.  In the event that the Class A Required Amount for such
     Distribution Date is greater than zero, the Servicer shall give written
     notice to the Trustee of such positive Class A Required Amount on the
     related Determination Date and all or a portion

                                       38
<PAGE>
 
     of the Excess Spread with respect to the related Monthly Period in an
     amount equal to the Class A Required Amount for such Distribution Date
     shall be distributed from the Finance Charge Account on such Distribution
     Date pursuant to Section 4.6(c)(i).  In the event that the Class A Required
     Amount for such Distribution Date exceeds the amount of Excess Spread with
     respect to the related Monthly Period, then the Trustee shall withdraw from
     the finance charge accounts for other Series the amounts of Shared Finance
     Charge Collections with respect to the related Monthly Period, if any,
     allocable to Series 1996-1 from other Series, in an amount equal to the
     remaining Class A Required Amount, and such amount shall be deposited into
     the Distribution Account and be distributed on such Distribution Date in
     accordance with subsections 4.6(a)(i) through (iv).  In the event that the
     Class A Required Amount for such Distribution Date exceeds the amount of
     Excess Spread and the amount of the Shared Finance Charge Collections
     allocable to the Series 1996-1 Certificates with respect to the related
     Monthly Period, then by 1:00 p.m. New York City time on the related
     Transfer Date, the Trustee, acting upon instruction from the Servicer,
     shall make a withdrawal from the Cash Collateral Account of all or a
     portion of the Available Cash Collateral Amount with respect to such
     Distribution Date in an amount equal to such excess, which amount shall be
     applied to fund the Class A Required Amount in accordance with subsection
     4.6(c)(i).  In the event that the Class A Required Amount for such
     Distribution Date exceeds the amount of Excess Spread, Shared Finance
     Charge Collections allocable to the Class A Certificates, and the Available
     Cash Collateral Amount with respect to such Distribution Date, all or a
     portion of the Reallocated Principal Collections with respect to such
     Monthly Period in an amount equal to such excess shall be distributed from
     the Collection Account on such Distribution Date pursuant to Section
     4.12(a).

          (e)  With respect to each Distribution Date, on the related
     Determination Date, the Servicer shall determine the amount (the "Class B
     Required Amount"), if any, equal to the sum of (x) the amount, if any, by
     which the sum of (i) Class B Monthly Cap Rate Interest for such
     Distribution Date, (ii) any Class B Monthly Cap Rate Interest previously
     due but not paid to the Class B Certificateholders on a prior Distribution
     Date, (iii) the Class B Monthly Servicing Fee for the related Dis-

                                       39
<PAGE>
 
     tribution Date and any accrued and unpaid Class B Monthly Servicing Fees
     from prior Monthly Periods, (iv) the Class B Investor Default Amount and
     (v) the unreimbursed Class B Investor Charge Offs, if any, for such
     Distribution Date, exceeds the Class B Available Finance Charge Collections
     deposited in the Finance Charge Account for the related Monthly Period.  In
     the event that the Class B Required Amount for such Distribution Date is
     greater than zero, the Servicer shall give written notice to the Trustee of
     such positive Class B Required Amount on the related Determination Date and
     all or a portion of Excess Spread (other than Excess Spread applied to fund
     the Class A Required Amount with respect to such Distribution Date) with
     respect to the related Monthly Period shall be distributed from the Finance
     Charge Account on such Distribution Date pursuant to Section 4.6(c)(ii).
     In the event that the Class B Required Amount for such Distribution Date
     exceeds the amount of Excess Spread with respect to such Monthly Period
     remaining after application thereof to fund the Class A Required Amount,
     then the Trustee shall withdraw from the finance charge accounts for other
     Series the amounts of Shared Finance Charge Collections with respect to the
     related Monthly Period, if any, allocable to the Series 1996-1 Certificates
     from other Series, after the application thereof pursuant to subsection
     4.6(d), in an amount equal to the remaining Class B Required Amount, and
     such amount shall be deposited to the Distribution Account and be
     distributed on such Distribution Date in accordance with subsections
     4.6(b)(i) through (iv) and then applied to the amount of any reduction in
     the Class B Investor Interest in connection with the payment of the Class A
     Required Amount which has not been reinstated pursuant to subsection
     4.6(c)(v), and then applied to the amount of any remaining excess pursuant
     to subsection 4.6(c)(vii), and then applied to the amount of any remaining
     excess pursuant to subsection 4.6(c)(viii).  In the event that the Class B
     Required Amount for such Distribution Date exceeds the amount of Excess
     Spread and the amount of the remaining Shared Finance Charge Collections
     allocable to the Series 1996-1 Certificates with respect to the related
     Monthly Period, then by 1:00 p.m. New York City time on the related
     Transfer Date, the Trustee, acting upon instruction from the Servicer,
     shall make a withdrawal from the Cash Collateral Account of all or a
     portion of the Available Cash Collateral Amount (other than that portion of
     the Available Cash Collateral Amount applied to fund the

                                       40
<PAGE>
 
     Class A Required Amount with respect to such Distribution Date) in an
     amount equal to such excess, and any amount so withdrawn shall be applied
     to fund the remaining Class B Required Amount in accordance with subsection
     4.6(b).

     SECTION 4.7  Payment of Certificate Interest.  On each Distribution Date,
                  -------------------------------                             
the Paying Agent shall pay in accordance with Section 5.1 to the Class A
Certificateholders from the Distribution Account the amount deposited into the
Distribution Account and allocated to the Class A Certificates pursuant to
subsections 4.6(a)(i), 4.6(c)(i), (iii), (vii) and (x), 4.6(d), 4.11(a) and
4.12(a) on the related Transfer Date or on such Distribution Date, as
applicable, and to the Class B Certificateholders from the Distribution Account
the amount deposited into the Distribution Account and allocated to the Class B
Certificates pursuant to subsections 4.6(b)(i), 4.6(c)(ii), (iv), (viii) and
(xi), 4.6(e) and 4.11(a) on the related Transfer Date or on such Distribution
Date, as applicable.

     SECTION 4.8  Payment of Certificate Principal.
                  -------------------------------- 

     (a)  On the Determination Date in the Monthly Period following the Monthly
Period in which either the Controlled Amortization Period or the Rapid
Amortization Period commences and on each Determination Date thereafter, the
Servicer shall, subject to the following paragraph, give notice to the Trustee
that it will itself withdraw, or shall instruct the Trustee to withdraw, and on
the Transfer Date succeeding such Determination Date, the Servicer or the
Trustee shall, subject to the following paragraph, withdraw from the Principal
Account and deposit in the Distribution Account (1) the Available Principal
Collections for the preceding Monthly Period, and (2) the amount to be deposited
in the Principal Account on such Transfer Date pursuant to subsections 4.6(a)
through (e) of the Agreement; provided, however that during the Controlled
                              --------  -------                           
Amortization Period such amount to be deposited in the Distribution Account
shall not exceed the Controlled Distribution Amount and any amounts in excess
thereof shall be treated as Shared Principal Collections and be applied in
accordance with Section 4.2(e) of the Agreement; further provided, however, that
                                                 ------- --------  -------      
on each Transfer Date in the Controlled Amortization Period, the Servicer shall
withdraw, or instruct the Trustee to withdraw, and on such Transfer Date the
Trustee shall withdraw, from the Excess Funding Account and deposit to the
Distribution Account, an amount equal to the lesser of (x) the amount on deposit
therein (exclusive of investment earnings) and (y) the amount by which the
Controlled

                                       41
<PAGE>
 
Distribution Amount exceeds the sum of (I) the Monthly Total Principal
Allocation, (II) the amount deposited or to be deposited in the Principal
Account on such Transfer Date pursuant to subsections 4.6(a) through (e) of the
Agreement and (III) the amount of Shared Principal Collections from other Series
deposited in the Principal Account during the preceding Monthly Period pursuant
to Section 4.4(d)(ii) (the sum of (A) the amount of such excess less the amount
to be withdrawn from the Excess Funding Account with respect thereto for any
Monthly Period and (B) the amount calculated pursuant to clause (A) for the
Monthly Period immediately preceding such Monthly Period, to the extent unpaid
(or for the first Monthly Period, zero) shall be the "Deficit Controlled
Amortization Amount" for the next succeeding Monthly Period); and further
                                                                  -------
provided, however, that on the first Transfer Date in the Rapid Amortization
- --------  -------                                                           
Period, the Servicer shall withdraw, or instruct the Trustee to withdraw, and on
such Transfer Date the Trustee shall withdraw, from the Excess Funding Account
and deposit to the Distribution Account, any amount on deposit therein
(exclusive of investment earnings).  The amounts deposited into the Distribution
Account pursuant to the preceding sentence on each Transfer Date shall be
distributed on the related Distribution Date in accordance with Section 5.1
hereof first to the Class A Certificateholders until the earlier of the
Distribution Date on which the Class A Investor Interest is paid in full and the
Scheduled Series 1996-1 Termination Date and then, beginning on the Class B
Payment Commencement Date and on each Distribution Date thereafter, to the Class
B Certificateholders until the Series 1996-1 Termination Date.

     On the Determination Date preceding the final Transfer Date, the Servicer
shall determine the amounts to be deposited pursuant to this sentence and on the
final Transfer Date:  (x) the Servicer shall, or shall instruct the Trustee to,
and the Trustee shall, withdraw from the Principal Account and deposit into the
Distribution Account, an amount which is no greater than the sum of the Class A
Investor Interest and the Class B Investor Interest as of the end of the day on
the preceding Record Date; and (y) the Servicer shall, or shall instruct the
Trustee to, and the Trustee shall, withdraw from the Principal Account and
deposit into the Collection Account, for allocation to other Series as Principal
Collections pursuant to Article IV, the amount, if any, remaining in the
Principal Account after giving effect to the withdrawals made pursuant to clause
(x).

     (b)  On each Distribution Date occurring after a deposit is made to the
Distribution Account pursuant to

                                       42
<PAGE>
 
subsection 4.8(a) or Sections 5 or 15 of the Series Supplement relating to
Series 1996-1, the Paying Agent shall pay in accordance with Section 5.1 to the
Series 1996-1 Certificateholders from the Distribution Account, the amount so
deposited into the Distribution Account.

     SECTION 4.9  Establishment of the Cash Collateral Account.
                  -------------------------------------------- 

     (a)  Cash Collateral Account.  The Servicer, for the benefit of the Series
          -----------------------                                              
1996-1 Certificateholders, shall establish and maintain or cause to be
established and maintained with a Qualified Trust Institution (other than the
Servicer) in the name of the Trustee, on behalf of the Series 1996-1
Certificateholders, the "Cash Collateral Account," which shall be a segregated
trust account with the corporate trust department of such Qualified Trust
Institution, and held in trust by such Qualified Trust Institution bearing a
designation clearly indicating that the funds deposited therein are held by the
Trustee, on behalf of the Series 1996-1 Certificateholders.  The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Cash Collateral Account and in all proceeds thereof.  If, at any time,
the institution holding the Cash Collateral Account ceases to be a Qualified
Trust Institution, the Servicer shall within 20 Business Days establish a new
Cash Collateral Account meeting the conditions specified above with a Qualified
Trust Institution and shall transfer any cash and/or any investments to such new
Cash Collateral Account.  From the date such new Cash Collateral Account is
established, it shall be the "Cash Collateral Account."  On the Closing Date,
the Cash Collateral Account will be funded from the proceeds of a loan made
pursuant to the Loan Agreement by the Cash Collateral Depositor and from a
deposit by the Transferor on the Closing Date in the aggregate amount of
$__________ to the Cash Collateral Account and on each Transfer Date the
Servicer or the Trustee acting in accordance with the instructions from the
Servicer shall make deposits and withdrawals in the accounts specified in
Sections 4.6 and 4.10 hereof, as the case may be.  The Trustee, acting in
accordance with instructions from the Servicer, shall make withdrawals from the
Cash Collateral Account from time to time in an amount up to the Available Cash
Collateral Amount at such time, for the purposes set forth in this Section 4.9.
Such withdrawals shall be made in the priority set forth below and the Available
Cash Collateral Amount will be reduced by the amount of each such withdrawal as
provided in the definition thereof set forth in Section l.

                                       43
<PAGE>
 
     (b)  Administration of the Cash Collateral Account.  The Servicer shall
          ---------------------------------------------                     
administer the Cash Collateral Account in accordance with Section 2.7 of the
Loan Agreement and this Agreement and, on behalf of the Trustee, shall direct
the investment of funds on deposit in the Cash Collateral Account in Permitted
Investments.  Funds on deposit in the Cash Collateral Account on any Transfer
Date, after giving effect to any deposits to or withdrawals from the Cash
Collateral Account on such Transfer Date, shall be invested in such investments
that will mature so that such funds will be available for withdrawal on or prior
to the following Transfer Date; provided, however, that no such reinvestment
                                --------  -------                           
shall be made before 2:00 p.m. (New York City time) on such Transfer Date; and
                                                                              
further provided, however, that each Permitted Investment shall mature not later
- ------- --------  -------                                                       
than the Business Day preceding the following Transfer Date.  The net earnings
from such investment shall be applied as specified in the Loan Agreement.

     The Trustee shall maintain, either on its own behalf or through its nominee
or custodian, on behalf of the Series 1996-1 Certificateholders, possession of
any certificated negotiable instrument or security (other than certificated
securities held by a clearing corporation) evidencing the Permitted Investments
made pursuant to this subsection 4.9(b) described in clause (a) of the
definition of "Permitted Investments" from the time of purchase thereof until
the time of sale or maturity.  Subject to the restrictions set forth above, the
Servicer, or a Person designated in writing by the Servicer of which the Trustee
shall have received notification thereof, shall have the authority to instruct
the Trustee with respect to the investment of funds on deposit in the Cash
Collateral Account.  For purposes of determining the availability of funds or
the balances in the Cash Collateral Account for any reason under this Agreement,
all investment earnings on such funds shall be deemed not to be available or on
deposit.

     (c)  Notice of Withdrawals.  In the event that, for any Transfer Date, the
          ---------------------                                                
sum of the amount required to be withdrawn from the Cash Collateral Account
pursuant to subsections 4.6(d) and (e) (such sum being referred to as the "Total
Withdrawal Amount") is greater than zero, the Servicer shall give written notice
to the Trustee, in substantially the form of Exhibit C to the Agreement, of such
positive Total Withdrawal Amount.

     (d)  Application of Cash Collateral Account Surplus.  In the event that the
          ----------------------------------------------                        
Cash Collateral Account Surplus on any Transfer Date, after giving effect to all
deposits to

                                       44
<PAGE>
 
and withdrawals from the Cash Collateral Account pursuant to subsections 4.6(d)
and (e) on such Transfer Date, is greater than zero, the Trustee, acting in
accordance with the instructions of the Servicer, shall withdraw from the Cash
Collateral Account not later than 1:00 p.m. (New York City time) an amount equal
to the Cash Collateral Account Surplus and, as directed, either (x) apply such
amount in accordance with subsections 4.6(c)(ix) through (xiii) hereof or (y) in
the case of a Cash Collateral Account Surplus arising as a result of an
Additional Loan (as defined in the Loan Agreement), pay such amount to the
Seller in accordance with the Loan Agreement.

     (e)  Termination of Series.  On the Business Day succeeding the Series
          ---------------------                                            
1996-1 Termination Date, the Trustee, acting in accordance with the instructions
of the Servicer, after the prior payment of all amounts owing to the Series
1996-1 Certificateholders and the Servicer and payable from the Cash Collateral
Account as provided herein, shall withdraw from the Cash Collateral Account not
later than 1:00 p.m. (New York City time) and pay in accordance with subsections
4.6(c)(ix) through (xiii) of this Agreement, all amounts then on deposit in the
Cash Collateral Account.

     SECTION 4.10  Transferor's or Servicer's Failure to Make a Deposit or
                   -------------------------------------------------------
Payment.
- ------- 

     (a)  If (i) the Servicer fails to give instructions on any Determination
Date to make any payment or deposit relating to the Series 1996-1 Certificates
required to be made by the Servicer on the related Transfer Date at the time
specified in the Agreement (including applicable grace periods), or (ii) the
Trustee shall not have received the notice referred to in the first paragraph of
subsection 4.10(c) in the manner and at the time specified in the first
paragraph of subsection 4.10(c), and, in either case, the Trustee determines
that any payment or deposit (other than as required by subsection 2.4(d) (except
as provided in the immediately following paragraph), 2.4(e), 2.4(f), 3.3, 9.2,
10.2, or 12.2(a) of the Agreement, or Sections 4 or 15 of the Series Supplement
relating to Series 1996-1 (collectively, "Excluded Payments")) required to be
made by the Transferor or the Servicer, as the case may be, has not been made on
the related Transfer Date, the Trustee (x) shall make such payment from the
applicable Investor Account or the Cash Collateral Account, as the case may be,
without instruction from the Servicer, or (y) shall (except in the case of (i) a
deposit or payment which was required to have been made to or from the Cash
Collateral Account, (ii) payments required to be made to the Servicer pursuant
to

                                       45
<PAGE>
 
subsection 4.6(a)(ii) or (b)(ii) and (iii) Excluded Payments), subject to
subsection 4.10(c), make a withdrawal from the Cash Collateral Account (up to
the Available Cash Collateral Amount), in an amount equal to the amount of such
payment or deposit.  The Trustee shall be required to make any such payment,
deposit or withdrawal hereunder only to the extent that it has sufficient
information to allow the Trustee to determine the amount thereof; provided,
                                                                  -------- 
however, that the Trustee shall in all cases be deemed to have sufficient
- -------                                                                  
information to determine the amount of interest (i) required to be paid or
provided for under subsections 4.6(a)(i) and (b)(i) on each Transfer Date, and
(ii) payable to the Series 1996-1 Certificateholders on each Distribution Date.
The Servicer shall, upon request of the Trustee, promptly provide the Trustee
with all information necessary to allow the Trustee to make such a payment or
withdrawal.  Such funds or the proceeds of such withdrawal shall be applied by
the Trustee in the manner in which such payment or deposit should have been made
by the Transferor or the Servicer, as the case may be.

     If (i) the Servicer or the Transferor fails to make any payment or deposit
relating to the Series 1996-1 Certificates (including, but not limited by, any
deposits pursuant to Section 4.4, and other than (w) payments or deposits
(referred to above) required to be made on any Transfer Date relating to the
Series 1996-1 Certificates, (x) payments or deposits required by subsection
2.4(d) (except as referred to below), (y) payments or deposits required by
subsection 2.4(e), 2.4(f), 3.3, 9.2, 10.2 or 12.2(a) of the Agreement or Section
5 or 15 of the Series Supplement relating to Series 1996-1) required to be made
by the Servicer or Transferor, respectively, at the time specified in the
Agreement (including applicable grace periods) and (ii) the Trustee shall have
received the notice referred to in the second paragraph of subsection 4.10(c)
from the Transferor or the Servicer, as the case may be, in the manner and at
the time specified in the second paragraph of subsection 4.10(c), the Trustee
shall make such payment from the applicable Investor Account without instruction
from the Servicer, or shall, subject to subsection 4.10(c), make a withdrawal
from the Cash Collateral Account (up to the Available Cash Collateral Amount) in
an amount equal to the amount of such payment or deposit relating to the Series
1996-1 Certificates; provided, however, that the Trustee shall make a withdrawal
                     --------  -------                                          
from the Cash Collateral Account (up to the Available Cash Collateral Amount) in
an amount equal to the deposit required to be made by the Transferor pursuant to
subsection 2.4(d) hereof to the extent allocable to the Investor Interest that
has not been made for any Ineligi-

                                       46
<PAGE>
 
ble Receivable as to which (i) reassignment would have occurred under subsection
2.4(d) hereof but for the Transferor's failure to make a deposit into the
Collection Account required under subsection 2.4(d) to the extent allocable to
the Investor Interest and (ii) either (A) Collections with respect to such
Ineligible Receivable have not been deposited, or are prohibited from being
deposited, in the Collection Account, or (B) the Obligor with respect to such
Ineligible Receivable does not make one or more payments to the Servicer with
respect thereto because it is an Ineligible Receivable.  The Trustee shall be
required to make any such payment, deposit or withdrawal hereunder only to the
extent that it has sufficient information to allow the Trustee to determine the
amount thereof.  Such funds or the proceeds of such withdrawal shall be applied
by the Trustee in the manner in which such payment or deposits should have been
made by the Transferor or the Servicer, as the case may be.

     (b)  If a withdrawal is made from the Cash Collateral Account pursuant to
subsection 4.10(a) because of a failure of the Servicer or the Transferor to
make, or give instructions to make, any payment or deposit required to be made
or given by the Servicer or the Transferor from sources other than a withdrawal
from the Cash Collateral Account, the Servicer or the Transferor, as the case
may be, shall, as appropriate, (i) make the required payment, deposit or
transfer within five Business Days, or (ii) give the Trustee instructions to
transfer the required payment or deposit in respect of which such withdrawal
from the Cash Collateral Account was made, to the Cash Collateral Account.

     (c)  The Transferor and the Servicer covenant and agree hereby to notify
the Trustee, no later than 10:00 a.m. (New York time) on each Transfer Date,
that the Transferor or the Servicer, as the case may be, has made all deposits
and withdrawals required to be made on such Business Day by the Servicer or the
Transferor, as the case may be, relating to the Series 1996-1 Certificates on
such Transfer Date, which notice may be by telephone confirmed by facsimile.
Such notice shall be substantially in the form of Exhibit 4 to the Supplement
relating to Series 1996-1, with such changes as the Servicer may determine to be
necessary or desirable; provided, however, that no change shall serve to exclude
                        --------  -------                                       
information required pursuant to this Section 4.10(c).  The Trustee shall be
entitled to rely on such telephone notice as conclusive evidence that such
deposits and withdrawals have been made by the Transferor or the Servicer, as
the case may be, in a timely manner unless

                                       47
<PAGE>
 
such Trustee shall not have received such facsimile confirmation by 12:00 noon,
(New York time) on such Transfer Date.

     If, on any Business Day, the Transferor or the Servicer fails to make any
payment or deposit relating to the Series 1996-1 Certificates required to be
made by it on such Business Day (other than the deposits and payments required
to be made by the Transferor or the Servicer on each Transfer Date), the
Transferor or the Servicer, as the case may be, shall notify the Trustee not
later than 11:00 a.m. (New York time) on such Business Day that it has failed to
make such payment or deposit, which notice shall specify (i) the amount of such
deposit or payment and (ii) if applicable, the account from which such payment
was to be made and the Person to whom, or the account into which, such payment
was to be made.  Such notice shall be substantially in the form of Exhibit 5 to
the Series Supplement relating to Series 1996-1.

     If, on any Business Day, the Trustee shall be required to make a withdrawal
from the Cash Collateral Account pursuant to Section 4.10, the Trustee shall
make such withdrawal from the Cash Collateral Account not later than 2:00 p.m.
(New York City time) on such Business Day.

     SECTION 4.11  Interest Rate Caps.
                   ------------------ 

     (a)  The Trustee hereby acknowledges that the Class A Interest Rate Cap has
been obtained for the benefit of the Class A Certificateholders and the Class B
Interest Rate Cap for the benefit of the Class B Certificateholders.  Each of
the Interest Rate Caps provides that (i) the Trust shall not be required to make
any payments thereunder and (ii) the Trust shall be entitled to receive a
payment (determined in accordance with the respective Interest Rate Cap) from
the Interest Rate Cap Provider on or prior to each Transfer Date if LIBOR plus
0.__% for the related Interest Accrual Period exceeds the Class A Cap Rate or
LIBOR plus 0.__% for the related Interest Accrual Period exceeds the Class B Cap
Rate.  The Interest Rate Cap Provider will make a payment on or prior to each
Transfer Date to the Trustee, on behalf of the Trust, in an amount equal to the
product of (i) the amount by which, in the case of the Class A Interest Rate
Cap, LIBOR plus 0.__% exceeds the Class A Cap Rate or, in the case of the Class
B Interest Rate Cap, LIBOR plus 0.__% exceeds the Class B Cap Rate, as
applicable, (ii) the Class A Notional Amount or the Class B Notional Amount, as
applicable, for the related Calculation Peri-

                                       48
<PAGE>
 
od, and (iii) the actual number of days in such Calculation Period divided by
360.  Payments pursuant to the Class A Interest Rate Cap will be deposited in
the Distribution Account for payment to the Class A Certificateholders on the
following Distribution Date.  Payments pursuant to the Class B Interest Rate Cap
will be deposited in the Distribution Account for payment to the Class B
Certificateholders on the following Distribution Date.

     (b)  In the event that the long term unsecured debt or long term
certificate of deposit rating of the Interest Rate Cap Provider is withdrawn or
reduced below AAA by Standard & Poor's or is withdrawn or reduced below Aa3 by
Moody's, then within 30 days after receiving notice of such decline in the
creditworthiness of the Interest Rate Cap Provider as determined by the Rating
Agency, either (x) the Interest Rate Cap Provider, at its own expense, will
obtain a Replacement Interest Rate Cap for each Interest Rate Cap under which it
is then currently an obligor or (y) the Trustee, at the direction of the
Servicer, shall at its option either (i) with the prior written confirmation of
the Rating Agency that such action will not result in a reduction or withdrawal
of the rating of the Class A Certificates or the Class B Certificates, use its
best efforts to (A) cause the Interest Rate Cap Provider to pledge securities in
the manner provided by applicable law or (B) otherwise cause to be pledged
securities, which in each case shall be held by the Trustee, its custodian, or
its agent free and clear of the Lien of any third party, in a manner conferring
on the Trustee a perfected first Lien in such securities securing the Interest
Rate Cap Provider's performance of its obligations under the applicable Interest
Rate Cap or Caps, or (ii) provided that for each Interest Rate Cap under which
such Interest Rate Cap Provider is then currently an obligor, a Replacement
Interest Rate Cap or Qualified Substitute Arrangement meeting the requirements
of Section 4.11(c) has been obtained or will be obtained prior to or
simultaneously with the termination of such Interest Rate Cap pursuant to clause
(B) below, (A) provide written notice to the Interest Rate Cap Provider of its
intention to terminate the Interest Rate Cap within such 30-day period and (B)
terminate such Interest Rate Cap within such 30-day period, request the payment
to it of all amounts due to the Trust under such Interest Rate Cap through the
termination date and deposit any such amounts so received, on the day of
receipt, to the Collection Account for application as Finance Charge Receivables
for the benefit of the applicable Class of Certificateholders, or (iii) use
reasonable efforts to establish any other arrangement satisfactory to the Rating
Agency including collateral, guarantees or letters of credit,

                                       49
<PAGE>
 
which arrangement will result in the Rating Agency's not reducing or withdrawing
the then rating of the Class A Certificates or the Class B Certificates (a
"Qualified Substitute Arrangement"); provided, however, that in the event at any
                                     --------  -------                          
time any alternative arrangement established pursuant to clause (x) or (y)(i) or
(y)(iii) above shall cease to be satisfactory to the Rating Agency or shall
terminate prior to the Class B Expected Final Payment Date, then the provisions
of this Section 4.11(b) shall again be applied and in connection therewith the
30-day period referred to above shall commence on the date the Servicer receives
notice of such cessation or termination, as the case may be.

     (c)  Unless an alternative arrangement pursuant to clause (x) or (y)(i) of
Section 4.11(b) is being established, the Trustee, at the direction of the
Servicer shall use its best efforts to obtain with respect to each Interest Rate
Cap referenced in Section 4.11(b) a Replacement Interest Rate Cap or Qualified
Substitute Arrangement meeting the requirements of this Section 4.11(c) during
the 30-day period referred to in Section 4.11(b).  The Trustee shall not at any
time terminate any such Interest Rate Cap unless, prior to or simultaneously
with the termination thereof, the Trustee or the Servicer has obtained or shall
obtain (i) a Replacement Interest Rate Cap or Qualified Substitute Arrangement
with respect thereto, (ii) to the extent applicable, an Opinion of Counsel as to
the due authorization, execution, delivery, validity and enforceability of such
Replacement Interest Rate Cap or Qualified Substitute Arrangement, as the case
may be, and (iii) a letter from the Rating Agency confirming that the
termination of such Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap or Qualified Substitute Arrangement will not adversely affect
its rating of the Class A Certificates or the Class B Certificates.

     (d)  The Servicer shall notify the Trustee, the Rating Agency and the Cash
Collateral Depositor within five Business Days after obtaining knowledge that
the long term unsecured debt or the long term certificate of deposit rating of
the Interest Rate Cap Provider has been withdrawn or reduced by Standard &
Poor's or Moody's.

                                       50
<PAGE>
 
     (e)  Notwithstanding the foregoing, the Servicer may at any time obtain a
Replacement Interest Rate Cap, provided that the Servicer delivers to the
Trustee (i) an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
and (ii) a letter from the Rating Agency confirming that the termination of the
then current Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap will not adversely affect its rating of the Class A
Certificates or the Class B Certificates.

     (f)  The Trustee hereby appoints the Interest Rate Cap Provider to perform
the duties of the calculation agent under the Interest Rate Cap and the Interest
Rate Cap Provider accepts such appointment.  The Trustee shall, at the direction
of the Servicer, request a copy of the audited annual consolidated financial
statements of the Union Bank of Switzerland, prepared in accordance with
accounting principles that are generally accepted in Switzerland.

     (g)  The Trustee, on behalf of the Certificateholders, shall have the right
(during the Amortization Period) to, and upon notification from the Servicer
shall, sell all or a portion of the Interest Rate Caps subject to the following
conditions having been met:

          (i)  The Notional Amount of the unsold portion of each Interest Rate
     Cap remaining as an asset of the Trust shall at least equal the Class A
     Investor Interest, in the case of the Class A Interest Rate Cap, and the
     Class B Investor Interest, in the case of the Class B Interest Rate Cap,
     outstanding as of the date of such sale; and

          (ii)  Such sale will not result in a downgrading or withdrawal of the
     then current rating on the relevant class of Certificates by the Rating
     Agency.

     The Servicer shall have the duty of obtaining a fair market value price for
the sale of the Trust's rights under an Interest Rate Cap, notifying the Trustee
of prospective purchasers and bids, selecting the purchaser of such Interest
Rate Cap, and instructing the selected purchaser (and/or the Trustee) to deposit
the purchase price therefor into the Collection Account.  The Trustee, upon
receipt of the purchase price into the Collection Account, shall execute all
documentation, prepared by the Servicer, necessary to effect the transfer of the
Trust's rights under the Interest Rate Cap and to release the

                                       51
<PAGE>
 
lien of the Trustee on the Interest Rate Cap and proceeds thereof.

     Funds deposited in the Collection Account in respect of the sale of all or
a portion of Interest Rate Cap or a Class B Interest Rate Cap shall be applied
on the next Transfer Date as, respectively, Class A Available Finance Charge
Collections or Class B Available Finance Charge Collections in accordance with
subsections 4.6(a) through (c) of the Agreement.

     SECTION 4.12  Reallocated Principal Collections.  The Servicer shall apply
                   ---------------------------------                           
or shall cause the Trustee to apply on each Distribution Date Collections of
Principal Receivables (including amounts specified pursuant to subsections
4.6(b)(iii) and (iv) to be treated as Collections of Principal Receivables
allocable to the Class B Investor Interest) in an amount, not to exceed the
Class B Investor Interest, equal to the product of (a) the Class B Investor
Percentage of the Investor Percentage and (b) the amount of Collections of
Principal Receivables with respect to the Monthly Period relating to such
Distribution Date, and to make the following distributions in the following
priority:

          (a)  an amount equal to the excess, if any, of (i) the Class A
     Required Amount, if any, with respect to such Distribution Date over (ii)
     the sum of (x) the amount of Excess Spread and Shared Finance Charge
     Collections from other Series with respect to the related Monthly Period
     and (y) the Available Cash Collateral Amount with respect to such
     Distribution Date, shall be distributed by the Trustee to fund any
     deficiency pursuant to Sections 4.6(a)(i) through (iv), in that order of
     priority (such amount, "Reallocated Principal Collections"); and

          (b)  the balance, if any, of such Principal Collections allocable to
     the Class B Investor Interest shall be treated during the Revolving Period
     as Shared Principal Collections and during an Amortization Period as a
     portion of Available Principal Collections.

     SECTION 4.13  Determination of LIBOR.  "LIBOR" shall mean, for a specific
                   ----------------------                                     
Interest Accrual Period (other than the initial Interest Accrual Period), the
rate for deposits in United States dollars for one month (commencing on the
first day of the relevant Interest Accrual Period) which appears on Telerate
Page 3750 as of 11:00 a.m., London time, on the LIBOR Determination Date for
such

                                       52
<PAGE>
 
Interest Accrual Period.  If such rate does not appear on Telerate Page 3750,
the rate for such Interest Accrual Period will be determined on the basis of the
rates at which deposits in the United States dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on such LIBOR
Determination Date to prime banks in the London interbank market for a period
equal to one month (commencing on the first day of Interest Accrual Period).
The Trustee will request the principal London office of each such bank to
provide a quotation of its rate.  If at least two such quotations are provided,
the rate for such Interest Accrual Period will be the arithmetic mean of the
quotations.  If fewer than two quotations are provided as requested, the rate
for such Interest Accrual Period will be the arithmetic mean of the rates quoted
by four major banks in New York City, selected by the Trustee, at approximately
11:00 a.m., New York City time, on the first day of such Interest Accrual Period
for loans in United States dollars to leading European banks for a period equal
to one month (commencing on the first day of such Interest Accrual Period).

     SECTION 4.14  Discount Option. (a) The Seller may at it option (the 
                   ---------------                                            
"Discount Option"), any time, upon not less than 30 days prior written notice to
the Servicer, the Trustee, the Cash Collateral Depositor, and each Rating
Agency, designate a percentage, which may be a fixed percentage or a variable
percentage based on a formula (the "Discounted Percentage"), of the amount of
Principal Receivables to be treated on and after such designation, or for the
period specified in such notice, as Finance Charge Receivables; provided,
                                                                -------- 
however, that no such designation shall become effective on the date specified
- -------      
in such written notice unless the following conditions have been satisfied:

          (i) on or before the date specified in the written notice, the Seller
          shall have received written confirmation from each Rating Agency which
          is then rating an outstanding Series of Certificates that such
          designation will not result in a withdrawal of its rating of such
          Series of Certificates;

          (ii) such exercise of the Discount Option shall not, in the reasonable
          belief of the Seller, cause a Pay Out Event to occur or cause an event
          which with notice or the lapse of time or both would constitute a Pay
          Out Event;

                                       53
<PAGE>
 
          (iii) the Seller shall have delivered to the Trustee an Officer's
          Certificate confirming the items set forth in clauses (i) and (ii)
          above. The Trustee may conclusively rely on such  Officer's
          Certificate shall have no duty to make inquiries with regard to the
          matters set forth therein and shall incur no liability in so relying.

          On and after the date of satisfaction of each of the above conditions,
in processing Collection of Principal Receivables of the Accounts, the Servicer
shall deem the product of the Discount Percentage and Collections of such
Principal Receivables as Collections of Finance Charge Receivables.

          (b) Each Certificateholder by its acceptance of a beneficial interest 
in a Certificate shall be deemed to have consented to the exercise by the 
Transferor of the Discount Option at such time as the Transferor determines to 
exercise such options.

                                   ARTICLE V

                     DISTRIBUTIONS AND REPORTS TO INVESTOR
                               CERTIFICATEHOLDERS


                         [THE FOLLOWING PORTION OF THIS
                 ARTICLE IS APPLICABLE ONLY TO SERIES 1996-1.]


     SECTION 5.1  Distributions.
                  ------------- 

     (a)  On each Distribution Date, the Paying Agent shall distribute (in
accordance with the certificate delivered by the Servicer to the Trustee
pursuant to subsection 3.4(b)) to each Class A Certificateholder of record on
the immediately preceding Record Date (other than as provided in subsection
2.4(e) or Section 12.3 respecting a final distribution) such Class A
Certificateholder's pro rata share (based on the aggregate Undivided Interests
                    --- ----                                                  
represented by Class A Certificates held by such Class A Certificateholder) of
amounts on deposit in the Distribution Account as are payable to the Class A
Certificateholders pursuant to Sections 4.7 and 4.8 hereof by check mailed to
each Class A Certificateholder except that, with respect to Class A Certificates
registered in the name of the nominee of a Clearing Agency, such distribution
shall be made in immediately available funds.

     (b)  On each Distribution Date, the Paying Agent shall distribute (in
accordance with the certificate delivered by the Servicer to the Trustee
pursuant to subsection 3.4(b)) to each Class B Certificateholder of record on
the immediately preceding Record Date (other

                                       54
<PAGE>
 
than as provided in subsection 2.4(e) or Section 12.3 respecting a final
distribution) such Class B Certificateholder's pro rata share (based on the
                                               --- ----                    
aggregate Undivided Interests represented by Class B Certificates held by such
Class B Certificateholder) of amounts on deposit in the Distribution Account as
are payable to the Class B Certificateholders pursuant to Sections 4.7 and 4.8
hereof by check mailed to each Class B Certificateholder except that, with
respect to Class B Certificates registered in the name of the nominee of a
Clearing Agency, such distribution shall be made in immediately available funds.

     SECTION 5.2  Monthly Certificateholders' Statement.
                  ------------------------------------- 

     (a) On or before each Distribution Date, the Paying Agent shall forward to
each Series 1996-1 Certificateholder and the Rating Agencies a statement
substantially in the form of Exhibit 2 to the Series Supplement relating to
Series 1996-1 prepared by the Servicer setting forth among other things the
following information (which, in the case of subclauses (i), (ii) and (iii)
below, shall be stated on the basis of an original principal amount of $1,000
per Certificate and, in the case of subclauses (viii) and (ix) shall be stated
on an aggregate basis and on the basis of an original principal amount of $1,000
per Certificate):

               (i)  the total amount distributed to the Class A
          Certificateholders and the Class B Certificateholders, respectively,
          on such Distribution Date;

               (ii)  the amount of such distribution, if any, allocable to
          principal with respect to the Class A Certificates and the Class B
          Certificates, respectively;

               (iii)  the amount of such distribution allocable to interest on
          the Class A Certificates and the Class B Certificates, respectively;

               (iv)  the amount of Collections of Principal Receivables
          processed during the preceding Monthly Period (including amounts
          arising from the sale of either Interest Rate Cap to be treated as
          collections of Principal Receivables), as appropriate, and allocated
          in respect of the Class A Certificates and the Class B Certificates,
          respectively;

                                       55
<PAGE>
 
               (v)  the aggregate amount of Principal Receivables, the Class A
          Investor Interest, the Class B Investor Interest, the Investor
          Percentage, the Class A Investor Percentage and the Class B Investor
          Percentage as of the close of business on the last day of the
          preceding Monthly Period;

               (vi)  the aggregate outstanding balance of Accounts which are up
          to 30, 31-60, 61-90 and 91 or more days delinquent in accordance with
          the Servicer's then existing Account Guidelines as of the close of
          business on the last day of the preceding Monthly Period;

               (vii)  the Class A Investor Default Amount and the Class B
          Investor Default Amount for the preceding Monthly Period;

               (viii)  the aggregate amount of Class A Investor Charge Offs and
          the Class B Investor Charge Offs for the preceding Monthly Period;

               (ix)  the aggregate amount of Investor Charge Offs reimbursed to
          the Class A Certificateholders and the Class B Certificateholders on
          the Transfer Date immediately preceding such Distribution Date;

               (x)  the amount of the Class A Monthly Servicing Fee and the
          Class B Monthly Servicing Fee for the preceding Monthly Period;

               (xi)  the Available Cash Collateral Amount and the Required Cash
          Collateral Amount as of the close of business on such Distribution
          Date;

               (xii)  the Class A Pool Factor and the Class B Pool Factor as of
          the end of the last day of the preceding Monthly Period;

               (xiii)  the Deficit Controlled Amortization Amount for each class
          of the Series 1996-1;

               (xiv) the aggregate amount of Collections of Finance Charge
          Receivables during the preceding Monthly Period, as appropriate, and
          allocated in respect of the Series 1996-1 Certificates;

                                       56
<PAGE>
 
               (xv)  the amounts required to be withdrawn from the Cash
          Collateral Account, the amount of Reallocated Principal Allocations,
          if any, to be applied with respect to the Class A Required Amount and
          the amount of any reductions in the Class B Investor Interest to
          satisfy the Class A Required Amount; and

               (xvi)  the ratio of the Available Cash Collateral Amount to the
          Investor Interest of the Certificates as of the last day of the
          preceding Monthly Period.

     The Monthly Certificateholders' Statement shall be substantially in the
form of Exhibit 2, with such changes as the Servicer may determine to be
necessary or desirable; provided, however, that no such change shall serve to
                        --------  -------                                    
exclude information required by this subsection 5.2(a).  The Servicer shall,
upon making such determination, deliver to the Trustee and the Rating Agency an
Officer's Certificate to which shall be annexed the form of Exhibit 2, as so
changed.  Upon the delivery of such Officer's Certificate to the Trustee,
Exhibit 2, as so changed, shall for all purposes of this Agreement constitute
Exhibit 2.  The Trustee may conclusively rely upon such Officer's Certificate as
to such change conforming to the requirements of this Agreement.

     (b)  On or before January 31 of each calendar year, beginning with calendar
year 1997, the Servicer shall furnish to the Paying Agent, who shall distribute
to each Person who at any time during the preceding calendar year was a Series
1996-1 Certificateholder, a statement prepared by the Servicer containing the
information required to be contained in the regular monthly report to Series
1996-1 Certificateholders, as set forth in subclauses (i), (ii) and (iii) above,
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Series 1996-1 Certificateholder, together with such other
customary information (consistent with the treatment of the Certificate as debt)
as the Trustee or the Servicer deems necessary or desirable to enable the Series
1996-1 Certificateholders to prepare their tax returns.  Such obligations of the
Paying Agent shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Paying Agent
pursuant to any requirements of the Internal Revenue Code as from time to time
in effect.

     SECTION 9.A  Series 1996-1 Pay Out Events.  If any one of the following
                  ----------------------------                              
events shall occur during the Re-

                                       57
<PAGE>
 
volving Period or the Controlled Amortization Period with respect to the Series
1996-1 Certificates:

               (a)  failure on the part of the Transferor or the Holder of the
     Exchangeable Seller Certificate (i) to make any payment or deposit required
     by the terms of (A) the Agreement relating to the Series 1996-1
     Certificates, or (B) this Series Supplement, in each case on or before the
     date occurring five Business Days after the date such payment or deposit is
     required to be made herein or (ii) duly to observe or perform in any
     material respect any covenants or agreements of the Seller set forth in the
     Agreement, which failure has a material adverse effect on the Series 1996-1
     Certificateholders (which determination shall be made without regard to
     whether any funds are available pursuant to the Enhancement or the Interest
     Rate Caps) and which continues unremedied for a period of 60 days after the
     date on which written notice of such failure, requiring the same to be
     remedied, shall have been given to the Transferor by the Trustee, or to the
     Transferor and the Trustee by the Holders of Series 1996-1 Certificates
     evidencing Undivided Interests aggregating not less than 50% of each of the
     Class A Investor Interest and the Class B Investor Interest of this Series
     1996-1, and continues to affect materially and adversely the interests of
     the Series 1996-1 Certificateholders for such period;

               (b)  any representation or warranty made by the Transferor in the
     Agreement, including this Series Supplement, or any information contained
     in a computer file or microfiche list required to be delivered by the
     Transferor pursuant to Section 2.1, 2.6 or 3.4(c), (i) shall prove to have
     been incorrect in any material respect when made or when delivered, which
     continues to be incorrect in any material respect for a period of 60 days,
     after the date on which written notice of such failure, requiring the same
     to be remedied, shall have been given to the Transferor by the Trustee, or
     to the Transferor and the Trustee by the Holders of the Series 1996-1
     Certificates evidencing Undivided Interests aggregating not less than 50%
     of each of the Class A Investor Interest and the Class B Investor Interest
     of this Series 1996-1, and (ii) as a result of which the interests of the
     Series 1996-1 Certificateholders are materially and adversely affected
     (which determination shall be made without regard to whether any funds are
     available pursuant

                                       58
<PAGE>
 
     to the Enhancement or the Interest Rate Caps) and continue to be materially
     and adversely affected for such period; provided, however, that a Series
                                             --------  -------               
     1996-1 Pay Out Event pursuant to this subsection 9A(b) shall not be deemed
     to have occurred hereunder if the Transferor has accepted reassignment of
     the related Receivable, or all of such Receivables, if applicable, during
     such period in accordance with the provisions hereof;

               (c)  the average of the Portfolio Yields for any three
     consecutive Monthly Periods is a rate which is less than the Base Rate;

               (d)  the Transferor shall fail to convey Receivables arising
     under Additional Accounts to the Trust, as required by subsection 2.6(e);

               (e)  any Servicer Default shall occur which would have a material
     adverse effect on the holders of the Series 1996-1 Certificates (which
     determination shall be made without regard to whether funds are available
     pursuant to the Enhancement or the Interest Rate Caps);

               (f)  on any Transfer Date, the Available Cash Collateral Amount
     shall be less than the lesser of 3% of the Initial Investor Interest and
     the Investor Interest as of the close of business on the last day of the
     related Monthly Period;

               (g)  failure to pay the Class A Certificates in full on the Class
     A Expected Final Distribution Date;

               (h)  failure to pay the Class B Certificates in full on the Class
     B Expected Final Distribution Date; or

               (i)  failure of the Interest Rate Cap Provider to make any
     payment under the Class A Interest Rate Cap or the Class B Interest Rate
     Cap within five days of the date on which such payment was due;

then, in the case of any event described in subparagraphs (a), (b) or (e), after
the applicable grace period set forth in such subparagraphs, either the Trustee
or the Holders of Series 1996-1 Certificates evidencing Undivided Interests
aggregating more than 50% of each of the Class A Investor Interest and the Class
B Investor Interest by notice then given in writing to the Seller and the

                                       59
<PAGE>
 
Servicer (and to the Trustee if given by the Certificateholders) may declare
that a pay out event (a "Series 1996-1 Pay Out Event") has occurred as of the
date of such notice, and in the case of any event described in subparagraphs
(c), (d), (f), (g), (h) or (i) a Series 1996-1 Pay Out Event shall occur without
any notice or other action on the part of the Trustee or the Series 1996-1
Certificateholders immediately upon the occurrence of such event.

     Notwithstanding the foregoing, any failure of performance under Section
9A(a)(i) for a period of up to 60 calendar days with respect to an event
described in clause (i) below or up to 15 calendar days with respect to an event
described in clause (ii) below (in addition to the five Business Days provided
above) shall not constitute a Pay Out Event for purposes of this sentence until
the expiration of such period, if such failure could not be prevented by the
exercise of reasonable diligence by the Transferor and such failure was caused
by (i) an act of God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes or (ii) computer malfunction,
communication malfunction or other electronic system malfunction; the preceding
clause shall not relieve the Transferor from using its best efforts to perform
its respective obligations in a timely manner in accordance with the terms of
this Agreement and any Supplement and the Transferor shall provide the Trustee,
each Rating Agency, the Cash Collateral Depositor, and the Certificateholders
with an Officer's Certificate giving prompt notice of such failure, together
with a description of its efforts to so perform its obligations.  Notice of any
such Pay Out Event shall be given by the Servicer to the Rating Agencies.

     SECTION 10.  Series 1996-1 Termination.
                  ------------------------- 

     All principal or interest with respect to the Certificates shall be due and
payable no later than the Scheduled Series 1996-1 Termination Date.  In the
event that the Investor Interest of the Certificates is greater than zero on the
Scheduled Series 1996-1 Termination Date, after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and the payment of
principal to be made on the Certificates on such date, the Trustee will sell or
cause to be sold, and pay the proceeds to the Certificateholders pro rata in
final payment of all principal of and accrued interest on the Certificates, an
amount of Principal Receivables and the related Finance Charge Receivables (or
interests therein)

                                       60
<PAGE>
 
up to 110% of the Investor Interest at the close of business on such date (but
not more than an amount of Receivables equal to the sum of (1) the product of
(A) the Seller Percentage, (B) the aggregate outstanding Principal Receivables
and (C) a fraction the numerator of which is the related Investor Percentage of
Collections of Finance Charge Receivables and the denominator of which is the
sum of all Investor Percentages with respect to Collections of Finance Charge
Receivables of all Series outstanding and (2) the Investor Interest of such
Series).  The Transferor or any of its Affiliates shall be permitted to bid for
such Receivables.  In addition, the Transferor or any of its Affiliates shall
have the right to match any bid by a third person and be granted the right to
purchase the Receivables at such matched bid price.  Any proceeds of such sale
in excess of such principal and interest paid shall be paid to the Cash
Collateral Depositor to satisfy any amounts owing under the Loan Agreement and
thereafter paid to the Holder of the Exchangeable Seller Certificate.  Upon such
Scheduled Series 1996-1 Termination Date, final payment of all amounts allocable
to the Certificates shall be made in the manner provided in Section 12.3 of the
Agreement.

     SECTION 11.  Ratification and Reaffirmation of Pooling and Servicing
                  -------------------------------------------------------
Agreement.  As supplemented by this Series Supplement, the Agreement is in all
- ---------                                                                     
respects ratified and confirmed and the Agreement as so supplemented by this
Series Supplement shall be read, taken, and construed as one and the same
instrument.

     SECTION 12.  Ratification and Reaffirmation of Representations and
                  -----------------------------------------------------
Warranties.  Except as otherwise provided in the Agreement, each of the
- ----------                                                             
Transferor, the Servicer and the Trustee hereby ratify and reaffirm its
representations and warranties contained in the Agreement  as follows: (a) with
respect to the Transferor, the representations and warranties contained in (i)
Section 2.3 of the Agreement, (ii) Section 2.4(a) of the Agreement (with respect
to the Agreement as supplemented by this Series Supplement) and (iii) Section
2.4(b) of the Agreement, (b) with respect to the Servicer, the representations
and warranties contained in Section 3.3 of the Agreement and (c) with respect to
the Trustee, the representations and warranties contained in Section 11.15 of
the Agreement, as though such representations and warranties were made by such
party as of the Closing Date.

                                       61
<PAGE>
 
     SECTION 13.  [RESERVED]

     SECTION 14.  No Subordination.  Notwithstanding the provisions contained in
                  ----------------                                              
Section 13.1 of the Agreement to the contrary, the Agreement may also be amended
from time to time by the Servicer, the Transferor and the Trustee with the
consent of the Holders of Series 1996-1 Certificates evidencing Undivided
Interests aggregating not less than 100% of the Investor Interest for the
purpose of (i) adding any provisions to or changing in any manner or eliminating
any of the provisions of this Series Supplement or (ii) modifying in any manner
the rights of the Investor Certificateholders which would, in either case,
result in the subordination of the rights of the Series 1996-1
Certificateholders to the rights of the Holders of any other Series.

     SECTION 15.  Repurchase of the Series 1996-1 Certificates.  In the event of
                  --------------------------------------------                  
a breach of any of the representations and warranties set forth in Section
12(a)(ii) hereof, either the Trustee or the Holders of Series 1996-1
Certificates evidencing Undivided Interests aggregating more than 50% of each of
the Class A Investor Interest and the Class B Investor Interest, by notice then
given in writing to the Transferor (and to the Trustee and the Servicer, if
given by the Series 1996-1 Certificateholders), may direct the Transferor to
purchase the Series 1996-1 Certificates (as specified below) within 60 days of
such notice, or within such longer period as may be specified in such notice,
which period shall not exceed 120 days, and the Transferor shall be obligated to
purchase on a Distribution Date specified by the Transferor (such Distribution
Date, the "Repurchase Date") occurring within such applicable period on the
terms and conditions set forth below; provided, however, that no such purchase
                                      --------  -------                         
shall be required to be made if, at any time during such applicable period, the
representations and warranties contained in Section 12(a)(ii) hereof, shall then
be true and correct in all material respects.  The Transferor shall deposit on
the Transfer Date (in New York Clearing House, next day funds) immediately
preceding such Repurchase Date, an amount equal to the reassignment deposit
amount for such Certificates in the Distribution Account, for distribution to
the Series 1996-1 Certificateholders pursuant to Article XII of the Agreement
and Section 10 hereof.  The reassignment deposit amount for such reassignment
shall be equal to (i) the Investor Interest at the end of the day on the last
day of the Monthly Period preceding the Repurchase Date, less the amount on
deposit in the Principal Account which will be transferred to the Distribution
Account pursuant to the second paragraph of subsec-

                                       62
<PAGE>
 
tion 4.8(a) on the related Transfer Date, (ii) an amount equal to all interest
accrued but unpaid on the Series 1996-1 Certificates at the Certificate Rate
through and including the last day of the month preceding the month in which
such Transfer Date occurs, less the amount on deposit in the Finance Charge
Account and the Cash Collateral Account which will be transferred to the
Distribution Account pursuant to subsections 4.6(a) through (e) on the related
Transfer Date and (iii) any amounts owing to the Cash Collateral Depositor
pursuant to the Loan Agreement.  Payment of the portion of the reassignment
deposit amount and the transfer into the Distribution Account of the amounts
referred to in the second portion of clauses (i) and (ii) of the preceding
sentence, shall be considered a prepayment in full of the Series 1996-1
Certificates.  The Series 1996-1 Termination Date shall be deemed to have
occurred on the Repurchase Date as long as such amount was deposited in full
into the Distribution Account on such Transfer Date.  If the Trustee or the
Series 1996-1 Certificateholders give notice directing the Transferor to
repurchase the Series 1996-1 Certificates as provided above, the obligation of
the Transferor to purchase the Series 1996-1 Certificates and to pay the
reassignment deposit amount pursuant to this Section 15 shall constitute the 
sole remedy respecting a breach of the representations and warranties referenced
in Section 12(a)(ii) hereof available to the Series 1996-1 Certificateholders or
the Trustee on behalf of the Series 1996-1 Certificateholders.

     SECTION 16.  Counterparts.  This Series Supplement may be executed in any
                  ------------                                                
number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.

     SECTION 17.  Additional Covenants of Transferor.  People's Bank, in its
                  ----------------------------------                        
capacity as Transferor, hereby covenants that following the occurrence of a
Series Pay Out Event described in Section 9A(c) hereof, except as otherwise
required by any Requirements of Law, it will not reduce the Periodic Finance
Charges assessed on any Receivable, or other fees on any Account if the
Transferor reasonably believes that, as a result of such reduction, (i) the
weighted average of the Periodic Finance Charges on the last day of the Monthly
Period during which such reduction will be effective (weighted based on the
Transferor's reasonable belief as to the Principal Receivables which will be
outstanding on such last day) will be less than (ii) the sum of (1) 2.00% and
(2) the weighted average of the Certificates Rates of each Series that will be
outstanding on such last day (weighted based

                                       63
<PAGE>
 
on the Transferor's reasonable belief as to (x) the amount of the Investor
Interest of each Series will be outstanding on such last day, and (y) in the
case of Series for which the Certificate Rate is a floating rate, the
Certificate Rate applicable to such Monthly Period), and (z) in the case of
Series 1996-1, the weighted average of (A) the lesser of the Class A Certificate
Rate and the Class A Cap Rate and (B) the lesser of the Class B Certificate Rate
and the Class B Cap Rate (weighted based on the Transferor's reasonable belief
as to the Principal Receivables, which will be outstanding on such last day).

     SECTION 18.  Series 1996-1 Investor Exchange.  Pursuant to subsection
                  -------------------------------                         
6.9(b) of the Agreement, the Series 1996-1 Certificateholders may tender their
Series 1996-1 Certificates, and the Holders of the Exchangeable Seller
Certificate may tender the Exchangeable Seller Certificate, in exchange for (i)
one or more newly issued Series of Investor Certificates and (ii) a reissued
Exchangeable Seller Certificate in accordance with the terms and conditions
contained in a notice of exchange delivered to the Series 1996-1
Certificateholders.  Such notice of exchange will specify, among other things:
(a) the amount of Series 1996-1 Certificates that may be tendered, (b) the
Certificate Rate with respect to the new Series, (c) the term of the Series, (d)
the method of computing the investor percentage, (e) the manner of Enhancement,
if any, with respect to the Series and (f) the time and the manner at which the
tender and cancellation of the Series 1996-1 Certificates and the issuance of
the new Series of Certificates will be effectuated.  Upon satisfaction of the
conditions contained in subsections 6.9(b) and 6.9(c) of the Agreement, and the
receipt by the Trustee of the Exchange Notice and the related Supplement, the
Trustee shall cancel the existing Exchangeable Seller Certificate and the
applicable Series 1996-1 Certificates, and shall issue such Series of Investor
Certificates a new Exchangeable Seller Certificates, each dated the Exchange
Date.

   SECTION 19.  GOVERNING LAW.  THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN
                -------------                                               
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       64
<PAGE>
 
         IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
as of the day and year first above written.


                        PEOPLE'S BANK,
                             Transferor and Servicer


                        By:____________________________
                           Name:
                           Title:


                        BANKERS TRUST COMPANY, not in
                             its individual capacity but
                             solely as Trustee



                        By:____________________________
                           Name:
                           Title:

                                       65
<PAGE>
 
                                                                     EXHIBIT 1-A
                                                                     -----------



                      FORM OF CLASS A INVESTOR CERTIFICATE
                      ------------------------------------

                                                                     $__________
No. 1  CUSIP No. __________


              PEOPLE'S BANK CREDIT CARD MASTER TRUST FLOATING RATE
                CLASS A ASSET BACKED CERTIFICATE, SERIES 1996-1

Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA/*/ and MasterCard/1/ credit
                                                                 -          
card receivables generated or to be generated by People's Bank.




                      (Not an interest in or obligation of
                                 People's Bank
                           or any Affiliate thereof.)

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO PEOPLE'S BANK OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

This certifies that CEDE & CO. (CEDE & CO. or any successors or assigns of CEDE
& CO. with respect to this certificate, the "Class A Investor
Certificateholders") is the registered owner of the undivided interest in
certain assets of a trust (the "Trust"), the corpus of which consists of a
portfolio of Receivables (the "Receiv-

- -----------------

/*/  VISA and MasterCard are registered trademarks of VISA USA, Inc., and
MasterCard International Incorporated, respectively.

                                       1
<PAGE>
 
ables") now existing or hereafter created under selected VISA and MasterCard
credit card accounts (the "Accounts") of People's Bank, a Connecticut stock
savings bank, all Receivables in Automatic Additional Accounts and Additional
Accounts added to the Trust from time to time, all monies due or to become due
in payment of the Receivables (including all Finance Charge Receivables), and
the other assets and interests constituting the Trust pursuant to a Pooling and
Servicing Agreement dated as of June 1, 1993, as amended, and as supplemented by
the Series 1996-1 Supplement dated as of June __, 1996 (collectively, the
"Agreement"), by and between People's Bank, as Seller or Transferor and
Servicer, and Bankers Trust Company, as Trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth herein below.

   The Seller has structured the Agreement and the Investor Certificates with
the intention that the Investor Certificates will qualify under applicable tax
law as indebtedness, and the Seller, the Holder of the Exchangeable Seller
Certificate, the Servicer and each Investor Certificateholder (or Certificate
Owner) by acceptance of its Certificate (or, in the case of a Certificate Owner,
by virtue of such Certificate Owner's acquisition of a beneficial interest
therein), agrees to treat the Investor Certificates consistently with, and to
take no action inconsistent with, the treatment of the Investor Certificates (or
beneficial interest therein) for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness.  Each Certificateholder agrees that it will cause any
Certificateholder acquiring an interest in a Certificate through it to comply
with this Agreement as to treatment as indebtedness under applicable tax law.

   To the extent not defined herein, capitalized terms used herein have the
meanings assigned in the Agreement.  This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof assents and by which the Certificateholder is bound.  In the
case of conflict between the terms specified in this Class A Certificate and any
terms specified in the Agreement, the terms of the Agreement shall govern.

   THE AGREEMENT AND THE CERTIFICATES CREATED THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       2
<PAGE>
 
   The Receivables consist of Principal Receivables which arise from the
purchase of goods, services and cash advances and of Finance Charge Receivables
which arise generally from Periodic Finance Charges and other fees and charges
as fully specified in the Agreement.  The assets of the Trust in which this
Certificate represents an interest, consist of (i)(a) the Receivables now
existing and hereafter created and arising in connection with the Accounts, and
all Receivables in the Automatic Additional Accounts and Additional Accounts
added to the Trust from time to time (b) all monies due or to become due with
respect thereto (including all Finance Charge Receivables), (c) all proceeds (as
defined in Section 9-306 of the UCC as in effect in the State of New York) of
such Receivables, (d) proceeds of insurance policies relating to the
Receivables, (e) Interchange and Recoveries pursuant to subsections 2.5(k) and
(l) of the Agreement, (ii) such funds as from time to time are deposited in the
Collection Account, the Excess Funding Account, the Series 1996-1 Collection
Subaccount, (iii) the benefits of a Cash Collateral Account having an initial
balance of $_________, and (iv) the benefit of the Class A Interest Rate Cap
between the Trustee and the Interest Rate Cap Provider.

   This Certificate is one of the People's Bank Credit Card Master Trust
$________ Floating Rate Class A Asset Backed Certificates, Series 1996-1 (the
"Class A Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class A Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders.  The aggregate interest represented by
the Class A Certificates at any time in the Principal Receivables in the Trust
shall not exceed an amount equal to the Class A Investor Interest at such time.
The Initial Class A Investor Interest is $_______ minus the retirement of any
Class A Certificates pursuant to an Investor Exchange.  The Class A Investor
Interest on any date of determination will be an amount equal to (a) the Class A
Initial Investor Interest, minus (b) the aggregate amount of payments of
                           -----                                        
Certificate Principal paid to the Class A Certificateholders prior to such date
of determination, minus (c) the excess, if any, of the aggregate amount of Class
                  -----                                                         
A Investor Charge Offs over Class A Investor Charge Offs reimbursed prior to
                       ----                                                 
such date of determination.  In addition to the Class A Certificates, a class of
certificates entitled "People's Bank Credit Card Master Trust $____________
Floating Rate Class B Asset Backed Certificates, Series 1996-1" (the "Class B
Certificates") will

                                       3
<PAGE>
 
be issued, and the Exchangeable Seller Certificate will be reissued to the
Holder of the Exchangeable Seller Certificate pursuant to the Agreement, and
other Series of certificates have been, and may from time to time be, issued by
the Trust, which represent or will represent an undivided interest in the Trust.
The Exchangeable Seller Certificate will represent the interest in the Principal
Receivables not represented by the Investor Certificates or any other Series of
certificates.

   During the Revolving Period, which begins on the date of issuance of this
Class A Certificate, Certificate Interest at the Class A Certificate Rate will
be distributed on July 15, 1996 and on the fifteenth day of each calendar month
thereafter, or if such fifteenth day is not a Business Day, on the next
succeeding Business Day (a "Distribution Date"), to the Class A
Certificateholders of record on the Record Date preceding the related
Distribution Date.  During either the Controlled Amortization Period, which is
scheduled to begin with the September 1999 Monthly Period, except in certain
limited circumstances set forth in the Agreement, or the Rapid Amortization
Period, Certificate Interest and Certificate Principal will be distributed to
the Class A Certificateholders on the Distribution Date of each calendar month
commencing in the month following the month in which either the Controlled
Amortization Period or the Rapid Amortization Period commences.

   The Servicer shall deposit all Collections in the Collection Account as
promptly as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following such Date of Processing.

   Notwithstanding anything in the Agreement to the contrary, for so long as,
and only so long as, the Seller shall remain the Servicer hereunder and (a)(i)
the Servicer provides to the Trustee a letter of credit or other arrangement
covering risk of collection of the Servicer acceptable to the Rating Agency (as
evidenced by letters from the Rating Agency) and (ii) the Seller shall not have
received a notice from the Rating Agency that such letter of credit or other
arrangement would result in the lowering or withdrawal of such Rating Agency's
then-existing rating of any Series of Investor Certificates or (b) under certain
other circumstances permitted under the Agreement, the Servicer need not deposit
Collections into the Collection Account, the Principal Account or the Finance
Charge Account in accordance with the immediately preceding sentence, or make
payments to the Holder of the Exchangeable Seller Certificate prior

                                       4
<PAGE>
 
to the close of business on the day any Collections are received, but may make
such payments on the Transfer Date in the Monthly Period following the Monthly
Period in which such Collections are received in an amount equal to the net
amount of such deposits, payments and withdrawals which would have been made but
for the provisions of this paragraph.

   On each Transfer Date, the Servicer or the Trustee acting in accordance with
instructions from the Servicer shall withdraw from the Finance Charge Account
and/or deposit to the Distribution Account to the extent funds are available on
the terms specified in the Agreement from Available Finance Charge Collections,
payments made pursuant to the Class A Interest Rate Cap and from Excess Spread
an amount equal to, with respect to Class A Certificates, the sum of: (i) the
product of (a) the Class A Certificate Rate, (b) the lesser of the Class A
Investor Interest determined as of the preceding Distribution Date (or, for the
initial Interest Accrual Period, the Closing Date), after giving effect to all
payments, deposits and withdrawals on such Distribution Date or Closing Date,
and the Expected Class A Principal as of the preceding Distribution Date or
Closing Date, and (c) the actual number of days in the related Interest Accrual
Period divided by 360, plus (ii) the product of (a) the Class A Excess
Principal, (b) the lesser of the Class A Certificate Rate and __% per annum, and
(c) the actual number of days in the related Interest Period divided by 360
(collectively, the "Class A Monthly Interest"), plus (iii) to the extent
permitted by applicable law, any interest accrued on the Class A Certificates
(including interest on any overdue Class A Monthly Interest) during any prior
accrual period which has not been distributed to the Class A Certificateholders,
plus, (iv) to the extent that there is available Excess Spread, an amount equal
to the product of (a) the amount by which the Class A Certificate Rate exceeds
__%, (b) the Class A Excess Principal and (c) the actual number of days in the
related Interest Period divided by 360 (the "Class A Excess Interest").  On such
Transfer Date the Servicer or the Trustee shall deposit such funds into the
Distribution Account.

   If, in any Monthly Period, collections of Finance Charge Receivables
allocable to the Class A Investor Interest for such Monthly Period available to
the Class A Certificates are insufficient to pay (i) the interest which accrued
on the Class A Certificates with respect to the related Distribution Date, in an
amount equal to the product of (a) the lesser of the Class A Certificate Rate
and the Class A Cap Rate, (b) the Class A Investor Interest as determined as of
the preceding Distribution Date

                                       5
<PAGE>
 
(or, for the initial Interest Accrual Period, the Closing Date), after giving
effect to all payments, deposits and withdrawals on such Distribution Date or
Closing Date and (c) the actual number of days in the related Interest Accrual
Period divided by 360 (the "Class A Monthly Cap Rate Interest"), and any Class A
Monthly Cap Rate Interest accrued during any prior period which has not been
distributed to the Class A Certificateholders, (ii) the Class A Monthly
Servicing Fee and any accrued and unpaid Class A Monthly Servicing Fees from
prior Monthly Periods, (iii) the Class A Investor Default Amount for such
Distribution Date, and (iv) any unreimbursed Class A Investor Charge Offs (the
sum of the foregoing clauses (i) through (iv) being referred to as the "Class A
Required Amount"), then first, Excess Spread, if any, from collections of
Finance Charge Receivables allocable to the Class B Certificates will be
allocated to the Class A Certificates up to the unpaid amount of the Class A
Required Amount, second, Shared Finance Charge Collections, if any, allocable to
the Series 1996-1 will be allocated to the Class A Certificates up to the amount
of the Class A Required Amount remaining unpaid and third, a withdrawal will be
made from the Cash Collateral Account on the Distribution Date immediately
following such Monthly Period, to the extent of any Class A Required Amount
remaining unpaid (but not more than the applicable Available Cash Collateral
Amount).  If such applicable Available Cash Collateral Amount is less than the
unpaid amount of the Class A Required Amount for such Distribution Date (after
application of any available Excess Spread and Shared Finance Charge
Receivables), the applicable Class B Investor Percentage of the Investor
Percentage of collections in respect of Principal Receivables for the preceding
Monthly Period will then be used to fund the remaining Class A Required Amount
(such collections, "Reallocated Principal Collections").  The Class B Investor
Interest will be reduced by the amount of Reallocated Principal Collections.

   If, on such Distribution Date, the Excess Spread, Shared Finance Collections,
Available Cash Collateral Amount and Reallocated Principal Collections are
insufficient to fund the remaining Class A Required Amount for such Monthly
Period, the remaining Class B Investor Interest will be reduced (but not in
excess of the Class A Investor Default Amount for such Distribution Date) by the
amount of such remaining insufficiency, until such time as the Class B Investor
Interest has been reduced to zero.  Thereafter, the Class A Investor Interest
will be reduced by the amount of any remaining unpaid Class A Required Amount (a
"Class A Investor Charge Off"), but

                                       6
<PAGE>
 
not in excess of the Class A Investor Default Amount for such Distribution Date.

   The Trustee has entered into the Class A Interest Rate Cap and Class B
Interest Rate Cap with the Interest Rate Cap Provider for the exclusive benefit
of the Class A Certificateholders and the Class B Certificateholders,
respectively.  On each Transfer Date that the Class A Certificate Rate or the
Class B Certificate Rate for the related Interest Period exceeds the Class A Cap
Rate or the Class B Cap Rate, respectively, the Interest Rate Cap Provider will
make a payment to the Trustee, on behalf of the Trust, based on the amount of
such excess and the notional amount of the applicable Interest Rate Cap.  The
Class A Notional Amount will at all times equal the amount of the Expected Class
A Principal, and the Class B Notional Amount will at all times equal the amount
of the Expected Class B Principal.  The Class A Interest Rate Cap and the Class
B Interest Rate Cap, or its Replacement Interest Rate Cap or Qualified
Substitute Arrangement, will terminate on the day immediately following the
Class A Expected Final Distribution Date and the Class B Expected Final
Distribution Date, respectively.

   People's Bank, as Servicer, is entitled to receive as servicing compensation
a monthly servicing fee in an amount equal to one-twelfth of the product of
2.00% per annum and the Aggregate Principal Receivables in the Trust on the last
day of each Monthly Period, payable on each succeeding Distribution Date.  With
respect to any Distribution Date, the share of the servicing fee allocable to
the Class A Certificates shall be equal to one-twelfth of the product of 2.00%
per annum and the Class A Investor Interest as of the last day of the preceding
Monthly Period.  The remainder of the servicing fee, which will be allocable to
the Class B Certificateholders, the Holder of the Exchangeable Seller
Certificate and the other Series of certificates, if any, will be payable by the
Class B Certificateholders, the Holder of the Exchangeable Seller Certificate or
by the Holders of such Series of certificates, and none of the Trust, the
Trustee or the Class A Certificateholders will have any obligation to pay such
portion of the servicing fee.

   On the Determination Date in the Monthly Period following the Monthly Period
in which either the Controlled Amortization Period or the Rapid Amortization
Period commences, and on each Determination Date thereafter, the Servicer shall
notify the Trustee that it will withdraw, or shall instruct the Trustee to
withdraw, and on the next succeeding Transfer Date the Servicer or the Trustee
acting in accordance with such notice or instruc-

                                       7
<PAGE>
 
tions shall withdraw all amounts on deposit in the Principal Account in respect
of Collections processed during the preceding Monthly Period and deposit such
amounts in the Distribution Account for distribution to the Class A
Certificateholders to the extent specified in the Agreement on the next
succeeding Distribution Date.

   If on any Distribution Date in the Controlled Amortization Period through and
including the Class A Expected Final Distribution Date, the Monthly Total
Principal Allocations for the prior Monthly Period are equal to or greater than
the Controlled Distribution Amount, the amount of the Controlled Distribution
Amount will be paid from the Trust to the Class A Certificateholders up to the
outstanding Class A Investor Interest, as provided in the Agreement, and any
excess of such Monthly Total Principal Allocations over the Controlled
Distribution Amount will be applied as Shared Principal Collections and if not
so used, paid from the Trust to the holder of the Exchangeable Seller
Certificate.  If, while the Class A Investor Interest exceeds zero, the Monthly
Total Principal Allocations for any Monthly Period during the Controlled
Amortization Period is less than the Controlled Distribution Amount, the sum of
such Monthly Total Principal Allocations and the amount of any Shared Principal
Collections available from other Series to the Certificates of this Series will
be paid from the Trust to the applicable Class A Certificateholders in respect
to the Class A Investor Interest to the extent specified in the Agreement.

   On each Distribution Date beginning in the month following the Monthly Period
in which the Rapid Amortization Period commences, the Monthly Total Principal
Allocations from the prior Monthly Period along with Shared Principal
Collections from other Series, if any, will be distributed to the Class A
Certificateholders until the earlier of the date on which the Class A Investor
Interest is paid in full and the Series 1996-1 Termination Date and, following
the final principal payment to the Class A Certificateholders, to the Class B
Certificateholders until the earlier of the date on which the Class B Investor
Interest is paid in full and the Series 1996-1 Termination Date.

   On each Distribution Date occurring after a deposit is made pursuant to the
paragraphs above, the Paying Agent shall pay the Class A Certificateholders the
amount deposited into the Distribution Account on the related Transfer Date in
respect of interest payable to the Class A Certificateholders and, in addition,
during either the Controlled Amortization Period or the Rapid Amortization

                                       8
<PAGE>
 
Period, the Paying Agent shall pay to the Class A Certificateholders the amount
deposited on the related Transfer Date into the Distribution Account in respect
of principal payable to the Class A Certificateholders.  Distributions with
respect to this Class A Certificate will be made by the Paying Agent by check
mailed to the address of the holders of record appearing in the Certificate
Register (except for the final distribution in respect of this Class A
Certificate) without the presentation or surrender of this Certificate or the
making of any notation thereon, except that with respect to Certificates
registered in the name of the nominee of a Clearing Agency, distributions will
be made in the form of immediately available funds.

   This Class A Certificate does not represent an obligation of, or an interest
in, the Seller or the Servicer, and neither the Class A Certificates nor the
Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.  This Class A
Certificate is limited in right of payment to certain collections respecting the
Receivables, as more specifically set forth hereinabove and in the Agreement.

   As provided in the Agreement, withdrawals from the Series 1996-1 Investor
Accounts may be made upon the instructions of the Servicer from time to time for
purposes other than distributions to Class A Certificateholders.

   The Seller may designate (subject to the terms and conditions of the
Agreement), Accounts for deletion and removal from the Accounts previously
assigned to and constituting a part of  the Trust; provided, however, that the
                                                   --------  -------          
Seller shall not make more than one such designation in any Monthly Period.

   The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of the Certificateholders of any Series, to
cure any ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, and to add any other provisions
with respect to matters or questions arising under the Agreement and any
Supplement which are not inconsistent with the provisions of the Agreement and
any Supplement.  The Agreement may be amended from time to time by the Seller,
the Servicer and the Trustee, with the consent of any Trustee and without the
consent of any Certificateholders, to (a) provide for the transfer by the Seller
of its interest in and to all or part of the Accounts in accor-

                                       9
<PAGE>
 
dance with the provisions of the Agreement and (b) provide for the purchase of
Principal Receivables by the Trust at a price which is less than 100% of the
outstanding balance thereof, and to provide for the treatment of Collections of
Principal Receivables, in an amount up to the aggregate amount by which the
purchase price of Principal Receivables as sold thereafter is less than 100%, as
Collections of Finance Charge Receivables; provided, however, that any such
                                           --------  -------               
action shall not adversely affect in any material respect the interests of
Certificateholders; further provided that the Servicer and Trustee shall have
received notice from the Rating Agency that any such amendment will not result
in the reduction or withdrawal of its then-existing rating of the certificates
of any Series.  In addition, the Agreement and any Supplement may be amended
from time to time by the Seller, the Servicer and the Trustee, without
Certificateholder consent, to add to or change any of the provisions of the
Agreement to provide that bearer certificates issued with respect to any other
Series may be registrable as to principal, to change or eliminate any
restrictions on the payment of principal of or any interest on such bearer
certificates, to permit such bearer certificates to be issued in exchange for
registered certificates or bearer certificates of other authorized denominations
or to permit the issuance of uncertificated certificates, subject to certain
conditions.  Moreover, any Supplement and any amendments regarding the addition
or removal of Receivables from the Trust will not be considered amendments
requiring certificateholder consent under the provisions of the Agreement or any
Supplement.

   The Agreement and any Supplement may be amended by the Seller, 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 principal amount of
each Series adversely affected, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement or
any Supplement or of modifying in any manner the rights of certificateholders of
any 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 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 Agreement or any Supplement, the Trustee will furnish written notice of the
substance

                                       10
<PAGE>
 
of such amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).

   The transfer of this Class A Certificate shall (subject to the limitations
set forth in the Agreement) be registered in the Certificate Register upon
surrender of this Class A Certificate for registration of transfer at any office
or agency maintained by the Transfer Agent and Registrar accompanied by a
written instrument of transfer in a form satisfactory to the Trustee and the
Transfer Agent and Registrar duly executed by the Class A Certificateholder or
such Class A Certificateholder's attorney-in-fact duly authorized in writing,
and thereupon one or more new Class A Certificates of authorized denomination
and for the same aggregate Undivided Interests will be issued to the designated
transferee or transferees.  Pursuant to the Series 1996-1 Supplement, the
Seller has the option (the "Discount Option") at any time to designate a
fixed or variable percentage of Receivables in designated Accounts which
otherwise would be treated as Principal Receivables as Finance Charge
Receivables. The exercise by the Seller of the Discount Option will be
subject to, among other things, the receipt by the Trustee of written
confirmation from each Rating Agency that the exercise of such option will not
result in a withdrawal or reduction of its rating of the Certificates. Each
Certificateholder by its acceptance of a beneficial interest in a Certificate
shall be deemed to have consented to the exercise by the Seller of the
Discount Option at such time as the Seller determines to exercise such
option.

   As provided in the Agreement and subject to certain limitations therein set
forth, Class A Certificates are exchangeable for new Class A Certificates
evidencing like aggregate Undivided Interests, as requested by the Class A
Certificateholder surrendering such Class A Certificates.  No service charge may
be imposed for any such exchange but the Servicer or Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.

   The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar, and any agent of any of them, may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Agreement.

   Subject to the prior termination of Series 1996-1, the Agreement provides
that the right of the Class A Certificateholders to receive payments from the
Trust will terminate on the Scheduled Series 1996-1 Termination Date.  Upon the
termination of Trust pursuant to Section 12.1 of the Agreement (and subject to
the exceptions set forth in the Agreement), the Trustee will assign and convey
to the Holder of the Exchangeable Seller Certificate (without recourse,
representation or warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, and Recoveries
allocable to the Trust relating thereto and

                                       11
<PAGE>
 
Interchange pursuant to subsections 2.5(k) and (l) of the Agreement.  The
Trustee shall execute and deliver such instruments of transfer and assignment,
in each case without recourse, as shall be reasonably requested by the Holder of
the Exchangeable Seller Certificate to vest in such Holder all right, title and
interest which the Trustee had in the Receivables.

   Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class A Certificate shall not
be entitled to any benefit under the Agreement, or be valid for any purpose.

                                       12
<PAGE>
 
   IN WITNESS WHEREOF, People's Bank has caused this Class A Certificate to be
executed by its duly authorized officer.

                             PEOPLE'S BANK



                             By:________________________



Dated:  June __, 1996

                                       13
<PAGE>
 
                Form of Trustee's Certificate of Authentication
                -----------------------------------------------


   This is one of the Class A Certificates referred to in the within-mentioned
Agreement.


                        BANKERS TRUST COMPANY, not in
                             its individual capacity,
                             but solely as Trustee



                             By: _______________________
                                  (Authorized Officer)

                                       14
<PAGE>
 
                                                                     EXHIBIT 1-B
                                                                     -----------



                      FORM OF CLASS B INVESTOR CERTIFICATE
                      ------------------------------------

                                                                        $_______
No. R-1                                                    CUSIP No.    ________


              PEOPLE'S BANK CREDIT CARD MASTER TRUST FLOATING RATE
                CLASS B ASSET BACKED CERTIFICATE, SERIES 1996-1


Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA/*/ and MasterCard/1/credit
                                                                 -          
card receivables generated or to be generated by People's Bank.



                      (Not an interest in or obligation of
                                 People's Bank
                           or any Affiliate thereof.)

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO PEOPLE'S BANK OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

This certifies that CEDE & CO. (CEDE & CO. or any successors or assigns of CEDE
& CO. with respect to this certificate, the "Class B Investor
Certificateholders") is the registered owner of the undivided interest in
certain assets of a trust (the "Trust"), the corpus of which consists of a
portfolio of Receivables (the "Receiv-

- ------------------------

/*/  VISA and MasterCard are registered trademarks of VISA USA, Inc., and
MasterCard International Incorporated, respectively.

                                       1
<PAGE>
 
ables") now existing or hereafter created under selected VISA and MasterCard
credit card accounts (the "Accounts") of People's Bank, a Connecticut stock
savings bank, all Receivables in Automatic Additional Accounts and Additional
Accounts added to the Trust from time to time, all monies due or to become due
in payment of the Receivables (including all Finance Charge Receivables), and
the other assets and interests constituting the Trust pursuant to a Pooling and
Servicing Agreement dated as of June 1, 1993, as amended, and as supplemented 
by the Series 1996-1 Supplement dated as of June __, 1996 (collectively, the 
"Agreement"), by and between People's Bank, as Seller or Transferor and 
Servicer, and Bankers Trust Company, as Trustee (the "Trustee"), a summary of 
certain of the pertinent provisions of which is set forth herein below.

   The Seller has structured the Agreement and the Investor Certificates with
the intention that the Investor Certificates will qualify under applicable tax
law as indebtedness, and the Seller, the Holder of the Exchangeable Seller
Certificate, the Servicer and each Investor Certificateholder (or Certificate
Owner) by acceptance of its Certificate (or, in the case of a Certificate Owner,
by virtue of such Certificate Owner's acquisition of a beneficial interest
therein), agrees to treat the Investor Certificates consistently with, and to
take no action inconsistent with, the treatment of the Investor Certificates (or
beneficial interest therein) for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness.  Each Certificateholder agrees that it will cause any
Certificateholder acquiring an interest in a Certificate through it to comply
with this Agreement as to treatment as indebtedness under applicable tax law.

   To the extent not defined herein, capitalized terms used herein have the
meanings assigned in the Agreement.  This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof assents and by which the Certificateholder is bound.  In the
case of conflict between the terms specified in this Class B Certificate and any
terms specified in the Agreement, the terms of the Agreement shall govern.

   THE AGREEMENT AND THE CERTIFICATES CREATED THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                       2
<PAGE>
 
   The Receivables consist of Principal Receivables which arise from the
purchase of goods, services and cash advances and of Finance Charge Receivables
which arise generally from Periodic Finance Charges and other fees and charges
as fully specified in the Agreement.  The assets of the Trust in which this
Certificate represents an interest, consist of (i)(a) the Receivables now
existing and hereafter created and arising in connection with the Accounts and
all Receivables in Automatic Additional Accounts and Additional Accounts added
to the Trust from time to time, (b) all monies due or to become due with respect
thereto (including all Finance Charge Receivables), (c) all proceeds (as defined
in Section 9-306 of the UCC as in effect in the State of New York) of such
Receivables, (d) proceeds of insurance policies relating to the Receivables, (e)
Interchange and Recoveries pursuant to subsections 2.5(k) and (l) of the
Agreement, (ii) such funds as from time to time are deposited in the Collection
Account, the Excess Funding Account, the Investor Accounts and Series 1996-1
Collection Subaccount, (iii) the benefits of a Cash Collateral Account having an
initial balance of $__________ and (iv) the benefit of the Class B Interest Rate
Cap between the Trustee and the Interest Rate Cap Provider.

   This Certificate is one of the People's Bank Credit Card Master Trust
$__________ Floating Rate Class B Asset Backed Certificates, Series 1996-1 (the
"Class B Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class B Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders.  The aggregate interest represented by
the Class B Certificates at any time in the Principal Receivables in the Trust
shall not exceed an amount equal to the Class B Investor Interest at such time.
The Initial Class B Investor Interest is $__________ minus the retirement of any
Class B Certificates pursuant to an Investor Exchange.  The Class B Investor
Interest on any date of determination will be an amount equal to (a) the Class B
Initial Investor Interest, minus (b) the aggregate amount of payments of
                           -----                                        
Certificate Principal paid to the Class B Certificateholders prior to such date
of determination, minus (c) the excess, if any, of the aggregate amount of Class
                  -----                                                         
B Investor Charge Offs and Reallocated Principal Collections over Class B
                                                             ----        
Investor Charge Offs and Reallocated Principal Collections reimbursed prior to
such date of determination.  In addition to the Class B Certificates, a class of
certificates entitled "People's Bank Credit Card Master Trust $__________
Floating Rate Class

                                       3
<PAGE>
 
A Asset Backed Certificates, Series 1996-1" (the "Class A Certificates") will be
issued, and an Exchangeable Seller Certificate will be issued to the Holder of
the Exchangeable Seller Certificate pursuant to the Agreement, and other Series
of certificates have been, and may from time to time be, issued by the Trust,
which represent or will represent an undivided interest in the Trust. The
Exchangeable Seller Certificate will represent the interest in the Principal
Receivables not represented by the Investor Certificates or any other Series of
certificates.

   During the Revolving Period, which begins on the date of issuance of this
Class B Certificate, Class B Certificate Interest at the Class B Certificate
Rate will be distributed on July 15, 1996 and on the fifteenth day of each
calendar month thereafter, or if such fifteenth day is not a Business Day, on
the next succeeding Business Day (a "Distribution Date"), to the Class B
Certificateholders of record on the Record Date preceding the related
Distribution Date.  During either the Controlled Amortization Period or the
Rapid Amortization Period, Certificate Interest and Certificate Principal will
be distributed to the Class B Certificateholders on the Distribution Date of
each calendar month commencing with the Class B Payment Commencement Date.

   The Servicer shall deposit all Collections in the Collection Account as
promptly as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following such Date of Processing.

   Notwithstanding anything in the Agreement to the contrary, for so long as,
and only so long as, the Seller shall remain the Servicer hereunder and (a)(i)
the Servicer provides to the Trustee a letter of credit or other arrangement
covering risk of collection of the Servicer acceptable to the Rating Agency (as
evidenced by letters from the Rating Agency) and (ii) the Seller shall not have
received a notice from the Rating Agency that such letter of credit or other
arrangement would result in the lowering or withdrawal of such Rating Agency's
then-existing rating of any Series of Investor Certificates or (b) under certain
circumstances permitted under the Agreement, the Servicer need not deposit
Collections into the Collection Account, the Principal Account or the Finance
Charge Account in accordance with the immediately preceding sentence or make
payments to the Holder of the Exchangeable Seller Certificate prior to the close
of business on the day any Collections are deposited in the Collection Account,
but may make such payments on the Transfer Date in the Monthly Period following
the Monthly

                                       4
<PAGE>
 
Period in which such Collections are received in an amount equal to the net
amount of such deposits, payments and withdrawals which would have been made but
for the provisions of this paragraph.

   On each Transfer Date, the Servicer or the Trustee acting in accordance with
instructions from the Servicer shall withdraw from the Finance Charge Account
and/or deposit to the Distribution Account to the extent funds are available on
the terms specified in the Agreement from Available Finance Charge Collections,
payments made pursuant to the Class B Interest Rate Cap and from Excess Spread
an amount equal to, with respect to Class B Certificates, the sum of: (i) the
product of (a) the Class B Certificate Rate, (b) the lesser of the Class B
Investor Interest determined as of the preceding Distribution Date (or, for the
initial Interest Accrual Period, the Closing Date), after giving effect to all
payments, deposits and withdrawals on such Distribution Date and the Expected
Class B Principal as of the preceding Distribution Date or Closing Date and (c)
the actual number of days in the related Interest Period divided by 360, plus
(ii) the product of (a) the Class B Excess Principal, (b) the lesser of the
Class B Certificate Rate and __%, and (c) the actual number of days in the
related Interest Period divided by 360 (collectively, the "Class B Monthly
Interest"), plus (iii) to the extent permitted by applicable law, any interest
accrued on the Class B Certificates (including interest on any overdue Class B
Monthly Interest) during any prior accrual period which has not been distributed
to the Class B Certificateholders, plus, (iv) to the extent that there is
available Excess Spread, an amount equal to the product of (a) the amount by
which the Class B Certificate Rate exceeds __%, (b) the Class B Excess Principal
and (c) the actual number of days in the related Interest Period divided by 360
(the "Class B Excess Interest").  On such Transfer Date the Servicer or the
Trustee shall deposit such funds into the Distribution Account.

   If, in any Monthly Period, collections of Finance Charge Receivables
allocable to the Class B Investor Interest for such Monthly Period available to
the Class B Certificates are insufficient to pay (i) the interest which accrued
on the Class B Certificates with respect to the related Distribution Date, in an
amount equal to the product of (a) the lesser of the Class B Certificate Rate
and the Class B Cap Rate, (b) the Class B Investor Interest as determined as of
the preceding Distribution Date (or, for the initial Interest Accrual Period,
the Closing Date), after giving effect to all payments, deposits and withdrawals
on such Distribution Date or Closing Date and

                                       5
<PAGE>
 
(c) the actual number of days in the related Interest Accrual Period divided by
360 (the "Class B Monthly Cap Rate Interest"), and any Class B Monthly Cap Rate
Interest accrued during any prior period which has not been distributed to the
Class B Certificateholders, (ii) the Class B Monthly Servicing Fee and any
accrued and unpaid Class B Monthly Servicing Fees from prior Monthly Periods,
(iii) the Class B Investor Default Amount for such Distribution Date Monthly
Period, and (iv) unreimbursed Class B Investor Charge Offs (the sum of the
foregoing clauses (i) through (iv) being referred to as the "Class B Required
Amount"), then first, Excess Spread, if any, from collections of Finance Charge
Receivables allocable to the Class A Certificates will be allocated to the Class
B Certificates up to the unpaid amount of the Class B Required Amount, second,
Shared Finance Charge Collections, if any, allocable to the Series 1996-1 and
not required to pay the Class A Required Amount for such Distribution Date will
be allocated to the Class B Certificates up to the amount of the Class B
Required Amount remaining unpaid and third, a withdrawal will be made from the
Cash Collateral Account on the Distribution Date immediately following such
Monthly Period, to the extent of any remaining Class B Required Amount (but not
more than the portion of the applicable Available Cash Collateral Amount, if
any, not required to pay the Class A Required Amount for such Distribution
Date).

   If on any Distribution Date the Available Cash Collateral Amount is less than
any remaining Class A Required Amount after application of any available Excess
Spread and Shared Finance Charge Collections for such Distribution Date, the
applicable Class B Investor Percentage of the Investor Percentage of collections
in respect of Principal Receivables (such collections, "Reallocated Principal
Collections") will then be used to fund the Class A Required Amount remaining
after application of all funds on deposit in the Cash Collateral.  The Class B
Investor Interest will be reduced by the amount of Reallocated Principal
Collections.  If, on such Distribution Date, the Excess Spread, Shared Finance
Charge Collections, Available Cash Collateral Amount and Reallocated Principal
Collections are insufficient to fund any Class A Required Amount for such
Monthly Period, the remaining Class B Investor Interest will be reduced (but not
in excess of the Class A Investor Default Amount for such Distribution Date) by
the amount of such remaining insufficiency, until such time as the Class B
Investor Interest has been reduced to zero.  In addition, if on such
Distribution Date the Excess Spread and any remaining Available Cash Collateral
Amount are insufficient to fund the Class B Required Amount for such Monthly
Period,

                                       6
<PAGE>
 
the remaining Class B Investor Interest will be reduced (but not in excess of
the Class B Investor Default amount for such Distribution Date) by the amount of
such remaining insufficiency, until such time as the Class B Investor Interest
has been reduced to zero.

   The Trustee has entered into the Class A Interest Rate Cap and Class B
Interest Rate Cap with the Interest Rate Cap Provider for the exclusive benefit
of the Class A Certificateholders and the Class B Certificateholders,
respectively.  On each Transfer Date that the Class A Certificate Rate or the
Class B Certificate Rate for the related Interest Period exceeds the Class A Cap
Rate or the Class B Cap Rate, respectively, the Interest Rate Cap Provider will
make a payment to the Trustee, on behalf of the Trust, based on the amount of
such excess and the notional amount of the applicable Interest Rate Cap.  The
Class A Notional Amount will at all times equal the amount of the Expected Class
A Principal, and the Class B Notional Amount will at all times equal the amount
of the Expected Class B Principal.  The Class A Interest Rate Cap and the Class
B Interest Rate Cap, or its Replacement Interest Rate Cap or Qualified
Substitute Arrangement, will terminate on the day immediately following the
Class A Expected Final Distribution Date and the Class B Expected Final
Distribution Date, respectively.

   People's Bank, as Servicer, is entitled to receive as servicing compensation
a monthly servicing fee in an amount equal to one-twelfth of the product of
2.00% per annum and the Aggregate Principal Receivables in the Trust on the last
day of each Monthly Period, payable on each succeeding Distribution Date.  With
respect to any Distribution Date, the share of the servicing fee for each
Monthly Period allocable to the Class B Certificates shall be equal to one-
twelfth of the product of 2.00% per annum and the Class B Investor Interest as
of the last day of the preceding Monthly Period.  The remainder of the servicing
fee, which will be allocable to the Class A Certificateholders, the Holder of
the Exchangeable Seller Certificate and the other Series of certificates, if
any, will be payable by the Class A Certificateholders, the Holder of the
Exchangeable Seller Certificate or by the Holders of such Series of
certificates, and none of the Trust, the Trustee or the Class B
Certificateholders will have any obligation to pay such portion of the servicing
fee.

   On the Determination Date immediately preceding the Class B Payment
Commencement Date, and on each Determination Date thereafter, the Servicer shall
notify the Trustee that it will withdraw, or shall instruct the

                                       7
<PAGE>
 
Trustee to withdraw, and on the next succeeding Transfer Date the Servicer or
the Trustee acting in accordance with such notice or instructions shall withdraw
all amounts on deposit in the Principal Account, in respect of Collections
processed during the preceding Monthly Period and deposit such amounts less any
amounts required to be paid on the succeeding Distribution Date to the Class A
Certificateholders in the Distribution Account for distribution to the Class B
Certificateholders to the extent specified in the Agreement on the next
succeeding Distribution Date.

   If on any Distribution Date in the Controlled Amortization Period commencing
with the Class B Payment Commencement Date, the Monthly Total Principal
Allocations for the prior Monthly Period are equal to or greater than the
Controlled Distribution Amount, the amount of the Controlled Distribution Amount
will be paid from the Trust to the Class B Certificateholders up to the
outstanding Class B Investor Interest, as provided in the Agreement and any
excess of such Monthly Total Principal Allocations over the Controlled
Distribution Amount will be applied as Shared Principal Collections and if not
so used, paid from the Trust to the holder of the Exchangeable Seller
Certificate.  If Monthly Total Principal Allocation for any Monthly Period
during the Controlled Amortization Period is less than the Controlled
Distribution Amount, the sum of such Monthly Total Principal Allocations and the
amount of any Shared Principal Collections available from other Series to the
Certificates of this Series will be paid from the Trust to the applicable Class
B Certificateholders in respect to the Class B Investor Interest to the extent
specified in the Agreement.

   On each Distribution Date beginning with the month following the Monthly
Period in which the Rapid Amortization Period commences, the Monthly Total
Principal Allocation from the prior Monthly Period along with Shared Principal
Collections from other Series, if any, will be distributed to the Class A
Certificateholders until the earlier of the date on which the Class A Investor
Interest is paid in full and, the Series 1996-1 Termination Date and, following
the final principal payment to the Class A Certificateholders, to the Class B
Certificateholders until the earlier of the date on which the Series 1996-1
Termination Date.

   On each Distribution Date occurring after a deposit is made pursuant to the
paragraphs above, the Paying Agent shall pay the Class B Certificateholders the
amount deposited into the Distribution Account on the related

                                       8
<PAGE>
 
Transfer Date in respect of interest payable to the Class B Certificateholders
and, in addition, upon and following the Class B Payment Commencement Date, the
Paying Agent shall pay to the Class B Certificateholders the amount deposited on
the related Transfer Date into the Distribution Account in respect of principal
payable to the Class B Certificateholders.  Distributions with respect to this
Class B Certificate will be made by the Paying Agent by check mailed to the
address of the holder of record appearing in the Certificate Register (except
for the final distribution in respect of this Class B Certificate) without the
presentation or surrender of this Certificate or the making of any notation
thereon, except that with respect to Certificates registered in the name of the
nominee of a Clearing Agency, distributions will be made in the form of
immediately available funds.

   This Class B Certificate does not represent an obligation of, or an interest
in, the Seller or the Servicer, and neither the Class B Certificates nor the
Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.  This Class B
Certificate is limited in right of payment to certain collections respecting the
Receivables, as more specifically set forth hereinabove and in the Agreement.

   As provided in the Agreement, withdrawals from the Series 1996-1 Investor
Accounts may be made upon the instructions of the Servicer from time to time for
purposes other than distributions to Class B Certificateholders.

   The Seller may designate (subject to the terms and conditions of the
Agreement) Accounts for deletion and removal from the Accounts previously
assigned to and constituting a part of  the Trust; provided, however, that the
                                                   --------  -------          
Seller shall not make more than one such designation in any Monthly Period.

   The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of the Certificateholder of any Series, to
cure any ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, to add any other provisions with
respect to matters or questions arising under the Agreement and any Supplement
which are not inconsistent with the provisions of the Agreement and any
Supplement.  The Agreement may be amended from time to time by the Seller, the
Servicer and the Trustee, with the consent of the Trustee and without the
consent of the certificateholders, to (a)

                                       9
<PAGE>
 
provide for the transfer by the Seller of its interest in and to all or part of
the Accounts in accordance with the provisions of the Agreement and (b) provide
for the purchase of Principal Receivables by the Trust at a price which is less
than 100% of the outstanding balance thereof, and to provide for the treatment
of Collections of Principal Receivables, in an amount up to the aggregate amount
by which the purchase price of Principal Receivables as sold thereafter is less
than 100%, as Collections of Finance Charge Receivables; provided, however, that
                                                         --------  -------      
any such action shall not adversely affect in any material respect the interests
of the certificateholders; further provided that the Servicer and the Trustee
shall have received notice from the Rating Agency that any such amendment will
not result in the reduction or withdrawal of its then-existing rating of the
certificates of any Series.  In addition, the Agreement and any Supplement may
be amended from time to time by the Seller, the Servicer and the Trustee,
without certificateholder consent, to add to or change any of the provisions of
the Agreement to provide that bearer certificates issued with respect to any
other Series may be registrable as to principal, to change or eliminate any
restrictions on the payment of principal of or any interest on such bearer
certificates, to permit such bearer certificates to be issued in exchange for
registered certificates or bearer certificates of other authorized denominations
or to permit the issuance of uncertificated certificates, subject to certain
conditions.  Moreover, any Supplement and any amendments regarding the addition
or removal of Receivables from the Trust will not be considered amendments
requiring certificateholder consent under the provisions of the Agreement or any
Supplement.

   The Agreement and any Supplement may be amended by the Seller, 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 principal amount of
each Series adversely affected, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement or
any Supplement or of modifying in any manner the rights of Certificateholders of
any 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 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 execu-

                                       10
<PAGE>
 
tion of any amendment to the Agreement or any Supplement, the Trustee will
furnish written notice of the substance of such amendment to each
Certificateholder of all Series (or with respect to an amendment of a
Supplement, to the applicable Series).

   The transfer of this Class B Certificate shall be registered in the
Certificate Register upon surrender of this Class B Certificate for registration
of transfer at any office or agency maintained by the Transfer Agent and
Registrar accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the Class B
Certificateholder or such Class B Certificateholder's attorney-in-fact duly
authorized in writing, and thereupon one or more new Class B Certificates of
authorized denomination and for the same aggregate Undivided Interests will be
issued to the designated transferee or transferees.

   Pursuant to the Series 1996-1 Supplement, the Seller has the option (the
"Discount Option") at any time to designate a fixed or variable percentage of
Receivables in designated Accounts which otherwise would be treated as Principal
Receivables as Finance Charge Receivables. The exercise by the Seller of the
Discount Option will be subject to, among other things, the receipt by the
Trustee of written confirmation from each Rating Agency that the exercise of
such option will not result in a withdrawal or reduction of its rating of the
Certificates. Each Certificateholder by its acceptance of a beneficial interest
in a Certificate shall be deemed to have consented to the exercise by the
Seller of the Discount Option at such time as the Seller determines to
exercise such option.

   As provided in the Agreement and subject to certain limitations therein set
forth, Class B Certificates are exchangeable for new Class B Certificates
evidencing like aggregate Undivided Interests, as requested by the Class B
Certificateholder surrendering such Class B Certificates.  No service charge may
be imposed for any such exchange but the Servicer or Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.

   The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar, and any agent of any of them, may treat the person in whose name this
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Agreement.

   Subject to the prior termination of Series 1996-1, the Agreement provides
that the right of the Class B Certificateholders to receive payments from the
Trust will terminate on the Scheduled Series 1996-1 Termination Date.  Upon the
termination of Trust pursuant to Section 12.1 of the Agreement, the Trustee will
assign and convey to the Holder of the Exchangeable Seller Certificate (without
recourse, representation or warranty) all right, title and interest of the Trust
in the Receivables, whether then existing or thereafter created, and Recoveries
allocable to the Trust relating thereto and Interchange pursuant to subsections
2.5(k) and (l) of the

                                       11

<PAGE>
 
Agreement.  The Trustee shall execute and deliver such instruments of transfer
and assignment, in each case without recourse, as shall be reasonably requested
by the Holder of the Exchangeable Seller Certificate to vest in such Holder all
right, title and interest which the Trustee had in the Receivables.

   Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class B Certificate shall not
be entitled to any benefit under the Agreement, or be valid for any purpose.

                                       12
<PAGE>
 
   IN WITNESS WHEREOF, People's Bank has caused this Class B Certificate to be
executed by its duly authorized officer.

                             PEOPLE'S BANK



                             By:________________________



Dated:  June __ , 1996

                                       13
<PAGE>
 
                Form of Trustee's Certificate of Authentication
                -----------------------------------------------


   This is one of the Class B Certificates referred to in the within-mentioned
Agreement.

 
                        BANKERS TRUST COMPANY, not in
                             its individual capacity,
                             but solely as Trustee



                             By: _______________________
                                    (Authorized Officer)

                                       14
<PAGE>
 
                                                                       EXHIBIT 2
                                                                       ---------


                 FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT
                 ---------------------------------------------

                                 PEOPLE'S BANK

             PEOPLE'S BANK CREDIT CARD MASTER TRUST, Series 1996-1

         MONTHLY CERTIFICATEHOLDERS' STATEMENT FOR MONTHLY PERIOD #___



Monthly Period - Beginning Date                _________

Monthly Period - Ending Date                   _________

Determination Date                             _________
 
Distribution Date                              _________

(Note:    Monthly Period numbers found herein refer solely to Series 1996-1 and
          may not correspond to Monthly Period numbers used for other Series of
          the Trust.)

I.   Information Regarding Distributions to Certificateholders
 
A.  Total amount distributed to
    Certificateholders (per $1,000
    Initial Investor Interest)                             _________________
 
B.  Total principal amount
    distributed to Certificateholders
    (per $1,000 Initial Investor Interest)                 _________________
 
C.  Total interest amount distributed to
    Certificateholders (Per $1,000 Initial
    Investor Interest)                                     _________________
 
 
II. Receivables Balances
 
A.  Aggregate Principal Receivables in                
    Trust, end of period                                   _________________ 
 
    (i)  Aggregate Principal Receivables                  
         in Trust on Closing Date                          _________________
 
B.  Investor Interest, end of period __                    _________________
 
    (i)  Investor Interest as of Closing Date              _________________


                                       1
<PAGE>
 
C.  Investor Interest as a percentage                    
    of Trust Principal Receivables                         _________________ 
 
    (i)  Investor Interest as a
         percentage of Trust Principal
         Receivables as of the Closing Date                _________________ 

III. Collections

A.  Aggregate amount of Collections Processed 
    during the Monthly Period allocated to 
    Certificateholders                                     _________________ 

B.  Monthly Pay Rate for:
 
          1.  Period - 1    _________%
          2.  Period - 2    _________%
          3.  Period - 3    _________%
          4.  Period - 4    _________%
          5.  Period - 5    _________%
          6.  Period - 6    _________%
          7.  6 mo. Avg.    _________%
C.  Collections of Principal Receivables during 
    the Monthly Period allocated
    to Certificateholders                                  _________________

D.  Amount by which Controlled Amortization
    Amount exceeds principal allocated to            
    Investors                                              _________________ 

E.  Collections of Finance Charge Receivables
    during the Monthly Period allocated to
    Certificateholders                                     _________________

                                       2
<PAGE>
 
- -------------
 
F.   Annualized Gross Portfolio Yield for:
 
     1.    Period - 1          _________%
     2.    Period - 2          _________%
     3.    Period - 3          _________%
     4.    3 mo. avg.          _________%

                                       3
<PAGE>
 
IV.            Delinquent Balances*
 
                                         Aggregate
                                         Account
                                         Balances
                                         ---------
 
     A.    Less than 31 days delinquent  ________
     B.    31 - 60 days delinquent       ________
     C.    61-90 days delinquent         ________
     D.    More than 90 days delinquent  ________
     E.    Total                         ________


                                       4
<PAGE>
 
Percent of
Aggregate
Receivables
- -----------

___________%
___________%
___________%
___________%
___________%
 
V.  Default Summary
 
A.  Aggregate Investor Default Amount                      _________________
 
                              Aggregate         Percent of
                              Account           Aggregate
                              Balances          Receivables
                              ------------      ------------
 
B. Investor default percentage for:
 
   1.              Period - 1              _________%
   2.              Period - 2              _________%
   3.              Period - 3              _________%
   4.              3 mo. avg.              _________%
 
C. Investor Charge Offs
 
   1.  Aggregate dollar amount                             _________________
   2.  Per $1,000 of Initial Investor Interest             _________________
 
D. Reimbursed Investor Charge Offs
 
   1.  Aggregate dollar amount                             _________________
   2.  Per $1,000 of Initial Investor Interest             _________________
 
E. Base Rate                                               _________________
 
F.  Portfolio Yield minus Base Rate for:
 
    1.  Period - 1  _________%
    2.  Period - 2  _________%
    3.  Period - 3  _________%
    4.  3 mo. avg.  _________%
 
VI.  Monthly Investor Servicing Fee                        _________________
 
VII.  Withdrawal from Cash Collateral Account under
      Section 4.6                                          _________________
 
 

                                       5
<PAGE>
 
VIII. Required Cash Collateral Amount                      _________________
 
 
IX.   Available Cash Collateral Amount


                                       6
<PAGE>
 
_____________

X.  Deficit Controlled Amortization                        _________________
    Amount

XI. Pool Factor




                                       7
<PAGE>
 
_____________

                                    PEOPLE'S BANK, Servicer


                                    By:_______________________


Calculations
- ------------

Monthly Pay Rate = Aggregate Collections (excluding Interchange) during the
Monthly Period/Aggregate Amount of Receivables at the end of the prior Monthly
Period

Amount by which Controlled Amortization Amount exceeds Principal allocated to
Investors during the Monthly Period = $________ -Principal allocated to
Investors

Gross Portfolio Yield = Finance Charges allocated to Investors during the
Monthly Period (including Interchange allocated to Investors and deposited in
the Finance Charge Account)/Investor Interest for the prior Monthly Period
#_______

Portfolio Yield minus Base Rate - Finance charges allocated to Investors during
the Monthly Period (including Interchange allocated to Investors and deposited
in the Finance Charge Amount) -Investor Default Amount for the Monthly
Period/Investor Interest for the prior Monthly Period - Base Rate.



                                       8
<PAGE>
 
                                                                       Exhibit 4


                Form of Monthly Payment Instructions to Trustee


ON __________, PLEASE PERFORM THE FOLLOWING TRANSACTIONS PURSUANT TO THE SERIES
1996-1 SUPPLEMENT AND THE POOLING AND SERVICING AGREEMENT DATED JUNE 1, 1993:

Per Section
  4.6(a)(i) &
  4.6(c)(vii)



Per Section
  4.6(b)(i) &
  4.6(c)(viii)
                  Please withdraw $_______ from Finance Charge Account - and
                  deposit into the Distribution Account - to pay Class A Monthly
                  Interest to Class A Certificate Holders.

                  Please withdraw $_______ from Finance Charge Account - and
                  deposit into the Distribution Account - to pay Class B Monthly
                  Interest to Class B Certificate Holders.

Per Section       Please withdraw $__________ from
4.6(a)(ii) &      Finance Charge Account - to pay
4.6(b)(ii)        Monthly Investor Servicing Fee to People's Bank.
 
Per Section       Please withdraw $_________ from
  4.6(a)(iii) &   Finance Charge Account - to pay
  4.6(b)(iii)     Investor Default Amount to People's Bank.
 
 
Per Section       Please withdraw $_________ from
  4.6(c)(ix)      Finance Charge Account - to pay
                  Monthly Loan Fee to _____________, as Administrative Agent
                  under the Loan Agreement, dated as of June __, 1996among
                  Trustee, People's Bank, _________________________ and
                  ___________ ______________, Individually and as Administrative
                  Agent.
 
 
Per Section       Please withdraw $____________ from
  4.6(c)(xiv)     Finance Charge Account - and pay to
                  People's Structured Finance Corp.
 
   AUTHORIZED BY:  _______________________________
 


                                       1
<PAGE>
 
                                                                       Exhibit 5

                   Form of Notification to Trustee Regarding
                            Failure to Make Payment


                                 PEOPLE'S BANK

             PEOPLE'S BANK CREDIT CARD MASTER TRUST, Series 1996-1


     This is to inform you that we have been unable to make a [payment or
deposit] in the amount of __________ for the Monthly Period beginning on
________ and ending on _________.  Such payments were to be made from [Account]
on _________ and such payment or deposit was to be made to [Person or Account].

 
                              Name:
                              Title:




                                       1

<PAGE>
 
                                                                  Exhibit 4.3

(MULTICURRENCY-CROSS BORDER)

                                    ISDA(R)
                  International Swap Dealers Association, Inc.
                                MASTER AGREEMENT
                           dated as of _____________


_______________________________  and _____________________________________ have
entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows:-

     1.  INTERPRETATION.

     (a)  DEFINITIONS.  The terms defined in Section 14 and in the Schedule will
have the meanings therein specified for the purpose of this Master Agreement.

     (b)  INCONSISTENCY.  In the event of any inconsistency between the
provisions of the Schedule and the other provisions of this Master Agreement,
the Schedule will prevail.  In the event of any inconsistency between the
provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant
Transaction.

     (c)  SINGLE AGREEMENT.  All Transactions are entered into in reliance on
the fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this "Agreement"),
and the parties would not otherwise enter into any Transactions.

     2.  OBLIGATIONS.

     (a)  GENERAL CONDITIONS.

          (i)  Each party will make each payment or delivery specified in each
     Confirmation to be made by it, subject to the other provisions of this
     Agreement.


       Copyright (C) 1992 by International Swap Dealers Association, Inc.
<PAGE>
 
          (ii)  Payments under this Agreement will be made on the due date for
     value on that date in the place of the account specified in the relevant
     Confirmation or otherwise pursuant to this Agreement, in freely
     transferable funds and in the manner customary for payments in the required
     currency.  Where settlement is by delivery (that is, other than by
     payment), such delivery will be made for receipt on the due date in the
     manner customary for the relevant obligation unless otherwise specified in
     the relevant Confirmation or elsewhere in this Agreement.

          (iii)  Each obligation of each party under Section 2(a)(i) is subject
     to (1) the condition precedent that no Event of Default or Potential Event
     of Default with respect to the other party has occurred and is continuing,
     (2) the condition precedent that no Early Termination Date in respect of
     the relevant Transaction has occurred or been effectively designated and
     (3) each other applicable condition precedent specified in this Agreement.

     (b)  CHANGE OF ACCOUNT.  Either party may change its account for receiving
a payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.

     (c)  NETTING.  If on any date amounts would otherwise be payable:-

          (i)  in the same currency; and

          (ii)  in respect of the same Transaction,

by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.

     The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable on the same date in
the same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction.  The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such date).  This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of Offices through which the parties make and
receive payments or deliveries.

                                      -2-
<PAGE>
 
     (d)  DEDUCTION OR WITHHOLDING FOR TAX.

          (i)  GROSS-UP.  All payments under this Agreement will be made without
     any deduction or withholding for or on account of any Tax unless such
     deduction or withholding is required by any applicable law, as modified by
     the practice of any relevant governmental revenue authority, then in
     effect.  If a party is so required to deduct or withhold, then that party
     ("X") will:-

               (1)  promptly notify the other party ("Y") of such requirement;

               (2)  pay to the relevant authorities the full amount required to
          be deducted or withheld (including the full amount required to be
          deducted or withheld from any additional amount paid by X to Y under
          this Section 2(d)) promptly upon the earlier of determining that such
          deduction or withholding is required or receiving notice that such
          amount has been assessed against Y;

               (3)  promptly forward to Y an official receipt (or a certified
          copy), or other documentation reasonably acceptable to Y, evidencing
          such payment to such authorities; and

               (4)  if such Tax is an Indemnifiable Tax, pay to Y, in addition
          to the payment to which Y is otherwise entitled under this Agreement,
          such additional amount as is necessary to ensure that the net amount
          actually received by Y (free and clear of Indemnifiable Taxes, whether
          assessed against X or Y) will equal the full amount Y would have
          received had no such deduction or withholding been required.  However,
          X will not be required to pay any additional amount to Y to the extent
          that it would not be required to be paid but for:-

                    (A)  the failure by Y to comply with or perform any
               agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

                    (B)  the failure of a representation made by Y pursuant to
               Section 3(f) to be accurate and true unless such failure would
               not have occurred but for (I) any action taken by a taxing
               authority, or brought in a court of competent jurisdiction, on or
               after the date on which a Transaction is entered into (regardless
               of whether such action is taken or brought with respect to a
               party to this Agreement) or (II) a Change in Tax Law.

                                      -3-
<PAGE>
 
          (ii)  LIABILITY.  If:-

               (1)  X is required by any applicable law, as modified by the
          practice of any relevant governmental revenue authority, to make any
          deduction or withholding in respect of which X would not be required
          to pay an additional amount to Y under Section 2(d)(i)(4);

               (2)  X does not so deduct or withhold; and

               (3)  a liability resulting from such Tax is assessed directly
          against X,

          then, except to the extent Y has satisfied or then satisfies the
          liability resulting from such Tax, Y will promptly pay to X the amount
          of such liability (including any related liability for interest, but
          including any related liability for penalties only if Y has failed to
          comply with or perform any agreement contained in Section 4(a)(i),
          4(a)(iii) or 4(d)).

     (e)  DEFAULT INTEREST; OTHER AMOUNTS.  Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate.  Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.  If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.

     3.  REPRESENTATIONS.

     Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Transaction is
entered into and, in the case of the representations in Section 3(f), at all
times until the termination of this Agreement) that:-

     (a)  BASIC REPRESENTATIONS.

          (i)  STATUS. It is duly organized and validly existing under the laws
     of the jurisdiction of its Organization or incorporation and, if relevant
     under such laws, in good standing;

                                      -4-
<PAGE>
 
          (ii)  POWERS.  It has the power to execute this Agreement and any
     other documentation relating to this Agreement to which it is a party, to
     deliver this Agreement and any other documentation relating to this
     Agreement that it is required by this Agreement to deliver and to perform
     its obligations under this Agreement and any obligations it has under any
     Credit Support Document to which it is a party and has taken all necessary
     action to authorize such execution, delivery and performance;

          (iii)  NO VIOLATION OR CONFLICT.  Such execution, delivery and
     performance do not violate or conflict with any law applicable to it, any
     provision of its constitutional documents, any order or judgment of any
     court or other agency of government applicable to it or any of its assets
     or any contractual restriction binding on or affecting it or any of its
     assets;

          (iv)  CONSENTS.  All governmental and other consents that are required
     to have been obtained by it with respect to this Agreement or any Credit
     Support Document to which it is a party have been obtained and are in full
     force and effect and all conditions of any such consents have been complied
     with; and

          (v)  OBLIGATIONS BINDING.  Its obligations under this Agreement and
     any Credit Support Document to which it is a party constitute its legal,
     valid and binding obligations, enforceable in accordance with their
     respective terms (subject to applicable bankruptcy, reorganization,
     insolvency, moratorium or similar laws affecting creditors' rights
     generally and subject, as to enforceability, to equitable principles of
     general application (regardless of whether enforcement is sought in a
     proceeding in equity or at law)).

     (b)  ABSENCE OF CERTAIN EVENTS.  No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.

     (c)  ABSENCE OF LITIGATION.  There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.

     (d)  ACCURACY OF SPECIFIED INFORMATION.  All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.

                                      -5-
<PAGE>
 
     (e)  PAYER TAX REPRESENTATION.  Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(e) is accurate
and true.

     (f)  PAYEE TAX REPRESENTATIONS.  Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.

     4.  AGREEMENTS.

     Each party agrees with the other that, so long as either party has or may
have any obligation under this Agreement or under any Credit Support Document to
which it is a party:-

     (a)  FURNISH SPECIFIED INFORMATION.  It will deliver to the other party or,
in certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-

          (i)  any forms, documents or certificates relating to taxation
     specified in the Schedule or any Confirmation;

          (ii)  any other documents specified in the Schedule or any
     Confirmation; and

          (iii)  upon reasonable demand by such other party, any form or
     document that may be required or reasonably requested in writing in order
     to allow such other party or its Credit Support Provider to make a payment
     under this Agreement or any applicable Credit Support Document without any
     deduction or withholding for or on account of any Tax or with such
     deduction or withholding at a reduced rate (so long as the completion,
     execution or submission of such form or document would not materially
     prejudice the legal or commercial position of the party in receipt of such
     demand), with any such form or document to be accurate and completed in a
     manner reasonably satisfactory to such other party and to be executed and
     to be delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.

     (b)  MAINTAIN AUTHORIZATIONS.  It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement
or any Credit Support Document to which it is a party and will use all
reasonable efforts to obtain any that may become necessary in the future.

     (c)  COMPLY WITH LAWS.  It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its

                                      -6-
<PAGE>
 
ability to perform its obligations under this Agreement or any Credit Support
Document to which it is a party.

     (d)  TAX AGREEMENT.  It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.

     (e)  PAYMENT OF STAMP TAX.  Subject to Section 11, it will pay any Stamp
Tax levied or imposed upon it or in respect of its execution or performance of
this Agreement by a jurisdiction in which it is incorporated, organized, managed
and controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.

     5.  EVENTS OF DEFAULT AND TERMINATION EVENTS.

     (a)  EVENTS OF DEFAULT.  The occurrence at any time with respect to a party
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-

          (i)  FAILURE TO PAY OR DELIVER.  Failure by the party to make, when
     due, any payment under this Agreement or delivery under Section 2(a)(i) or
     2(e) required to be made by it if such failure is not remedied on or before
     the third Local Business Day after notice of such failure is given to the
     party;

          (ii)  BREACH OF AGREEMENT.  Failure by the party to comply with or
     perform any agreement or obligation (other than an obligation to make any
     payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or
     to give notice of a Termination Event or any agreement or obligation under
     Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the
     party in accordance with this Agreement if such failure is not remedied on
     or before the thirtieth day after notice of such failure is given to the
     party;

          (iii)  CREDIT SUPPORT DEFAULT.

               (1)  Failure by the party or any Credit Support Provider of such
          party to comply with or perform any agreement or obligation to be
          complied with or performed by it in accordance with any Credit Support
          Document if such failure is continuing after any applicable grace
          period has elapsed;

                                      -7-
<PAGE>
 
               (2)  the expiration or termination of such Credit Support
          Document or the failing or ceasing of such Credit Support Document to
          be in full force and effect for the purpose of this Agreement (in
          either case other than in accordance with its terms) prior to the
          satisfaction of all obligations of such party under each Transaction
          to which such Credit Support Document relates without the written
          consent of the other party; or

               (3)  the party or such Credit Support Provider disaffirms,
          disclaims, repudiates or rejects, in whole or in part, or challenges
          the validity of, such Credit Support Document;

          (iv)  MISREPRESENTATION.  A representation (other than a
     representation under Section 3(e) or (f)) made or repeated or deemed to
     have been made or repeated by the party or any Credit Support Provider of
     such party in this Agreement or any Credit Support Document proves to have
     been incorrect or misleading in any material respect when made or repeated
     or deemed to have been made or repeated;

          (v)  DEFAULT UNDER SPECIFIED TRANSACTION.  The party, any Credit
     Support Provider of such party or any applicable Specified Entity of such
     party (1) defaults under a Specified Transaction and, after giving effect
     to any applicable notice requirement or grace period, there occurs a
     liquidation of, an acceleration of obligations under, or an early
     termination of, that Specified Transaction, (2) defaults, after giving
     effect to any applicable notice requirement or grace period, in making any
     payment or delivery due on the last payment, delivery or exchange date of,
     or any payment on early termination of, a Specified Transaction (or such
     default continues for at least three Local Business Days if there is no
     applicable notice requirement or grace period) or (3) disaffirms,
     disclaims, repudiates or rejects, in whole or in part, a Specified
     Transaction (or such action is taken by any person or entity appointed or
     empowered to operate it or act on its behalf);

          (vi)  CROSS DEFAULT.  If "Cross Default" is specified in the Schedule
     as applying to the party, the occurrence or existence of (1) a default,
     event of default or other similar condition or event (however described) in
     respect of such party, any Credit Support Provider of such party or any
     applicable Specified Entity of such party under one or more agreements or
     instruments relating to Specified Indebtedness of any of them (individually
     or collectively) in an aggregate amount of not less than the applicable
     Threshold Amount (as specified in the Schedule) which has resulted in such
     Specified Indebtedness becoming, or becoming capable at such time of being
     declared, due and payable under such agreements or instruments, before it
     would otherwise have been due and payable or (2) a default by such party,
     such Credit Support Provider or such Specified Entity (individually or
     collectively) in making one or more payments on the due date thereof in an
     aggregate amount of not less than the

                                      -8-
<PAGE>
 
     applicable Threshold Amount under such agreements or instruments (after
     giving effect to any applicable notice requirement or grace period);

          (vii)  BANKRUPTCY.  The party, any Credit Support Provider of such
     party or any applicable Specified Entity of such party:-

               (1)  is dissolved (other than pursuant to a consolidation,
          amalgamation or merger); (2) becomes insolvent or is unable to pay its
          debts or fails or admits in writing its inability generally to pay its
          debts as they become due; (3) makes a general assignment, arrangement
          or composition with or for the benefit of its creditors; (4)
          institutes or has instituted against it a proceeding seeking a
          judgment of insolvency or bankruptcy or any other relief under any
          bankruptcy or insolvency law or other similar law affecting creditors'
          rights, or a petition is presented for its winding-up or liquidation,
          and, in the case of any such proceeding or petition instituted or
          presented against it, such proceeding or petition (A) results in a
          judgment of insolvency or bankruptcy or the entry of an order for
          relief or the making of an order for its winding-up or liquidation or
          (B) is not dismissed, discharged, stayed or restrained in each case
          within 30 days of the institution or presentation thereof; (5) has a
          resolution passed for its winding-up, official management or
          liquidation (other than pursuant to a consolidation, amalgamation or
          merger); (6) seeks or becomes subject to the appointment of an
          administrator, provisional liquidator, conservator, receiver, trustee,
          custodian or other similar official for it or for all or substantially
          all its assets; (7) has a secured party take possession of all or
          substantially all its assets or has a distress, execution, attachment,
          sequestration or other legal process levied, enforced or sued on or
          against all or substantially all its assets and such secured party
          maintains possession, or any such process is not dismissed,
          discharged, stayed or restrained, in each case within 30 days
          thereafter; (8) causes or is subject to any event with respect to it
          which, under the applicable laws of any jurisdiction, has an analogous
          effect to any of the events specified in clauses (1) to (7)
          (inclusive); or (9) takes any action in furtherance of, or indicating
          its consent to, approval of, or acquiescence in, any of the foregoing
          acts; or

          (viii)  MERGER WITHOUT ASSUMPTION.  The party or any Credit Support
     Provider of such party consolidates or amalgamates with, or merges with or
     into, or transfers all or substantially all its assets to, another entity
     and, at the time of such consolidation, amalgamation, merger or transfer:-

               (1)  the resulting, surviving or transferee entity fails to
          assume all the obligations of such party or such Credit Support
          Provider under this Agreement or any Credit Support Document to which
          it or its predecessor was

                                      -9-
<PAGE>
 
          a party by operation of law or pursuant to an agreement reasonably
          satisfactory to the other party to this Agreement; or

               (2)  the benefits of any Credit Support Document fail to extend
          (without the consent of the other party) to the performance by such
          resulting, surviving or transferee entity of its obligations under
          this Agreement.

     (b)  TERMINATION EVENTS.  The occurrence at any time with respect to a
party or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any event specified below constitutes an
Illegality if the event is specified in (i) below, a Tax Event if the event is
specified in (ii) below or a Tax Event Upon Merger if the event is specified in
(iii) below, and, if specified to be applicable, a Credit Event Upon Merger if
the event is specified pursuant to (iv) below or an Additional Termination Event
if the event is specified pursuant to (v) below:-

          (i)  ILLEGALITY.  Due to the adoption of, or any change in, any
     applicable law after the date on which a Transaction is entered into, or
     due to the promulgation of, or any change in, the interpretation by any
     court, tribunal or regulatory authority with competent jurisdiction of any
     applicable law after such date, it becomes unlawful (other than as a result
     of a breach by the party of Section 4(b)) for such party (which will be the
     Affected Party):-

               (1)  to perform any absolute or contingent obligation to make a
          payment or delivery or to receive a payment or delivery in respect of
          such Transaction or to comply with any other material provision of
          this Agreement relating to such Transaction; or

               (2)  to perform, or for any Credit Support Provider of such party
          to perform, any contingent or other obligation which the party (or
          such Credit Support Provider) has under any Credit Support Document
          relating to such Transaction;

          (ii)  TAX EVENT.  Due to (x) any action taken by a taxing authority,
     or brought in a court of competent jurisdiction, on or after the date on
     which a Transaction is entered into (regardless of whether such action is
     taken or brought with respect to a party to this Agreement) or (y) a Change
     in Tax Law, the party (which will be the Affected Party) will, or there is
     a substantial likelihood that it will, on the next succeeding Scheduled
     Payment Date (1) be required to pay to the other party an additional amount
     in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
     respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
     payment from which an amount is required to be deducted or withheld for or
     on account of a Tax (except in respect of interest under Section 2(e),
     6(d)(ii) or 6(e)) and no

                                      -10-
<PAGE>
 
     additional amount is required to be paid in respect of such Tax under
     Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));

          (iii)  TAX EVENT UPON MERGER.  The party (the "Burdened Party") on the
     next succeeding Scheduled Payment Date will either (1) be required to pay
     an additional amount in respect of an Indemnifiable Tax under Section
     2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
     6(e)) or (2) receive a payment from which an amount has been deducted or
     withheld for or on account of any Indemnifiable Tax in respect of which the
     other party is not required to pay an additional amount (other than by
     reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
     party consolidating or amalgamating with, or merging with or into, or
     transferring all or substantially all its assets to, another entity (which
     will be the Affected Party) where such action does not constitute an event
     described in Section 5(a)(viii);

          (iv)  CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
     specified in the Schedule as applying to the party, such party ("X"), any
     Credit Support Provider of X or any applicable Specified Entity of X
     consolidates or amalgamates with, or merges with or into, or transfers all
     or substantially all its assets to, another entity and such action does not
     constitute an event described in Section 5(a)(viii) but the
     creditworthiness of the resulting, surviving or transferee entity is
     materially weaker than that of X, such Credit Support Provider or such
     Specified Entity, as the case may be, immediately prior to such action
     (and, in such event, X or its successor or transferee, as appropriate, will
     be the Affected Party); or

          (v)  ADDITIONAL TERMINATION EVENT.  If any "Additional Termination
     Event" is specified in the Schedule or any Confirmation as applying, the
     occurrence of such event (and, in such event, the Affected Party or
     Affected Parties shall be as specified for such Additional Termination
     Event in the Schedule or such Confirmation).

     (c)  EVENT OF DEFAULT AND ILLEGALITY.  If an event or circumstance which
would otherwise constitute or give rise to an Event of Default also constitutes
an Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.

     6.  EARLY TERMINATION.

     (a)  RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT.  If at any time an
Event of Default with respect to a party (the "Defaulting Party") has occurred
and is then continuing, the other party (the "Non-defaulting Party") may, by not
more than 20 days notice to the Defaulting Party specifying the relevant Event
of Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions.  If,
however, "Automatic Early Termination" is specified in the Schedule as applying
to a party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect to such
party of an

                                      -11-
<PAGE>
 
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

     (b)  RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.

          (i)  NOTICE.  If a Termination Event occurs, an Affected Party will,
     promptly upon becoming aware of it, notify the other party, specifying the
     nature of that Termination Event and each Affected Transaction and will
     also give such other information about that Termination Event as the other
     party may reasonably require.

          (ii)  TRANSFER TO AVOID TERMINATION EVENT.  If either an Illegality
     under Section 5(b)(i)(1) or a Tax Event occurs and there is only one
     Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party
     is the Affected Party, the Affected Party will, as a condition to its right
     to designate an Early Termination Date under Section 6(b)(iv), use all
     reasonable efforts (which will not require such party to incur a loss,
     excluding immaterial, incidental expenses) to transfer within 20 days after
     it gives notice under Section 6(b)(i) all its rights and obligations under
     this Agreement in respect of the Affected Transactions to another of its
     Offices or Affiliates so that such Termination Event ceases to exist.

     If the Affected Party is not able to make such a transfer it will give
     notice to the other party to that effect within such 20 day period,
     whereupon the other party may effect such a transfer within 30 days after
     the notice is given under Section 6(b)(i).

     Any such transfer by a party under this Section 6(b)(ii) will be subject to
     and conditional upon the prior written consent of the other party, which
     consent will not be withheld if such other party's policies in effect at
     such time would permit it to enter into transactions with the transferee on
     the terms proposed.

          (iii)  TWO AFFECTED PARTIES.  If an Illegality under Section
     5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each
     party will use all reasonable efforts to reach agreement within 30 days
     after notice thereof is given under Section 6(b)(i) on action to avoid that
     Termination Event.

          (iv)  RIGHT TO TERMINATE. If:-

               (1)  a transfer under Section 6(b)(ii) or an agreement under
          Section 6(b)(iii), as the case may be, has not been effected with
          respect to all Affected Transactions within 30 days after an Affected
          Party gives notice under Section 6(b)(i); or

                                      -12-
<PAGE>
 
     (2)  an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or
          an Additional Termination Event occurs, or a Tax Event Upon Merger
          occurs and the Burdened Party is not the Affected Party,

     either party in the case of an Illegality, the Burdened Party in the case
     of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
     or an Additional Termination Event if there is more than one Affected
     Party, or the party which is not the Affected Party in the case of a Credit
     Event Upon Merger or an Additional Termination Event if there is only one
     Affected Party may, by not more than 20 days notice to the other party and
     provided that the relevant Termination Event is then continuing, designate
     a day not earlier than the day such notice is effective as an Early
     Termination Date in respect of all Affected Transactions.

     (c)  EFFECT OF DESIGNATION.

          (i)  If notice designating an Early Termination Date is given under
     Section 6(a) or (b), the Early Termination Date will occur on the date so
     designated, whether or not the relevant Event of Default or Termination
     Event is then continuing.

          (ii)  Upon the occurrence or effective designation of an Early
     Termination Date, no further payments or deliveries under Section 2(a)(i)
     or 2(e) in respect of the Terminated Transactions will be required to be
     made, but without prejudice to the other provisions of this Agreement.  The
     amount, if any, payable in respect of an Early Termination Date shall be
     determined pursuant to Section 6(e).

     (d)  CALCULATIONS.

          (i)  STATEMENT.  On or as soon as reasonably practicable following the
     occurrence of an Early Termination Date, each party will make the
     calculations on its part, if any, contemplated by Section 6(e) and will
     provide to the other party a statement (1) showing, in reasonable detail,
     such calculations (including all relevant quotations and specifying any
     amount payable under Section 6(e)) and (2) giving details of the relevant
     account to which any amount payable to it is to be paid.  In the absence of
     written confirmation from the source of a quotation obtained in determining
     a Market Quotation, the records of the party obtaining such quotation will
     be conclusive evidence of the existence and accuracy of such quotation.

          (ii)  PAYMENT DATE.  An amount calculated as being due in respect of
     any Early Termination Date under Section 6(e) will be payable on the day
     that notice of the amount payable is effective (in the case of an Early
     Termination Date which is designated or occurs as a result of an Event of
     Default) and on the day which is two Local Business Days after the day on
     which notice of the amount payable is effective (in the case of an Early
     Termination Date which is designated as a result of a

                                      -13-
<PAGE>
 
     Termination Event).  Such amount will be paid together with (to the extent
     permitted under applicable law) interest thereon (before as well as after
     judgment) in the Termination Currency, from (and including) the relevant
     Early Termination Date to (but excluding) the date such amount is paid, at
     the Applicable Rate.  Such interest will be calculated on the basis of
     daily compounding and the actual number of days elapsed.

     (e)  PAYMENTS ON EARLY TERMINATION.  If an Early Termination Date occurs,
the following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method".  If the
parties fail to designate a payment measure or payment method in the Schedule,
it will be deemed that "Market Quotation" or the "Second Method", as the case
may be, shall apply.  The amount, if any, payable in respect of an Early
Termination Date and determined pursuant to this Section will be subject to any
Set-off.

          (i)  EVENTS OF DEFAULT.  If the Early Termination Date results from an
     Event of Default:-

               (1)  First Method and Market Quotation.  If the First Method and
          Market Quotation apply, the Defaulting Party will pay to the Non-
          defaulting Party the excess, if a positive number, of (A) the sum of
          the Settlement Amount (determined by the Non-defaulting Party) in
          respect of the Terminated Transactions and the Termination Currency
          Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
          over (B) the Termination Currency Equivalent of the Unpaid Amounts
          owing to the Defaulting Party.

               (2)  First Method and Loss.  If the First Method and Loss apply,
          the Defaulting Party will pay to the Non-defaulting Party, if a
          positive number, the Non-defaulting Party's Loss in respect of this
          Agreement.

               (3)  Second Method and Market Quotation. If the Second Method and
          Market Quotation apply, an amount will be payable equal to (A) the sum
          of the Settlement Amount (determined by the Non-defaulting Party) in
          respect of the Terminated Transactions and the Termination Currency
          Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
          less (B) the Termination Currency Equivalent of the Unpaid Amounts
          owing to the Defaulting Party.  If that amount is a positive number,
          the Defaulting Party will pay it to the Non-defaulting Party; if it is
          a negative number, the Non-defaulting Party will pay the absolute
          value of that amount to the Defaulting Party.

               (4)  Second Method and Loss.  If the Second Method and Loss
          apply, an amount will be payable equal to the Non-defaulting Party's
          Loss in respect

                                      -14-
<PAGE>
 
          of this Agreement.  If that amount is a positive number, the
          Defaulting Party will pay it to the Non-defaulting Party; if it is a
          negative number, the Non-defaulting Party will pay the absolute value
          of that amount to the Defaulting Party.

          (ii)  TERMINATION EVENTS.  If the Early Termination Date results from
     a Termination Event:-

               (1)  One Affected Party.  If there is one Affected Party, the
          amount payable will be determined in accordance with Section
          6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if
          Loss applies, except that, in either case, references to the
          Defaulting Party and to the Non-defaulting Party will be deemed to be
          references to the Affected Party and the party which is not the
          Affected Party, respectively, and, if Loss applies and fewer than all
          the Transactions are being terminated, Loss shall be calculated in
          respect of all Terminated Transactions.

               (2)  Two Affected Parties.  If there are two Affected Parties:-

                    (A)  if Market Quotation applies, each party will determine
               a Settlement Amount in respect of the Terminated Transactions,
               and an amount will be payable equal to (I) the sum of (a) one-
               half of the difference between the Settlement Amount of the party
               with the higher Settlement Amount ("X") and the Settlement Amount
               of the party with the lower Settlement Amount ("Y") and (b) the
               Termination Currency Equivalent of the Unpaid Amounts owing to X
               less (II) the Termination Currency Equivalent of the Unpaid
               Amounts owing to Y; and

                    (B)  if Loss applies, each party will determine its Loss in
               respect of this Agreement (or, if fewer than all the Transactions
               are being terminated, in respect of all Terminated Transactions)
               and an amount will be payable equal to one-half of the difference
               between the Loss of the party with the higher Loss ("X") and the
               Loss of the party with the lower Loss ("Y").

     If the amount payable is a positive number, Y will pay it to X; if it is a
     negative number, X will pay the absolute value of that amount to Y.

          (iii)  ADJUSTMENT FOR BANKRUPTCY.  In circumstances where an Early
     Termination Date occurs because "Automatic Early Termination" applies in
     respect of a party, the amount determined under this Section 6(e) will be
     subject to such adjustments as are appropriate and permitted by law to
     reflect any payments or deliveries made by one party to the other under
     this Agreement (and retained by such

                                      -15-
<PAGE>
 
     other party) during the period from the relevant Early Termination Date to
     the date for payment determined under Section 6(d)(ii).

          (iv)  PRE-ESTIMATE.  The parties agree that if Market Quotation
     applies an amount recoverable under this Section 6(e) is a reasonable pre-
     estimate of loss and not a penalty.  Such amount is payable for the loss of
     bargain and the loss of protection against future risks and except as
     otherwise provided in this Agreement neither party will be entitled to
     recover any additional damages as a consequence of such losses.

     7.  TRANSFER.

     Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-

          (a)  a party may make such a transfer of this Agreement pursuant to a
     consolidation or amalgamation with, or merger with or into, or transfer of
     all or substantially all its assets to, another entity (but without
     prejudice to any other right or remedy under this Agreement); and

          (b)  a party may make such a transfer of all or any part of its
     interest in any amount payable to it from a Defaulting Party under Section
     6(e).

Any purported transfer that is not in compliance with this Section will be void.

     8.  CONTRACTUAL CURRENCY.

     (a)  PAYMENT IN THE CONTRACTUAL CURRENCY.  Each payment under this
Agreement will be made in the relevant currency specified in this Agreement for
that payment (the "Contractual Currency").  To the extent permitted by
applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in any
currency other than the Contractual Currency, except to the extent such tender
results in the actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement.  If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required to
make the payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be necessary to
compensate for the shortfall.  If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency payable in
respect of

                                      -16-
<PAGE>
 
this Agreement, the party receiving the payment will refund promptly the amount
of such excess.

     (b)  JUDGMENTS.  To the extent permitted by applicable law, if any judgment
or order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.

     (c)  SEPARATE INDEMNITIES.  To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.

     (d)  EVIDENCE OF LOSS.  For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.

     9.  MISCELLANEOUS.

     (a)  ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.

     (b)  AMENDMENTS.  No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile

                                      -17-
<PAGE>
 
transmission) and executed by each of the parties or confirmed by an exchange of
telexes or electronic messages on an electronic messaging system.

     (c)  SURVIVAL OF OBLIGATIONS.  Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.

     (d)  REMEDIES CUMULATIVE.  Except as provided in this Agreement, the
rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges
provided by law.

     (e)  COUNTERPARTS AND CONFIRMATIONS.

          (i)  This Agreement (and each amendment, modification and waiver in
     respect of it) may be executed and delivered in counterparts (including by
     facsimile transmission), each of which will be deemed an original.

          (ii)  The parties intend that they are legally bound by the terms of
     each Transaction from the moment they agree to those terms (whether orally
     or otherwise).  A Confirmation shall be entered into as soon as practicable
     and may be executed and delivered in counterparts (including by facsimile
     transmission) or be created by an exchange of telexes or by an exchange of
     electronic messages on an electronic messaging system, which in each case
     will be sufficient for all purposes to evidence a binding supplement to
     this Agreement.  The parties will specify therein or through another
     effective means that any such counterpart, telex or electronic message
     constitutes a Confirmation.

     (f)  NO WAIVER OF RIGHTS.  A failure or delay in exercising any right,
power or privilege in respect of this Agreement will not be presumed to operate
as a waiver, and a single or partial exercise of any right, power or privilege
will not be presumed to preclude any subsequent or further exercise, of that
right, power or privilege or the exercise of any other right, power or
privilege.

     (g)  HEADINGS.  The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.

     10.  OFFICES; MULTIBRANCH PARTIES.

     (a)  If Section 10(a) is specified in the Schedule as applying, each party
that enters into a Transaction through an Office other than its head or home
office represents to the other party that, notwithstanding the place of booking
office or jurisdiction of incorporation or organization of such party, the
obligations of such party are the same as if it had entered

                                      -18-
<PAGE>
 
into the Transaction through its head or home office.  This representation will
be deemed to be repeated by such party on each date on which a Transaction is
entered into.

     (b)  Neither party may change the Office through which it makes and
receives payments or deliveries for the purpose of a Transaction without the
prior written consent of the other party.

     (c)  If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.

     11.  EXPENSES.

     A Defaulting Party will, on demand, indemnify and hold harmless the other
party for and against all reasonable out-of-pocket expenses, including legal
fees and Stamp Tax, incurred by such other party by reason of the enforcement
and protection of its rights under this Agreement or any Credit Support Document
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.

     12.  NOTICES.

     (a)  EFFECTIVENESS.  Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-

          (i)  if in writing and delivered in person or by courier, on the date
     it is delivered;

          (ii)  if sent by telex, on the date the recipient's answerback is
     received;

          (iii)  if sent by facsimile transmission, on the date that
     transmission is received by a responsible employee of the recipient in
     legible form (it being agreed that the burden of proving receipt will be on
     the sender and will not be met by a transmission report generated by the
     sender's facsimile machine);

          (iv)  if sent by certified or registered mail (airmail, if overseas)
     or the equivalent (return receipt requested), on the date that mail is
     delivered or its delivery is attempted; or

                                      -19-
<PAGE>
 
          (v)  if sent by electronic messaging system, on the date that
     electronic message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following, day that is a Local Business Day.

     (b)  CHANGE OF ADDRESSES.  Either party may by notice to the other change
the address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.

     13.  GOVERNING LAW AND JURISDICTION.

     (a)  GOVERNING LAW.  This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.

     (b)  JURISDICTION.  With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:-

          (i)  submits to the jurisdiction of the English courts, if this
     Agreement is expressed to be governed by English law, or to the non-
     exclusive jurisdiction of the courts of the State of New York and the
     United States District Court located in the Borough of Manhattan in New
     York City, if this Agreement is expressed to be governed by the laws of the
     State of New York; and

          (ii)  waives any objection which it may have at any time to the laying
     of venue of any Proceedings brought in any such court, waives any claim
     that such Proceedings have been brought in an inconvenient forum and
     further waives the right to object, with respect to such Proceedings, that
     such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or re-
enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

     (c)  SERVICE OF PROCESS.  Each party irrevocably appoints the Process Agent
(if any) specified opposite its name in the Schedule to receive, for it and on
its behalf, service of process in any Proceedings.  If for any reason any
party's Process Agent is unable to act as

                                      -20-
<PAGE>
 
such, such party will promptly notify the other party and within 30 days appoint
a substitute process agent acceptable to the other party.  The parties
irrevocably consent to service of process given in the manner provided for
notices in Section 12.  Nothing in this Agreement will affect the right of
either party to serve process in any other manner permitted by law.

     (d)  WAIVER OF IMMUNITIES.  Each party irrevocably waives, to the fullest
extent permitted by applicable law, with respect to itself and its revenues and
assets (irrespective of their use or intended use), all immunity on the grounds
of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.

     14.  DEFINITIONS.

     As used in this Agreement:-

     "Additional Termination Event" has the meaning specified in Section 5(b).
      ----------------------------                                            

     "Affected Party" has the meaning specified in Section 5(b).
      --------------                                            

     "Affected Transactions" means (a) with respect to any Termination Event
      ---------------------                                                 
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

     "Affiliate" means, subject to the Schedule, in relation to any person, any
      ---------                                                                
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person.  For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.

     "Applicable Rate" means:-
      ---------------         

     (a)  in respect of obligations payable or deliverable (or which would have
been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

     (b)  in respect of an obligation to pay an amount under Section 6(e) of
either party from and after the date (determined in accordance with Section
6(d)(ii)) on which that amount is payable, the Default Rate;

                                      -21-
<PAGE>
 
     (c)  in respect of all other obligations payable or deliverable (or which
would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-
default Rate; and

     (d)  in all other cases, the Termination Rate.

     "Burdened Party" has the meaning specified in Section 5(b).
      --------------                                            

     "Change in Tax Law" means the enactment, promulgation, execution or
      -----------------                                                 
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.

     "consent" includes a consent, approval, action, authorization, exemption,
      -------                                                                 
notice, filing, registration or exchange control consent.

     "Credit Event Upon Merger" has the meaning specified in Section 5(b).
      ------------------------                                            

     "Credit Support Document" means any agreement or instrument that is
      -----------------------                                           
specified as such in this Agreement.

     "Credit Support Provider" has the meaning specified in the Schedule.
      -----------------------                                            

     "Default Rate" means a rate per annum equal to the cost (without proof or
      ------------                                                            
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.

     "Defaulting Party" has the meaning specified in Section 6(a).
      ----------------                                            

     "Early Termination Date" means the date determined in accordance with
      ----------------------                                              
Section 6(a) or 6(b)(iv).

     "Event of Default" has the meaning specified in Section 5(a) and, if
      ----------------                                                   
applicable, in the Schedule.

     "Illegality" has the meaning specified in Section 5(b).
      ----------                                            

     "Indemnifiable Tax" means any Tax other than a Tax that would not be
      -----------------                                                  
imposed in respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organized, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from

                                      -22-
<PAGE>
 
such recipient or related person having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement or a Credit
Support Document).

     "law" includes any treaty, law, rule or regulation (as modified, in the
      ---                                                                   
case of tax matters, by the practice of any relevant governmental revenue
authority) and "lawful" and "unlawful" will be construed accordingly.
                ------       --------                                

     "Local Business Day" means, subject to the Schedule, a day on which
      ------------------                                                
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so
specified, as otherwise agreed by the parties in writing or determined pursuant
to provisions contained, or incorporated by reference, in this Agreement, (b) in
relation to any other payment, in the place where the relevant account is
located and, if different, in the principal financial center, if any, of the
currency of such payment, (c) in relation to any notice or other communication,
including notice contemplated under Section 5(a)(i), in the city specified in
the address for notice provided by the recipient and, in the case of a notice
contemplated by Section 2(b), in the place where the relevant new account is to
be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations
for performance with respect to such Specified Transaction.

     "Loss" means, with respect to this Agreement or one or more Terminated
      ----                                                                 
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them).  Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies.  Loss does not include a party's legal fees and out-
of-pocket expenses referred to under Section 11.  A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable.  A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.

     "Market Quotation" means, with respect to one or more Terminated
      ----------------                                               
Transactions and a party making the determination, an amount determined on the
basis of quotations from Reference Market-makers.  Each quotation will be for an
amount, if any, that would be paid to such party (expressed as a negative
number) or by such party (expressed as a positive number) in consideration of an
agreement between such party (taking into account any

                                      -23-
<PAGE>
 
existing Credit Support Document with respect to the obligations of such party)
and the quoting Reference Market-maker to enter into a transaction (the
                                                                       
"Replacement Transaction") that would have the effect of preserving for such
- ------------------------                                                    
party the economic equivalent of any payment or delivery (whether the underlying
obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in respect
of such Terminated Transaction or group of Terminated Transactions that would,
but for the occurrence of the relevant Early Termination Date, have been
required after that date.  For this purpose, Unpaid Amounts in respect of the
Terminated Transaction or group of Terminated Transactions are to be excluded
but, without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of
each applicable condition precedent) after that Early Termination Date is to be
included.  The Replacement Transaction would be subject to such documentation as
such party and the Reference Market-maker may, in good faith, agree.  The party
making the determination (or its agent) will request each Reference Market-maker
to provide its quotation to the extent reasonably practicable as of the same day
and time (without regard to different time zones) on or as soon as reasonably
practicable after the relevant Early Termination Date.  The day and time as of
which those quotations are to be obtained will be selected in good faith by the
party obliged to make a determination under Section 6(e), and, if each party is
so obliged, after consultation with the other.  If more than three quotations
are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values.  If exactly three such quotations are provided, the Market Quotation
will be the quotation remaining after disregarding the highest and lowest
quotations.  For this purpose, if more than one quotation has the same highest
value or lowest value, then one of such quotations shall be disregarded.  If
fewer than three quotations are provided, it will be deemed that the Market
Quotation in respect of such Terminated Transaction or group of Terminated
Transactions cannot be determined.

     "Non-default Rate" means a rate per annum equal to the cost (without proof
      ----------------                                                         
or evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.

     "Non-defaulting Party" has the meaning specified in Section 6(a).
      --------------------                                            

     "Office" means a branch or office of a party, which may be such party's
      ------                                                                
head or home office.

     "Potential Event of Default" means any event which, with the giving of
      --------------------------                                           
notice or the lapse of time or both, would constitute an Event of Default.

     "Reference Market-makers" means four leading dealers in the relevant market
      -----------------------                                                   
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the

                                      -24-
<PAGE>
 
time in deciding whether to offer or to make an extension of credit and (b) to
the extent practicable, from among such dealers having an office in the same
city.

     "Relevant Jurisdiction" means, with respect to a party, the jurisdictions
      ---------------------                                                   
(a) in which the party is incorporated, organized, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.

     "Scheduled Payment Date" means a date on which a payment or delivery is to
      ----------------------                                                   
be made under Section 2(a)(i) with respect to a Transaction.

     "Set-off" means set-off, offset, combination of accounts, right of
      -------                                                          
retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised by,
or imposed on, such payer.

     "Settlement Amount" means, with respect to a party and any Early
      -----------------                                              
Termination Date, the sum of:-

          (a)  the Termination Currency Equivalent of the Market Quotations
     (whether positive or negative) for each Terminated Transaction or group of
     Terminated Transactions for which a Market Quotation is determined; and

          (b)  such party's Loss (whether positive or negative and without
     reference to any Unpaid Amounts) for each Terminated Transaction or group
     of Terminated Transactions for which a Market Quotation cannot be
     determined or would not (in the reasonable belief of the party making the
     determination) produce a commercially reasonable result.

     "Specified Entity" has the meaning specified in the Schedule.
      ----------------                                            

     "Specified Indebtedness" means, subject to the Schedule, any obligation
      ----------------------                                                
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.

     "Specified Transaction"means, subject to the Schedule, (a) any transaction
      ---------------------                                                    
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option,

                                      -25-
<PAGE>
 
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of these transactions), (b) any combination of these transactions
and (c) any other transaction identified as a Specified Transaction in this
Agreement or the relevant confirmation.

     "Stamp Tax" means any stamp, registration, documentation or similar tax.
      ---------                                                              

     "Tax" means any present or future tax, levy, impost, duty, charge,
      ---                                                              
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.

     "Tax Event" has the meaning specified in Section 5(b).
      ---------                                            

     "Tax Event Upon Merger" has the meaning specified in Section 5(b).
      ---------------------                                            

     "Terminated Transactions" means with respect to any Early Termination Date
      -----------------------                                                  
(a) if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).

     "Termination Currency" has the meaning specified in the Schedule.
      --------------------                                            

     "Termination Currency Equivalent" means, in respect of any amount
      -------------------------------                                 
denominated in the Termination Currency, such Termination Currency amount and,
in respect of any amount denominated in a currency other than the Termination
Currency (the "Other Currency"), the amount in the Termination Currency
               --------------                                          
determined by the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant Early Termination
Date, or, if the relevant Market Quotation or Loss (as the case may be), is
determined as of a later date, that later date, with the Termination Currency at
the rate equal to the spot exchange rate of the foreign exchange agent (selected
as provided below) for the purchase of such Other Currency with the Termination
Currency at or about 11:00 a.m. (in the city in which such foreign exchange
agent is located) on such date as would be customary for the determination of
such a rate for the purchase of such Other Currency for value on the relevant
Early Termination Date or that later date.  The foreign exchange agent will, if
only one party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by the
parties.

     "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon
      -----------------                                                      
Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.

                                      -26-
<PAGE>
 
     "Termination Rate" means a rate per annum equal to the arithmetic mean of
      ----------------                                                        
the cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.

     "Unpaid Amounts" owing to any party means, with respect to an Early
      --------------                                                    
Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become payable
but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to
such Early Termination Date and which remain unpaid as at such Early Termination
Date and (b) in respect of each Terminated Transaction, for each obligation
under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market value of that which was (or would have
been) required to be delivered as of the originally scheduled date for delivery,
in each case together with (to the extent permitted under applicable law)
interest, in the currency of such amounts, from (and including) the date such
amounts or obligations were or would have been required to have been paid or
performed to (but excluding) such Early Termination Date, at the Applicable
Rate.  Such amounts of interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.  The fair market value of any
obligation referred to in clause (b) above shall be reasonably determined by the
party obliged to make the determination under Section 6(e) or, if each party is
so obliged, it shall be the average of the Termination Currency Equivalents of
the fair market values reasonably determined by both parties.

     IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date specified on the
first page of this document.

 
______________________________________  _______________________________________
                                                    (Name of Party)
           (Name of Party)

By:__________________________________   By:___________________________________
     Name:                                   Name:
     Title:                                  Title:
     Date:                                   Date:

                                      -27-
<PAGE>
 


                                    SCHEDULE

                                     TO THE

                                MASTER AGREEMENT

                           Dated as of June __, 1996

                                    between

             BANKERS TRUST COMPANY, a New York banking corporation,
             not in its individual capacity, but solely as Trustee
                   ("Party A"), for PEOPLE'S BANK CREDIT CARD
                           MASTER TRUST (the "Trust")

                                      and

                     SWISS BANK CORPORATION, LONDON BRANCH
                                  ("Party B").


                                     PART 1

                             TERMINATION PROVISIONS
                             ----------------------


     (a)  "SPECIFIED ENTITY" means in relation to Party A for the purpose of:

     Section 5(a)(v), none.
     Section 5(a)(vi), none.
     Section 5(a)(vii), none.
     Section 5(b)(iv), none.

                 and in relation to Party B for the purpose of:

     Section 5(a)(v), none.
     Section 5(a)(vi), none.
     Section 5(a)(vii), none.
     Section 5(b)(iv), none.
<PAGE>
 
     (b)  "SPECIFIED TRANSACTION" will have the meaning specified in Section 14.

     "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b) as it
applies to Party B but not Party A.  "MATERIALLY WEAKER" as such term is used in
Section 5(b)(iv) means that the resulting, surviving or transferee entity has
suffered a Downgrade (as defined herein except that the resulting, surviving or
transferee entity will replace Party B within the Downgrade definition).

     (c)  The "CROSS-DEFAULT" provisions of Section 5(a)(vi) will not apply to
Party A but will apply to Party B but shall exclude any default that results
solely from wire transfer difficulties or an error or omission of an
administrative or operational nature (so long as sufficient funds are available
to the relevant party on the relevant date and only if payment is made within
three Business Days after such transfer difficulties have been corrected or the
error or omission has been discovered).

     "THRESHOLD AMOUNT" means with respect to Party B, 2% of "Total Capital and
Reserves" as shown on the most recent annual audited financial statements of
Swiss Bank Corporation.

     (d)  The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not
apply to Party A or Party B.

     (e)  PAYMENTS ON EARLY TERMINATION.  For the purpose of Section 6(e):

          (i)  Loss will apply; provided, however, that for the avoidance of
                                --------  -------                           
               doubt, if at any time and so long as Party A shall have satisfied
               in full all its payment obligations under Section 2(a)(i) of this
               Agreement and shall at the time have no future payment
               obligations, (i) if Party A shall be determining its Loss in
               respect of any Terminated Transaction, such Loss shall never be a
               negative number, and (ii) if Party B shall be determining its
               Loss in respect of any Terminated Transaction, such Loss shall
               never be expressed as a positive number.

          (ii)  The Second Method will apply.

     (f)  "TERMINATION CURRENCY" means United States Dollars.

     (g)  ADDITIONAL TERMINATION EVENT; CREDIT DOWNGRADE.

          (i)  If either (A) the long-term unsecured debt or long-term
     certificate of deposit rating of Party B is

                                      -2-
<PAGE>
 
     withdrawn or reduced below Aa3 by Moody's Investors Service, Inc.
     ("Moody's") or (B) the short-term unsecured debt or short-term certificate
     of deposit rating of Party B is withdrawn or reduced below A-1+ by Standard
     & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
     ("S&P") (each such withdrawal or reduction, a "Downgrade"), Party B shall
     promptly notify in writing Party A and the Rating Agencies of such
     Downgrade, and shall within 30 days of the date of such Downgrade (in the
     case of a Downgrade by Moody's) or within 60 days of the date of such
     Downgrade (in the case of a Downgrade by S&P), in each case with the prior
     written confirmation of each of the Rating Agencies that such arrangement
     will not result in the reduction or withdrawal of the rating of the Series
     1996-1 Certificates in effect immediately prior to such Downgrade, at the
     expense of Party B, (x) obtain a substitute cap provider ("X"), reasonably
     acceptable to Party A and with respect to which the Rating Agencies shall
     have provided the foregoing prior written confirmation, and replace the
     Transactions hereunder with Transactions on identical terms except that X
     shall be "Party B", or (y) enter into a "Qualifying Substitute Arrangement"
     (as defined below) to assure performance by Party B of its obligations
     under the Transactions.

          (ii)  In the event that Party B fails to satisfy any of its
     obligations referred to in Clause (i) above within the time periods
     prescribed, such failure shall constitute an Additional Termination Event
     with Party B as the Affected Party.

          (iii)  "Qualifying Substitute Arrangement" shall mean  any arrangement
     satisfactory to the Rating Agencies, including collateral, guarantees or
     letters of credit, which arrangement will result in the Rating Agencies not
     reducing or withdrawing the rating in effect of the Series 1996-1
     Certificates outstanding immediately prior to the Downgrade.

     (h)  Notwithstanding any provision contained herein, in the Agreement or in
any Confirmation (including any provision relating to Section 2(a)(iii) of the
Agreement regarding Events of Default and Potential Events of Default, Section 5
of the Agreement regarding Events of Default and Termination Events, but
excluding Section 5(b)(i) of the Agreement, or Section 6 of the Agreement
regarding Early Termination), the obligations of Party B contained herein, in
the Agreement or in any Confirmation shall be absolute, unconditional and
irrevocable and all payments required to be made by Party B hereunder, under the
Agreement and under any Confirmation shall be made without offset, counterclaim
or defense.

                                      -3-
<PAGE>
 
     (i)  The first sentence of Section 6(d)(ii) of the Agreement is hereby
modified to read in its entirety as follows: "An amount calculated as being due
in respect of an Early Termination Date under section 6(e) will be payable on
(i) the day that notice of the amount payable is effective if such notice is
given prior to 10:00 a.m. (New York time) or (ii) the next New York City
Business Day after notice of the amount payable is effective if such notice is
given after 10:00 a.m. (New York time)."

                                     PART 2

                              TAX REPRESENTATIONS
                              -------------------

     (a)  PAYER TAX REPRESENTATIONS.  For the purposes of Section 3(e) of this
Agreement, Party B will make the following representation:

     It is not required by any applicable law, as modified by the practice of
     any relevant governmental revenue authority, of any Relevant Jurisdiction
     to make any deduction or withholding for or on account of any Tax from any
     payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this
     Agreement) to be made by it to Party A under this Agreement.

     (b)  PAYEE TAX REPRESENTATIONS.  For the purposes of Sections 3(e) and 3(f)
of this Agreement, Party A makes no representations.


                                     PART 3

                         AGREEMENT TO DELIVER DOCUMENTS
                         ------------------------------

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:

     (a)  Tax forms, documents or certificates to be delivered are:

<TABLE>
<CAPTION>
 
PARTY REQUIRED TO     FORM/DOCUMENT/        DATE BY WHICH
 DELIVER DOCUMENT      CERTIFICATE         TO BE DELIVERED
- -----------------     -------------     ----------------------
<S>                  <C>                <C>

Party B              IRS Form 4224      Upon execution of this
                                        Agreement.
 
Party A              W-9 for the Trust  Upon execution of this
                                        Agreement.
 
</TABLE>

                                      -4-
<PAGE>
 
     (b)  Other documents to be delivered are:
<TABLE>
<CAPTION>
 
 
                                                   DATE BY       COVERED BY
PARTY REQUIRED TO         FORM/DOCUMENT/        WHICH TO BE     SECTION 3(d)
 DELIVER DOCUMENT           CERTIFICATE          DELIVERED     REPRESENTATION
- -----------------        ---------------       -------------   ---------------

<S>                  <C>                        <C>            <C>
Party A              A Certificate of an        Upon           Yes.
                     authorized officer of      execution of
                     the party, certifying      this
                     the names, true            Agreement.
                     signatures and authority
                     of the officers of the
                     party signing this
                     Agreement.

Party A              Opinion of counsel of      Upon           Yes.
                     Party A in form and        execution of
                     substance satisfactory     this
                     to Party B.                Agreement.

Party B              A certificate of an        Upon           Yes.
                     authorized officer of      execution of
                     the party, certifying      this
                     the names, true            Agreement.
                     signatures and authority
                     of the officers of the
                     party signing this
                     Agreement.

Party B              Opinions of Swiss          Upon           Yes.
                     counsel, United Kingdom    execution of
                     counsel and New York       this
                     counsel to Party B and     Agreement.
                     addressed to Party A,
                     the rating agencies
                     rating the Certificates
                     issued by the Trust,
                     covering such other
                     matters as reasonably
                     requested by, and
                     satisfactory to the
                     addressees.


</TABLE> 

                                      -5-
<PAGE>
 
<TABLE>
<CAPTION>
 
 
                                                   DATE BY       COVERED BY
PARTY REQUIRED TO         FORM/DOCUMENT/        WHICH TO BE     SECTION 3(d)
 DELIVER DOCUMENT           CERTIFICATE          DELIVERED     REPRESENTATION
- -----------------        ---------------       -------------   ---------------
<S>                  <C>                        <C>            <C>

Party B              Audited annual             120 days       Yes.
                     consolidated financial     after each
                     statements of Party B,     fiscal year
                     prepared in accordance     of Party B.
                     with accounting
                     principles that are
                     generally accepted in
                     Switzerland.
</TABLE>

                                     PART 4

                                 MISCELLANEOUS
                                 -------------

     (a)  ADDRESSES FOR NOTICES.  For the purpose of Section 12(a) of this 
Agreement:

     Address for notices or communications to Party A:

          Address:  Bankers Trust Company, as Trustee
                      for People's Bank Credit Card
                      Master Trust
                    4 Albany Street
                    New York, New York  10006

          Attention:  Corporate Trust and Agency Group

          Facsimile No.:  (212) 250-6439

          Telephone No.:  (212) 250-6137

          (For all purposes)

     With copies to the Servicer:

          Address:  People's Bank
                    Bridgeport Center
                    850 Main Street
                    Bridgeport, Connecticut  06604-4913

          Attention:  General Counsel and
                      Interest Rate Risk Manager

     Address for notices or communications to Party B:

          Address:  Swiss Bank Corporation, London Branch
                    1 High Timber Street
                    London EC4V 3SB, England

                                      -6-
<PAGE>
 
          Attention:  Swaps Group

          Telex No.:  887434        Answerback:  SBCOG

          Facsimile No.:  071-711-2634

          Telephone No.:  071-711-2131

          (For all purposes.)

     (b)  PROCESS AGENT.  For the purpose of Section 13(c):

     Party B appoints as its Process Agent in the State of New York: Swiss Bank
     Corporation, New York Branch, 222 Broadway, New York, New York 10038,
     Attention:  Legal Affairs.

     (c)  OFFICES.  The provisions of Section 10(a) will apply to this
Agreement, it being the understanding of the parties that while obligations
entered into by Party B pursuant to this Agreement constitute obligations of
Swiss Bank Corporation ("SBC") (and not merely of its London Branch), Party A
will, in respect of any Transaction and in the ordinary course of business, send
payments and notices to and receive payments and notices from Party B rather
than any other Office of SBC.  Party A may seek payment from the head office of
SBC with respect to this Agreement in the event that an amount payable to Party
A by Party B pursuant to this Agreement (including any amount payable as a
result of the occurrence or designation of an Early Termination Date) has not
been paid in full when due.

     (d)  MULTIBRANCH PARTY.  For the purpose of Section 10:

     Party A is not a Multibranch Party.

     Party B is not a Multibranch Party.

     (e)  CALCULATION AGENT.  The Calculation Agent is Party B, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.

     (f)  CREDIT SUPPORT DOCUMENT.  None, except as may be provided pursuant to
paragraph (g) of Part 1 of this Schedule.

     (g)  CREDIT SUPPORT PROVIDER.  None, except as may be applicable pursuant
to paragraph (g) of Part 1 of this Schedule.

     (h)  GOVERNING LAW.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CHOICE OF
LAW DOCTRINE.

                                      -7-
<PAGE>
 
     (i)  "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement.

     (j)  NETTING OF PAYMENTS.  The limitation set forth in Section 2(c)(ii) of
this Agreement will apply and therefore the netting specified in Section 2(c) of
this Agreement will be limited to the same Transaction.


                                     PART 5

                                OTHER PROVISIONS
                                ----------------

     (a)  RECOURSE.  Notwithstanding anything to the contrary contained in this
Agreement, the obligations of Party A under this Agreement shall not be recourse
to Bankers Trust Company or People's Bank, a Connecticut capital stock savings
bank ("People's Bank"), as Seller and Servicer under the Pooling and Servicing
Agreement (as defined below under "Capitalized Terms"), or any Class A
Certificateholder or Class B Certificateholder (either, any "Certificateholder")
(or any person or organization acting on behalf of Bankers Trust Company,
People's Bank or any Certificateholder or any affiliate, officer or director of
Bankers Trust Company, People's Bank or any Certificateholder) and, with respect
to any payment obligations of Party A, recourse shall be had solely to the
assets of the Trust.

     (b)  LIMITATION OF DEFAULTS AND TERMINATION.  Notwithstanding the terms of
Sections 5 and 6 of this Agreement, if at any time and so long as Party A shall
have satisfied in full all of its payment obligations under Section 2(a)(i) of
this Agreement and shall at the time have no future payment obligations, whether
absolute or contingent, under such Section, then unless Party B is required
pursuant to appropriate proceedings to return to Party A or otherwise returns to
Party A upon demand of Party A of any portion of any such payment, (i) the
occurrence of an event described in Section 5(a) of this Agreement with respect
to Party A shall not constitute an Event of Default or a Potential Event of
Default with respect to Party A as the Defaulting Party and (ii) Party B shall
be entitled to designate an Early Termination Date pursuant to Section 6 of this
Agreement only as a result of the occurrence of a Termination Event set forth in
Section 5(b)(i) of this Agreement with respect to Party B as the Affected Party;
                                                                                
provided, however, that upon the occurrence of a Termination Event as set forth
- --------  -------                                                              
in Section 5(b)(ii) or 5(b)(iii) of the Agreement with respect to Party B as the
Affected Party, Party B may transfer all its rights and obligations under this
Agreement in respect of the Affected Transactions to another branch of SBC so
that such Termination Event ceases to exist.  Any such transfer will be subject
to and conditional upon the prior written consent of Party A, which

                                      -8-
<PAGE>
 
consent will not be withheld if Party A's policies in effect at such time would
permit it to enter into Transactions with the transferee on the terms proposed.
For the purposes of the immediately preceding sentence and Section 6(b)(ii) of
the Agreement and for the avoidance of doubt, Party A's policies include,
without limitation, a requirement that each of the Rating Agencies confirm in
writing that the relevant transfer not result in the reduction or withdrawal of
the rating of the Series 1996-1 Certificates in effect immediately prior to the
applicable Termination Event.

     (c)  COVENANT NOT TO INSTITUTE PROCEEDINGS.  In connection with this
Agreement, Party B hereby covenants and agrees that it will not at any time
institute against the Trust, or join in any institution against the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state or
any foreign bankruptcy or similar law.

     (d)  TRANSFER OF RIGHTS.  Notwithstanding anything in Section 7 of the
Agreement or any Confirmation to the contrary, Party B hereby agrees and
acknowledges that Party A shall have the right to transfer all or a portion of
its rights to payment from Party B under any Transaction to any Person, provided
that either (A) (i) such Person meets the U.K. money laundering internal
policies of Party B and is a corporation or financial institution organized
under the laws of the United States or any State or political subdivision
thereof, and (ii) neither party is required to pay to the other party an
additional amount under Section 2(d)(i)(4) or to receive a payment from which an
amount is required to be deducted or withheld for or on account of a Tax and no
additional amount is required to be paid in respect of such Tax under Section
2(d)(i)(4) of the Agreement or (B) Party B has given its consent to such
transfer (which consent shall not be unreasonably withheld by Party B).  In the
case of clause (A)(i) of the immediately preceding sentence, within five
Business Days after Party A notifies Party B in writing of the identity of the
prospective transferee, Party B shall notify Party A whether or not such Person
meets the policies of Party B described in such clause (A)(i).  Any transfer
pursuant to this paragraph (d) shall be in accordance with the provisions of
Section 4.11 of the Supplement (as defined herein).  Party B hereby agrees to
make such payments due hereunder as have been transferred to the transferee
designated by Party A and to the account or accounts specified in a written
notice to be provided by Party A to Party B at least 5 Business Days prior to
the effectiveness of such transfer but not more than 30 days prior to the
effectiveness of such transfer.

     (e)  SUCCESSORS.  Notwithstanding anything in Section 7 of the Agreement or
any Confirmation to the contrary, the terms

                                      -9-
<PAGE>
 
Party A and other terms with like significance as used in the Agreement or
therein shall include all successors from time to time to Bankers Trust Company,
as trustee for the Trust and no consent of Party B shall be required for any
transfer or assignment to a successor trustee for the Trust.

     (f)  NO PERSONAL LIABILITY.  In the absence of gross negligence, willful
misconduct, or bad faith on the part of the Trustee, the Trustee will have no
personal liability for any amounts required to be paid by the Trust under this
Agreement.

     (g)  SEVERABILITY.  Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of the Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. The parties hereto
shall endeavor in good faith negotiations to replace the prohibited or
unenforceable provision with a valid provision, the economic effect of which
comes as close as possible to that of the prohibited or unenforceable provision.

     (h)  AMENDMENT.  No amendment, modification or waiver in respect of this
Agreement will be effective unless (i) it is in writing and executed by each of
the parties or confirmed by an exchange of telexes or facsimiles and (ii) except
as waived by the Rating Agencies, the Rating Agencies shall have received at
least 5 days prior written notice of such amendment and have advised in writing
that such amendment will not result in a downgrade or withdrawal of the then-
current rating on the Series 1996-1 Certificates.

     (i)  TERMINATION AT THE OPTION OF THE TRUST.  Party A may, upon at least
two Business Days' prior written notice, terminate in whole or in part (which
termination shall not be deemed to constitute a default or Event of Default
hereunder) any Transaction, prior to the related Termination Date, under the
Agreement; any amount paid by Party B in connection with such termination shall
be as agreed between the parties hereto, or if no agreement is reached by 12
noon, New York City time, on the applicable Early Termination Date, as
calculated by Party B on the basis of Market Quotations and Second Method.  For
the avoidance of doubt, Market Quotation shall never be expressed as being an
amount payable by Party A to Party B.

     (j)  SCHEDULED PAYMENTS BY PARTY A.  For the avoidance of doubt, Party A
has no payment obligations under Section 2(a)(i) of the Agreement other than
those specified as the Fixed Amounts in the Confirmations relating to the
Covered Transactions (as defined below), with a Fixed Rate Payer Payment Date of
June __, 1996.

                                      -10-
<PAGE>
 
     (k)  TRANSACTIONS.  This Agreement and all Transactions relate to the
Trust's Series 1996-1 Certificates, and unless otherwise agreed to in writing by
the parties hereto, the only Transactions governed hereby shall be the two
Transactions evidenced by the Confirmations dated June __, 1996, as such
Confirmations are modified from time to time (the "Covered Transactions").

     (l)  CAPITALIZED TERMS.  Capitalized terms not otherwise defined herein or
in the Definitions shall have the meanings assigned to them in the Pooling and
Servicing Agreement, dated as of June 1, 1993, by and between People's Bank as
Seller and Servicer, and Party A, as supplemented by the Series 1996-1
Supplement, dated as of June __, 1996 (the "Supplement") (as so supplemented,
the "Pooling and Servicing Agreement").

     (m)  WAIVER OF JURY TRIAL.  Each party hereto hereby irrevocably waives any
and all right to trial by jury in any Proceedings.

     (n)  REPRESENTATIONS AND WARRANTIES.  Section 3(a) is amended by adding the
following paragraph (vi):

          "(vii)  ELIGIBLE SWAP PARTICIPANT.  It is an "eligible swap
          participant" as that term is defined by the United States Commodity
          Futures Trading Commission in 17 C.F.R. Section 35.1(b)(2) and it has
          entered into this Agreement and it is entering into each Transaction
          in connection with its line of business (including financial
          intermediation services) or the financing of its business; and the
          material terms of this Agreement and such Transaction have been
          individually tailored and negotiated."

     (o)  NO RELIANCE.  This Agreement and each Transaction have been entered
into by each party in reliance only upon its judgment, in order to accomplish
legitimate business needs.  Neither party holds itself out as advising, or any
of its employees or agents as having any authority to advise, the other party as
to whether or not it should enter into this Agreement or any Transaction.
Neither party is receiving any compensation from the other party for providing
advice in respect of this Agreement or any Transaction, and any such advice
provided to such other party will not form the primary basis for an investment
decision by such other party.

     (p)  CONSENT TO RECORDING.  The parties agree that each may electronically
record all telephonic conversations between them and that any such recordings
may be submitted in evidence to any court or in any Proceedings for the purpose
of establishing any matters pertinent to any Transaction.

                                      -11-
<PAGE>
 
     IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date specified on the
first page of this document.


BANKERS TRUST COMPANY, not in its       SWISS BANK CORPORATION, LONDON 
 individual capacity but solely as      BRANCH
 Trustee for People's Bank Credit
 Card Master Trust
 
 
By:                                     By:
   ---------------------------             ------------------------------
Name:                                   Name:
Title:                                  Title:


DATE:                                   DATE:
     -------------------------               ----------------------------

                                      -12-
<PAGE>
 
                         [FORM OF CLASS A CONFIRMATION]

                                                                       [Class A]



                                  CONFIRMATION
                                  ------------


Date:  June __, 1996

To:  Bankers Trust Company,
     not in its individual
     capacity, but solely as
     Trustee for People's Bank
     Credit Card Master Trust

Attention:

From:  Swiss Bank Corporation,
           London Branch

Transaction
Reference Number:  _______________

          The purpose of this letter agreement is to set forth the terms and
conditions of the Transaction entered into between us on the date hereof.  This
letter constitutes a "Confirmation" as referred to in the Master Agreement
specified below.

          The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) (the
"Definitions") are incorporated into this Confirmation.  In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

     (a)  This Confirmation supplements, forms a part of, and is subject to, the
Master Agreement dated as of June __, 1996, as amended or supplemented from time
to time (the "Master Agreement") between you and us.  All provisions contained
in the Master Agreement shall govern this Confirmation except as expressly
modified below.  Additionally, upon the due execution and delivery of this
Confirmation, the [Class A] Confirmation dated June __, 1996, between People's
Bank and Swiss Bank Corporation, London Branch ("SBC"), which supplements the
Master Agreement dated as of June __, 1996, between People's Bank and SBC shall
be deemed cancelled in its entirety, and all right, title, obligations and
interest created thereunder shall cease to exist.
<PAGE>
 
     (b)  The terms of the particular Transaction to which this Confirmation
relates are as follows:

Type of Transaction:          Rate Cap Transaction

Notional Amount:              The Notional Amount for the period from the
                              Effective Date through and including the
                              Calculation Period commencing on _______ __, ____
                              (or, if such day is not a Business Day, commencing
                              on the following Business Day) is
                              U.S.$___________.  Thereafter, the Notional Amount
                              for the applicable Calculation Period commencing
                              on the applicable date specified below (or, if
                              such day is not a Business Day, commencing on the
                              following Business Day) is set forth below
                              opposite such date:

                                                      Notional
                              Date                     Amount
                              ----                     ------

                              _________ __, ____     $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____    $___________
                              __________ __, ____         0


Trade Date:                   June __, 1996

Effective Date:               June __, 1996

Termination Date:             _________ __, 200_

                                      -2-
<PAGE>
 
Fixed Rate Amounts:

     Fixed Rate Payer:        Bankers Trust Company, not in its individual
                              capacity, but solely as Trustee for People's Bank
                              Credit Card Master Trust (the "Trustee")

     Fixed Rate Payer
       Payment Date:          Not applicable.

     Fixed Amount:            Zero./1/


Floating Amounts:

     Floating Rate Payer:     SBC

     Cap Rate:                __.__% per annum

     Floating Rate Payer
       Payment Dates:         The third Business Day preceding each Distribution
                              Date.  Early Payment applies.  No adjustment of
                              Floating Rate Payer Payment Dates.

     Period End Dates:        Each Distribution Date.  No
                              adjustment of Period End Dates.

     Floating Rate for Initial
       Calculation Period:    _.____% per annum

     Floating Rate Option:    USD-LIBOR-BBA

     Designated Maturity:     One Month.

     Spread:                  None.

     Floating Rate Day Count
       Fraction:              Actual/360

     Reset Dates:             First day of each Calculation Period.

- ----------------------
/1/  This Confirmation relates to an Interest Rate Cap Assignment and Assumption
     Agreement, dated as of June __, 1996, among People's Bank, the Trustee and
     SBC, pursuant to which People's Bank transferred all of its rights, title,
     obligations and interest in and under the Confirmations, dated June __,
     1996, between People's Bank and SBC. Under the Confirmation executed by
     People's Bank and SBC, relating to this Confirmation, the Fixed Amount was
     U.S.$_____________.



                                      -3-
<PAGE>
 
 Compounding:                 Not applicable.

 Business Days:               New York, and Bridgeport, Connecticut

Calculation Agent:            SBC

     (c)  Account Details:

Payments to Bankers Trust
  Company:

     Account for payments:    Bankers Trust Company
                              ABA No.:  ___-___-___
                              Account No.:  ___-___-__
                              Reference:  People's Bank 1996-1
                              Attention:  Corporate Trust and
                                           Agency Group

Payments to SBC

     Account for payments:    ___________________
                              ABA No.:  ___-___-___
                              Account No.:  ___-___-___
                              [Account Name:] _______________
                              [Reference:] __________________

     (d)  Other Provisions:

               Solely for the avoidance of doubt, in the event that the Reset
               Date for any Calculation Period shall not be a London Banking Day
               and the rate appearing on the Telerate Page 3750 described in the
               definition of "USD-LIBOR-BBA" on the day that is two London
               Banking Days preceding that Reset Date indicates that it shall be
               effective for deposits commencing on the London Banking Day
               immediately succeeding the Reset Date, such rate shall
               nonetheless be the Floating Rate for such Calculation Period.

Credit Support Documents:

     SBC Credit
     Support Documents:       None.

     Counterparty Credit
     Support Documents:       None.

                                      -4-
<PAGE>
 
Certain Defined Terms:

     "Distribution Date" shall mean _____ __, 1996 and the fifteenth day of each
calendar month thereafter, or, if such fifteenth day is not a Business Day, the
next succeeding Business Day.

               [Rest of page intentionally left blank.]


















                                      -5-
<PAGE>
 
     Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.

                         SWISS BANK CORPORATION,
                           LONDON BRANCH


                         By:______________________
                            [Name]
                            [Title]



















                                      -6-
<PAGE>
 
Accepted and confirmed as
of the date first written:

BANKERS TRUST COMPANY, not in
  its individual capacity, but
  solely as Trustee for
  People's Bank Credit Card
  Master Trust


By:
   ------------------------------













                                      -7-
<PAGE>
 
                         [FORM OF CLASS B CONFIRMATION]

                                                                       [Class B]



                                  CONFIRMATION
                                  ------------


Date:  June __, 1996

To:  Bankers Trust Company, 
     not in its individual 
     capacity, but solely as
     Trustee for People's Bank 
     Credit Card Master Trust

Attention:

From:  Swiss Bank Corporation,           
          London Branch.

Transaction
Reference Number: _________________

          The purpose of this letter agreement is to set forth the terms and
conditions of the Transaction entered into between us on the date hereof.  This
letter constitutes a "Confirmation" as referred to in the Master Agreement
specified below.

          The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) (the
"Definitions") are incorporated into this Confirmation.  In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

     (a)  This Confirmation supplements, forms a part of, and is subject to, the
Master Agreement dated as of June __, 1996, as amended or supplemented from time
to time (the "Master Agreement") between you and us.  All provisions contained
in the Master Agreement shall govern this Confirmation except as expressly
modified below.  Additionally, upon the due execution and delivery of this
Confirmation, the [Class B] Confirmation dated June __, 1996, between People's
Bank and Swiss Bank Corporation, London Branch ("SBC"), which supplements the
Master Agreement dated as of June __, 1996, between People's Bank and SBC shall
be deemed cancelled in its entirety, and all right, title, obligations and
interest created thereunder shall cease to exist.
<PAGE>
 
     (b)  The terms of the particular Transaction to which this Confirmation
relates are as follows:

Type of Transaction:                Rate Cap Transaction

Notional Amount:                    U.S.$___________

Trade Date:                         June __, 1996

Effective Date:                     June __, 1996

Termination Date:                   ________ __, 200_

Fixed Rate Amounts:

     Fixed Rate Payer:              Bankers Trust Company, not in its individual
                                    capacity, but solely as Trustee for People's
                                    Bank Credit Card Master Trust (the
                                    "Trustee")

     Fixed Rate Payer
       Payment Date:                Not applicable.

     Fixed Amount:                  Zero./1/


Floating Amounts:

     Floating Rate Payer:           SBC

     Cap Rate:                      __.__% per annum





- --------------------
/1/  This Confirmation relates to an Interest Rate Cap Assignment and Assumption
     Agreement, dated as of June __, 1996, among People's Bank, the Trustee and
     SBC, pursuant to which People's Bank transferred all of its rights, title,
     obligations and interest in and under the Confirmations, dated June __,
     1996, between People's Bank and SBC. Under the applicable Confirmation,
     executed by People's Bank and SBC, relating to this Confirmation, the Fixed
     Amount was U.S.$___,___.



                                      -2-
<PAGE>
 
                                    Floating Rate Payer
       Payment Dates:               The third Business Day preceding each
                                    Distribution Date.  Early Payment applies.
                                    No adjustment of Floating Rate Payer Payment
                                    Dates.

     Period End Dates:              Each Distribution Date.
                                    No adjustment of Period End Dates.

     Floating Rate for Initial
       Calculation Period:          _.___% per annum

     Floating Rate Option:          USD-LIBOR-BBA

     Designated Maturity:           One Month.

     Spread:                        None

     Floating Rate Day Count
       Fraction:                    Actual/360

     Reset Dates:                   First day of each Calculation Period.

     Compounding:                   Not applicable.

     Business Days:                 New York, and Bridgeport, Connecticut

Calculation Agent:                  SBC

     (c)  Account Details:

Payments to Bankers Trust
  Company:

     Account for payments:          Bankers Trust Company ABA No.:  ___-___-___
                                    Account No.:  ___-___-__ Reference:
                                    People's Bank 1996-1 Attention:  Corporate
                                    Trust and Agency Group

Payments to SBC:

     Account for payments:          ____________________
                                    ABA No.:  ___-___-___
                                    Account No.:  ___-___-___
                                    [Account Name:] ______________


                                      -3-
<PAGE>
 
                                    [Reference:] ________________

     (d)  Other Provisions:         Solely for the avoidance of doubt, in the
                                    event that the Reset Date for any
                                    Calculation Period shall not be a London
                                    Banking Day and the rate appearing on the
                                    Telerate Page 3750 described in the
                                    definition of "USD-LIBOR-BBA" on the day
                                    that is two London Banking Days preceding
                                    that Reset Date indicates that it shall be
                                    effective for deposits commencing on the
                                    London Banking Day immediately succeeding
                                    the Reset Date, such rate shall nonetheless
                                    be the Floating Rate for such Calculation
                                    Period.

Credit Support Documents:

     SBC Credit
     Support Documents:             None.

     Counterparty Credit
     Support Documents:             None.

Certain Defined Terms:

"Distribution Date" shall mean ____ __, 1996 and the fifteenth day of each
 -----------------                                                        
calendar month thereafter, or, if such fifteenth day is not a Business Day, the
next succeeding Business Day.

                    [Rest of page intentionally left blank.]















                                      -4-
<PAGE>
 
     Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.

                              SWISS BANK CORPORATION,
                                LONDON BRANCH


                              By:   ________________________
                                    [Name]
                                    [Title]



















                                      -5-
<PAGE>
 
Accepted and confirmed as
of the date first written:

BANKERS TRUST COMPANY, not in     
  its individual capacity, but
  solely as Trustee for
  People's Bank Credit Card
  Master Trust


By:  ________________________




















                                      -6-

<PAGE>
 
                                                                     Exhibit 5.1
                                                                     -----------


                     [LETTERHEAD OF MAYER, BROWN & PLATT]


                                                                               
                                                            June 21, 1996


People's Bank
850 Main Street
Bridgeport, Connecticut  06604


     Re:  People's Bank Master Credit Card Trust
          Floating Rate Class A Asset Backed Certificates, Series 1996-1
          --------------------------------------------------------------
          Floating Rate Class B Asset Backed Certificates, Series 1996-1
          --------------------------------------------------------------

Ladies and Gentlemen:

          We have acted as special counsel to People's Bank, a Connecticut stock
savings bank ("People's").  At your request, we have examined the Registration
Statement on Form S-1 (the "Registration Statement") filed by People's, as
originator of the People's Bank Credit Card Master Trust (the "Trust"), on
November 17, 1995 with the Securities and Exchange Commission, relating to the
registration under the Securities Act of 1933, as amended (the "Act"), of the
Floating Rate Class A Asset Backed Certificates, Series 1996-1 (the "Class A
Certificates") and the Floating Rate Class B Asset Backed Certificates, Series
1996-1 (the "Class B Certificates"; together with the Class A Certificates, the
"Certificates") to be issued by the Trust, including a copy of the form of
Pooling and Servicing Agreement included as Exhibit 4.1 to the Registration
Statement (the "Pooling and Servicing Agreement").  We have also examined the
corporate resolutions adopted by People's in connection with the authorization
of the transactions described in the Registration Statement and such other
documents and records as we have deemed necessary for the purposes of rendering
this opinion.

          Based on such examination, we are of the opinion that the
Certificates, when executed and delivered by People's in accordance with the
Pooling and Servicing Agreement, authenticated by the Trustee in accordance with
the Pooling and Servicing Agreement, and issued and sold as contemplated by the
Registration Statement and the Prospectus delivered pursuant to  Section 5 of
the Act, will be legally and validly issued, fully paid and nonassessable and
entitled to the benefits provided by the Pooling and Servicing Agreement.
<PAGE>
 
MAYER, BROWN & PLATT


          We have assumed the due authorization, execution and delivery of the
Pooling and Servicing Agreement by the parties thereto, other than the due
authorization of the execution and delivery of such agreement by People's.  We
are authorized to practice law in the State of New York and do not express any
opinion as to any laws other than the laws of the State of New York and the
federal laws of the United States of America.

          We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus which constitutes a part of the Registration
Statement.

                                         Very truly yours,


                                     /s/ Mayer, Brown & Platt

<PAGE>
 
                                                                     EXHIBIT 8.1

                     [LETTERHEAD OF MAYER, BROWN & PLATT]


                                  June 21, 1996




People's Bank
850 Main Street
Bridgeport, Connecticut  06604


          Re:  People's Bank Credit Card Master Trust
               Floating Rate Class A Asset Backed Certificates,
               Series 1996-1; Floating Rate Class B Asset Backed
               Certificates, Series 1996-1
               -------------------------------------------------

Ladies and Gentlemen:

     We have acted as special tax counsel to People's Bank, a Connecticut stock
savings bank (the "Company"), in connection with (i) the proposed issuance and
sale by the Company of the Floating Rate Class A Asset Backed Certificates,
Series 1996-1 (the "Class A Certificates") and the Floating Rate Class B Asset
Backed Certificates, Series 1996-1 (the "Class B Certificates" and together with
the Class A Certificates, the "Certificates") issued by People's Bank Credit
Card Master Trust pursuant to the Pooling and Servicing Agreement, dated as of
June 1, 1993, between the Company, as Seller and Servicer, and Bankers Trust
Company, a New York banking corporation, as Trustee, and the Series 1996-1
Supplement thereto (collectively, the "Pooling and Servicing Agreement"), and
(ii) the preparation and filing with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, of a Registration Statement on
Form S-1 (as amended by Amendment No. 2 thereto, the "Registration Statement").

     We are familiar with the proceedings to date in connection with the
proposed issuance and sale of the Certificates and in order to express our
opinion hereinafter stated, (a) we have examined copies of the form of the
Pooling and Servicing Agreement and the form of the Certificates filed as
exhibits to the Registration Statement (collectively the "Operative Documents")
and (b) we have examined such other records and documents and such matters of
law, and we have satisfied ourselves as to such matters of fact, as we have
considered relevant for purposes of this opinion.
<PAGE>
 
MAYER, BROWN & PLATT

People's Bank
June 21, 1996
Page 2

     The opinion set forth in this letter is based upon the applicable
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated and proposed thereunder, current positions of the
Internal Revenue Service (the "IRS") contained in published Revenue Rulings and
Revenue Procedures, current administrative positions of the IRS and existing
judicial decisions.  No tax rulings will be sought from the IRS with respect to
any of the matters discussed herein.

     We express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States of America to the extent specifically referred
to herein.

     Based on and subject to the foregoing and assuming that the Operative
Documents are executed and delivered in substantially the form we have examined,
we hereby confirm that the statements described to be our legal opinions in the
Prospectus which constitutes a part of the Registration Statement (the
"Prospectus") under the heading "Certain Federal Income Tax Consequences"
constitute our opinions as to the material federal income tax consequences
discussed therein.  There can be no assurance, however, that the tax conclusions
presented therein will not be successfully challenged by the IRS, or
significantly altered by new legislation, changes in IRS positions or judicial
decisions, any of which challenges or alterations may be applied retroactively
with respect to completed transactions.

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of our name under the headings "Prospectus
Summary -- Tax Status" and "Certain Federal Income Tax Consequences" in the
Prospectus.

                              Very truly yours,


                          /s/ Mayer, Brown & Platt

<PAGE>
 
                                                                     EXHIBIT 8.2


                    [LETTERHEAD OF PULLMAN & COMLEY, LLC]

                                                June 21, 1996


People's Bank
850 Main Street
Bridgeport, Connecticut 06604

     RE: PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1996-1
         ----------------------------------------------------

Gentlemen:

          You have requested our opinion as to certain Connecticut income tax
consequences of the issuance of Asset Backed Certificates (the "Certificates")
pursuant to a Pooling and Servicing Agreement dated as of June 1, 1993 (as
amended to date, the "Pooling and Servicing Agreement") by and between People's
Bank ("People's"), as seller and servicer, and Bankers Trust Company as trustee
acting on behalf of the holders of Certificates, as the same is to be
supplemented by the Series 1996-1 Supplement by and between the same parties
(the "Supplement"). Specifically, you have asked us whether the Certificates
will be treated as indebtedness and whether the People's Bank Credit Card Master
Trust (the "Trust") will be disregarded for Connecticut income tax purposes.

          In connection with your request, you have furnished us with copies of:
(a) the Registration Statement on Form S-1 (as amended by Amendment No. 2
thereto, the "Registration Statement") relating to the Certificates; (b) the
Pooling and Servicing Agreement; (c) a draft of the Supplement, and (d) the
opinion of Mayer, Brown & Platt (upon which we have been authorized to rely) as
to certain federal income tax consequences of the issuance of the Certificates.
This opinion is based on those documents and on the assumption that there will
be no material changes in fact or law between the date hereof and the date of
the issuance and sale of the Certificates.

          Mayer, Brown & Platt has opined that for federal income tax purposes,
the Trust will be disregarded and the Certificates will be characterized as
indebtedness secured by the receivables which are transferred to the Trust. We
assume that opinion to be correct, and based upon that assumption, it is our
opinion that the Trust will be disregarded and the Certificates will be treated
as indebtedness for both the Connecticut income tax applicable to individuals,
trusts and estates and the Connecticut corporation business tax.
<PAGE>
 
PULLMAN & COMLEY, LLC

  Page 2


          Mayer, Brown & Platt has further opined that the issuance of the
Certificates will not adversely affect the federal income tax characterization
of the holder of any outstanding series of asset-backed certificates or any
Certificate Owner (as defined in the Pooling and Servicing Agreement), or result
in the Trust being subject to federal income tax at the entity level. We assume
that opinion to be correct, and based upon that assumption, it is our opinion
that the issuance of the Certificates will likewise not adversely affect the
Connecticut income and corporation business tax characterization of the holder
of any outstanding series of asset-based certificates or any Certificate Owner,
or result in the Trust being subject to Connecticut income tax at the entity
level.

          For purposes of each of the Connecticut income and corporation
business taxes, the Connecticut adjusted gross income upon which tax is payable
is the taxpayer's federal adjusted gross income, subject to certain adjustments
which are not relevant in this case. Consequently, the characterization properly
accorded to the Trust and the Certificates for federal income tax purposes will
be determinative for purposes of the Connecticut income and corporation business
taxes.

          We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of our name in the Prospectus which
constitutes a part of the Registration Statement.


                                                Very truly yours,       
                                                                        
                                                                        
                                                /s/ PULLMAN & COMLEY, LLC
                                                    PULLMAN & COMLEY, LLC

P&C:cs


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