<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997
REGISTRATION NO.333-33269
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
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 OFFERED CERTIFICATES)
UNITED STATES 6025 06-1213065
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
850 MAIN STREET
BRIDGEPORT, CONNECTICUT 06604
(203) 338-7171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA 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. MAYER, ANDREW M. FAULKNER, ESQ.SKADDEN,
BROWN & PLATT1675 BROADWAY NEW ARPS, SLATE, MEAGHER & FLOM LLP919
YORK, NEW YORK 10019(212) 506-2500 THIRD AVENUENEW 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. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE PROPOSED
SECURITIES BEING AMOUNT TO OFFERING MAXIMUM AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
Floating Rate Class A
Asset Backed
Certificates,
Series 1997-2......... $425,000,000 100% $425,000,000 $128,787.88
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Floating Rate Class B
Asset Backed
Certificates,
Series 1997-2......... $ 33,750,000 100% $ 33,750,000 $ 10,227.27
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Total.................. $458,750,000 100% $458,750,000 $139,015.15
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) $303.04 of which has previously been 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.
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<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
NAME AND CAPTION IN FORM S-1 CAPTION IN PROSPECTUS
---------------------------- ---------------------
<C> <S> <C>
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; Special
Considerations; 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 Prospectus Summary; The Trust; The
Registered...................... 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 $425,000,000 aggregate
principal amount of Floating Rate Class A Asset Backed Certificates, Series
1997-2 and $33,750,000 aggregate principal amount of Floating Rate Class B
Asset Backed Certificates, Series 1997-2. This Registration Statement also
contains a Prospectus Supplement which will be used in connection with the
Prospectus for the Offered Certificates in connection with certain offers and
sales outside the United States.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGIS- +
+TRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECU- +
+RITIES 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 September 12, 1997
PEOPLE'S BANK CREDIT CARD MASTER TRUST
$425,000,000 Floating Rate Class A Asset Backed Certificates, Series 1997-2
$33,750,000 Floating Rate Class B Asset Backed Certificates, Series 1997-2
[LOGO OF PEOPLE'S BANK APPEARS HERE]
Transferor and Servicer
Each of the Floating Rate Class A Asset Backed Certificates, Series 1997-2 (the
"Class A Certificates") and each of the Floating Rate Class B Asset Backed
Certificates, Series 1997-2 (the "Class B Certificates" and, together with the
Class A Certificates, the "Offered 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 and restated, between People's Bank, as
transferor and servicer (the "Transferor"), and Bankers Trust Company, as
trustee. In addition, the Collateral Interest (as defined herein), which is not
offered hereby, will be issued in the initial amount of $41,250,000 (the
Collateral Interest together with the Offered Certificates, the
(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, PEOPLE'S STRUCTURED
FINANCE CORP. ("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>
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Price to Underwriting Proceeds to
Public (1) Discount (2) PSFC (1)(3)
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<S> <C> <C> <C>
Per Class A Certificate % % %
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Per Class B Certificate % % %
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Total $ $ $
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</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 esti-
mated to be $750,000.
The Offered 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 Offered
Certificates will be delivered in book-entry form on or about September ,
1997, through the facilities of The Depository Trust Company, Cedel Bank,
societe anonyme, and the Euroclear System.
UNDERWRITERS OF THE CLASS A CERTIFICATES
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
UNDERWRITER OF THE CLASS B CERTIFICATES
J.P. MORGAN & CO.
The date of this Prospectus is September , 1997.
<PAGE>
(Continued from previous page)
"Certificates"). 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 certain bank accounts with respect to
the Certificates and certain interest rate cap agreements, each as defined or
described herein. People's Bank services the Receivables, and PSFC, a wholly-
owned subsidiary of People's Bank, owns the undivided interest in the Trust
not represented by the Certificates or the other interests issued by the
Trust. The Trust currently has four other series of certificates outstanding,
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 Offered Certificates is scheduled to be
distributed on October 15, 1997 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 October 14, 1997 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
October 14, 1997 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 the August 2002 Distribution
Date (the "Class A Scheduled Payment Date"), but may be paid earlier or later
under certain limited circumstances as described herein. Principal with
respect to the Class B Certificates is scheduled to be distributed on the
September 2002 Distribution Date (the "Class B Scheduled Payment Date"), but
may be paid earlier or later under certain limited circumstances as described
herein. See "Maturity Considerations". Principal payments will not be made to
Class B Certificate Holders 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. In addition, the Collateral Interest will be subordinated to
the Offered Certificates to the extent described herein.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
CERTIFICATES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE OFFERED CERTIFICATES IN THE
OPEN MARKET. SEE "UNDERWRITING".
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.
2
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information 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 delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, 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.
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................... 2
Reports to Certificate Holders.......................................... 3
Prospectus Summary...................................................... 5
Risk Factors............................................................ 25
The Trust............................................................... 31
The Credit Card Business of People's Bank............................... 32
The Receivables......................................................... 38
Maturity Considerations................................................. 41
Receivable Yield Considerations......................................... 44
Use of Proceeds......................................................... 44
People's Bank........................................................... 45
Description of the Certificates......................................... 45
Certain Legal Aspects of the Receivables................................ 86
Certain Federal Income Tax Consequences................................. 89
State and Local Tax Consequences........................................ 93
Certain Employee Benefit Plan Considerations............................ 94
Underwriting............................................................ 96
Legal Matters........................................................... 97
Index of Key Terms...................................................... 98
Annex I Prior Series Issued and Outstanding............................. AI-1
Annex II Global Clearance, Settlement and Tax Documentation Procedures.. AII-1
</TABLE>
REPORTS TO CERTIFICATE HOLDERS
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 Offered Certificates, pursuant to the Agreement. See
"Description of the Certificates--Book-Entry Registration", "--Reports to
Certificate Holders" 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 Certificate Holders or to the owners of beneficial
interests in the Offered Certificates ("Offered 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.
3
<PAGE>
[This Page Intentionally Left Blank]
4
<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......... $425,000,000 Floating Rate Class A Asset Backed
Certificates, Series 1997-2 (the "Class A
Certificates") and $33,750,000 Floating Rate
Class B Asset Backed Certificates, Series 1997-2
(the "Class B Certificates" and, together with
the Class A Certificates, the "Offered
Certificates" and, together with the Collateral
Interest described herein, 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 1997-2 Supplement"
refers to the supplement to the Agreement
relating to the Certificates; the term
"Agreement" refers to the Amended and Restated
Pooling and Servicing Agreement dated as of
March 18, 1997, amending and restating in its
entirety the Pooling and Servicing Agreement
dated as of June 1, 1993, and, unless the
context requires otherwise, refers to the
Agreement as supplemented by the Series 1997-2
Supplement; the term "Offered Certificate
Holders" refers to holders of the Offered
Certificates; the term "Certificate Holders"
refers to the Offered Certificate Holders and
the Collateral Interest Holder collectively; the
term "Class A Certificate Holders" refers to
holders of the Class A Certificates and the term
"Class B Certificate Holders" refers to holders
of the Class B Certificates; the term "Series"
refers to any series of certificates issued by
the Trust, including the Certificates; and the
term "Series 1997-2" refers to the Series
represented by the Certificates.
The Trust currently has four other Series
outstanding. See "Annex I: Prior Series Issued
and Outstanding" for a summary of these
outstanding 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.
5
<PAGE>
Trust Assets................ The property of the Trust includes receivables
(the "Receivables") arising under certain
VISA(R)* and MasterCard(R)* credit card
accounts, all Receivables arising in Automatic
Additional Accounts and Additional Accounts
designated 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 and
securities on deposit in certain bank accounts
established and maintained for the benefit of
Certificate Holders of any Series, an interest
rate cap agreement for the exclusive benefit of
the Class A Certificate Holders (the "Class A
Interest Rate Cap") and an interest rate cap
agreement for the exclusive benefit of the Class
B Certificate Holders (the "Class B Interest
Rate Cap" and, together with the Class A
Interest Rate Cap, the "Interest Rate Caps"),
each provided by Morgan Guaranty Trust Company
of New York (the "Interest Rate Cap Provider"),
and any Enhancement issued with respect to any
Series. The term "Trust Portfolio" means the
pool of Eligible Receivables representing assets
of the Trust as of a specified date. The Trust
does not and will not include the Receivables of
any Accounts designated from time to time as
Removed Accounts, the Receivables of which have
been removed from the Trust.
The Offered Certificate Holders will not be
entitled to the benefits of any Enhancement
issued with respect to any Series other than
Series 1997-2, and the holders of the
certificates of other Series will not be
entitled to the benefits of, among other things,
the Interest Rate Caps or the Collateral
Interest. The term "Enhancement" shall mean,
with respect to any other Series, any letter of
credit, cash collateral account, collateral
interest, surety bond, guaranteed rate
agreement, maturity guaranty facility, tax
protection agreement, reserve account or other
contract or agreement principally for the
benefit of Certificate Holders of such Series.
The term "Enhancement" shall mean, with respect
to the Offered Certificates, the subordination
of the Collateral Interest and, in the case of
the Class A Certificates, the funds and
securities on deposit in the Reserve Account, up
to the Available Reserve Account Amount, and the
subordination of the Class B Investor Interest.
Securities Offered.......... The Class A Certificates and the Class B
Certificates will be issued on September ,
1997 (the "Closing Date") in book-entry form
only, in the initial principal amounts of
$425,000,000 and $33,750,000, respectively, and
will each be represented by one or more Offered
Certificates registered in the name of Cede. All
references herein to Offered Certificate
Holders, Class A
* VISA(R) and MasterCard(R) are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
6
<PAGE>
Certificate Holders or Class B Certificate
Holders shall refer to Offered Certificate
Owners, except as otherwise specified herein.
See "Description of the Certificates--Definitive
Certificates".
In addition to the Class A Certificates and the
Class B Certificates, the Collateral Interest
will be issued on the Closing Date in the
initial amount of $41,250,000 (which amount
represents 8.25% of the amount of the Initial
Investor Interest) as Enhancement for the
Offered Certificates. The provider of such
Enhancement is sometimes referred to herein as
the "Collateral Interest Holder".
Each of the Certificates represents a fractional
undivided interest in certain assets of the
Trust. The Trust assets will be allocated among
the Certificate Holders, the holders of
certificates of any other Series which is
outstanding at the time of such allocation and
the holder of 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").
Neither the Receivables nor the underlying
Accounts are insured or guaranteed by the FDIC
or any other governmental agency.
Investor Interest; Trans-
feror Interest............. On the Closing Date, the amount of the Class A
Certificate Holders' interest in Principal
Receivables will equal $425,000,000 (the "Class
A Initial Investor Interest"), the amount of the
Class B Certificate Holders' interest in
Principal Receivables will equal $33,750,000
(the "Class B Initial Investor Interest"), and
the amount of the Collateral Interest in
Principal Receivables will equal $41,250,000
(the "Initial Collateral Interest" and, together
with the Class A Initial Investor Interest and
the Class B Initial Investor Interest, the
"Initial Investor Interest"). The Class A
Initial Investor Interest and the Class B
Initial Investor Interest may be reduced to
reflect the tender and cancellation of Offered
Certificates pursuant to an Investor Exchange.
The Class A Certificate Holders' interest in
Principal Receivables on any date
7
<PAGE>
after the Closing Date (the "Class A Investor
Interest") will equal the Class A Initial
Investor Interest, less the sum of (i) an amount
equal to the sum of all payments in respect of
principal made on the Class A Certificates and
(ii) all Class A Investor Charge-Offs, plus any
reimbursements of such Class A Investor Charge-
Offs. The "Class A Adjusted Investor Interest"
will equal (i) the Class A Investor Interest
less (ii) the Principal Funding Account Balance
on such date. The Class B Certificate Holders'
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,
any Class B Investor Charge-Offs and any other
reductions of the Class B Investor Interest as
described herein, plus any reimbursements of
such Class B Investor Charge-Offs and such other
reductions of the Class B Investor Interest as
described herein. The Collateral Interest
Holder's interest in Principal Receivables on
any date after the Closing Date (the "Collateral
Interest") will equal the Initial Collateral
Interest, less all payments in respect of
principal made on the Collateral Interest, any
Collateral Interest Charge-Offs and any other
reductions of the Collateral Interest as
described herein, plus any reimbursements of
such Collateral Interest Charge-Offs and such
other reductions of the Collateral Interest as
described herein. The aggregate of the Class A
Investor Interest, the Class B Investor Interest
and the Collateral Interest at any time is the
"Investor Interest". The aggregate of the Class
A Adjusted Investor Interest, the Class B
Investor Interest and the Collateral Interest at
any time is the "Adjusted Investor Interest".
The Holder of the Exchangeable Transferor
Certificate holds in the Trust the remaining
undivided interest in the Principal Receivables
and amounts on deposit in the Excess Funding
Account not represented by the Certificates or
any other undivided interests in the Trust that
have been issued and are outstanding at the time
of such determination (the "Transferor
Interest"). As new Receivables are added to the
Trust and as payments are made on Receivables,
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,
six other Series have been issued by the Trust,
two of which have been paid in full. See "Annex
I: Prior Series Issued and Outstanding".
8
<PAGE>
Allocation Percentages...... The Certificates will include the right to
receive (but only to the extent required to make
payments under the Agreement) a percentage (the
"Investor Percentage") of the Finance Charge
Collections and Principal Collections received
during each calendar month (a "Monthly Period").
Finance Charge Collections and Receivables in
Defaulted Accounts, at all times, and Principal
Collections during the Revolving Period, will be
allocated to the Certificate Holders based on
the Floating Investor Percentage as described
under "Description of the Certificates--
Allocation Percentages". Such amounts so
allocated will be further allocated among the
Class A Certificate Holders, the Class B
Certificate Holders and the Collateral Interest
Holder based on the Class A Floating Allocation,
the Class B Floating Allocation and the
Collateral Floating Allocation, respectively,
applicable during the related Monthly Period.
Principal Collections during the Controlled
Accumulation Period and the Rapid Amortization
Period will be allocated to the Certificate
Holders based on the Fixed Investor Percentage,
as described under "Description of the
Certificates--Allocation Percentages". Such
amounts so allocated will be further allocated
between the Class A Certificate Holders, the
Class B Certificate Holders and the Collateral
Interest Holder based on the Class A Fixed
Allocation, the Class B Fixed Allocation and the
Collateral Fixed Allocation, respectively. See
"Description of the Certificates--Allocation
Percentages".
Interest.................... Interest is required to be distributed on October
15, 1997 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 (v) 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 Adjusted Investor Interest as of
the preceding Distribution Date after giving
effect to all payments, deposits and withdrawals
on such Distribution Date (or, in the case of
the first Distribution Date, the Class A Initial
Investor Interest) 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 (w) the
Class A Covered Amounts for such Interest
Period, 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 (clauses (v), (w) and (x)
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
9
<PAGE>
period which has not been distributed to the
Class A Certificate Holders, 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 an
"Offered Certificate Rate" and collectively, the
"Offered Certificate Rates") (or % for the
Initial Interest Period), (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) 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
Certificate Holders, 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 October 15, 1997 will accrue
from and including the Closing Date to and
including October 14, 1997 (the "Initial
Interest Period").
Revolving Period............ No principal will be payable to Offered
Certificate Holders until the August 2002
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
10
<PAGE>
to and including the day prior to the day on
which the Controlled Accumulation Period or the
Rapid Amortization Period commences (the
"Revolving Period"), Available Investor
Principal Collections otherwise allocable to the
Certificate Holders will, unless a reduction in
the Required Collateral Interest has occurred
and subject to certain other limitations, be
applied as Shared Principal Collections, as
described below, and thereafter (to the extent
that the Transferor Interest exceeds the Minimum
Transferor Interest) be 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 early
termination of the Revolving Period.
Principal Payments;
Controlled Accumulation
Period..................... Unless a Pay Out Event has occurred or is deemed
to have occurred or the Controlled Accumulation
Period is postponed as a result of the
conditions set forth under "Description of the
Certificates--Postponement of Controlled
Accumulation Period", the controlled
accumulation period for the Certificates (the
"Controlled Accumulation Period") will commence
on June 1, 2001 (the "Controlled Accumulation
Date"), and will end on the earliest of (a) the
commencement of the Rapid Amortization Period,
(b) the payment of the Investor Interest in full
and (c) the termination of the Trust pursuant to
the Agreement. On the Business Day immediately
preceding each Distribution Date (each such
date, a "Transfer Date"), beginning with the
Transfer Date following the Monthly Period in
which the Controlled Accumulation Period
commences, an amount equal to the least of (a)
the Available Investor Principal Collections
with respect to the related Monthly Period, (b)
the sum of the Controlled Accumulation Amount
for the related Monthly Period and the
Accumulation Shortfall, if any (such sum, the
"Controlled Deposit Amount") and (c) the Class A
Adjusted Investor Interest on such Transfer Date
(prior to any deposits on such date) will be
deposited in a trust account established by the
Trustee (the "Principal Funding Account"). The
amount on deposit in the Principal Funding
Account (the "Principal Funding Account
Balance") will be deposited in the Distribution
Account for distribution to the Class A
Certificate Holders on the Class A Scheduled
Payment Date. If, for any Monthly Period prior
to the Class A Scheduled Payment Date, the
Available Investor Principal Collections for
such Monthly Period are less than the applicable
Controlled Deposit Amount, the amount of such
deficiency will be the applicable "Accumulation
Shortfall" for the succeeding Monthly Period.
See "Description of the Certificates--
Application of Collections".
On the Transfer Date immediately following the
Distribution Date on which the Class A Investor
Interest has been paid in full, an
11
<PAGE>
amount equal to the lesser of (a) the Available
Investor Principal Collections for the related
Monthly Period and (b) the Class B Investor
Interest will be deposited into the Distribution
Account for distribution to the Class B
Certificate Holders on the Class B Scheduled
Payment Date. If, for any Monthly Period, the
Available Investor Principal Collections for
such Monthly Period exceed the applicable
Controlled Deposit Amount, such excess will be
first paid to the Collateral Interest Holder to
the extent that the Collateral Interest exceeds
the Required Collateral Interest (such excess,
the "Collateral Interest Surplus") and then
treated as Shared Principal Collections and
allocated to the holders of other Series of
certificates issued and outstanding or, subject
to certain limitations described herein (to the
extent that the Transferor Interest exceeds the
Minimum Transferor Interest), paid to the holder
of the Exchangeable Transferor Certificate.
Unless a Pay Out Event has occurred or is deemed
to have occurred, prior to the payment of the
Class A Investor Interest in full, all funds on
deposit in the Principal Funding Account will be
invested at the direction of the Servicer by the
Trustee in certain Permitted Investments.
Investment earnings (net of investment losses
and expenses) on funds on deposit in the
Principal Funding Account (the "Principal
Funding Investment Proceeds") during the
Controlled Accumulation Period will be used to
pay interest on the Class A Certificates up to
an amount (the "Class A Covered Amount") equal
to, for each Transfer Date, the product of (a) a
fraction, the numerator of which is the actual
number of days in the related Interest Period
and the denominator of which is 360, (b) the
Class A Certificate Rate in effect with respect
to the related Interest Period and (c) the
Principal Funding Account Balance as of the
preceding Distribution Date after giving effect
to all payments, deposits and withdrawals on
such Distribution Date. If, for any Transfer
Date, the Principal Funding Investment Proceeds
are less than the Class A Covered Amount, the
amount of such deficiency (the "Class A
Principal Funding Investment Shortfall") will be
paid, to the extent available, from the Reserve
Account and, if necessary, from Excess Spread
and Reallocated Principal Collections.
Funds on deposit in the Principal Funding Account
will be available to pay the Class A Certificate
Holders in respect of the Class A Investor
Interest on the Class A Scheduled Payment Date.
If the aggregate principal amount of deposits
made to the Principal Funding Account is
insufficient to pay the Class A Investor
Interest in full on the Class A Scheduled
Payment Date, the Rapid Amortization Period will
commence as described below. Although it is
anticipated that during the Controlled
Accumulation Period prior to the payment of the
Class A Investor Interest in full, funds will be
deposited in the Principal Funding Account in an
amount equal to the applicable Controlled
Deposit
12
<PAGE>
Amount on each Transfer Date and that scheduled
principal will be available for distribution to
the Class A Certificate Holders on the Class A
Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity
Considerations".
On the Class B Scheduled Payment Date, provided
that the Class A Investor Interest is paid in
full on the Class A Scheduled Payment Date and a
Rapid Amortization Period has not commenced,
Available Investor Principal Collections will be
used to pay the Class B Certificate Holders in
respect of the Class B Investor Interest as
described herein. If Available Investor
Principal Collections are insufficient to pay
the Class B Investor Interest in full on the
Class B Scheduled Payment Date, the Rapid
Amortization Period will commence as described
below. Although it is anticipated that scheduled
principal will be available for distribution to
the Class B Certificate Holders on the Class B
Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity
Considerations".
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization
Period will commence and any amounts on deposit
in the Principal Funding Account will be
deposited in the Distribution Account for
distribution to the Class A Certificate Holders
on the Distribution Date following the Monthly
Period in which the Rapid Amortization Period
commences. See "Maturity Considerations",
"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 1997-2
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 Certificate Holders until the Class A Investor
Interest is paid in full and, following the
final principal payment to the Class A
Certificate Holders, to the Class B Certificate
Holders until the Class B Investor Interest is
paid in full and, following the final principal
payment to the Class B Certificate Holders, to
the Collateral Interest Holder until the
Collateral Interest is paid in full, on each
Distribution Date beginning with the
Distribution Date in 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.
13
<PAGE>
Scheduled Payment of Prin-
cipal and Interest......... The final distributions of interest and the
scheduled payment of principal on the Class A
Certificates and the Class B Certificates,
respectively, are scheduled to be made on the
August 2002 Distribution Date (the "Class A
Scheduled Payment Date") and the September 2002
Distribution Date (the "Class B Scheduled
Payment Date"; "Scheduled Payment Date" shall
refer to the Class B Scheduled Payment Date
and/or the Class A Scheduled Payment Date, as
applicable) and will be made no later than the
April 2005 Distribution Date (the "Scheduled
Series 1997-2 Termination Date"). After the
Scheduled Series 1997-2 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 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 1997-2 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".
14
<PAGE>
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 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.
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, certain premiums in respect of
credit insurance relating to cardholders'
balances, Recoveries, Interchange and investment
earnings on the Excess Funding Account
(collectively, the "Finance Charge
Receivables"). 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
15
<PAGE>
accounts identified as part of the accounts
underlying the Receivables in the Trust
Portfolio as of June 30, 1997, (the "Series Cut-
Off Date"), together with Additional Accounts
conveyed on August 1, 1997. "Recoveries" means
amounts received with respect to charged-off
credit card receivables which, prior to being
charged-off, were included in the Trust
Portfolio. The aggregate amount of Receivables
in the Accounts as of the Series Cut-Off Date
was approximately $2,650,000,000. The Finance
Charge Receivables will not 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.
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, the
certificates of other Series or any other
undivided interests in the Trust, 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".
Addition and Removal of
Accounts................... 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 or categories of eligible consumer
revolving credit accounts satisfying certain
criteria specified in the Agreement (the
"Automatic Additional Accounts") and has
conveyed or will convey (as applicable) to the
Trust all of the Receivables in such Automatic
Additional Accounts whether such Receivables are
then existing or thereafter created. See
"Description of the Certificates--Addition of
Accounts". 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. The Transferor
previously designated Additional Accounts to be
included as Accounts on July 9, 1993, October 4,
1994, July 14, 1995, May 1, 1996, October 1,
1996, May 1, 1997, and August 1, 1997.
Automatic Additional Accounts and Additional
Accounts will consist of certain of the
Transferor's VISA credit card accounts
16
<PAGE>
and MasterCard credit card accounts
constituting, respectively, Eligible Automatic
Additional Accounts and Eligible Additional
Accounts and satisfying certain other criteria,
and arising in Accounts designated by the
Transferor from time to time. Automatic
Additional Accounts and Additional Accounts may,
subject to certain conditions, also include
certain other consumer revolving credit
accounts. See "Description of the Certificates--
Addition of Accounts".
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. Removed Accounts are not
included as Accounts of the Trust Portfolio. See
"Description of the Certificates--Removal of
Accounts".
Denomination................ The Offered Certificates will be offered for
purchase in minimum denominations of $1,000 and
integral multiples thereof.
Registration of Offered
Certificates............... The Offered Certificates will initially be
represented by certificates registered in the
name of Cede, as the nominee of DTC. No Offered
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.... Offered 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 their respective
depositaries, which will hold positions 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, and any such
successor servicer acting in such capacity, are
referred to herein as the "Servicer"). The
Servicer is permitted to delegate certain of its
duties as servicer under the
17
<PAGE>
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 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 1997-2 Supplement,
and the Supplements relating to any past or
future Series, by the Servicer between Principal
Collections and Finance Charge Collections. If
the Discount Option is exercised by the
Transferor, certain Collections that would
otherwise be characterized as Principal
Collections will instead be treated as Finance
Charge Collections. See "Description of the
Certificates--Discount Option". All such amounts
will then be allocated in accordance with the
respective interests of the Certificate Holders,
the certificate holders 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 and the
Collateral Interest........ The Class B Investor Interest and the Collateral
Interest will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class A
Certificates and the Class A Monthly Servicing
Fee as described herein. In addition, the
Collateral Interest will be subordinated as
described herein to the extent necessary to fund
certain payments with respect to the Class B
Certificates and the Class B Monthly Servicing
Fee. If the Collateral Interest is reduced to
zero, the Class B Certificate Holders will bear
directly the credit and other risks associated
with their interest in the Trust. If the Class B
Investor Interest and the Collateral Interest
are reduced to zero, the Class A Certificate
Holders will bear directly the credit and other
risks associated with their interest in the
Trust. To the extent the Class B Investor
Interest is thereby reduced, the percentage of
Finance Charge Collections allocated to the
Class B Certificate Holders in subsequent
Monthly Periods 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. 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 Certificate Holders
will be reduced. See "Description of
Certificates--Subordination of the Class B
Certificates" and "--Application of
Collections".
Application of Excess
Spread and Reallocated
Cashflow................... If Finance Charge Collections allocable to the
Class A Investor Interest for any Monthly Period
plus, during the Controlled
18
<PAGE>
Accumulation Period, Principal Funding
Investment Proceeds and amounts, if any,
withdrawn from the Reserve Account with respect
to such Monthly Period, are insufficient (such
insufficiency being the "Class A Required
Amount") to pay (i) interest accrued on the
Class A Certificates with respect to the related
Distribution Date in an amount equal to the sum
of (a) the Class A Monthly Cap Rate Interest due
on the related Distribution Date and any overdue
Class A Monthly Cap Rate Interest, and (b) the
Class A Covered Amount for the related Interest
Period, (ii) the Class A Monthly Servicing Fee
for the related Interest Period and any overdue
Class A Monthly Servicing Fees, (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 Finance
Charge Collections allocable to the Class B
Certificates and the Collateral Interest will be
allocated to the Class A Certificates up to the
Class A Required Amount, and 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. If the sum of such Excess
Spread and Shared Finance Charge Collections is
less than the Class A Required Amount for such
Monthly Period, Reallocated Collateral Principal
Collections and, if the foregoing is
insufficient, Reallocated Class B Principal
Collections with respect to the related Monthly
Period, will be used to fund the remaining Class
A Required Amount. The Collateral Interest will
be reduced by the amount of Reallocated
Collateral Principal Collections and Reallocated
Class B Principal Collections used to fund the
Class A Required Amount, and the Class B
Investor Interest will be reduced by the amount
of Reallocated Class B Principal Collections in
excess of the Collateral Interest (after giving
effect to reductions for any Collateral Interest
Charge-Offs and any Reallocated Collateral
Principal Collections as of the related
Distribution Date) used to fund the Class A
Required Amount.
If, on the related Distribution Date, Reallocated
Principal Collections are insufficient to fund
the remaining Class A Required Amount for such
Monthly Period, then the Collateral Interest
(after giving effect to reductions for any
Collateral Interest Charge-Offs and Reallocated
Principal Collections as of such Distribution
Date) will be reduced by the amount of such
deficiency (but not by more than the Class A
Investor Default Amount for the related Monthly
Period). In the event that such reduction would
cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced
to zero, and the Class B Investor Interest
(after giving effect to reductions for any Class
B Investor Charge-Offs and any Reallocated Class
B Principal Collections as of such Distribution
Date) will be reduced by the amount by which the
Collateral Interest would
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have been reduced below zero. 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
(such reduction, a "Class A Investor Charge-
Off").
If Finance Charge Collections allocable to the
Class B Investor Interest for any Monthly Period
are insufficient (such insufficiency being the
"Class B Required Amount") to pay (i) interest
accrued on the Class B Certificates with respect
to the related Distribution Date in an amount
equal to the Class B Monthly Cap Rate Interest
due on the related Distribution Date and any
overdue Class B Monthly Cap Rate Interest, (ii)
the Class B Monthly Servicing Fee for the
related Interest Period and any overdue Class B
Monthly Servicing Fees, (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 Finance Charge
Collections allocable to the Class A
Certificates and the Collateral Interest, to the
extent not required to pay the Class A Required
Amount for such Monthly Period, will be
allocated to the Class B Certificates up to the
Class B Required Amount, and second, Shared
Finance Charge Collections, if any, allocable to
the Certificates and not required to pay the
Class A Required Amount for such Monthly Period
will be allocated to the Class B Certificates up
to the remaining Class B Required Amount. If the
sum of such Excess Spread and such Shared
Finance Charge Collections is insufficient to
fund the Class B Required Amount for such
Monthly Period, Reallocated Collateral Principal
Collections for the related Monthly Period and
not required to fund the Class A Required Amount
will be used to fund the remaining Class B
Required Amount.
If, on the related Distribution Date, Reallocated
Collateral Principal Collections not required to
fund the Class A Required Amount are
insufficient to fund the remaining Class B
Required Amount for such Monthly Period, then
the Collateral Interest (after giving effect to
reductions for any Collateral Interest Charge-
Offs, Reallocated Principal Collections and any
adjustments made thereto for the benefit of the
Class A Certificate Holders) will be reduced by
the amount of such deficiency (but not by more
than the Class B Investor Default Amount for
such Monthly Period). In the event that such
reduction would cause the Collateral Interest to
be a negative number, the Collateral Interest
will be reduced to zero, and the Class B
Investor Interest will be reduced by the amount
by which the Collateral Interest would have been
reduced below zero (such reduction, a "Class B
Investor Charge-Off"). In the event of a
reduction of the Class A Investor Interest,
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<PAGE>
the Class B Investor Interest or the Collateral
Interest, the amount of principal and interest
available to fund payments with respect to the
Class A Certificates, the Class B Certificates
and the Collateral Interest will be decreased.
See "Description of the Certificates--
Reallocation of Cash Flows" and "--Defaulted
Receivables; Adjustments and Fraudulent
Charges".
Finance Charge Collections allocable to the
Collateral Interest for any Monthly Period will
be applied to pay the Collateral Interest
Monthly Servicing Fee with respect to such
Monthly Period and any accrued and unpaid
Collateral Interest Monthly Servicing Fee with
respect to prior Monthly Periods, and any such
remaining Finance Charge Collections will be
applied as Excess Spread.
With respect to the related Transfer Date, Excess
Spread not required to fund the Class A Required
Amount and the Class B Required Amount, if any,
will be applied as specified in "Description of
the Certificates--Allocation of Funds--Payment
of Fees, Interest and Other Items".
Required Collateral Inter-
est........................ The "Required Collateral Interest" with respect
to any Transfer Date means (a) initially, the
Initial Collateral Interest and (b) on any
Transfer Date thereafter, an amount equal to
8.25% of the Adjusted Investor Interest on such
Transfer Date, after taking into account
deposits into the Principal Funding Account on
such Transfer Date and all payments to be made
on the related Distribution Date and all
adjustments made on such Transfer Date, but not
less than $15,000,000; provided, however, that
(1) if certain reductions in the Collateral
Interest occur or if a Pay Out Event occurs, the
Required Collateral Interest for such Transfer
Date shall equal the Required Collateral
Interest for the Transfer Date immediately
preceding the occurrence of such reduction or
Pay Out Event; (2) in no event shall the
Required Collateral Interest exceed the unpaid
principal amount of the Offered Certificates as
of the last day of the Monthly Period preceding
such Transfer Date, less cash held in the
Principal Funding Account as of such Transfer
Date, after taking into account payments to be
made on the related Distribution Date; and (3)
the Required Collateral Interest may be reduced
at any time to a lesser amount upon written
confirmation from the Rating Agency that such
reduction will not result in the Rating Agency
reducing or withdrawing its rating on any then
outstanding Series rated by it. See "Description
of the Certificates--Required Collateral
Interest".
If on any Transfer Date, the Collateral Interest
has been reduced to an amount less than the
Required Collateral Interest, Excess Spread, to
the extent available, will be used to increase
the Collateral Interest to the extent of such
shortfall. See "Description of the
Certificates--Allocation of Funds--Excess
Spread."
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<PAGE>
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 Interest Rate Cap
Provider for the exclusive benefit of the Class
A Certificate Holders and the Class B
Certificate Holders, 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 be equal to or
greater than 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, in each case less the
aggregate notional amount of any portion of the
related Interest Rate Cap sold on or prior to
the date of determination. The Class A Interest
Rate Cap and the Class B Interest Rate Cap will
terminate on the day immediately following the
Class A Scheduled Payment Date and the Class B
Scheduled Payment 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, Principal Collections otherwise
allocable to the Certificates, to the extent not
required to be paid to the Collateral Interest
Holder in respect of the excess, if any, of the
Collateral Interest over the Required Collateral
Interest, will be available to cover principal
payments due to or for the benefit of the
Certificate Holders of other Series. In
addition, if in any Monthly Period during the
Controlled Accumulation Period the Principal
Allocation is greater than the sum of (i) the
Controlled Deposit Amount and (ii) the
Collateral Monthly Principal, such excess will
also be available to cover principal payments
due to or for the benefit of Certificate Holders
of other Series and holders of other undivided
interests in the Trust issued pursuant to the
Agreement and the applicable Supplements. Such
Principal Collections applied to the payment of
certificates of other Series and to such other
interests in the Trust are herein referred to as
"Shared Principal Collections". Any such
application of Shared Principal Collections to
other Series 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
Certificate Holders. See "Description of the
Certificates--Allocation of Funds".
In any Monthly Period, the amount of Excess
Spread available after application of those
items listed under "Description of the
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<PAGE>
Certificates--Allocation of Funds--Payment of
Fees, Interest and Other Items" (such amount
constituting "Shared Finance Charge
Collections") will be applied to cover any
shortfalls with respect to certain amounts
payable from Finance Charge Collections
allocable to any other Series or other undivided
interests in the Trust then outstanding. In
addition, amounts designated as Shared Finance
Charge Collections pursuant to the Supplement
for any other Series may be applied to cover
certain payments due to be made out of Finance
Charge Collections to the Certificate Holders,
including the reimbursement of reductions in the
Class B Investor Interest arising in connection
with the payment of the Class A Required Amount
and the reimbursement of reductions in the
Collateral Interest arising in connection with
the payment of the Class A Required Amount and
the Class B Required Amount. See "Description of
the Certificates--Allocation of Funds".
Shared Finance Charge Collections and Shared
Principal Collections will be applied to any
Series (and any related undivided interests in
the Trust) then outstanding pro rata, based upon
the amount of shortfall, if any, with respect to
such Series (and such interests).
Repurchase.................. The Investor Interest will be subject to optional
purchase by the Transferor on any Distribution
Date on which the Investor Interest is an amount
less than or equal to 5% of the Initial Investor
Interest (after giving effect to all payments to
be made on such date), 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 1997-
2 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, accrued and unpaid
interest on the Certificates and all other
amounts owing under the Loan Agreement among the
Trustee, the Transferor, the Servicer, the
Collateral Interest Holder and the other
financial institutions party thereto (the "Loan
Agreement") 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 Offered Certificates will be
characterized as indebtedness for federal income
tax purposes. Under the Agreement, the
Transferor, the Trustee, the Holder of the
Exchangeable Transferor Certificate and the
Certificate
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<PAGE>
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 Offered Certificates of any class if
certain conditions are met, including that the
Offered 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 with respect to the
Class A Certificates. The Class B Underwriters
do not anticipate that the Class B Certificates
will be held by at least 100 persons upon the
completion of this offering. Accordingly, the
Class B Certificates may not be acquired with
the assets of any employee benefit plan,
including without limitation any insurance
company general account deemed to include the
assets of an 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 Offered 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 benefit
plans contemplating purchasing the Offered
Certificates should consult their counsel before
making a purchase. See "Certain Employee Benefit
Plan Considerations".
Class A Certificate Rat-
ing........................ It is a condition to the issuance of the Class A
Certificates that the Class A Certificates be
rated in the highest generic rating category by
at least one nationally recognized rating
agency.
Class B Certificate Rat-
ing........................ It is a condition to the issuance of the Class B
Certificates that the Class B Certificates 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.
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<PAGE>
RISK FACTORS
Limited Liquidity. There is currently no market for the Offered
Certificates. The Underwriters intend to make a market in the Offered
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
Offered Certificate Holders with liquidity of investment or that it will
continue until the Offered 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. In that event, 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
25
<PAGE>
did not vote to disapprove of the sale of the Receivables in 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
Certificate Holders of each such Series (including the Certificate Holders) 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 Certificate Holders 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 Certificate Holders 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. During
recent years, federal legislative proposals have attempted unsuccessfully to
limit the maximum annual percentage rate that issuers may assess on credit
card accounts. If such legislation were enacted and imposed 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
average of the Base Rates for 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.
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 made, 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 Certificate Holders in the Receivables if such
laws result in any Receivables being written off as uncollectible when there
are insufficient funds available to reimburse such losses. See "Description of
the Certificates--Defaulted Receivables; Adjustments and Fraudulent Charges".
26
<PAGE>
Competition in the Credit Card Industry. The credit card industry is highly
competitive and operates in an environment increasingly focused on the
interest and fees charged to consumers for credit card services. As new card
issuers enter the market and issuers seek to expand their shares of the
market, there is increased use of advertising, target marketing, pricing
competition and incentive programs, all of which may adversely impact issuer
profit margins. The MasterCard and Visa 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. The Transferor has traditionally competed as a low fixed-rate
provider of credit card services targeting highly creditworthy customers who
carry balances on their credit cards. The growth of the Transferor's credit
card portfolio is largely due to customers who, attracted by its low rates,
have transferred balances from competing credit card issuers, as well as due
to higher balances from purchases and cash advances. The Transferor is
participating in such competition through direct marketing programs, average
annual percentage rates 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 and rate of new Receivables generated
in the Accounts may be reduced and certain purchase and payment patterns with
respect to Receivables may be affected. The size of the Trust will be
dependent upon the Transferor's continued ability to generate new Receivables.
If the amount of new Receivables generated declines significantly, Receivables
from Additional Accounts (to the extent available) may be added to the Trust,
as described below, or a Pay Out Event could occur, in which event the Rapid
Amortization Period would commence. See "Description of the Certificates--Pay
Out Events".
Payments and Maturity. The Receivables may be paid at any time, and there is
no assurance that there will be additional Receivables created in the Accounts
or that any particular pattern of cardholder repayments will occur. The
commencement and continuation of the Controlled Accumulation 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 Certificate Holders and
the commencement of the Rapid Amortization Period. Certificate Holders 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 accumulation of principal during the Controlled Accumulation Period or
delay the payment of principal on the Class A Scheduled Payment Date or the
Class B Scheduled Payment Date or during the Rapid Amortization Period, and
such delay of the accumulation of principal or payment of principal, as the
case may be, could adversely affect the ability of investors to reinvest
profitably. See "--Ability to Change Terms of the Receivables", "Maturity
Considerations" and "The Credit Card Business of People's Bank--Underwriting
Procedures".
Social, Technological and Economic Factors. Changes in card usage and
payment pattern by cardholders may result from a variety of social,
technological and economic factors. Social factors include potential changes
in consumers' attitudes to financing purchases with debt. Technological
factors include new methods of payment, such as debit cards. Economic factors
include the rate of inflation, unemployment levels, personal bankruptcy levels
and relative interest rates. As a consequence of some of these factors, the
credit card industry has experienced generally increased levels of losses and
delinquencies. The loss and delinquency experience of the Trust Portfolio has
reflected that trend.
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. The concentration of such accounts is currently
approximately 10%. See "The Receivables". The loss and delinquency experience
in Connecticut is currently more favorable than the experience of the Bank
Portfolio. Connecticut's economy has historically been
27
<PAGE>
highly dependent on the insurance, aerospace and defense industries. As a
result of consolidation and structural changes in the financial services
sector and defense budget cutbacks, Connecticut's overall job growth has
lagged behind the United States as a whole. However, total job growth has been
positive in the state since 1993 and Connecticut residents continue to have
the highest per capita income of any state in the country. The Transferor is
unable to determine and has no basis to predict whether, or to what extent,
social, technological or economic factors will affect future credit card usage
or payment patterns.
Effect of Subordination of the Class B Certificates. 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 Class A
Investor Interest has been paid in full 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 from other Series
allocable to the Certificates or from Reallocated Collateral Principal
Collections and if the Collateral Interest has been reduced to zero. If the
Class B Investor Interest suffers such a reduction, the portion of Finance
Charge Collections allocable to the Class B Certificate Holders 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
with respect to the Certificate Holders' interest in such Receivables will
first be used to pay principal amounts due to the Class A Certificate Holders
and will then be used to pay amounts due to the Class B Certificate Holders,
thereby causing a loss to Class B Certificate Holders if such remaining
portion is insufficient to pay the Class B Certificate Holders 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 Certificate
Holders 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 Certificate Holders 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 efforts. 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, (y) the lesser of the Class B Certificate Rate and the Class B Cap Rate,
and (z) the Collateral Rate (weighted based on the Class A Investor Interest,
the Class B Investor Interest and the Collateral Interest,
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respectively, as of the last day of the preceding Monthly Period) plus the
Servicing Fee Rate. 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 equal to the sum of 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), Principal Funding Investment Proceeds
and amounts withdrawn from the Reserve Account and deposited into the Finance
Charge Account and allocable to the Certificates 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
Yields for any three consecutive Monthly Periods being less than the average
of the Base Rates for such Monthly Periods), 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 of the base rates for all Series. 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 Certificate Holders. 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. In addition, an increase in the monthly periodic
finance charges and other fees applicable to the Accounts might have the
result of decreasing the volume of Receivables generated on those Accounts. A
significant decrease in Receivables could cause the Transferor Interest to
decline below the Minimum Transferor Interest. The Transferor would be
obligated in such event to add Receivables from Additional Accounts (to the
extent available) to the Trust. If the Transferor were unable to convey
Receivables in Additional Accounts to the Trust when required by the
Agreement, a Pay Out Event would occur.
Master Trust Considerations. The Trust, as a master trust, will issue the
Certificates, has issued six prior Series of certificates, two of which have
been paid in full, and may issue additional Series of certificates in the
future. See "Annex I: Prior Series Issued and Outstanding". 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 1997-2 Supplement
will not permit the subordination of Series 1997-2 to any other 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) the Rating
Agency delivers written confirmation to the Trustee that such issuance or
Exchange will not result in the 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 or Automatic Additional Accounts, might not have an impact
on the timing and amount of payments received by a Certificate Holder,
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".
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Addition of Accounts. The Transferor expects, and in some cases will be
obligated, to designate Additional Accounts from time to time, the Receivables
in which will be conveyed to the Trust. Such Additional Accounts will likely
include accounts originated using criteria different from those which were
applied to previously-designated Accounts, because such Accounts were
originated at a different date, under different underwriting criteria or by
different institutions, or represent a separate segment of the Transferor's
credit card business. Consequently, there can be no assurance that Additional
Accounts designated in the future will be originated, priced or underwritten
in the same manner as previously-designated Accounts. The designation of
Additional Accounts will be subject to the satisfaction of certain conditions
described herein under "Description of the Certificates--Addition of
Accounts."
Control. Subject to certain exceptions, the Certificate Holders 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
Certificate Holders votes to take or direct such action, the Certificate
Holders of such other Series may control whether or not such action occurs.
Certificate Ratings. It is a condition to issuance of the Class A
Certificates that the Class A Certificates 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 the Class B
Certificates 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 1997-2 Termination Date. The ratings
are based primarily on the quality of the Receivables, the credit support
provided by the Collateral Interest, 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
Offered Certificates will be provided by (i) the Collateral Interest and (ii)
with respect to the Class A Certificates, the subordination of the Class B
Certificates, the Collateral Interest and the Class B Investor Interest are
limited and will be reduced by certain claims made that are not paid from
Finance Charge Collections allocated to the Certificates and are not
reimbursed from Excess Spread or Shared Finance Charge Collections. If Finance
Charge Collections allocated to the Investor Interest, Excess Spread, Shared
Finance Charge Collections allocated to the Certificates, and Reallocated
Principal Collections are not sufficient to cover the Class A Investor Default
Amount and the Class B Investor Default Amount in any Monthly Period and if
the Collateral Interest has been reduced to zero, the Investor Interest will
be reduced (unless it is otherwise reimbursed) resulting in a reduction of the
amount of Collections allocable to Certificate Holders in future Monthly
Periods and in a reduction of the aggregate principal amount returned to the
Certificate Holders. If the Collateral Interest and, with respect to the Class
A Certificates, the Class B Investor Interest are reduced to zero, Class A
Certificate Holders and Class B Certificate Holders will bear directly the
credit and other risks associated with their undivided interest in the Trust.
See "Description of the Certificates--Reallocation of Cash Flows" and "--
Defaulted Receivables; Adjustments and Fraudulent Charges".
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Reductions of the Collateral Interest and the Class B Investor Interest,
other than reductions resulting from principal payments, will be reimbursed by
Excess Spread and Shared Finance Charge Collections which are allocated and
available to fund such amounts. Certain factors, such as lowering the finance
charges (including late fees and membership charges) on outstanding
Receivables balances and increased 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, may lower the amount of Finance Charge Receivables
generated as well as Collections in respect thereof, and may thereby reduce
the Excess Spread and Shared Finance Charge Collections available to replenish
the credit enhancement. See "Description of the Certificates--Allocation of
Funds". Finally, a slowing in payment rates on the Receivables could extend
the final Distribution Date for the Class A Certificates and Class B
Certificates beyond the Scheduled Payment Date for each such class. See "--
Payments and Maturity". The Reallocated Collateral Principal Collections and
the Reallocated Class B Principal Collections may only be utilized to cover
Required Amounts on and prior to the Scheduled Series 1997-2 Termination Date
and will not be available otherwise to pay the remaining principal on the
Certificates at any time.
Book-Entry Registration. The Offered 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 Offered
Certificate Owners or their nominees. Unless and until Definitive Certificates
are issued, Offered Certificate Owners will not be recognized by the Trustee
as Offered Certificate Holders, as that term is used in the Agreement. Hence,
until such time, Offered Certificate Owners will only be able to exercise the
rights of Offered Certificate Holders indirectly through DTC and its
participating organizations. See "Description of the Certificates--Book-Entry
Registration" and "--Definitive Certificates".
Reports to Certificate Holders. 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 Offered
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 Offered Certificate Owners. See
"Description of the Certificates--Book-Entry Registration", "--Definitive
Certificates" and "--Reports to Certificate Holders".
Limitations on Interest Rate Cap Coverage. The Class A Notional Amount of
the Class A Interest Rate Cap will be reduced during the Controlled
Accumulation Period to an amount not less than the Expected Class A Principal.
Any Class A Excess Principal will not have the benefit of the Class A Interest
Rate Cap. The Class B Notional Amount of the Class B Interest Rate Cap will be
reduced to zero on the Class B Scheduled Payment Date. To the extent the Class
B Investor Interest is greater than zero on the Class B Scheduled Payment
Date, the Class B Certificate Holders will not have the benefit of the Class B
Interest Rate Cap. 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 other undivided interests 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.
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THE CREDIT CARD BUSINESS OF PEOPLE'S BANK
GENERAL
People's Bank began its credit card program in 1985 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, People's Bank expanded the
program nationally. The June 1997 Nilson Report ranked People's Bank the 26th
largest VISA USA, Inc. ("VISA") and MasterCard International Incorporated
("MasterCard") credit card issuer in the United States as of March 1997 on the
basis of outstanding balances. People's Bank further expanded its credit card
operations in 1996 by establishing a limited branch in the United Kingdom,
which had generated credit card receivables of approximately $108 million at
June 30, 1997. No receivable generated by the United Kingdom branch will be
included in the Trust Portfolio. All of the eligible receivables in the Trust
Portfolio are payable in United States dollars.
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
in Bridgeport, Connecticut. Certain operations are performed on behalf of
People's Bank by Total System Services, Inc., of Columbus, Georgia ("Total
System"), including 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 could be time-
consuming. As a result, delays in payments to Certificate Holders 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. Since the May 1, 1996 addition of Additional Accounts, the Trust
Portfolio has included both standard and premium accounts. As of June 30,
1997, 5.17% of the accounts in the Bank Portfolio were premium accounts and
94.83% 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 5.50% and 94.50%, 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 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 VISA or MasterCard credit card account. Pursuant
to each such agreement, 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
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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 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 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.
All applications, including prescreened and direct mail candidates, are
evaluated by utilizing a credit scoring system. 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
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by People's Bank are reviewed and are periodically updated to reflect more
current statistical data. Based on statistical analysis, People's Bank has
established a policy that certain accounts receiving high credit scores may be
automatically approved without judgmental review. Judgmental underwriting of
People's Bank's credit card accounts is used to evaluate those who score below
the preset level for automatic approval and above the preset level for
automatic rejection.
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 Credit Card
Services 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.
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. The current fixed annual percentage rate
for purchases generally ranges from 11.90% to 13.99%; however, People's Bank
offers 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 generally 19.80%. For a
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break-down of the yield from finance charges and fees billed, see the table
titled "Revenue Experience Representative Portfolio" included under
"Receivable Yield Considerations".
Under the terms of People's Bank's agreement with each of its cardholders,
People's Bank may change the annual percentage rates applicable to Accounts.
In July 1997, People's Bank notified certain cardholders of its decision to
increase the annual percentage rates applicable to their Accounts for existing
balances and for future purchases and convenience checks. These increases are
generally not reflected in the current fixed annual percentage rates specified
above. On an average basis, the annual percentage rate increases on these
Accounts (which, as of June 30, 1997, had outstanding balances of
approximately $600 million) ranged between 2.0% and 2.5%. An increase in the
annual percentage rates applicable to these Accounts could, however, have the
result of reducing the volume of Receivables generated on such Accounts,
thereby limiting the favorable impact on yield of such increase. See "Risk
Factors--Ability to Change Terms of the Receivables". The annual percentage
rates and other terms of the cardholder agreements are continually reviewed by
People's Bank, and further changes to annual percentage rates and such terms
may occur based on changes in the law, changes in the marketplace or prudent
business practices. People's Bank expects to implement further selected
changes to annual percentage rates.
In addition, People's Bank may, at its option, increase the annual
percentage rates for purchases, balance transfer checks and cash advances for
the accounts of cardholders who fail to make payments by the due date or who
exceed the total credit limit set by People's Bank; however, People's Bank's
current practice is to lower such rates back to the corresponding standard
rates that were in effect upon compliance by such cardholders with the terms
of the accounts (e.g., making timely payments and staying within the credit
limit) for 5 consecutive Billing Cycles.
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 repayment programs. Such repayment programs
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 programs.
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 equal to 2% of
the amount of each cash advance (minimum $3; maximum $25) applied per
transaction at ATMs, People's Bank or any other bank; (iii) an overlimit fee,
generally in the amount of $20; and (iv) a returned check fee, generally in
the amount of $20. 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. People's Bank may, pursuant to its
agreements with cardholders, apply payments received on the Accounts to
finance charges, principal balances and other amounts due in the order that it
may elect from time to time.
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
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days delinquent may be sent a notice and telephone calls to the accountholder
may 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, between 61 and
91 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"). These Representative
Portfolio tables illustrate the historical performance of the Receivables as
if all Accounts in the Trust as of the Series Cut-Off Date were included in
the Trust since their origination. In fact, the Transferor has in the past
added pools of Additional Accounts that are about to reprice from an
introductory pricing period. During the introductory pricing period, Accounts
generally exhibit lower levels of yield and loss than do more seasoned
Accounts with standard pricing. As a consequence, the Representative Portfolio
tables below show revenue and loss experience that incorporates the impact of
introductory pricing and newer account loss experience which are not
representative of the Trust Portfolio.
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.
36
<PAGE>
LOSS EXPERIENCE
REPRESENTATIVE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTH PERIOD YEAR ENDED DECEMBER 31,
ENDED JUNE 30, ----------------------------------
1997 1996 1995 1994
---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Receivables Out-
standing(1)............ $2,575,359 $2,151,979 $1,649,780 $1,182,028
Gross Charge-
Offs(2)(3)............. 64,294 99,542 56,101 27,858
Recoveries(4)........... 5,707 8,553 5,175 3,876
Net Charge-Offs(3)...... 58,587 90,989 50,926 23,982
Net Charge-Offs as Per-
centage of Average
Receivables Outstand-
ing(3)................. 4.55%(5) 4.23% 3.09% 2.03%
</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) Recoveries have historically been allocated to the Trust on a pro rata
basis. Peoples's Bank expects to adopt a methodology following the closing
date pursuant to which those Recoveries relating to previously charged-off
Trust Receivables will be treated as Finance Charge Receivables.
(5) Calculated on an annualized basis.
DELINQUENCY EXPERIENCE
REPRESENTATIVE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
------------------ ---------------------------------------------------------
1997 1996 1995 1994
------------------ ------------------- ------------------ ------------------
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........... $26,061 0.98% $ 30,726 1.24% $23,227 1.27% $13,888 0.92%
61 to 90 days........... 17,342 0.66 19,566 0.79 13,292 0.73 7,476 0.50
91 to 120 days.......... 14,452 0.54 15,216 0.61 11,397 0.62 5,178 0.34
121 to 150 days......... 11,603 0.44 12,649 0.51 9,032 0.49 4,069 0.27
151 to 180 days......... 9,827 0.37 9,808 0.40 7,384 0.40 3,124 0.21
181 days or greater..... 16,826 0.64 14,666 0.59 10,613 0.58 4,498 0.30
------- ---- -------- ---- ------- ---- ------- ----
Total(2).............. $96,111 3.63% $102,631 4.14% $74,945 4.09% $38,233 2.54%
======= ==== ======== ==== ======= ==== ======= ====
</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.
Delinquencies and charge-offs as a percentage of the Representative
Portfolio are affected by a variety of factors. Among them are: (i) the rate
of growth of receivables in the Representative Portfolio; (ii) general
economic conditions in the United States and particularly the nationwide rise
in consumer loan delinquencies and the rise in personal bankruptcy filings;
(iii) the seasoning of the accounts in the Representative Portfolio; and (iv)
the creation and inclusion in the Representative Portfolio of a new product
group that generated higher revenues and higher losses. This new product group
represented approximately $85 million of receivables as of July 31, 1997.
People's Bank will not add additional receivables of this type to the Trust
without rating agency approval.
37
<PAGE>
The decline in delinquencies in 1997 compared to prior years can be
attributed to the increased rate of growth of Receivables and the increased
percentage of unseasoned accounts in the Representative Portfolio, as well as
tightened credit underwriting criteria. Conversely, the rise in delinquencies
in 1995 and 1996 resulted from lower growth rates and therefore a lower level
of unseasoned accounts in the Representative Portfolio.
The rise in charge-offs since 1994 as a percentage of the Representative
Portfolio is primarily the result of the increased level of consumer loan
delinquencies, the rise of personal bankruptcies nationwide and the overall
seasoning of the Receivables in the Representative Portfolio.
People's Bank believes that conformity with its underwriting procedures (see
"--Underwriting Procedures") will keep the loss and delinquency experience
within historical norms, although there can be no assurance that the loss and
delinquency amounts as a percentage of the Representative Portfolio will
remain at current levels.
RECOVERIES
Recoveries have historically been allocated to the Trust on a pro rata
basis. People's Bank expects to adopt a methodology pursuant to which the
Transferor will be required, following the Closing Date, to transfer to the
Trust on each Transfer Date the amount of Recoveries received by the Servicer
during the preceding Monthly Period with respect to the Receivables in the
Trust Portfolio. Recoveries allocated to the Trust are treated as collections
of Finance Charge Receivables. See "--Loss and Delinquency Experience".
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 2.17% 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 Certificate
Holders 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 satisfying eligibility
criteria set forth in the Agreement (the "Trust Portfolio"). Such criteria do
not create a selection adverse to the Certificate Holders. 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, 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
38
<PAGE>
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 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 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 "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 credit card accounts designated
as Accounts by the Transferor 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, after
giving effect to Additional Accounts conveyed on August 1, 1997, totaled
$2,646,979,589.36. The Accounts had, as of the June 30, 1997 Monthly Period,
an average outstanding balance of $1,553 and an average credit limit of
$5,767. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was 26.93%, and the weighted average age of the
Accounts was approximately 31 months. As of the June 30, 1997 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 June 1997 Monthly Period for each of the Accounts (including the
Additional Accounts added August 1, 1997). 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 June 1997
Monthly Period.
39
<PAGE>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF TOTAL
NUMBER OF TOTAL NUMBER RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE BALANCE
- --------------------- --------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
Credit Balance......... 28,254 1.66% $ (2,968,289.65) (0.11)%
Zero Balance........... 633,451 37.17 0.00 0.00
$0.01-$1,000.00........ 337,373 19.79 125,518,137.43 4.74
$1,000.01-$3,000.00.... 312,484 18.33 613,567,609.55 23.18
$3,000.01-$5,000.00.... 243,657 14.30 959,202,332.97 36.24
$5,000.01-$10,000.00... 146,676 8.61 923,535,057.20 34.89
Over $10,000.00........ 2,385 0.14 28,124,741.86 1.06
--------- ------ ----------------- ------
Total................ 1,704,280 100.00% $2,646,979,589.36 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF TOTAL
NUMBER OF TOTAL NUMBER RECEIVABLES
CREDIT LIMIT RANGE ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE BALANCE
- ------------------ --------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
$0.01-$1,000.00........ 46,922 2.75% $ 12,145,927.94 0.46%
$1,000.01-$2,000.00.... 77,096 4.53 46,917,810.18 1.77
$2,000.01-$3,000.00.... 100,945 5.92 96,501,259.27 3.65
$3,000.01-$4,000.00.... 145,069 8.51 176,742,785.04 6.68
$4,000.01-$5,000.00.... 273,596 16.05 410,097,909.81 15.49
$5,000.01-$10,000.00... 1,026,066 60.21 1,827,705,827.57 69.05
Over $10,000.00........ 34,586 2.03 76,868,069.55 2.90
--------- ------ ----------------- ------
Total................ 1,704,280 100.00% $2,646,979,589.36 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD OF DELINQUENCY PERCENTAGE OF OF TOTAL
(DAYS CONTRACTUALLY NUMBER OF TOTAL NUMBER RECEIVABLES
DELINQUENT) ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE BALANCE
- --------------------- --------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
Current................. 1,637,290 96.07% $2,436,497,902.30 92.05%
1-30 Days............... 39,222 2.30 114,370,331.78 4.32
31-60 Days.............. 8,619 0.51 26,061,272.09 0.98
61 or More Days......... 19,149 1.12 70,050,083.19 2.65
--------- ------ ----------------- ------
Total................. 1,704,280 100.00% $2,646,979,589.36 100.00%
========= ====== ================= ======
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF TOTAL
NUMBER OF TOTAL NUMBER RECEIVABLES
ACCOUNT AGE ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE BALANCE
- ----------- --------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
0 to 6 Months.......... 266,360 15.63% $ 482,077,058.04 18.21%
Over 6 to 12 Months.... 241,334 14.16 349,743,252.02 13.22
Over 12 to 24 Months... 433,096 25.41 608,874,746.42 23.00
Over 24 to 48 Months... 398,058 23.36 660,951,641.05 24.97
Over 48 Months......... 365,432 21.44 545,332,891.83 20.60
--------- ------ ----------------- ------
Total................ 1,704,280 100.00% $2,646,979,589.36 100.00%
========= ====== ================= ======
</TABLE>
40
<PAGE>
GEOGRAPHIC DISTRIBUTION BY RECEIVABLES BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF TOTAL
NUMBER OF TOTAL NUMBER RECEIVABLES
ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE BALANCE
--------- ------------- ------------------- -----------
<S> <C> <C> <C> <C>
Connecticut............ 174,425 10.23% $ 262,688,649.30 9.92%
California............. 159,394 9.35 259,221,943.32 9.79
Texas.................. 118,134 6.93 203,960,738.37 7.71
New York............... 112,935 6.63 168,676,093.62 6.37
Florida................ 85,309 5.01 123,489,361.22 4.67
Illinois............... 67,330 3.95 110,759,571.82 4.19
Pennsylvania........... 77,572 4.55 107,737,173.75 4.07
Ohio................... 67,916 3.99 103,864,511.40 3.92
Michigan............... 57,718 3.39 94,276,696.53 3.56
New Jersey............. 56,114 3.29 82,914,013.05 3.13
Other(1)............... 727,433 42.68 1,129,390,836.98 42.67
--------- ------ ----------------- ------
Total................ 1,704,280 100.00% $2,646,979,589.36 100.00%
========= ====== ================= ======
</TABLE>
- --------
(1) States with less than 3.13% of the Percentage of Total Receivables
Balance.
MATURITY CONSIDERATIONS
The Agreement provides that the Class A Certificate Holders and the Class B
Certificate Holders will not receive principal payments until the Class A
Scheduled Payment Date and the Class B Scheduled Payment Date, respectively,
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 Certificate Holders 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 Certificate Holders, (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 average of the Portfolio Yields for any three
consecutive Monthly Periods to a rate which is less than the average of the
Base Rates for such period, (h) the failure to pay each class of Offered
Certificates in full on or prior to its applicable Scheduled Payment Date or
(i) 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".
Controlled Accumulation Period. On each Transfer Date beginning with the
Transfer Date following the Monthly Period in which the Controlled
Accumulation Period commences, an amount equal to the least of (a) the
Available Investor Principal Collections with respect to the related Monthly
Period, (b) the "Controlled Deposit Amount", which is equal to the sum of the
Controlled Accumulation Amount for the related Monthly Period and the
Accumulation Shortfall, if any, for such Monthly Period, and (c) the Class A
Adjusted Investor Interest on such Transfer Date will be deposited in the
Principal Funding Account until the amount on deposit in the Principal Funding
Account (the "Principal Funding Account Balance") equals the Class A Investor
Interest. Amounts deposited in the Principal Funding Account will be deposited
in the Distribution Account for distribution to the Class A Certificate
Holders on the Class A Scheduled Payment Date. On the Transfer Date during the
Controlled Accumulation Period immediately following the Distribution Date on
which the Class A Investor Interest has been paid in full, an amount equal to
the lesser of (a) the Available Investor Principal Collections for the related
Monthly Period and (b) the Class B Investor Interest will be deposited into
the
41
<PAGE>
Distribution Account for distribution to the Class B Certificate Holders on
the Class B Scheduled Payment Date. If, for any Monthly Period prior to the
payment in full of the Class A Investor Interest and the Class B Investor
Interest, the Available Investor Principal Collections for such Monthly Period
exceed the applicable Controlled Deposit Amount, any such excess will be first
paid to the Collateral Interest Holder to the extent that the Collateral
Interest exceeds the Required Collateral Interest and then treated as Shared
Principal Collections and allocated to the holders of other Series of
certificates issued and outstanding or, subject to certain limitations
described herein (to the extent that the Transferor Interest exceeds the
Minimum Transferor Interest), paid to the Holder of the Exchangeable
Transferor Certificate. After the Class A Investor Interest and the Class B
Investor Interest have each been paid in full, the remaining Available
Investor Principal Collections, to the extent required, will be distributed to
the Collateral Interest Holder on each related Transfer Date until the
earliest of the date the Collateral Interest has been paid in full, the
Scheduled Series 1997-2 Termination Date and the termination of the Trust.
Amounts in the Principal Funding Account are expected to be available to pay
the Class A Investor Interest in full on the Class A Scheduled Payment Date.
Available Investor Principal Collections are expected to be available to pay
the Class B Investor Interest in full on the Class B Scheduled Payment Date.
Although it is anticipated that Available Investor Principal Collections with
respect to each Monthly Period during the Controlled Accumulation Period will
be available on the related Transfer Date to make a deposit of the Controlled
Deposit Amount to the Principal Funding Account and that the Class A Investor
Interest will be paid to the Class A Certificate Holders on the Class A
Scheduled Payment Date and the Class B Investor Interest will be paid to the
Class B Certificate Holders on the Class B Scheduled Payment Date,
respectively, no assurance can be given in this regard. If the amount required
to pay the Class A Investor Interest or the Class B Investor Interest in full
is not available on the Class A Scheduled Payment Date or the Class B
Scheduled Payment Date, respectively, a Pay Out Event will occur and the Rapid
Amortization Period will commence.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $30,357,142.86; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described
below under "Description of the Certificates--Postponement of Controlled
Accumulation Period," the Controlled Accumulation Amount may be higher than
the amount stated above for each Transfer Date with respect to the Controlled
Accumulation Period and will be determined by the Servicer in accordance with
the Series 1997-2 Supplement based on the principal payment rates for the
Accounts and on the investor interests of other Series (other than certain
excluded Series) which are scheduled to be in their revolving periods and
scheduled to create Shared Principal Collections during the Controlled
Accumulation Period and (b) for any Transfer Date with respect to the
Controlled Accumulation Period after the payment in full of the Class A
Investor Interest, an amount equal to the Class B Investor Interest on such
Transfer Date.
"Accumulation Shortfall" means on each Transfer Date with respect to the
Controlled Accumulation Period prior to the Class A Scheduled Payment Date,
the excess, if any, of the applicable Controlled Deposit Amount for the
immediately preceding Transfer Date over the amount deposited in the Principal
Funding Account as Class A Monthly Principal for such preceding Transfer Date.
Should the Rapid Amortization Period commence, the Certificate Holders 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 Principal Collections
received during the related Monthly Period (less the amount of Reallocated
Principal Collections with respect to such Monthly Period used to fund the
Required Amounts), plus certain amounts treated as Principal Collections with
respect to such Monthly Period (including amounts applied with respect to
Investor Default Amounts and Investor Charge-Offs), plus the amount of Shared
Principal Collections, if any, allocable to the Certificates with respect to
such Monthly Period (collectively, the "Available Investor Principal
Collections"). Allocations based upon the applicable Fixed Investor Percentage
may result in deposits to the Principal Funding Account during the Controlled
Accumulation Period or distributions of principal to Certificate Holders
during the Rapid Amortization Period greater, relative to the
42
<PAGE>
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 deposited or distributed, as the case may be,
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
Certificate Holders 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 the Controlled
Accumulation Period or the Rapid 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 Certificate Holders 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 Certificate Holders
may be lower than if the Certificates had matured when expected and the
Certificate Holders 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>
SIX MONTH YEAR ENDED DECEMBER 31,
PERIOD ENDED -------------------------
JUNE 30, 1997 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Lowest................................. 10.52% 9.30% 9.12% 9.82%
Highest................................ 12.39 11.18 11.19 13.02
Average(2)............................. 11.36 10.41 10.03 11.08
</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 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 Principal Collections with respect
to the Trust Portfolio, and thus the rate at which Certificate Holders could
expect to receive payments of principal on the Certificates during either the
Controlled Accumulation 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 Accumulation Amounts, or because a Pay Out
Event may occur which would initiate the Rapid Amortization Period, there can
be no assurance that the Class A Investor Interest will be paid to the Class A
Certificate Holders on the Class A Scheduled Payment Date and the Class B
Investor Interest will be paid to the Class B Certificate Holders on the Class
B Scheduled Payment Date. As described under "Description of the
Certificates--Postponement of Controlled Accumulation Period," the Servicer
may shorten the Controlled Accumulation Period and, in such event, there can
be no assurance that there will be sufficient time to accumulate all amounts
necessary to pay the Class A Investor Interest and the Class B Investor
Interest on the Class A Scheduled Payment Date and the Class B Scheduled
Payment Date, respectively.
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RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Representative Portfolio for the six month period ending June 30, 1997 and for
each of the three years ended December 31, 1996, 1995 and 1994 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, yields on a
billed basis may exceed cash yields as amounts collected on credit card
receivables lag behind amounts billed to cardholders. Conversely, as
delinquencies decrease, cash yields may exceed yields on a billed basis as
amounts collected in a current period may include amounts billed during prior
periods. The yield on both a billed basis 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>
SIX MONTH YEAR ENDED DECEMBER 31,
PERIOD ENDED ----------------------------------
JUNE 30, 1997 1996 1995 1994
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Finance Charges and Fees
Billed(1)............... $ 191,692 $ 331,317 $ 263,583 $ 182,657
Average Receivables Out-
standing(2)............. $2,575,359 $2,151,979 $1,649,780 $1,182,028
Yield from Finance
Charges and Fees
Billed(3)(4)............ 14.89%(5) 15.40% 15.98% 15.45%
</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. The new methodology for payment of
Recoveries relating to charged off Receivables in the Trust may favorably
impact future yield levels for the Representative Portfolio by paying more
Recoveries to the Trust than under the previous pro rata payment
methodology.
(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 1994 do 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.
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 Offered Certificates, approximately
$ , before deduction of expenses, will be paid to PSFC, other than $
thereof, which will be deposited in the Finance Charge Account for the payment
of interest on the Certificates with respect to the first Distribution Date.
PSFC intends to distribute substantially all of the remaining 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.
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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 June 30, 1997 owned 59.7% of the issued and outstanding
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. People's
Bank is the largest independent bank in Connecticut, with total assets of
approximately $7.9 billion, total liabilities of approximately $7.2 billion,
and total stockholders' equity of approximately $667 million as of June 30,
1997. At June 30, 1997, People's Bank's Tier 1 leverage capital ratio was
8.5%, satisfying the minimum ratio of 4.0% 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 June 30, 1997 with ratios of 10.2% and 13.8%, respectively.
People's Bank's regulatory capital ratios at June 30, 1997 exceeded the FDIC's
numeric criteria for classification as a "well capitalized" institution. On
September 3, 1997, People's Bank entered into a definitive agreement to
acquire Norwich Financial Corp. ("Norwich") and its wholly-owned subsidiary,
The Norwich Savings Society. Norwich has assets of approximately $713 million
and is located in eastern Connecticut.
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.
DESCRIPTION OF THE CERTIFICATES
The Offered Certificates will be issued pursuant to the Agreement, including
the Series 1997-2 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 Certificate Holders
and the holders of other undivided interests in the Trust, 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
six Supplements in connection with the issuance of other Series of
certificates, four of which are currently outstanding, 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
Certificate Holders without charge upon written request. The following summary
describes certain terms of the Agreement (including the Series 1997-2
Supplement) and is qualified in its entirety by reference to the Agreement
(including the Series 1997-2 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
and, with respect to the Offered Certificates, 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
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<PAGE>
on deposit in accounts established pursuant to the Series 1997-2 Supplement,
funds on deposit in any Series accounts established for the benefit of
Certificate Holders other than the Certificate Holders pursuant to the related
Supplement, funds on deposit and securities held in the Reserve Account for
the benefit of the Class A Certificate Holders, the benefit of the Interest
Rate Caps, the Collateral Interest 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 Certificate
Holders). 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 Offered Certificate Holders in whose names the Offered Certificates
were registered as of (i) the business day preceding the Distribution Date
with respect to book-entry Offered Certificates and (ii) the last day of the
calendar month preceding such Distribution Date with respect to Definitive
Certificates (each, a "Record Date"), and to the Collateral Interest Holder.
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
on the Offered Certificates will be derived from Finance Charge Collections,
amounts paid under the Interest Rate Caps, Principal Collections otherwise
allocable to the Collateral Interest and, for the Class A Certificate Holders,
withdrawals from the Reserve Account, Principal Funding Investment Proceeds
and Principal Collections otherwise allocable to the Class B Certificates.
Allocations of Finance Charge Collections 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 Offered 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 Offered 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 Offered Certificates. No Offered Certificate Owner
acquiring an interest in the Offered Certificates will be entitled to receive
a certificate representing such person's interest in the Offered Certificates.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references herein to actions by Offered
Certificate Holders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Offered Certificate Holders
shall refer to distributions, notices, reports and statements to DTC or Cede,
as the registered holder of the Offered Certificates, as the case may be, for
distribution to Offered 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 Certificate that is
mutilated, destroyed, lost or stolen may be exchanged or replaced, as the case
may be, at the offices of the Transfer Agent and Registrar or, in the case of
the Class A Certificates, the co-transfer agent and co-registrar in Luxembourg
upon presentation of the Certificate or satisfactory evidence of the
destruction, loss or theft thereof the Transfer Agent and Registrar or to the
co-transfer agent and co-registrar, as applicable. An indemnity satisfactory
to the Transfer Agent and Registrar or the co-transfer agent and co-registrar,
as the case may be, and the Trustee may be required at the expense of the
Offered Certificate Holder before a replacement Offered Certificate will be
issued. The Certificate Holder 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
either the Transfer Agent and Registrar or the co-transfer agent and co-
registrar, as applicable) connected therewith.
46
<PAGE>
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 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 Certificate
Holders and the Class B Certificate Holders, respectively.
The notional amount of the Class A Interest Rate Cap (the "Class A Notional
Amount") will at all times be equal to or greater than the amount of the
Expected Class A Principal less the aggregate notional amount of any portions
of the Class A Interest Rate Cap sold on or prior to the date of
determination. 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 Scheduled Payment 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 Agency, which in each case will not
result in the reduction or withdrawal of the rating of the Offered
Certificates (such substitute interest rate cap, a "Replacement Interest Rate
Cap"; such alternative arrangement, a "Qualified Substitute Arrangement").
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<PAGE>
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 less the aggregate notional amount of any portions of the Class B
Interest Rate Cap sold on or prior to the date of determination. 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 Scheduled
Payment 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.
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 Adjusted 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 Offered Certificates. Funds from any such sale will be
applied as Class A Available Funds or Class B Available Funds, respectively,
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.
Morgan Guaranty Trust Company of New York ("Morgan Guaranty") is a wholly-
owned subsidiary and the principal asset of J.P. Morgan & Co. Incorporated
("Morgan"), a Delaware corporation whose principal office is located in New
York, New York. Morgan Guaranty is a commercial bank offering a wide range of
banking services to its customers both domestically and internationally. Its
business is subject to examination and regulation by Federal and New York
State banking authorities. As of June 30, 1997 Morgan Guaranty and its
subsidiaries had total assets of $188.5 billion, total net loans of $28.6
billion, total deposits of $57.9 billion and stockholder's equity of $10.1
billion. As of December 31, 1996, Morgan Guaranty and its subsidiaries had
total assets of $164.8 billion, total net loans of $27.4 billion, total
deposits of $53.1 billion, and stockholder's equity of $9.9 billion.
The Consolidated Statement of Condition of Morgan Guaranty as of June 30,
1997 is set forth on page 9 of Exhibit 99 to Form 8-K dated July 10, 1997 as
filed by Morgan with the Securities and Exchange Commission. Morgan Guaranty
will provide without charge to each person to whom this Prospectus is
delivered, on the request of any such person, a copy of the Form 8-K referred
to above. Written requests should be directed to: Morgan Guaranty Trust
Company of New York, 60 Wall Street, New York, New York 10260-0060, Attention:
Office of the Secretary.
The information with respect to Morgan Guaranty contained herein has been
obtained from Morgan Guaranty. The delivery of this Prospectus shall not
create any implication that there has been no change in the affairs of Morgan
Guaranty since the date hereof, or that the information contained or referred
to herein is correct as of any time subsequent to its date.
The Offered Certificates do not represent an obligation of Morgan Guaranty
or Morgan. Certificateholders will not have any right to proceed directly
against Morgan Guaranty in respect of Morgan Guaranty's obligations under the
Interest Rate Caps except in the limited circumstances described herein.
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<PAGE>
Morgan Guaranty is an affiliate of J.P. Morgan Securities Inc., one of the
Class A Underwriters and the Class B Underwriter.
BOOK ENTRY REGISTRATION
Offered Certificate Holders may hold their Offered Certificates through DTC
(in the United States) or Cedel or Euroclear (in Europe), which in turn hold
through DTC, if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the physical Offered Certificate or
Offered 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.
Offered Certificate Owners that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interest in, Offered Certificates may do so only through Participants
and Indirect Participants. In addition, Offered Certificate Owners will
receive all distributions of principal and
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<PAGE>
interest on the Offered Certificates from the Trustee through the Participants
who in turn will receive them from DTC. Under a book entry format, Offered
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 Offered Certificate Owners. It is
anticipated that the only "Offered Certificate Holder" (as such term is used
in the Agreement) of Offered Certificates in book entry form will be Cede, as
nominee of DTC. Offered Certificate Owners will not be recognized by the
Trustee as Offered Certificate Holders, as such term is used in the Agreement,
and Offered Certificate Owners will only be permitted to exercise the rights
of Offered Certificate Holders indirectly through the Participants who in turn
will exercise the rights of Offered Certificate Holders 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 Offered Certificates
and is required to receive and transmit distributions of principal and
interest on the Offered Certificates. Participants and Indirect Participants
with which Offered Certificate Owners have accounts with respect to the
Offered Certificates similarly are required to make book entry transfers and
receive and transmit such payments on behalf of their respective Offered
Certificate Owners. Accordingly, although Offered Certificate Owners will not
possess Offered Certificates, Offered 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 an Offered
Certificate Owner to pledge Offered Certificates to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such Offered Certificates, may be limited due to the lack of a physical
certificate for such Offered Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by an Offered Certificate Holder under the Agreement only at the
direction of one or more Participants to whose account with DTC the Offered
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 36 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulations by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of certificates. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets
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in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System,
S.C., a Belgian cooperative corporation (the "Cooperative"). All operations
are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for the
Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters
of any Series of certificates. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Offered 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 an Offered
Certificate Holder 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 Offered 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 Offered Certificates will be issued in fully registered, certificated
form to Offered 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
Offered 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, Offered 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 Offered Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all the Offered Certificate
Owners through Participants of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the definitive certificate representing
the Offered Certificates and instructions for re-registration, the Trustee
will issue the Offered Certificates as Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
holders of the Offered Certificates under the Agreement ("Holders").
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Distribution of principal and interest on the Offered 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 the Controlled Accumulation Period or the Rapid Amortization
Period, interest and principal payments in respect of the Offered
Certificates, will be made to Offered Certificate Holders 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 Offered
Certificate (whether Definitive Certificates or the Offered Certificates
registered in the name of Cede representing the Offered Certificates),
however, will be made only upon presentation and surrender of such Offered
Certificate at the office or agency specified in the notice of final
distribution to Offered Certificate Holders. The Trustee will provide such
notice to registered Offered Certificate Holders 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 October 15, 1997,
and on each Distribution Date thereafter to Certificate Holders. Interest on
the Class A Certificates will be distributed in the amount of the sum of (v)
the product of (a) the Class A Certificate Rate, (b) the lesser of the Class A
Adjusted 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 (w) the Class A Covered Amount for the related
Interest Period, 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 (clauses (v), (w) and (x) 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 Certificate Holders, 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 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
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default rate of interest) during any prior accrual period not distributed to
the Certificate Holders, 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").
Any amounts in respect of distributable interest specified in clause (z)
above in each of the two preceding paragraphs 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.
"Expected Class A Principal" means (a) on each date to and excluding the
first Distribution Date occurring after the Monthly Period in which the
Controlled Accumulation Period commences (the "Initial Class A Accumulation
Date"), the Class A Initial Investor Interest, and (b) on each date thereafter
through but not including the Class A Scheduled Payment Date, the Class A
Initial Investor Interest less the product of (i) the Controlled Accumulation
Amount and the number of Distribution Dates which have occurred from and
including the Initial Class A Accumulation 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 Scheduled Payment 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 Adjusted 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.
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 Finance
Charge Collections allocated to the Class A Certificates and the Class B
Certificates, respectively, with respect to the preceding Monthly Period, and
interest payments up to the Class A Covered Amount will be funded from
Principal Funding Investment Proceeds and amounts withdrawn from the Reserve
Account. Payments of any Class A Monthly Cap Rate Interest, Class B Monthly
Cap Rate Interest and the Class A Covered Amount remaining unpaid after
application of such available funds will be paid from Excess Spread and Shared
Finance Charge Collections allocated to the Certificates. The Class A Monthly
Interest in excess of the sum of the Class A Monthly Cap Rate Interest and the
Class A Covered Amount 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 and Shared Finance Charge Collections. To the
extent the sum of (w) the applicable Floating Investor Percentage of Finance
Charge Collections during the preceding Monthly Period, (x) with respect to
the Class A Covered Amount, Principal Funding Investment Proceeds and amounts
withdrawn from the Reserve Account, and (y) Shared Finance Charge Collections
allocated and available to the Certificates is insufficient to pay such Class
A Monthly Cap Rate Interest and Class B Monthly Cap Rate Interest and such
Class A Covered Amount, then (i) Reallocated Principal Collections (to the
extent available) will be used to make such payments to the Class A
Certificates, and (ii) Reallocated Collateral Principal Collections (to the
extent available) remaining after such payments to the Class A Certificates
will be used to make such payments to the Class B Certificates.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the Controlled Accumulation Period or the Rapid Amortization
Period begins), unless a reduction in the Required Collateral Interest has
occurred, no principal payments will be made to Certificate Holders and
Principal Collections allocable to the Investor Interest will, subject to
certain limitations, including the allocation of any Reallocated Principal
Collections to pay the Class A Required Amount and the Class B Required
Amount, be treated as Shared Principal Collections. On each Transfer Date
relating to the Controlled Accumulation Period, the Trustee at the direction
of the Servicer will deposit in the Principal Funding Account an amount equal
to the least of (a) the Available Investor Principal Collections with respect
to the preceding Monthly Period, (b) the applicable Controlled Deposit Amount
and (c) the Class A Adjusted Investor Interest prior to any deposits on such
date.
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Amounts in the Principal Funding Account will be deposited in the Distribution
Account for payment to the Class A Certificate Holders on the Class A
Scheduled Payment Date. If the Class A Investor Interest has been paid in full
on the Class A Scheduled Payment Date, on the Transfer Date immediately
following the Class A Scheduled Payment Date, amounts equal to the lesser of
(a) the Available Investor Principal Collections with respect to the preceding
Monthly Period and (b) the Class B Investor Interest will be deposited in the
Distribution Account for distribution to the Class B Certificate Holders. Such
amounts in the Distribution Account will be paid to the Class B Certificate
Holders on the Class B Scheduled Payment Date. On each Transfer Date, if a
reduction in the Required Collateral Interest has occurred, any Available
Investor Principal Collections remaining after application to the Offered
Certificates as described herein will be applied in accordance with the Loan
Agreement to reduce the Collateral Interest to the Required Collateral
Interest. During the Controlled Accumulation Period until the final principal
payment is made to the Collateral Interest Holder, the portion of Available
Investor Principal Collections not applied to Class A Monthly Principal, Class
B Monthly Principal or Collateral Monthly Principal on a Transfer Date will
generally be treated as Shared Principal Collections.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a)(i) Principal Collections
received during such Monthly Period and certain other amounts allocable to the
Investor Interest, minus (ii) the amount of Reallocated Principal Collections
with respect to such Monthly Period used to fund the Required Amounts, plus
(b) any Shared Principal Collections from other Series that are allocated to
Series 1997-2 with respect to such Monthly Period.
During the Controlled Accumulation Period, the Trustee at the direction of
the Servicer will transfer Principal Collections (other than Reallocated
Principal Collections) and Shared Principal Collections from other Series, if
any, allocated to the Certificates from the Principal Account to the Principal
Funding Account as described under "--Application of Collections."
On each Distribution Date with respect to the Rapid Amortization Period, the
Class A Certificate Holders will be entitled to receive the sum of the
Available Investor Principal Collections for the related Monthly Period plus,
if the Rapid Amortization Period commences after the commencement of the
Accumulation Period, the Principal Funding Account Balance, in an amount up to
the Class A Investor Interest until the earliest of the date the Class A
Certificates are paid in full, the Scheduled Series 1997-2 Termination Date
and the termination of the Trust. After payment in full of the Class A
Investor Interest, the Class B Certificate Holders will be entitled to receive
on each Distribution Date with respect to the Rapid Amortization Period the
Available Investor Principal Collections until the earliest of the date the
Class B Certificates are paid in full, the Scheduled Series 1997-2 Termination
Date and the termination of the Trust. After payment in full of the Class B
Investor Interest, the Collateral Interest Holder will be entitled to receive
on each Transfer Date (other than the Transfer Date prior to the Scheduled
Series 1997-2 Termination Date) and on the Scheduled Series 1997-2 Termination
Date, the Available Investor Principal Collections until the earliest of the
date the Collateral Interest is paid in full, the Scheduled Series 1997-2
Termination Date and the termination of the Trust. 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 Principal
Collections and Shared Principal Collections available to the Certificates are
allocated during either the Controlled Accumulation Period or the Rapid
Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Controlled Accumulation Period, and extend the length of
the Revolving Period, subject to certain conditions including those set forth
below. The Servicer may make such election only if the Accumulation Period
Length (determined as described below) is less than fourteen months. On each
Determination Date until the Controlled Accumulation Period begins, the
Servicer will determine the "Accumulation Period Length", which is the number
of whole months expected to be required to fully fund the Principal Funding
Account no later than the Transfer Date preceding the Class A Scheduled
Payment Date, based on (a) the monthly Principal Collections expected to be
distributable to Certificate Holders of all Series, assuming a principal
payment rate no greater than the lowest
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monthly principal payment rate on the Receivables for the preceding twelve
months and (b) the amount of principal expected to be distributable to
Certificate Holders of all Series (excluding certain other Series) which are
not expected to be in their revolving periods during the Controlled
Accumulation Period. If the Accumulation Period Length is less than fourteen
months, the Servicer may, at its option, postpone the commencement of the
Controlled Accumulation Period such that the number of months included in the
Controlled Accumulation Period will be equal to or exceed the Accumulation
Period Length. The effect of the foregoing calculation is to permit the
reduction of the length of the Controlled Accumulation Period based on the
investor interest of certain other Series which are scheduled to be in their
revolving periods during the Controlled Accumulation Period and on increases
in the principal payment rate occurring after the Closing Date. The
Accumulation Period Length will not be determined to be less than four months.
SUBORDINATION
The Class B Investor Interest and the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. No payment of principal will be made to the Class B
Certificate Holders until the Class A Investor Interest is paid in full. No
payment of principal will be made to the Collateral Interest Holder on any
date until all payments of principal to the Class A Certificate Holders and
the Class B Certificate Holders to be made on such date have been paid or
provided for in full; provided, however, that on each Transfer Date, if a
reduction of the Required Collateral Interest has occurred, payments of
principal may be made to the Collateral Interest Holder prior to or
concurrently with payments of principal to Class A Certificate Holders and
Class B Certificate Holders. 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 Certificate Holders and then to the Class B Certificate
Holders. No payment of interest will be made to the Collateral Interest Holder
on any date until the Class A Required Amount and the Class B Required Amount,
if any, on such date have been paid in full. Certain principal payments
otherwise allocable to the Collateral Interest Holder and, if the foregoing
are insufficient, allocable to the Class B Certificate Holders may be
reallocated to the Class A Certificate Holders, and certain principal payments
otherwise allocable to the Collateral Interest Holder may be reallocated to
the Class B Certificate Holders; and, as a result of such reallocations, the
Collateral Interest and, if the Collateral Interest has been reduced to zero,
the Class B Investor Interest may thereby decrease. To the extent one or both
of the Collateral Interest and the Class B Investor Interest are so reduced,
the percentage of Finance Charge Collections allocated to the Collateral
Interest Holder and, as applicable, the Class B Certificate Holders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such decrease in the Collateral Interest Holder and/or the Class B Investor
Interest is not reimbursed, the amount of principal distributable to the
Collateral Interest and/or the Class B Certificate Holders 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, July 14, 1995, May 1, 1996, October 1, 1996, May 1, 1997,
and August 1, 1997, the Transferor transferred and assigned to the Trust
Receivables arising from certain Additional Accounts designated pursuant to
the Agreement. On each day that an Eligible Automatic Additional Account has
been originated or shall be originated or designated as an Automatic
Additional Account by the Transferor (and on any day such Account exists but
has not been previously added to the Trust as a result of the limitations
expressed in "Addition of Accounts"), the Transferor has added or will add the
Receivables in each such account to the Trust and such accounts are treated as
Automatic Additional Accounts in an amount not in excess of the Maximum
Addition Amount.
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
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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 August 31, 1997, which list has been and
will be further updated periodically to reflect new Automatic Additional
Accounts and Additional Accounts and the removal of Removed 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 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 Certificate
Holders 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 Certificate Holders 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 permanent 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 Certificate Holders 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 Certificate Holder 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 and the Holder of the Exchangeable Transferor
Certificate may offer any Series to the public under a Disclosure Document in
transactions either registered under
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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 and the Holder of
the Exchangeable Transferor Certificate 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 period during which amortization
or accumulation 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
or accumulation periods, as the case may be, while other Series are not. Thus,
certain Series may not be amortizing or accumulating, as the case may be,
while other Series are amortizing or accumulating. 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
1997-2 Supplement) an Investor Exchange by which the Certificate Holders 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 1997-2 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.
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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 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 Certificate Holders holding not less than 50% of
each of the Class A Investor Interest, the Class B Investor Interest and the
Collateral Interest and (ii) as a result the interests of the Certificate
Holders are materially adversely affected, and continue to be materially
adversely affected during such period, then the Trustee or Certificate Holders
holding not less than 50% of each of the Class A Investor Interest, the Class
B Investor Interest and the Collateral 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 Certificate
Holders or the Trustee on behalf of Certificate Holders.
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 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
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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 Certificate Holders), 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 Certificate Holders), 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
Certificate Holders), 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 Distribution Account will be considered a
prepayment in full of all Receivables and will be paid in full to the
Certificate Holders of such Series upon presentation and surrender of their
certificates. In the Series 1997-2 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, the Class
B Investor Interest and the Collateral Interest by written notice to the
Transferor (and to the Trustee and the Servicer if given by the Certificate
Holders) 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 Certificate Holders
(including the Certificate Holders) 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
Certificate Holders.
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 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
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(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 Certificate Holders.
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 Certificate Holders, (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 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
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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 Automatic Additional Accounts
whose inclusion has been approved by the Rating Agencies, that satisfy certain
other conditions and that were 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 were required to be and 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
Automatic Additional Accounts whose inclusion has been approved by the Rating
Agencies, that satisfy certain other conditions and that were 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 were required to be and 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 Series of certificates, including the Certificate Holders, 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
Certificate Holders (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
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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 Certificate Holders 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 Finance Charge
Collections and will be applied accordingly. The Transferor may at its option,
at any time, temporarily or permanently suspend the Discount Option. Each
Certificate Holder 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.
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 Certificate Holders, 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 Service, Inc. ("Moody's") and of A-1+ by Standard &
Poor's Ratings Services, a division of The McGraw Hill Companies, Inc.
("Standard & Poor's"), or a long term rating of at least Aa3 by Moody's and
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
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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 AAAm-G 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 Certificate Holders in the manner provided in the related
Supplement. The Paying Agent shall initially be the Trustee. The Series 1997-2
Supplement provides for the establishment of a Series 1997-2 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 Certificate
Holders 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 1997-2 ACCOUNTS
The Servicer will establish and maintain with a Qualified Trust Institution
in the name of the Trustee for the benefit of the Certificate Holders, 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), and which will be designated the "Finance Charge
Account" and the "Principal Account". The Servicer will also establish a
"Distribution Account" (a non-interest bearing segregated demand deposit
account established with a Qualified Trust Institution). In addition, the
Trustee will establish the Principal Funding Account and the Reserve Account.
See "--Principal Funding Account" and "--Reserve Account" for discussions of
the Principal Funding Account and the Reserve Account, respectively.
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, 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 Certificate Holders. 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, the Principal Funding
Account and the Distribution Account are collectively referred to as the
"Series 1997-2 Accounts".
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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 ("Finance Charge
Collections") and, second, as Collections in respect of Principal Receivables
("Principal Collections").
The Investor Percentage will be calculated as follows:
Finance Charge Collections and Receivables in Defaulted Accounts; Principal
Collections during Revolving Period. When used with respect to Finance Charge
Collections, or with respect to Receivables in Accounts written off as
uncollectible ("Defaulted Accounts") at any time, or when used with respect to
Principal Collections during the Revolving Period, "Investor Percentage" means
for any Monthly Period, the "Floating Investor Percentage", which shall be, on
any date of determination (except, in the case of Finance Charge Receivables
and Defaulted Receivables, with respect to the first Monthly Period), the
percentage equivalent of a fraction, the numerator of which is the Adjusted
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
applicable investor percentages for all outstanding Series on such date of
determination. With respect to the first Monthly Period, allocations of
Finance Charge Receivables and Defaulted Accounts described in the preceding
sentence will be calculated as the product of (i) such allocation for the full
calendar month of September 1997 and (ii) a fraction, the numerator of which
is the actual number of days from and including the Closing Date through and
including September 30, 1997, and the denominator of which is 30. Such amounts
so allocated will be further allocated between the Class A Certificate
Holders, the Class B Certificate Holders and the Collateral Interest Holder
based on the Class A Floating Allocation, the Class B Floating Allocation and
the Collateral Floating Allocation, respectively. The "Class A Floating
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage may never exceed 100%) of a fraction, the
numerator of which is equal to the Class A Adjusted Investor Interest as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Adjusted Investor Interest as of the
close of business on such day. The "Class B Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage may
never exceed 100%) of a fraction, the numerator of which is equal to the Class
B Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, as of
the Closing Date) and the denominator of which is equal to the Adjusted
Investor Interest as of the close of business on such day. The "Collateral
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage may never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the preceding Monthly Period (or with respect to
the first Monthly Period, as of the Closing Date) and the denominator of which
is equal to the Adjusted Investor Interest as of the close of business on such
day.
Principal Collections during the Controlled Accumulation Period or the Rapid
Amortization Period. When used with respect to Principal Collections for any
Monthly Period during the Controlled Accumulation Period or the Rapid
Amortization Period, "Investor Percentage" means the "Fixed Investor
Percentage", which shall be, on any date of determination, 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 canceled 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
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such date of determination and (b) the sum of the numerators used to calculate
the applicable investor percentages for all outstanding Series on such date of
determination with respect to Principal Receivables. Such amounts so allocated
will be further allocated between the Class A Certificate Holders, the Class B
Certificate Holders and the Collateral Interest Holder based on the Class A
Fixed Allocation, the Class B Fixed Allocation and the Collateral Fixed
Allocation, respectively. The "Class A Fixed Allocation" means, with respect
to any Monthly Period, the percentage equivalent (which percentage may never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Investor Interest as of the close of business on the last day of the Revolving
Period and the denominator of which is equal to the Investor Interest as of
the close of business on such day. The "Class B Fixed Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage may
never exceed 100%) of a fraction, the numerator of which is equal to the Class
B Investor Interest as of the close of business on the last day of the
Revolving Period and the denominator of which is equal to the Investor
Interest as of the close of business on such day. The "Collateral Fixed
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage may never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the Revolving Period and the denominator of which
is equal to the Investor Interest as of the close of business on such day.
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.
"Class A Investor Interest" for any date means an amount equal to (a) the
Class A Initial Investor Interest, minus (b) the aggregate amount of principal
payments made to the Class A Certificate Holders prior to such date, minus (c)
the excess, if any, of the aggregate amount of Class A Investor Charge-Offs
for all Transfer Dates prior to such date over the aggregate amount of any
reimbursements of Class A Investor Charge-Offs for all Transfer Dates prior to
such date; provided, however, that the Class A Investor Interest may not be
reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
Class B Initial Investor Interest, minus (b) the aggregate amount of principal
payments made to the Class B Certificate Holders prior to such date, minus (c)
the aggregate amount, if any, of Class B Investor Charge-Offs for all Transfer
Dates prior to such date, minus (d) the aggregate amount, if any, of
Reallocated Class B Principal Collections for all prior Transfer Dates with
respect to which the Collateral Interest has not been reduced, minus (e) the
aggregate amount, if any, by which the Class B Investor Interest has been
reduced to fund the Class A Investor Default Amount on all prior Transfer
Dates, plus (f) the aggregate amount of Excess Spread and Shared Finance
Charge Collections allocated and available on all prior Transfer Dates for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e); provided, however, that the Class B Investor Interest may not be
reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the Initial
Collateral Interest, minus (b) the aggregate amount of principal payments made
to the Collateral Interest Holder prior to such date, minus (c) the aggregate
amount, if any, of Collateral Interest Charge-Offs for all Transfer Dates
prior to such date, minus (d) the aggregate amount, if any, of Reallocated
Principal Collections for all prior Transfer Dates, minus (e) the aggregate
amount, if any, by which the Collateral Interest has been reduced to fund the
Class A Investor Default Amount and the Class B Investor Default Amount on all
prior Transfer Dates, plus (f) the aggregate amount of Excess Spread and
Shared Finance Charge Collections allocated and available on all prior
Transfer Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e); provided, however, that the Collateral
Interest may not be reduced below zero.
"Class A Adjusted Investor Interest", for any date of determination, means
an amount equal to the then current Class A Investor Interest minus the
Principal Funding Account Balance, if any, on such date.
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"Adjusted Investor Interest", for any date of determination, means an amount
equal to the sum of the Class A Adjusted Investor Interest, the Class B
Investor Interest and the Collateral Interest, in each case as of such date.
As a result of the calculations described above, Finance Charge Collections
received during any Monthly Period will generally be allocated to the
Certificate Holders 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 Principal Collections
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 Accumulation Period and the Rapid
Amortization Period, however, the amount of Principal Collections 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 Accumulation Period or the Rapid
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 an accumulation period or an amortization period, during which 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 (which are not Ineligible
Receivables) allocated to the Transferor Interest, no funds will be deposited
in the Excess Funding Account in respect of such reduction attributable to
such Receivables in Defaulted Accounts, as determined below. Funds on deposit
in the Excess Funding Account will be withdrawn and either (i) 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 (ii) 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 for the Series will be paid to the Certificate
Holders as a payment in respect of principal, and during the Controlled
Accumulation Period will be deposited in the Principal Funding Account to the
extent that the Available Investor Principal Collections allocable to the
Investor Interest are insufficient to deposit in to the Principal Funding
Account the applicable Controlled Deposit 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
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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 Principal Collections and Finance Charge Collections 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 applicable Floating Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Collections
will be deposited into the Finance Charge Account;
(b) during the Revolving Period, an amount equal to the applicable
Floating Investor Percentage of the aggregate amount of such deposits in
respect of Principal Collections, up to an amount by which the Collateral
Interest exceeds the Required Collateral Interest as of such day (such
excess, the "Collateral Interest Surplus"), will be deposited in the
Principal Account. On any business day when the amount on deposit in the
Principal Account exceeds the applicable Collateral Interest Surplus, such
excess will be treated as Shared Principal Collections and applied as such;
(c) during the Controlled Accumulation Period, an amount equal to the sum
of (i) the applicable Fixed Investor Percentage of the aggregate amount of
such deposits in respect of Principal Collections, together with certain
amounts treated as Principal Collections, 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 sum of the
applicable Controlled Deposit Amount and the applicable Collateral Interest
Surplus. On any business day when the amount on deposit in the Principal
Account exceeds the sum of the applicable Controlled Deposit Amount for the
Certificates and the applicable Collateral Interest Surplus, 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
applicable Fixed Investor Percentage of the aggregate amount of such
deposits in respect of Principal Collections, 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 Collections to cover amounts payable to the
Certificate Holders of any Series and, as applicable, to holders of other
related undivided interests in the Trust out of Collections in respect of
Principal Receivables. The Servicer will pay any remaining Shared
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Principal Collections on such business day to the Holder of the Exchangeable
Transferor Certificate (so long as the Transferor Interest exceeds the Minimum
Transferor Interest).
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. "Amortization
Period", with respect to any Series, refers to the period following the
related revolving period, which will be the early amortization period, the
rapid amortization period, the controlled accumulation period, the controlled
amortization period, or such other amortization or accumulation period, in
each case as defined, as applicable, with respect to such Series in the
related Series Supplement. 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 Principal Collections or Finance Charge Collections,
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 Class A Available Funds with respect to such
Transfer Date will be distributed in the following priority:
(a) the sum of (x) 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 Adjusted Investor Interest
determined as of the preceding Distribution Date (after giving effect
to all payments, deposits and withdrawals made on such Distribution
Date) or, for the Initial Interest Period, the Class A Initial Investor
Interest, and (iii) the actual number of days in the related Interest
Period or the Initial Interest Period divided by 360 (the "Class A
Monthly Cap Rate Interest") and (y) the Class A Covered Amount for the
related Interest Period plus any overdue Class A Monthly Cap Rate
Interest and Class A Covered Amount in respect of which a distribution
to Class A Certificate Holders has not been made, will be deposited in
the Distribution Account for distribution to Class A Certificate
Holders 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 Principal Collections and
will be applied on such Transfer Date in accordance with " Payments of
Principal" below;
(d) an amount equal to the unreimbursed Class A Investor Charge-Offs
will be treated as Principal Collections and will be applied on such
Transfer Date in accordance with "--Payments of Principal" below; and
(e) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described below.
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The excess of the Class A Monthly Interest over the sum of the Class A
Monthly Cap Rate Interest and the Class A Covered Amount 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 Class B Available Funds with respect to such
Transfer Date 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 (after giving effect to all payments,
deposits and withdrawals made on such Distribution Date) or, for the
Initial Interest Period, the Class B Initial Investor Interest, 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 Certificate Holders has not
been made, will be deposited in the Distribution Account for
distribution to Class B Certificate Holders 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 Principal Collections and
will be applied on such Transfer Date in accordance with "--Payments of
Principal" below;
(d) an amount equal to the unreimbursed Class B Investor Charge-Offs
will be treated as Principal Collections and (other than those amounts
treated as Reallocated Principal Collections) will be applied on such
Transfer Date in accordance with "--Payments of Principal" below; 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 and to the extent of Excess Spread.
(iii) An amount equal to the Collateral Available Funds with respect to
such Transfer Date will be distributed in the following priority:
(a) an amount equal to the Collateral Interest Monthly Servicing Fee
for the preceding Monthly Period and any accrued and unpaid Collateral
Interest Servicing Fees will be paid to the Servicer; and
(b) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described below.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of Finance
Charge Collections allocated to the Investor Interest and deposited in the
Finance Charge Account with respect to such Monthly Period, (b) Principal
Funding Investment Proceeds, if any, with respect to the related Transfer
Date, (c) amounts, if any, to be withdrawn from the Reserve Account which are
required to be included in Class A Available Funds pursuant to the Series
1997-2 Supplement with respect to such Transfer Date and (d) the proceeds from
the sale of all or any portion of the Class A Interest Rate Cap deposited into
the Collection Account during such Monthly Period. "Class B Available Funds"
means, with respect to any Monthly Period, an amount equal to the sum of (a)
the Class B Floating Allocation of Finance Charge Collections allocated to the
Investor Interest and deposited in the Finance Charge Account with respect to
such Monthly Period and (b) the proceeds from the sale of all or any portion
of the Class B Interest Rate Cap deposited into the Collection Account during
such Monthly Period. "Collateral Available Funds" means, with respect to any
Monthly Period, an amount equal to the Collateral Floating Allocation of
Finance Charge Collections allocated to the Investor Interest with respect to
such Monthly Period.
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"Excess Spread" on each Transfer Date will equal the sum of (a) the excess
of the Class A Available Funds over the Class A Payment Amount, (b) the excess
of the Class B Available Funds over the Class B Payment Amount and (c) the
excess of the Collateral Available Funds over the Collateral Interest Monthly
Servicing Fee payable on such Transfer Date.
Excess Spread. On each Transfer Date, the Servicer or the Trustee, acting
pursuant to the Servicer's instructions, will apply Excess Spread with respect
to the preceding Monthly Period and make the following payments and deposits
in the following priority:
(a) an amount equal to the Class A Required Amount will be used to pay
such Class A Required Amount and will be applied and distributed in
accordance with the priorities described in clauses (i)(a) through (i)(d)
above under "--Payment of Interest, Fees and Other Items";
(b) an amount equal to the Class B Required Amount will be used to pay
such Class B Required Amount and will be applied and distributed in
accordance with the priorities described in clauses (ii)(a) through (ii)(d)
above under "--Payment of Interest, Fees and Other Items";
(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, will be deposited in the Distribution
Account for distribution to Class A Certificate Holders on the next
succeeding Distribution Date;
(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, will be deposited in the Distribution
Account for distribution to Class B Certificate Holders on the next
succeeding Distribution Date;
(e) an amount equal to any unreimbursed 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 and will
be treated as Principal Collections and applied on such Transfer Date in
accordance with "--Payments of Principal" below;
(f) an amount equal to the product of (i) an amount equal to LIBOR plus
1.0% per annum, or such lesser amount as may be designated in the Loan
Agreement (the "Collateral Rate"), (ii) the Collateral Interest as of the
preceding Distribution Date (after giving effect to all payments, deposits
and withdrawals made on such date) or, for the first Transfer Date, the
Initial Collateral Interest, and (iii) the actual number of days in the
related Interest Period or the Initial Interest Period divided by 360 (the
"Collateral Monthly Interest"), plus any overdue Collateral Monthly
Interest in respect of which a distribution to the Collateral Interest
Holder has not been made, will be distributed to the Collateral Interest
Holder in accordance with the Loan Agreement;
(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, will be deposited in the Distribution Account for distribution to
Class A Certificate Holders on the next succeeding Distribution Date;
(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, will be deposited in the Distribution Account for distribution to
Class B Certificate Holders on the next succeeding Distribution Date;
(i) an amount equal to the aggregate Collateral Default Amount for the
preceding Monthly Period will be treated as Principal Collections and will
be applied on such Transfer Date in accordance with "--Payments of
Principal" below;
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(j) an amount equal to any unreimbursed reductions in the Collateral
Interest for reasons other than payment of principal to the Collateral
Interest Holder will be applied to reinstate the Collateral Interest and
will be treated as Principal Collections and applied on such Transfer Date
in accordance with "--Payments of Principal" below;
(k) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount will be deposited into the Reserve Account;
(l) any other amounts due and payable under the Loan Agreement will be
applied and distributed in accordance with and to the extent specified in
the Loan Agreement;
(m) an amount equal to the amount of any Class A Excess Interest accruing
during the related Interest Period;
(n) an amount equal to the amount of any Class B Excess Interest accruing
during the related Interest Period;
(o) the balance, if any, will constitute Shared Finance Charge
Collections, to be applied and distributed as described below in "--Shared
Finance Charge Collections";
(p) 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
(q) 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 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 (i)(d) above under "--Payments of
Fees, Interest and Other Items", second, to make the payments and deposits
described in clauses (ii)(a) through (ii)(d) above under "--Payments of Fees,
Interest and Other Items", third, to make the payment described in clause
(iii)(a) above under "--Payments of Fees, Interest and Other Items", fourth,
to reimburse any reductions in the Class B Investor Interest arising in
connection with the payment of the Class A Required Amount, fifth, to pay the
Collateral Monthly Interest and sixth, to make the payments described above in
clauses (g), (h), (i), (j), (k) and (l) 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
(i)(d) and (ii)(a) through (ii)(d) above under "--Payments of Fees, Interest
and Other Items", the Trustee, acting pursuant to the Servicer's instructions,
will apply Principal Collections allocated to the Collateral Interest as
Reallocated Collateral Principal Collections on the Transfer Date, first to
cover any remaining Class A Required Amount and second to cover any Class B
Required Amount, and if the Reallocated Collateral Principal Collections on
such Transfer Date are less than the remaining Class A Required Amount, to
apply Principal Collections allocated to the Class B Certificates as
Reallocated Class B Principal Collections on the Transfer Date to cover any
remaining Class A Required Amount. See "--Reallocation of Cash Flows".
Payments of Principal. On each Transfer Date, the Servicer or the Trustee,
acting pursuant to the Servicer's instructions, will distribute Available
Investor Principal Collections on deposit in the Principal Account in the
following priority:
(i) On each Transfer Date with respect to the Revolving Period:
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(a) an amount equal to the Collateral Monthly Principal will be paid
to the Collateral Interest Holder in accordance with the Loan
Agreement; and
(b) the balance, if any, will constitute Shared Principal Collections
and will be allocated and distributed as described below under "--
Shared Principal Collections";
(ii) On each Transfer Date with respect to the Controlled Accumulation
Period (beginning on the first Transfer Date following the Monthly Period
in which the Controlled Accumulation Period commences):
(a) prior to the Class A Scheduled Payment Date, an amount equal to
the Class A Monthly Principal will be deposited in the Principal
Funding Account, and on the Transfer Date immediately preceding the
Class A Scheduled Payment Date the aggregate amount on deposit in the
Principal Funding Account will be deposited in the Distribution Account
for distribution to the Class A Certificate Holders on the Class A
Scheduled Payment Date;
(b) for each Transfer Date after the Class A Investor Interest has
been paid in full, an amount equal to the Class B Monthly Principal for
such Transfer Date will be distributed to the Class B Certificate
Holders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period in which a reduction in the Required Collateral Interest has
occurred, an amount equal to the Collateral Monthly Principal will be
paid to the Collateral Interest Holder in accordance with the Loan
Agreement; and
(d) the balance, if any, will constitute Shared Principal Collections
and will be allocated and distributed as described below under "--
Shared Principal Collections";
(iii) On each Transfer Date with respect to the Rapid Amortization Period
(beginning on the first Transfer Date following the Monthly Period in which
the Rapid Amortization Period commences):
(a) an amount equal to the Class A Monthly Principal will be
deposited in the Distribution Account for distribution to the Class A
Certificate Holders on the next succeeding Distribution Date;
(b) after the Class A Investor Interest has been paid in full, an
amount equal to the Class B Monthly Principal will be deposited in the
Distribution Account for distribution to the Class B Certificate
Holders on the next succeeding Distribution Date;
(c) after the Class B Investor Interest has been paid in full, an
amount equal to the Collateral Monthly Principal will be paid to the
Collateral Interest Holder in accordance with the Loan Agreement; and
(d) the balance, if any, will constitute Shared Principal Collections
and will be allocated and distributed as described below under "--
Shared Principal Collections".
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, prior to
the payment in full of the Class A Investor Interest, will equal the least of
(i) Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date, (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, prior to the Class A Scheduled
Payment Date, the applicable Controlled Deposit Amount for such Transfer Date
and (iii) the Class A Adjusted Investor Interest prior to any deposits on such
Transfer Date.
"Class B Monthly Principal" with respect to the Transfer Date relating to
the Controlled Accumulation Period immediately following the Class A Scheduled
Payment Date, or with respect to any Transfer Date relating to the Rapid
Amortization Period, beginning with the Transfer Date on which the Class A
Investor Interest has been paid in full (after taking into account payments to
be made on the related Distribution Date), will equal the lesser of (i)
Available Investor Principal Collections on deposit in the Principal Account
(minus the portion of such Available Investor Principal Collections applied to
Class A Monthly Principal on such Transfer Date) and (ii) the Class B Investor
Interest for such Transfer Date.
"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest effected as described in clause (3) of the
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proviso in the definition of "Required Collateral Interest", an amount equal
to the lesser of (i) the excess, if any, of the Collateral Interest (after
giving effect to reductions for any Collateral Interest Charge-Offs and
Reallocated Principal Collections on such Transfer Date and after giving
effect to any further adjustments thereto for the benefit of the Class A
Certificate Holders and the Class B Certificate Holders on such Transfer Date)
over the Required Collateral Interest on such Transfer Date, and (ii) the
Available Investor Principal Collections on such Transfer Date or (b) with
respect to any Transfer Date relating to the Controlled Accumulation Period
prior to repayment in full of the Class B Investor Interest an amount equal to
the lesser of (i) the excess, if any, of the Collateral Interest (after giving
effect to reductions for any Collateral Interest Charge-Offs and Reallocated
Principal Collections on such Transfer Date and after giving effect to any
further adjustments thereto for the benefit of the Class A Certificate Holders
and the Class B Certificate Holders on such Transfer Date) over the Required
Collateral Interest on such Transfer Date, and (ii) the Available Investor
Principal Collections remaining after allocations to the Offered Certificates
on such Transfer Date or (c) with respect to any Transfer Date relating to the
Controlled Accumulation Period or the Rapid Amortization Period, beginning
with the Transfer Date on which the Class B Investor Interest has been paid in
full (after taking into account payments to be made on the related
Distribution Date), an amount equal the least of (i) Available Investor
Principal Collections on deposit in the Principal Account (minus the portion
of such Available Investor Principal Collections applied to Class A Monthly
Principal and Class B Monthly Principal on such Transfer Date) and (ii) the
Collateral Interest for such Transfer Date.
Shared Principal Collections. Principal Collections for any Monthly Period
allocated to the Investor Interest will first be used to cover, with respect
to any Monthly Period during the Controlled Accumulation Period, deposits of
the Controlled Deposit Amount to the Principal Funding Account with respect to
the Class A Certificates or of the Class B Investor Interest to the
Distribution Account with respect to the Class B Certificates, and during the
Rapid Amortization Period, the deposit of the Class A Investor Interest and
the Class B Investor Interest to the Distribution Account, and then under
certain circumstances payments to the Collateral Interest Holder, in each case
as described above. The Servicer will determine the amount of Principal
Collections for any Monthly Period allocated to the Investor Interest
remaining after covering required payments to the Certificate Holders and any
similar amount remaining for any other Series. The Servicer will allocate
Shared Principal Collections derived from Principal Collections allocated to
the Investor Interest to cover any scheduled or permitted principal
distributions to Certificate Holders of other Series, and deposits to
principal funding accounts, if any, for any other Series entitled thereto
which have not been covered out of the Principal Collections allocable to such
Series and out of certain other amounts for such Series ("Principal
Shortfalls"). If Principal Shortfalls exceed Shared Principal Collections for
any Monthly Period, Shared Principal Collections will be allocated pro rata
among the applicable Series based on the relative amounts of Principal
Shortfalls. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will be paid to the holder of the Exchangeable
Transferor Certificate or, under certain circumstances, deposited into the
Excess Funding Account. Any amounts designated as Shared Principal Collections
pursuant to Supplements for any other Series and allocable to the Certificates
will be applied as described in "--Payments of Principal" above.
REALLOCATION OF CASH FLOWS
On each Distribution Date during the Revolving Period, the Controlled
Accumulation Period and the Rapid Amortization Period, if any, the Servicer
will determine the Class A Required Amount and the Class B Required Amount. If
either or both of the Required Amounts are greater than zero after application
of available Finance Charge Collections, Excess Spread, and Shared Finance
Charge Collections, then Principal Collections allocable to the Collateral
Interest will be reallocated and applied first to fund the remaining Class A
Required Amount, if any, and second to fund to the remaining Class B Required
Amount, if any, and to the extent that Reallocated Collateral Principal
Collections are less than such remaining Class A Required Amount, Principal
Collections allocable to the Class B Certificates will then be reallocated and
applied to fund the remaining Class A Required Amount. The Collateral Interest
will be reduced by the amount of Reallocated Collateral Principal Collections
and Reallocated Class B Principal Collections applied to fund the Required
Amounts. The Class B Investor Interest will be reduced by the amount of
Reallocated Class B Principal Collections in excess of the Collateral
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Interest (after giving effect to reductions for any Collateral Interest
Charge-Offs and any Reallocated Collateral Principal Collections as of the
related Distribution Date) applied to fund the Class A Required Amount.
"Class A Required Amount" for any date means the amount, if any, by which
the Class A Available Funds with respect to the related Monthly Period are
insufficient to pay the Class A Payment Amount for the related date.
"Class A Payment Amount" for any date means the aggregate of (i) the Class A
Monthly Cap Rate Interest with respect to the related Distribution Date and
any Class A Monthly Cap Rate Interest accrued during any prior period and not
distributed to the Class A Certificate Holders, (ii) the Class A Covered
Amount and any Class A Covered Amount accrued during any prior period and not
distributed to the Class A Certificate Holders, (iii) the Class A Monthly
Servicing Fee with respect to 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 for the related Monthly Period, and (v)
unreimbursed Class A Investor Charge-Offs.
"Class B Required Amount" for any date means the amount, if any, by which
the Class B Available Funds for any Monthly Period are insufficient to pay the
Class B Payment Amount.
"Class B Payment Amount" for any date means the aggregate of (i) the Class B
Monthly Cap Rate Interest with respect to the related Distribution Date and
any Class B Monthly Cap Rate Interest accrued during any prior period and not
distributed to the Class B Certificate Holders, (ii) the Class B Monthly
Servicing Fee with respect to the related Distribution Date and any accrued
and unpaid Class B Monthly Servicing Fees from prior Monthly Periods, (iii)
the Class B Investor Default Amount for the related Monthly Period, and (iv)
unreimbursed Class B Investor Charge-Offs.
"Required Amounts" for any date means the Class A Required Amount and the
Class B Required Amount, collectively.
Principal Collections allocable to the Collateral Interest and the Class B
Certificates for the purpose of determining Collections available to be
applied as Reallocated Principal Collections will be determined (i) for any
Monthly Period during the Revolving Period by multiplying the Collateral
Floating Allocation or the Class B Floating Allocation, as the case may be, by
the applicable Floating Investor Percentage of Principal Collections for such
Monthly Period, and (ii) for any Monthly Period during the Controlled
Accumulation Period or the Rapid Amortization Period, if any, by multiplying
the Collateral Fixed Allocation or the Class B Fixed Allocation, as the case
may be, by the applicable Fixed Investor Percentage of Principal Collections
for such Monthly Period, and in each case adding certain other amounts treated
as Principal Collections (including amounts applied with respect to Investor
Default Amounts and Investor Charge-Offs).
Any reductions of the Class B Investor Interest or of the Collateral
Interest, if reduced to an amount less than the Required Collateral Interest,
due to payment of the Class A Required Amount or, with respect to the
Collateral Interest, payment of the Class B Required Amount, will thereafter
be reimbursed and the Class B Investor Interest and the Collateral Interest,
as the case may be, 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 (in the case of the Collateral Interest, up to the
Required Collateral Interest).
"Reallocated Class B Principal Collections" for any Monthly Period means
Principal Collections allocable to the Class B Investor Interest for the
related Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount, if any; provided, however, that such amount will
not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
Principal Collections allocable to the Collateral Interest for the related
Monthly Period in an amount not to exceed the amount applied to fund the Class
A Required Amount and the Class B Required Amount, if any; provided, however,
that such
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amount will not exceed the Collateral Interest after giving effect to any
Collateral Investor Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any date means Reallocated Class B
Principal Collections and Reallocated Collateral Principal Collections, for
such date, collectively.
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, the Class B Investor Default Amount and the
Collateral Default Amount for the preceding Monthly Period. The terms "Class A
Investor Default Amount", "Class B Investor Default Amount" and "Collateral
Default Amount" mean, respectively, for any Monthly Period, the product of (a)
the Class A Floating Allocation, the Class B Floating Allocation or the
Collateral Floating Allocation, as the case may be, determined as of the end
of the Monthly Period, (b) the Floating Investor Percentage for Receivables in
Defaulted Accounts and (c) the amount of Defaulted Receivables for such
Monthly Period (the sum of the Class A Investor Default Amount, the Class B
Investor Default Amount and the Collateral Default Amount being 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.
On each Determination Date, if the Class A Investor Default Amount exceeds
the amount of Excess Spread, Shared Finance Charge Collections and Reallocated
Principal Collections which are allocated and available to fund such amount
with respect to the Monthly Period immediately preceding such Determination
Date, the Collateral Interest (after giving effect to reductions for any
Collateral Interest Charge-Offs and any Reallocated Principal Collections as
of the related Distribution Date) will be reduced by the amount of such excess
(but not by more than the Class A Investor Default Amount for such Monthly
Period). In the event that such reduction would cause the Collateral Interest
to be a negative number, the Collateral Interest will be reduced to zero, and
the Class B Investor Interest (after giving effect to reductions for any Class
B Investor Charge-Offs and any Reallocated Class B Principal Collections in
excess of the Collateral Interest as of such Distribution Date) will be
reduced by the amount by which the Collateral Interest would have been reduced
below zero. 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 (a "Class A Investor Charge-Off"), which will have the effect of slowing
or reducing the return of principal and interest to the Class A Certificate
Holders. 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 Transfer Date
(but not by an amount in excess of the aggregate Class A Investor Charge-Offs)
by the amount of collections of Finance Charge Receivables, Excess Spread and
Shared Finance Charge Collections allocated and available for such purpose as
described under "--Allocation of Funds."
On each Determination Date, if the Class B Investor Default Amount exceeds
the amount of Excess Spread, Shared Finance Charge Collections and Reallocated
Collateral Principal Collections which are allocated and available to fund
such amount with respect to the Monthly Period preceding such Determination
Date, the Collateral Interest (after giving effect to reductions for any
Collateral Interest Charge-Offs and any Reallocated Principal Collections as
of the related Distribution Date and after giving effect to any adjustments
with respect thereto as described in the preceding paragraph) will be reduced
by the amount of such excess (but not by more than the Class B Investor
Default Amount for such Monthly Period). In the event that such reduction
would cause the Collateral Interest to be a negative number, the Collateral
Interest will be reduced to zero and the Class B Investor Interest will be
reduced by the amount by which the Collateral Interest would have been reduced
below zero (a "Class B Investor Charge-Off"). The Class B Investor Interest
will also be reduced by the amount of Reallocated Class B Principal
Collections in excess of the Collateral Interest (after giving effect to
reductions for any Collateral Interest Charge-Offs and any Reallocated
Collateral Principal Collections as of the related Distribution Date) and the
amount of any portion of the Class B Investor Interest allocated to the Class
A
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Certificates to avoid a reduction in the Class A Investor Interest. The Class
B Investor Interest will thereafter be reimbursed (but not in excess of the
unpaid principal balance of the Class B Certificates) on any Transfer Date by
the amount of Excess Spread and Shared Finance Charge Collections allocated
and available for that purpose as described under "--Allocation of Funds".
On each Determination Date, if the Collateral Default Amount exceeds the
amount of Excess Spread and Shared Finance Charge Collections which are
allocated and available to fund such amount with respect to the Monthly Period
preceding such Determination Date, the Collateral Interest will be reduced by
the amount of such excess but not more than the lesser of the Collateral
Default Amount and the Collateral Interest for such Transfer Date (a
"Collateral Interest Charge-Off"). The Collateral Interest will also be
reduced by the amount of Reallocated Collateral Principal Collections and the
amount of any portion of the Collateral Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest or to the
Class B Certificates to avoid a reduction in the Class B Investor Interest.
The Collateral Interest will thereafter be reimbursed on any Transfer Date by
the amount of Excess Spread allocated and available for that purpose as
described under "--Allocation of Funds". An "Investor Charge-Off" means a
Class A Investor Charge-Off, a Class B Investor Charge-Off or a Collateral
Interest Charge-Off, as the context requires.
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 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 Holder of the Exchangeable Transferor Certificate 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.
REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially, the Initial Collateral Interest and (ii) thereafter on each
Transfer Date an amount equal to 8.25% of the sum of the Class A Adjusted
Investor Interest, the Class B Investor Interest and the Collateral Interest
on such Transfer Date, after taking into account all deposits into the
Principal Funding Account on such Transfer Date and all payments to be made on
the related Distribution Date after all adjustments made on such Transfer
Date, but not less than $15,000,000; provided, however, that (1) if certain
reductions in the Collateral Interest are made or if a Pay Out Event occurs,
the Required Collateral Interest for such Transfer Date shall equal the
Required Collateral Interest for the Transfer Date immediately preceding the
occurrence of such reduction or Pay Out Event, (2) in no event shall the
Required Collateral Interest exceed the unpaid principal amount of the Offered
Certificates as of the last day of the Monthly Period preceding such Transfer
Date, less cash held in the Principal Funding Account as of such Transfer
Date, after taking into account deposits and payments to be made on the
related Distribution Date and (3) the Required Collateral Interest may be
reduced to a lesser amount at any time upon written confirmation from the
Rating Agency that such reduction will not result in the Rating Agency
reducing or withdrawing its rating on the Class A Certificates or the Class B
Certificates.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1997-2 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificate Holders (the "Principal Funding Account").
During the Controlled Accumulation Period, the Trustee at the direction of the
Servicer will transfer Principal Collections (other than Reallocated Principal
Collections) and Shared Principal Collections from other Series, if any,
allocated to the Certificates from the Principal Account to the Principal
Funding Account as described under "--Application of Collections."
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Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be used to pay interest on the Class A
Certificates up to an amount (the "Class A Covered Amount") equal to, for each
Transfer Date, the product of (a) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, (b) the Class A Certificate Rate in effect with respect to the
related Interest Period and (c) the Principal Funding Account Balance as of
the preceding Distribution Date after giving effect to all payments, deposits
and withdrawals on such Distribution Date. If, for any Transfer Date, the
Principal Funding Investment Proceeds are less than the Class A Covered
Amount, the amount of such deficiency (the "Class A Principal Funding
Investment Shortfall") will be withdrawn, to the extent available, from the
Reserve Account and deposited in the Finance Charge Account and included as
Class A Available Funds for such Transfer Date.
RESERVE ACCOUNT
Pursuant to the Series 1997-2 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificate Holders (the "Reserve Account"). The
Reserve Account is established to assist with the subsequent distribution of
interest on the Class A Certificates during the Controlled Accumulation
Period. On each Transfer Date from and after the Reserve Account Funding Date,
but prior to the termination of the Reserve Account, the Trustee, acting
pursuant to the Servicer's instructions, will apply Excess Spread allocated to
the Offered Certificates (to the extent described below under "--Allocation of
Funds--Excess Spread") to increase the amount on deposit in the Reserve
Account (to the extent such amount is less than the Required Reserve Account
Amount). The "Reserve Account Funding Date" will be the Transfer Date with
respect to the Monthly Period which commences no later than three months prior
to the commencement of the Controlled Accumulation Period, or such earlier
date as the Servicer may determine. The "Required Reserve Account Amount" for
any Transfer Date on or after the Reserve Account Funding Date will be equal
to (a) .50% of the Class A Investor Interest or (b) any other amount
designated by the Transferor; provided that if such designation is of a lesser
amount, the Transferor shall have provided the Servicer, the Collateral
Interest Holder and the Trustee with written confirmation from the Rating
Agency that such designation will not result in a reduction or withdrawal of
the Rating Agency's rating on the Class A Certificates or the Class B
Certificates and the Transferor shall have delivered to the Trustee a
certificate of an authorized officer to the effect that, based on the facts
known to such officer at such time, in the reasonable belief of the
Transferor, such designation will not cause a Pay Out Event to occur and will
not cause an event that, after the giving of notice or the lapse of time,
would cause a Pay Out Event to occur with respect to Series 1997-2. On each
Transfer Date, after giving effect to any deposit to be made to, and any
withdrawal to be made from, the Reserve Account on such Transfer Date, the
Trustee will withdraw from the Reserve Account an amount equal to the excess,
if any, of the amount on deposit in the Reserve Account over the Required
Reserve Account Amount and distribute such excess to the Collateral Interest
Holder for application in accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The
interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the Reserve Account (to the
extent the amount on deposit is less than the Required Reserve Account Amount)
or deposited in the Finance Charge Account and treated as Class A Available
Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and treated as
Class A Available Funds for such Transfer Date in an amount equal to the
lesser of (a) the Available Reserve Account Amount with respect to such
Transfer Date and (b) the Class A Principal Funding Investment Shortfall
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with respect to such Transfer Date; provided that the amount of such
withdrawal will be reduced to the extent that interest and other investment
income on Reserve Account funds are deposited in the Finance Charge Account
and treated as Finance Charge Collections as described in the last sentence of
the immediately preceding paragraph. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Reserve
Account Amount") will be equal to the lesser of the amount on deposit in the
Reserve Account (before giving effect to any deposit to be made to the Reserve
Account on such Transfer Date) and the Required Reserve Account Amount for
such Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of the Trust pursuant to the Agreement and (b) if the Controlled
Accumulation Period has not commenced, the first Transfer Date with respect to
the Rapid Amortization Period or, if the Controlled Accumulation Period has
commenced, the earlier to occur of (i) the first Transfer Date with respect to
the Rapid Amortization Period and (ii) the Transfer Date immediately preceding
the Class A Scheduled Payment Date. Upon the termination of the Reserve
Account, all amounts on deposit therein (after giving effect to any withdrawal
from the Reserve Account on such date as described above) will be distributed
to the Collateral Interest Holder for application in accordance with the terms
of the Loan Agreement.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
The Investor Interest 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 1997-2 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 Offered Certificate Rate or Collateral Rate, as applicable, and any
other amounts owing under the Loan Agreement 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 Certificate Holders and holders of other undivided interests in the
Trust, including the Certificate Holders, 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 Offered
Certificates will be made no later than the April 2005 Distribution Date (the
"Scheduled Series 1997-2 Termination Date").
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).
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In the event that the Investor Interest is greater than zero on the
Scheduled Series 1997-2 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 1997-2 Termination Date, as the final payment of the
Certificates, first, pro rata to the Class A Certificate Holders in an amount
sufficient to pay the Class A Investor Interest in full, second, pro rata to
the Class B Certificate Holders in an amount sufficient to pay to Class B
Investor Interest in full, and the balance to the Collateral Interest Holder.
PAY OUT EVENTS
The Revolving Period will continue through the end of the May 2001 Monthly
Period and the Controlled Accumulation Period will begin at such time, unless
such date is postponed as described under "--Postponement of Controlled
Accumulation Period" or a Pay Out Event occurs prior to such date. 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
Certificate Holders (which determination shall be made without regard to
whether 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 Certificate Holders
for such period;
(ii) any representation or warranty made by the Transferor in the
Agreement, including the Series 1997-2 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
Certificate Holders are materially and adversely affected (which
determination shall be made without regard to whether amounts are available
under the Interest Rate Caps); 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;
(iv) with respect to any Determination Date, the average of the Portfolio
Yields for the three consecutive Monthly Periods preceding such
Determination Date is a rate which is less than the average of the Base
Rates for such Monthly Periods;
(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 Certificate Holders (which determination shall be made
without regard to whether amounts are available under the Interest Rate
Caps);
(viii) failure to have paid the Class A Investor Interest in full on the
Class A Scheduled Payment Date or to have paid the Class B Investor
Interest in full on the Class B Scheduled Payment Date; or
(ix) 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.
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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 Certificate Holders evidencing undivided interests aggregating more
than 50% of each of the Class A Investor Interest, the Class B Investor
Interest and the Collateral Interest, by written notice to the Transferor and
the Servicer (and to the Trustee, if given by the Certificate Holders) 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), or (ix), 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, the Certificate Holders or all Certificate Holders, 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 Certificate
Holders 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, Certificate Holders 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 Certificate
Holders and other holders of undivided interests in the Trust 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 Certificate Holders and interest holders
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".
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
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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 Certificate Holders and on behalf of the Trustee.
SERVICER COVENANTS
In the Agreement, the Servicer covenants with the Certificate Holders
(including the Certificate Holders) 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 Certificate Holders
(including the Certificate Holders); (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 Certificate Holders (including the Certificate Holders) 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 Certificate Holders' 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 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 Certificate Holders 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 Certificate Holders, Certificate Holders of all of the
other Series and other holders of undivided interests in the Trust. 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 last day of the related Monthly Period. The portion of the
Servicing Fee allocable to each of the Class A Certificate Holders, the Class
B Certificate Holders and the Collateral Interest Holder on each Distribution
Date (respectively, the "Class A Monthly Servicing Fee", the "Class B Monthly
Servicing Fee" and the "Collateral Interest Monthly Servicing Fee"; together,
the "Monthly Servicing Fees") will be equal to one-twelfth of the product of
2% per annum (the "Servicing Fee Rate") and the Class A Adjusted Investor
Interest, the Class B Investor Interest or the Collateral Interest, as the
case may be, as of the last day of
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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 Certificate Holders of certain distributions of interest therefrom.
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 Certificate Holders 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 Certificate Holders (including the Certificate Holders), 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 Certificate Holders or the Offered Certificate
Owners for liabilities arising from actions taken by the Trustee at the
request of Certificate Holders, (c) the Trust, the Certificate Holders or the
Offered Certificate Owners for any losses, claims, damages or liabilities
incurred by any Certificate Holder 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
Certificate Holders or the Offered Certificate Owners for any liabilities,
costs or expenses of the Trust, the Certificate Holders or the Offered
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 Certificate Holders or the Offered 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 Certificate Holders 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
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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 Certificate Holders 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 for the assumption of the Transferor's
or Servicer's obligations 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
Certificate Holders 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.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or Certificate Holders and other interest holders representing undivided
interests aggregating more than 50% of the sum of the investor interests of
all certificates and other undivided interests in the Trust outstanding, by
written notice to the Servicer (and to the Trustee if given by the Certificate
Holders and interest holders), 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);
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(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
Certificate Holders (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 Certificate Holders 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 Certificate Holders
(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 Certificate Holders from effecting a Service Transfer.
REPORTS TO CERTIFICATE HOLDERS
On each Distribution Date, the Paying Agent will forward to each Certificate
Holder 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 Certificate Holders, the Class B Certificate Holders and the
Collateral Interest Holder, respectively, (b) the amount of the distribution
made on such Distribution Date allocable to Class A Monthly Principal, Class B
Monthly Principal and Collateral Monthly Principal, respectively, (c) the
amount of the distribution made on such Distribution Date allocable to Class A
Monthly Interest, Class B Monthly Interest and Collateral Monthly Interest,
respectively, (d) the amount of Principal Collections processed during the
preceding Monthly Period and allocated in respect of the Class A Certificates,
the Class B Certificates and the Collateral Interest, respectively, (e) the
aggregate amount of Principal Receivables, the Investor Interest, the Adjusted
Investor Interest, the Class A Investor Interest, the Class A Adjusted
Investor Interest, the Class B Investor Interest and the Collateral Interest,
and the Floating Investor Percentage, Class A Floating Allocation, the Class B
Floating Allocation and the Collateral Floating Allocation, the Fixed Investor
Percentage, the Class A Fixed Allocation, the Class B Fixed Allocation and the
Collateral Fixed Allocation, in each case 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, the Class B Investor Default
Amount and the Collateral Default Amount for the preceding Monthly Period, (h)
the aggregate amount of Class A Investor Charge-Offs, Class B Investor Charge-
Offs and Collateral Interest 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, the Class B Monthly Servicing Fee and the
Collateral Interest Monthly Servicing Fee for the preceding Monthly Period,
(j) 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), (k) the Principal Funding Account
Balance as of the related Transfer Date, (l) the Accumulation Shortfall for
the preceding Monthly Period, (m) the Principal Funding Investment Proceeds
transferred to the Finance Charge Account on the related Transfer Date, (n)
the Class A Principal Funding Investment Shortfall on the related Transfer
Date, (o) the amount of Class A Available Funds and Class B Available Funds on
deposit in the Finance Charge Account on the related Transfer Date, (p) the
aggregate amount of Finance Charge Collections allocable to the Investor
Interest for the preceding Monthly Period, (q) the Required Amounts, if any,
and, if the amount payable under the Interest Rate Caps and Shared Finance
Charge Collections available to the Certificates are insufficient to satisfy
the Required Amounts, the amount of Reallocated Collateral Principal
Allocations and Reallocated Class B Principal Allocations to be applied
thereto,
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and any reductions in the Collateral Interest and the Class B Investor
Interest to satisfy the Class A Required Amount and the Class B Required
Amount, as the case may be, (r) the Available Reserve Account Amount and the
Reserve Account Draw, and (s) the ratio of the Collateral Interest 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 1998, the
Paying Agent will furnish to each person who at any time during the preceding
calendar year was an Offered Certificate Holder 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 an Offered Certificate Holder, together with such other
customary information (consistent with the treatment of the Offered
Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable the Offered Certificate Holders to prepare their tax
returns.
The Trustee will publish or will cause to be published following each
Distribution Date (including the Scheduled Series 1997-2 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 Certificate Holders" in the prospectus will be
available for review at the main office of the listing agent of the Trust in
Luxembourg.
Notices to Certificate Holders 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 Certificate Holders
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, 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 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, 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, 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 certificate holder 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
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Agreement and any Supplement. See "The Receivables". The Agreement may be
amended from time to time without the consent of the Certificate Holders 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 Principal Collections, in an amount up to
the aggregate amount by which the purchase price of Principal Receivables as
sold thereafter is less than 100%, as Finance Charge Collections; provided,
however, that any such action shall not adversely affect in any material
respect the interests of the Certificate Holders (each Certificate Holder 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 Certificate
Holders); 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 certificate holder 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 Certificate holders 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 certificate holder 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
Certificate holders 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
certificate holder of all Series (or with respect to an amendment of a
Supplement, to the applicable Series).
LIST OF CERTIFICATE HOLDERS
Upon written request of Certificate Holders 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 Certificate
Holders for its costs and expenses, and having given the Servicer notice that
such request has been made, will afford such Certificate Holders access during
business hours to the current list of Certificate Holders of the Trust for
purposes of communicating with other Certificate Holders with respect to their
rights under the Agreement. The Agreement generally does not provide for any
annual or other meetings of Certificate Holders. See "--Book Entry
Registration" and "--Definitive Certificates" above.
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
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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 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
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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 Certificate Holders 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 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 Certificate Holders. 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,
Fair Debt Collection Practice and Electronic Funds Transfer 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
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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.
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
Offered Certificates. This discussion, however, does not address every aspect
of the Federal income tax laws that may be relevant to holders of Offered
Certificates in light of their personal investment circumstances or to certain
types of Offered Certificate Holders 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 Offered Certificates in their own
particular circumstances. The discussion is generally limited to those persons
who are the initial holders of the Offered Certificates and to investors who
will hold Offered 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 Offered Certificate Holders.
TREATMENT OF THE OFFERED 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 Offered Certificates, when issued, will be
characterized for Federal income tax purposes as indebtedness that is secured
by the Receivables.
The Transferor and Offered Certificate Holders 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 Offered 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 Offered Certificate
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Holder, by virtue of accepting a beneficial interest in an Offered
Certificate, will agree to treat the Offered 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.
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 Offered 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 Offered Certificates as
Interests in an Association Taxable as a Corporation or a Partnership" below.
Except as otherwise expressly indicated, the following discussion assumes that
the Offered Certificates will be treated as debt obligations for Federal
income tax purposes.
INTEREST INCOME TO OFFERED CERTIFICATE HOLDERS
It is anticipated that the Offered Certificates will be issued at par value
(or at an insubstantial discount from par value). To the extent that stated
interest on the Offered Certificates constitutes "qualified stated interest",
it will be taxable as ordinary income for Federal income tax purposes when
received or accrued by Offered Certificate Holders in accordance with their
respective methods of tax accounting. The Treasury regulations provide that
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. Interest is considered
"unconditionally payable" if reasonable legal remedies exist to compel timely
payment or terms and conditions of the debt instrument make the likelihood of
late payment (other than a late payment that occurs within a reasonable grace
period) or nonpayment (ignoring the possibility of nonpayment due to default,
insolvency or similar circumstances) a remote contingency. The Transferor and
PSFC intend to take the position that late payment or nonpayment of stated
interest on the Offered Certificates is a remote contingency, and therefore
that such stated interest constitutes qualified stated interest and (assuming
the Offered Certificates are not issued with a greater than de minimis
discount from par value) the Offered Certificates are not treated as being
issued with OID. It is possible, however, that the Internal Revenue Service
would take the position that none of the stated interest payable on the
Offered Certificates is "unconditionally payable" and hence that all of such
interest should be included in the Offered Certificates' stated redemption
price at maturity. Consequently, the Offered Certificates would be treated as
being issued with original issue discount ("OID") (generally, the excess of
the "stated redemption price at maturity" of an Offered Certificate, or all
payments on the Offered Certificate other than payments of qualified stated
interest, over the issue price of the Offered Certificate). To the extent the
Offered Certificates were treated as being issued with OID, an Offered
Certificate Holder would be required, subject to a de minimis exception, to
include OID in income as interest over the term of the Offered Certificate
under a constant yield method, and, in general, OID must be included in income
in advance of the receipt of cash representing that
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income. Because of the uncertainty of treatment, holders are urged to consult
their own tax advisors regarding the treatment of stated interest on the
Offered Certificates.
An Offered Certificate Holder who purchases an Offered 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 Offered
Certificate, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the market discount Offered Certificate.
If an Offered Certificate is purchased by an Offered Certificate Holder at a
premium, such premium will be amortized as an offset to interest income (with
a corresponding reduction in the Offered Certificate Holder's basis) under a
constant yield method over the term of the Offered Certificate if an election
under Section 171 of the Code is made or is previously in effect.
DISPOSITION OF OFFERED CERTIFICATES
If an Offered Certificate is sold, exchanged or otherwise disposed of, an
Offered Certificate Holder 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 Offered Certificate Holder's adjusted basis in the Offered
Certificate. The adjusted basis of an Offered Certificate generally will equal
the cost of the Offered Certificate to the Offered Certificate Holder,
increased by any OID or market discount previously includible in the Offered
Certificate Holder's gross income, and reduced by the portion of the basis of
the Offered Certificate allocable to payments on the Offered Certificate
previously received by the Offered Certificate Holder and any amortized
premium. Subject to the market discount rules, gain or loss on the sale or
other disposition of an Offered Certificate will be capital gain or loss if
the Offered Certificate is held by the Offered Certificate Holder 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 Offered
Certificate is held by the Offered Certificate Holder for more than one year
and otherwise will be short-term.
POSSIBLE CHARACTERIZATION OF OFFERED CERTIFICATES AS INTERESTS IN AN
ASSOCIATION TAXABLE AS A CORPORATION OR A PARTNERSHIP
Although, as described above, it is the opinion of Tax Counsel that the
Offered 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 Offered Certificates were not debt
obligations for Federal income tax purposes, Offered Certificates might be
classified for Federal income tax purposes as interests in an association
taxable as a corporation that owns the Receivables or 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 Offered
Certificate Holders and Offered Certificate Holders 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 Offered Certificates were treated as ownership interests 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 Offered
Certificate Holders would generally be treated as dividend income to the
Offered Certificate Holders.
If, alternatively, the Offered Certificates were treated as interests in a
partnership, the income reportable by the Offered Certificate Holders as
partners could differ from the income reportable by the Offered Certificate
Holders as holders of debt obligations. For example, a cash basis Offered
Certificate Holder might be required to report income when it accrued to the
partnership rather than when it is received by the Offered Certificate Holder.
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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 Offered Certificates. Finally, if a class of Offered
Certificates were treated as interests in a partnership and another class of
Offered Certificates were treated as debt, a portion of the taxable income
allocated to an Offered Certificate Holder of the class of Offered
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.
Since the Transferor and PSFC will treat the Offered 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 Offered Certificates.
FOREIGN INVESTORS
Assuming the Offered Certificates represent debt obligations for Federal
income tax purposes, if interest (including OID) on the Offered Certificates
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 Offered Certificate Holder 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 Offered 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 Offered Certificates
represent interests in a partnership (not taxable as a corporation), an
Offered Certificate Holder 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 an
Offered Certificate Holder 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
Offered Certificate Holder of record, the amount of interest paid (and OID
accrued, if any) on the Offered 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 Offered Certificate Holder 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 Offered Certificate Holder fail to provide the required
certification, the Offered Certificate Holder 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.
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STATE AND LOCAL TAX CONSEQUENCES
GENERAL
State tax consequences to each Offered Certificate Holder will depend upon
the provisions of the state tax laws to which the Offered Certificate Holder
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 Offered
Certificate Holders in all of the state taxing jurisdictions in which they are
already subject to tax.
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 Offered 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, Offered Certificate
Holders not otherwise subject to Connecticut tax would not become subject to
such tax solely because of their ownership of the Offered Certificates.
Offered Certificate Holders already subject to taxation in Connecticut as
corporations, however, could be required to pay tax on the income generated
from ownership of these Offered Certificates.
In the alternative, if the Offered 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 an Offered Certificate
Holder not otherwise subject to taxation in Connecticut could become subject
to Connecticut income taxes as a result of its mere ownership of Offered
Certificates.
If the Offered 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 Offered
Certificate Holders. An Offered Certificate Holder 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 Offered Certificate Holders 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 Offered Certificates would be treated as indebtedness
by any particular state. Offered Certificate Holders 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 OFFERED CERTIFICATES.
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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,
including entities whose underlying assets are deemed to include the assets of
one or more employee benefit plans (including without limitation insurance
company general accounts), "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
Offered 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 an Offered Certificate, the fiduciary of any 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 Offered 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 Offered Certificate Owners have agreed to
treat the Offered Certificates as debt instruments for tax purposes, the
Offered Certificates may be considered equity interests in the Trust for
purposes of the Plan Asset Regulation. In such a case, if investment in the
Offered 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 Offered
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 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. A class of securities will not fail to
be widely held solely because subsequent to the initial offering the number of
independent investors falls below 100 as a result of events beyond the control
of the issuer. 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 independent of the
Transferor and each other 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. It is not expected
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that the Class B Certificates will meet the criteria of publicly offered
securities, and accordingly the Class B Certificates may not be acquired with
the assets of any Benefit Plan (including without limitation any insurance
company general account deemed to include 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 an
Offered 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 an Offered Certificate by a Benefit Plan.
It should also be noted that the Small Business Job Protection Act of 1996
added new Section 401(c) of ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the Code.
Pursuant to Section 401(c), the Department of Labor is required to issue final
regulations (the "General Account Regulations") not later than December 31,
1997 with respect to insurance policies issued on or before December 31, 1998
that are supported by an insurer's general account. The General Account
Regulations are to provide guidance on which assets held by the insurer
constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also provides
that, except in the case of avoidance of the General Account Regulation and
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or federal criminal
law, until the date that is 18 months after the General Account Regulations
become final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code may result on the
basis of a claim that the assets of the general account of an insurance
company constitute the assets of any Benefit Plan. The plan asset status of
insurance company separate accounts is unaffected by new Section 401(c) of
ERISA, and separate account assets continue to be treated as the plan assets
of any Benefit Plan invested in a separate account.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of Offered 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.
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 Offered 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.
95
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
with respect to the Offered 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, for whom J.P. Morgan Securities Inc. is
acting as representative, 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>
J.P. Morgan Securities Inc................................. $
Goldman Sachs & Co.........................................
Lehman Brothers Inc........................................
Salomon Brothers Inc.......................................
------------
$425,000,000
============
</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 J.P. Morgan Securities Inc. (the "Class B Underwriter" and together
with the Class A Underwriters, the "Underwriters"), and the Class B
Underwriter has agreed to purchase, the Class B Certificates.
Under the terms and conditions of the Underwriting Agreement, the Class B
Underwriter is 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 Underwriter that it
proposes 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 Underwriter 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 Underwriter.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Offered
Certificates. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. In addition, the Underwriters may bid
for, and purchase the Offered Certificates in the open market to cover
syndicate shorts or to stabilize the price of the Offered Certificates. Any of
these activities may stabilize or maintain the market price of the Offered
Certificates above independent market levels. The Underwriters are not
required to engage in these activities, and if commenced, such activities may
be discontinued at any time.
96
<PAGE>
Each Underwriter has represented and agreed that (a) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Offered Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or
who is a person to whom the document may otherwise lawfully be issued or
passed on, (b) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 and other applicable laws and regulations
with respect to anything done by it in relation to the Offered Certificates
in, from and otherwise involving the United Kingdom and (c) if that
Underwriter is an authorized person under the Financial Services Act 1986, it
has only promoted and will only promote (as that term is defined in Regulation
1.02 of the Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described herein if that
person is of a kind described either in Section 76(2) of the Financial
Services Act of 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.
Morgan Guaranty is an affiliate of J.P. Morgan Securities Inc., one of the
Class A Underwriters and the Class B Underwriter.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered Certificates
will be passed upon for the Transferor by William T. Kosturko, General Counsel
to People's Bank. Certain legal matters relating to the Offered 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 Offered 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 Offered Certificates
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York.
97
<PAGE>
INDEX OF KEY TERMS
<TABLE>
<S> <C>
Accounts................................................................ 15
Accumulation Period Length.............................................. 54
Accumulation Shortfall.................................................. 11, 42
Additional Accounts..................................................... 16
Adjusted Investor Interest.............................................. 8, 66
Affinity Program Accounts............................................... 33
Agent Bank Accounts..................................................... 33
Aggregate Principal Receivables......................................... 39
Agreement............................................................... 5
Amortization Period..................................................... 68
Automatic Additional Accounts........................................... 16
Available Investor Principal Collections................................ 42, 54
Available Reserve Account Amount........................................ 78
Bank Portfolio.......................................................... 32
Base Rate............................................................... 28
Benefit Plans........................................................... 94
Billing Cycle........................................................... 34
Cedel Participants...................................................... 50
Cedel................................................................... 50
Cede.................................................................... 3
Certificate Holders..................................................... 5
Certificates............................................................ 2, 5
Class A Adjusted Investor Interest...................................... 8, 65
Class A Available Funds................................................. 69
Class A Cap Rate........................................................ 47
Class A Certificate Holders............................................. 5
Class A Certificate Rate................................................ 9
Class A Certificates.................................................... 1, 5
Class A Covered Amount.................................................. 12, 77
Class A Excess Interest................................................. 10, 52
Class A Excess Principal................................................ 53
Class A Fixed Allocation................................................ 65
Class A Floating Allocation............................................. 64
Class A Initial Investor Interest....................................... 7
Class A Interest Rate Cap............................................... 6
Class A Investor Charge-Off............................................. 20, 75
Class A Investor Default Amount......................................... 75
Class A Investor Interest............................................... 8, 65
Class A Monthly Cap Rate Interest....................................... 68
Class A Monthly Interest................................................ 9, 52
Class A Monthly Principal............................................... 72
Class A Monthly Servicing Fee........................................... 81
Class A Notional Amount................................................. 47
Class A Payment Amount.................................................. 19, 74
Class A Principal Funding Investment Shortfall.......................... 12, 77
Class A Required Amount................................................. 19, 74
Class A Scheduled Payment Date.......................................... 2, 14
Class A Underwriters.................................................... 96
Class B Available Funds................................................. 69
Class B Cap Rate........................................................ 48
</TABLE>
98
<PAGE>
<TABLE>
<S> <C>
Class B Certificate Holders............................................. 5
Class B Certificate Rate................................................ 10
Class B Certificates.................................................... 1, 5
Class B Excess Interest................................................. 10, 53
Class B Excess Principal................................................ 53
Class B Fixed Allocation................................................ 65
Class B Floating Allocation............................................. 64
Class B Initial Investor Interest....................................... 7
Class B Interest Rate Cap............................................... 6
Class B Investor Charge-Off............................................. 20, 75
Class B Investor Default Amount......................................... 75
Class B Investor Interest............................................... 8, 65
Class B Monthly Cap Rate Interest....................................... 69
Class B Monthly Interest................................................ 10, 52
Class B Monthly Principal............................................... 72
Class B Monthly Servicing Fee........................................... 81
Class B Notional Amount................................................. 48
Class B Payment Amount.................................................. 20, 74
Class B Required Amount................................................. 20, 74
Class B Scheduled Payment Date.......................................... 2, 14
Class B Underwriter..................................................... 96
Closing Date............................................................ 6
Code.................................................................... 89
Collateral Available Funds.............................................. 69
Collateral Default Amount............................................... 75
Collateral Fixed Allocation............................................. 65
Collateral Floating Allocation.......................................... 64
Collateral Interest Charge-Off.......................................... 76
Collateral Interest Holder.............................................. 7
Collateral Interest Monthly Servicing Fee............................... 81
Collateral Interest Surplus............................................. 12, 67
Collateral Interest..................................................... 8, 65
Collateral Monthly Interest............................................. 70
Collateral Monthly Principal............................................ 72
Collateral Rate......................................................... 70
Collection Account...................................................... 18, 62
Collection Subaccount................................................... 62
Collections............................................................. 64
Commission.............................................................. 3
Congress................................................................ 26
Controlled Accumulation Amount.......................................... 42
Controlled Accumulation Date............................................ 11
Controlled Accumulation Period.......................................... 11
Controlled Deposit Amount............................................... 11, 41
Cooperative............................................................. 51
Defaulted Accounts...................................................... 64
Defaulted Receivables................................................... 75
Definitive Certificates................................................. 51
Depositaries............................................................ 49
Depository.............................................................. 46
Determination Date...................................................... 75
Disclosure Document..................................................... 14
</TABLE>
99
<PAGE>
<TABLE>
<S> <C>
Discount Option....................................................... 62
Discount Percentage................................................... 62
Distribution Account.................................................. 63
Distribution Date..................................................... 2, 9
DOL................................................................... 94
DTC Participants...................................................... 49
DTC................................................................... 3, AII-1
Eligible Account...................................................... 59
Eligible Additional Account........................................... 61
Eligible Automatic Additional Account................................. 60
Eligible Receivable................................................... 59
Enhancement Provider.................................................. 58
Enhancement........................................................... 6
ERISA................................................................. 24
Euroclear Operator.................................................... 51
Euroclear Participants................................................ 50
Euroclear System...................................................... 50
Euroclear............................................................. 51
Excess Funding Account................................................ 63
Excess Principal...................................................... 53
Excess Spread......................................................... 70
Exchange Act.......................................................... 3
Exchangeable Transferor Certificate................................... 7
Exchange.............................................................. 14
Expected Class A Principal............................................ 53
Expected Class B Principal............................................ 53
FDIA.................................................................. 25
FDIC.................................................................. 1, 7
Finance Charge Account................................................ 63
Finance Charge Collections............................................ 64
Finance Charge Receivables............................................ 15
Fixed Investor Percentage............................................. 64
Floating Investor Percentage.......................................... 64
Global Securities..................................................... AII-1
Holder of the Exchangeable Transferor Certificate..................... 7
Holders............................................................... 51
Indirect Participants................................................. 49
Ineligible Receivable................................................. 58
Initial Class A Accumulation Date..................................... 53
Initial Collateral Interest........................................... 7
Initial Interest Period............................................... 10
Initial Investor Interest............................................. 7
Insolvency Event...................................................... 80
Interchange........................................................... 38
Interest Period....................................................... 47
Interest Rate Cap Provider............................................ 6
Interest Rate Caps.................................................... 6
Investor Charge-Off................................................... 76
Investor Default Amount............................................... 75
Investor Exchange..................................................... 14
Investor Interest..................................................... 8
Investor Percentage................................................... 9, 64
</TABLE>
100
<PAGE>
<TABLE>
<S> <C>
IRS................................................................... 89
LIBOR Determination Date.............................................. 47
LIBOR................................................................. 9, 47
Loan Agreement........................................................ 23
London Banking Day.................................................... 47
MasterCard............................................................ 32
Maximum Addition Amount............................................... 61
Minimum Aggregate Principal Receivables............................... 39
Minimum Transferor Interest........................................... 39
Monthly Period........................................................ 9
Monthly Servicer Report............................................... 84
Monthly Servicing Fees................................................ 81
Moody's............................................................... 62
Morgan................................................................ 48
Morgan Guaranty....................................................... 48
Norwich............................................................... 45
Offered Certificate Holder............................................ 50
Offered Certificate Holders........................................... 5
Offered Certificate Owners............................................ 3
Offered Certificate Rates............................................. 10
Offered Certificate Rate.............................................. 10
Offered Certificates.................................................. 1, 5
OID................................................................... 90
Participants.......................................................... 49
Pay Out Event......................................................... 41
Paying Agent.......................................................... 52
Permitted Investments................................................. 63
Plan Asset Regulation................................................. 94
Pool Factor........................................................... 84
Portfolio Yield....................................................... 29
Principal Account..................................................... 63
Principal Allocation.................................................. 67
Principal Collections................................................. 64
Principal Funding Account Balance..................................... 11, 41
Principal Funding Account............................................. 11, 76
Principal Funding Investment Proceeds................................. 12, 77
Principal Receivables................................................. 15
Principal Shortfalls.................................................. 73
Principal Terms....................................................... 56
PSFC.................................................................. 1, 7, 45
Qualified Institution................................................. 62
Qualified Substitute Arrangement...................................... 47
Qualified Trust Institution........................................... 63
Rapid Amortization Period............................................. 13
Rating Agency......................................................... 30
Reallocated Class B Principal Collections............................. 74
Reallocated Collateral Principal Collections.......................... 74
Reallocated Principal Collections..................................... 75
Receivables........................................................... 2, 6
Record Date........................................................... 46
Recoveries............................................................ 16
Reference Banks....................................................... 47
</TABLE>
101
<PAGE>
<TABLE>
<S> <C>
Removal Date........................................................ 62
Removed Accounts.................................................... 17, 61
Replacement Interest Rate Cap....................................... 47
Representative Portfolio............................................ 36
Required Amounts.................................................... 74
Required Collateral Interest........................................ 21, 73, 76
Required Reserve Account Amount..................................... 77
Reserve Account..................................................... 77
Reserve Account Funding Date........................................ 77
Revolving Period.................................................... 11
RTC Policy Statement................................................ 88
RTC................................................................. 25
Scheduled Payment Date.............................................. 14
Scheduled Series 1997-2 Termination Date............................ 14, 78
Securities Act...................................................... 2
Series 1997-2....................................................... 5
Series 1997-2 Accounts.............................................. 63
Series 1997-2 Supplement............................................ 5
Series Cut-Off Date................................................. 16
Series.............................................................. 5
Service Transfer.................................................... 83
Servicer Default.................................................... 83
Servicer............................................................ 17
Servicing Fee Rate.................................................. 81
Servicing Fee....................................................... 81
Shared Finance Charge Collections................................... 23
Shared Principal Collections........................................ 22
Standard & Poor's................................................... 62
Supplement.......................................................... 14
Tax Counsel......................................................... 89
Telerate Page 3750 ................................................. 47
Terms and Conditions................................................ 51
Total System........................................................ 32
Transfer Agent and Registrar........................................ 52
Transfer Date....................................................... 11
Transferor Exchange................................................. 14
Transferor Interest................................................. 8
Transferor Percentage............................................... 65
Transferor Servicing Fee............................................ 81
Transferor.......................................................... 1
Trust Portfolio..................................................... 6, 38
Trustee............................................................. 5
Trust............................................................... 1,5
U.S. Person......................................................... AII-4
UCC................................................................. 86
Underwriters........................................................ 96
Underwriting Agreement.............................................. 96
VISA................................................................ 32
</TABLE>
102
<PAGE>
ANNEX I
PRIOR SERIES ISSUED AND OUTSTANDING
The Trust has previously issued six Series of certificates, two of which have
been repaid in full. The table below sets forth the principal characteristics
of the four Series previously issued by the Trust that are currently
outstanding: the Series 1994-2 Certificates, the Series 1995-1 Certificates,
the Series 1996-1 Certificates and the Series 1997-1 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 Offered Certificates, a copy of
the Disclosure Documents for any previously publicly-issued and outstanding
Series.
<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..................................... 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
Class B Expected Final Distribution Date..................... June 1998
Scheduled Series 1994-2 Termination Date..................... March 2001
Series Issuance Date......................................... October 27, 1994
SERIES 1995-1
Initial Investor Interest.................................... $400,000,000
Class A Certificate Rate..................................... LIBOR plus 0.20%
Class B Certificate Rate..................................... 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
Class B Expected Final Distribution Date..................... November 2000
Scheduled Series 1995-1 Termination Date..................... August 2003
Series Issuance Date......................................... March 28, 1995
</TABLE>
AI-1
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-1
Initial Investor Interest..................................... $400,000,000
Class A Certificate Rate...................................... LIBOR plus 0.15%
Class B Certificate Rate...................................... LIBOR plus 0.30%
Current Investor Interest..................................... $400,000,000
Class A Controlled Amortization Amount........................ $27,071,428.57
Class B Controlled Amortization Amount........................ $21,000,000
Controlled Amortization Date.................................. November 1, 2000
Monthly Servicing Fee......................................... 2.0% per annum
Initial Cash Collateral Amount................................ $36,000,000
Class A Expected Final Distribution Date...................... January 2002
Class B Expected Final Distribution Date...................... February 2002
Scheduled Series 1996-1 Termination Date...................... November 2004
Series Issuance Date.......................................... July 2, 1996
SERIES 1997-1
Initial Investor Interest..................................... $500,000,000
Class A Initial Investor Interest............................. $425,000,000
Class B Initial Investor Interest............................. $33,750,000
Initial Collateral Interest................................... $41,250,000
Current Investor Interest..................................... $500,000,000
Class A Certificate Rate...................................... LIBOR plus 0.12%
Class B Certificate Rate...................................... LIBOR plus 0.32%
Controlled Accumulation Amount................................ $30,357,142.86
Controlled Accumulation Date.................................. December 1, 2000
Servicing Fee Rate............................................ 2.0% per annum
Class A Scheduled Payment Date................................ February 2002
Class B Scheduled Payment Date................................ March 2002
Scheduled Series 1997-1 Termination Date...................... October 2004
Series Issuance Date.......................................... March 27, 1997
</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 1997-2 and Floating Rate Class B Asset Backed Certificates, Series
1997-2 (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 Offered 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
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-
AII-2
<PAGE>
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 Offered
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 Offered 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 Offered
Certificate Owner or its agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Offered 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
AII-3
<PAGE>
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 the income of
which is includible in gross income for United States tax purposes, regardless
of its source or, for trusts whose taxable years begin after December 31,
1996, a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States fiduciaries who
have the authority to control all substantial decisions of the trust. This
summary does not deal with all aspects of U.S. Federal income tax withholding
that may be relevant to foreign holders of the Global Securities. Investors
are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
AII-4
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee................................................... $140,000
Printing and Engraving............................................. 100,000
Legal Fees and Expenses............................................ 175,000
Blue Sky Fees and Expenses......................................... 13,000
Accountants' Fees and Expenses..................................... 23,000
Rating Agency Fees................................................. 263,000
Miscellaneous Fees................................................. 36,000
--------
Total.............................................................. $750,000
========
</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.
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
II-1
<PAGE>
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>
<C> <S>
1.1 --Form of Underwriting Agreement.
3.1 --Articles of Incorporation, as amended.
3.2 --By-laws, as amended.
4.1 --Amended and Restated Pooling and Servicing Agreement, and certain
other related agreements as Exhibits thereto.
4.2 --Form of Series 1997-2 Supplement, including forms of the
Certificates, 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 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 (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.
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.
II-2
<PAGE>
(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. 1 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 SEPTEMBER 12, 1997.
People's Bank as originator of the
Trust (Registrant)
By /s/ William T. Kosturko
-------------------------------------
WILLIAM T. KOSTURKOEXECUTIVE
VICE PRESIDENT AND GENERAL
COUNSEL
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON SEPTEMBER 12,
1997 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* 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
* Vice President and Chief Accounting
- ----------------------------------- Officer
VINCENT J. CALABRESE
* Director
- -----------------------------------
GEORGE P. CARTER
* Director
- -----------------------------------
JOSEPH E. CLANCY
* Director
- -----------------------------------
GEORGE R. DUNBAR
Director
- -----------------------------------
JERRY FRANKLIN
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
- -----------------------------------
SAMUEL W. HAWLEY
Director
- -----------------------------------
BETTY RUTH HOLLANDER
Director
- -----------------------------------
JEAN M. LAVECCHIA
Director
- -----------------------------------
EUNICE S. GROARK
Director
- -----------------------------------
SAUL KWARTIN
* Director
- -----------------------------------
JACK E. MCGREGOR
Director
- -----------------------------------
JAMES A. THOMAS
* Director
- -----------------------------------
WILMONT F. WHEELER, JR.
</TABLE>
*By: /s/ George W. Morriss
-------------------------------
GEORGE W. MORRISS
AS ATTORNEY-IN-FACT
II-5
<PAGE>
REGISTRATION NO. 333-33269
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PEOPLE'S BANK CREDIT CARD MASTER TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 --Form of Underwriting Agreement.
3.1 --Articles of Incorporation, as amended.
3.2 --By-laws, as amended.
4.1 --Amended and Restated Pooling and Servicing Agreement, and certain other
related agreements as Exhibits thereto.
4.2 --Form of Series 1997-2 Supplement, including forms of the Certificates,
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 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 (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
$__________ Floating Rate Class A
Asset Backed Certificates, Series 1997-2
$__________ Floating Rate Class B
Asset Backed Certificates, Series 1997-2
Underwriting Agreement
J.P. Morgan Securities Inc.,
as Representative of
the Class A Underwriters and
as Class B Underwriter
60 Wall Street
New York, New York 10260
September __, 1997
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 $__________ principal amount of People's Bank Credit Card Master
Trust Floating Rate Class A Asset Backed Certificates, Series 1997-2 (the "Class
-----
A Certificates") and $__________ Floating Rate Class B Asset Backed
- --------------
Certificates, Series 1997-2 (the "Class B Certificates" and, together with Class
--------------------
A Certificates, the "Certificates"). We refer to you herein in your capacities
------------
as an Underwriter and as representative of the Underwriters as the
"Representative".
Each Certificate will represent an undivided interest in the People's
Bank Credit Card Master Trust (the "Trust") established pursuant to an Amended
-----
and Restated Pooling and Servicing Agreement between the
<PAGE>
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
-------
March 18, 1997, as amended and restated (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"), Assignment No. 3 between the Bank and the Trustee, dated as of May 1, 1996
("Assignment No. 3"), Assignment No. 4 between the Bank and the Trustee, dated
as of October 1, 1996 ("Assignment No. 4"), Assignment No. 5 between the Bank
and the Trustee, dated as of May 1, 1997 ("Assignment No. 5") and Assignment No.
6 between the Bank and the Trustee, dated as of August 1, 1997 ("Assignment No.
6"). 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 1997-2
Supplement between People's Bank, as Transferor and Servicer, and Bankers Trust
Company as Trustee, dated as of September __, 1997 (the "Series Supplement" and,
-----------------
together with the P&S Agreement, Assignment No. 1, Assignment No. 2, Assignment
No. 3, Assignment No. 4, Assignment No. 5 and Assignment No. 6 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 certain
bank accounts 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. In addition, the Certificates will have the exclusive
benefit of an interest in the Trust to be issued simultaneously with the
Certificates in the initial principal amount of $__________________ (the
"Collateral Interest"), which is subordinate to the Class A Certificates and the
Class B Certificates. To the extent not defined herein, capital-
2
<PAGE>
ized terms used herein have the meanings assigned in the Pooling and Servicing
Agreement.
1. PSFC and the Bank, each only as to itself, 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 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
3
<PAGE>
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 Representative 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 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
Representative 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 and any of the Bank's subsidiaries, on a consolidated basis,
and (ii) neither PSFC nor the Bank or any of the Bank's subsidiaries has
entered into any transaction or agreement (whether or not in the ordinary
course of business) material to PSFC or the Bank and the Bank's 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
4
<PAGE>
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 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 this Agreement, the Pooling and Servicing
Agreement, the Assignment and the Loan 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 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 this Agreement and the Assignment
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 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
5
<PAGE>
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 and the
Trustee, will constitute a valid and binding agreement of the Bank, 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 dealing
(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, executed and delivered
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 Loan Agreement has been duly authorized by the Bank and when
executed and delivered by the Bank, the Trustee, the Collateral Interest Holder
and the Agent, will constitute a valid and binding agreement of the Bank,
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 gener-
6
<PAGE>
al 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) to the further qualification that
certain remedial provisions in the Loan 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
Loan Agreement or pursuant to applicable law legally adequate remedies for a
realization of the principal benefits purported to be provided thereby);
(j) This Agreement has been duly authorized, executed and delivered
by the Bank and PSFC;
(k) 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, this Agreement, the Pooling and Servicing Agreement, the
Assignment and the Loan 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, the Loan
Agreement or the Assignment, 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 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 PSFC, the Bank or any of
the Bank's other subsidiaries is subject, nor 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 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
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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, the Loan Agreement
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;
(l) 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 in this
Agreement, the Pooling and Servicing Agreement, the Loan Agreement or the
Assignment; 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;
(m) Neither PSFC nor the Bank or any of the Bank's other 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;
(n) KPMG Peat Marwick, which have reviewed 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;
(o) 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
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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
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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;
(p) 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 or the Assignment),
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 (other than as
contemplated in the Pooling and Servicing Agreement or the Assignment) 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 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 on the date hereof the power and authority to transfer the
Certificates to the Underwriters, and, upon execution and delivery to the
Trustee of the Series Supplement and execution, authentication and delivery to
the Underwriters of the Certificates, the Trustee will have good and marketable
title to or a perfected security interest in the Receivables and the
Underwriters, upon payment of the purchase price of the Certificates, 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 the Pooling and Servicing Agreement or the Assignment);
(q) 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
9
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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;
(r) The Receivables pledged by the Bank to the Trustee under the
Pooling and Servicing Agreement have an aggregate outstanding balance
determined as of ______________, 1997 ("the Series Cut-Off Date"), in
accordance with the Pooling and Servicing Agreement of not less than
$___________________;
(s) 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
--------
(t) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended.
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 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
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office of Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019, at
10:00 a.m. on September __, 1997, 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 Representative,
which consent shall not be unreasonably delayed or withheld; to prepare and
file the Prospectus in a form approved by the Representative 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 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;
11
<PAGE>
(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 may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
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<PAGE>
(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 Representative, 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 Representative;
(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 Services and Moody's Investors
Service, Inc. or the rating provided with respect to the Collateral Interest by
Fitch Investors Service, LLP is conditional upon the furnishing of documents or
the taking of any other actions by PSFC or the Bank, PSFC or the Bank, as
applicable, shall furnish such documents and take any such other actions.
13
<PAGE>
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
theretofore to be performed, and the following additional conditions:
14
<PAGE>
(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 Representative;
(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 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 LLP, counsel for the
Underwriters, shall have furnished to 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
15
<PAGE>
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) This Agreement has been duly authorized, executed and
delivered by each of PSFC and the 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 this
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) 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
16
<PAGE>
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 Loan 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 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), and (z) to
the further qualification that certain remedial provisions in the Loan
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 Loan Agreement or
pursuant to applicable law legally adequate
17
<PAGE>
remedies for a realization of the principal benefits purported to be
provided thereby);
(vi) 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 this Agreement will not be, required to
register under the 1940 Act;
(vii) 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 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;
(viii) 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;
(ix) 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 man-
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ner 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;
(x) 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
(viii) above and under the headings "Prospectus Summary--Tax Status,"
"Prospectus Summary--ERISA Considerations," "Certain Federal Income
Tax Consequences" and "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 and operating data included therein as to all of which such
counsel expresses no view), contained any untrue statement of a
material fact or omitted 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 and operating data included therein as
to which such counsel expresses no view) contained or contains any
untrue statement of a material fact or omitted 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
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(xi) 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, the Bank and/or the Bank's other
subsidiaries or the legal opinion of the general counsel of PSFC and/or 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 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 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 Con-
20
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necticut state income tax purposes the Certificates will be characterized as
indebtedness 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 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 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 this
Agreement, the Pooling and Servicing Agreement, the Loan Agreement and
the Assignment 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 Receivable unenforceable by
the Bank or the Trust or would have a material adverse effect on the
Certificateholders or any Enhancement Provider;
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(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
this 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 have a material adverse effect
on the Certificateholders or any Enhancement Provider;
(iii) This Agreement, the Pooling and Servicing Agreement,
the Certificates, the Assignment and the Loan Agreement have been duly
authorized, executed and delivered by the Bank;
(iv) This 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
the Loan Agreement, or (B) the issuance and sale of the Certificates
or of the Collateral Interest, 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 this Agreement
or the Assignment by PSFC and the Bank, or the Certificates, the
Pooling and Servicing Agreement or the Loan
22
<PAGE>
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 of PSFC, the Articles of Incorporation of
the Bank, the By-laws of PSFC or the Bank, as applicable, 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 governmental 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 this
Agreement, the Pooling and Servicing Agreement or the Loan 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 this Agreement, the Pooling and Servicing Agreement, the
Loan Agreement, the Certificates or the Assignment, (ii) seeking to
prevent the issuance of the Certificates or of the Collateral Interest
or the consummation of any of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement, the Loan Agreement,
the Certificates or the Assignment, (iii) seeking
23
<PAGE>
any determination or ruling that would materially and adversely affect
the performance by PSFC or the Bank of their respective obligations
under this Agreement, the Pooling and Servicing Agreement, the Loan
Agreement or the Assignment (iv) seeking any determination or ruling
that would materially and adversely affect the validity or
enforceability of this Agreement, the Pooling and Servicing Agreement,
the Loan 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 does not assume any responsibility for, the
accuracy, completeness or fairness (except as set forth in paragraph
(viii) above) of the information contained in the Registration
Statement and Prospectus. Based upon the participation and discussions
described in subsection 7(e)(vii) 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 and operating data
included therein as to all of which such counsel expresses no view),
contained any untrue statement of a material fact or omitted 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) contained or
contains any untrue statement of a material fact or omitted or omits
to state a material
24
<PAGE>
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:
(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 the Loan Agreement and to carry out the
transactions contemplated by the Pooling and Servicing Agreement and
the Loan Agreement;
(iii) each of the P&S Agreement, the Assignment, the Series
Supplement and the Loan Agreement has been duly authorized, executed
and delivered by the Trustee;
(iv) assuming the due execution and delivery by the Bank
of each of the Pooling and Servicing Agreement and the Loan Agreement
and that each of the Pooling and Servicing Agreement and the Loan
Agreement is the legal, valid
25
<PAGE>
and binding obligation of the Bank, each of the Pooling and Servicing
Agreement and the Loan 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 Servicing
Agreement or the Loan Agreement or the performance by the Trustee
thereunder; and
(vii) the execution and delivery of the Pooling and
Servicing Agreement and the Loan 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 the
favorable written opinions of German counsel to [Name of CIA Holder] and of
[Name of counsel to CIA Holder] counsel to [Name of CIA Holder], New York
branch (the "Collateral Interest Holder"), as to the due authorization,
execution and delivery of the Loan Agreement by the Collateral Interest Holder
and
26
<PAGE>
the enforceability of the Loan Agreement, in each case in form and substance
satisfactory to the Underwriters and their counsel.
(n) 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 Services 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 Services and a rating of A2 from Moody's
Investor's Service, Inc. and the Collateral Interest shall have received the
rating of BBB from Fitch Investors Service, L.P. and such ratings shall not
have been rescinded or lowered, or at the Time of Delivery be under
surveillance or review;
(o) At the Time of Delivery, the Underwriters shall have received one
or more opinions of counsel to [Name of Cap Provider] (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, to be dated on or prior to ________, 1997,
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 Underwriters or their counsel may reasonably request
regarding the Interest Rate Cap.
(p) 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 Representative 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;
27
<PAGE>
(q) 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;
(r) 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 or the Collateral Interest 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;
(s) 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
(t) 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 Representative and its 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,
28
<PAGE>
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 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
29
<PAGE>
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
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
30
<PAGE>
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 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
31
<PAGE>
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.
(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
32
<PAGE>
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.
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
33
<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 J.P. Morgan Securities Inc., at 60 Wall
Street, New York, New York 10260-0060, Attention: Syndicate Desk; if to PSFC
shall be delivered or sent by mail, telex or facsimile transmission to 850 Main
Street, Bridgeport, Connecticut 06604, Attention: William T. Kosturko, Esq; and
if to the Bank shall be delivered or sent by mail, telex or facsimile
transmission to the
34
<PAGE>
address of the Bank set 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 agrees that (a) 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 who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements)(Exemptions) Order 1996 or who is a person to
whom the document may otherwise lawfully be
35
<PAGE>
issued or passed on; (b) it has complied and shall comply with all applicable
provisions of the Financial Services Act 1986 of Great Britain with respect to
anything done by it in relation to the Certificates in, from or otherwise
involving the United Kingdom; and (c) if such Underwriter is an authorized
person under the Financial Services Act 1986, it has only promoted and shall
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 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.
36
<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 among the
Underwriters, the Bank and PSFC.
Very truly yours,
PEOPLE'S STRUCTURED FINANCE CORP.
By:
------------------------
Name:
Title:
PEOPLE'S BANK
By:
------------------------
Name:
Title:
Accepted as of the date hereof:
- --------------------------
J.P. MORGAN SECURITIES INC.,
as Representative on
behalf of the Class A
Underwriters and as
Class B Underwriter
37
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
----------
Aggregate
Principal
Amount of the
Class A
Underwriter Certificates
- ----------- ---------------
<S> <C>
J.P. Morgan Securities Inc. $
$
$-
--------------
$
Aggregate
Principal
Underwriter Amount of the
- ----------- Class B
Certificates
----------------
$
</TABLE>
38
<PAGE>
EXHIBIT 3.1
PEOPLE'S BANK, ARTICLES OF INCORPORATION
<TABLE>
<S> <C> <C>
Article I Name P. 1
Article II Location P. 1
Article III Duration P. 1
Article IV Purpose and Powers P. 1
Article V Capital Stock P. 2
5.1 Authorized Stock P. 2
5.2 Common Stock P. 2
5.3 Preferred Stock P. 2
5.3A 8.50% Noncumulative Convertible
Preferred Stock, Series A P. 3
5.4 Vote Required P. 12
5.5 Action Without Meeting P. 13
5.6 Minimum Capital P. 13
Article VI Subscription and Pre-emptive Rights P. 13
Article VII Directors P. 14
7.1 Board of Directors P. 14
7.2 Initial Board P. 15
7.3 Nominations to Board P. 16
7.4 Vacancy on Board P. 17
7.5 Compensation P. 17
Article VIII Business Combinations P. 17
8.1 Evaluation of Business Combinations P. 17
8.2 Definition P. 18
Article IX Acquisition of Stock P. 18
9.1 Restrictions on Offers and Acquisitions P. 18
9.2 Definitions P. 19
9.3 Exclusion For Underwriters, Directors
Officers and Employees P. 19
9.4 Readoption of Restriction by
Shareholders P. 19
9.5 Exceptions P. 19
9.6 Enforcement of Article IX P. 19
Article X Indemnification P. 20
</TABLE>
<PAGE>
ARTICLES OF INCORPORATION
PEOPLE'S BANK
(A Reorganized Savings Bank)
--------------------------
ARTICLE I
Name
----
The name of the capital stock savings bank incorporated hereby (the
"Bank") shall be "People's Bank."
ARTICLE II
Location
--------
The main office of the Bank shall be located in the City of
Bridgeport, Connecticut. The population of Bridgeport is approximately 143,100.
ARTICLE III
Duration
--------
The Bank shall have perpetual existence.
ARTICLE IV
Purpose and Powers
------------------
The purpose of the Bank is to pursue any or all of the lawful
objectives of a capital stock savings bank chartered pursuant to the laws of the
State of Connecticut, and to exercise all of the express, implied and incidental
powers conferred by such laws and by all amendments or supplements to such laws,
subject to all lawful and applicable rules, regulations and orders of the
Banking Commissioner of the State of Connecticut (the "Commissioner"), the
Federal Deposit Insurance Corporation, or any other state or federal agency
having the authority to supervise or regulate the Bank and the conduct of its
business. Without limiting the foregoing, the Bank shall have the power to take
deposits, to make loans of every type and description (whether with or without
security), and generally to engage in any and all activities which constitute
the business of banking.
1
<PAGE>
ARTICLE V
Capital Stock
-------------
5.1 Authorized Stock. The total number of shares of all classes of
----------------
capital stock which the Bank shall have authority to issue is 110,000,000,
consisting of:
(a) One Hundred Million (100,000,000) shares of common stock, without
par value ("Common Stock"); and
(b) Ten Million (10,000,000) shares of preferred stock, without par
value ("Preferred Stock").
5.2 Common Stock.
------------
(a) Except as otherwise provided by law, all capital stock voting
power shall be vested exclusively in the Common Stock. A holder of Common Stock
shall be entitled to one vote for each share of Common Stock owned of record by
such holder on the capital stock records of the Bank.
(b) Subject to any superior rights or preferences of holders of
Preferred Stock at the time outstanding, holders of Common Stock shall be
entitled to such dividends as may be declared by the Board of Directors out of
funds lawfully available therefor. Upon any liquidation, dissolution or winding
up of the affairs of the Bank, whether voluntary or involuntary, holders of
Common Stock shall be entitled to receive the remaining assets of the Bank after
the holders of Preferred Stock have been paid in full any sums to which they may
be entitled in preference to the holders of Common Stock.
5.3 Preferred Stock. Shares of Preferred Stock may be issued from
---------------
time to time in one or more series as may from time to time be determined by the
Board of Directors, each of such series to be distinctly designated. All shares
of any one series of Preferred Stock shall be identical. Shares of Preferred
Stock shall not entitle the holder or holders thereof to vote, except when
specifically required or permitted to vote as a class by the provisions of
Chapter 601 of the Connecticut General Statutes, as the same may be amended or
recodified from time to time. All other preferences and relative, participating,
optional and other special rights of each of such series, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding; and the Board of
Directors of the Bank is hereby expressly granted authority to fix, by
resolution or resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the designations, preferences and
relative, optional and other special rights, and the qualifications, limitations
and restrictions, of such series including, but without limiting the generality
of the foregoing, the following:
2
<PAGE>
(a) The distinctive designation of and the number of shares of
Preferred Stock which shall constitute such series, which number may be
increased or decreased (but not below the number of shares then outstanding)
from time to time by like action of the Board of Directors;
(b) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be paid, the
extent of the preference or relation, if any, of such dividends to the dividends
payable on any other class or classes or series of the same or other classes of
capital stock and whether (and the dates from which) such dividends shall be
cumulative or noncumulative;
(c) The right, if any, of the holders of Preferred Stock of such
series to convert the shares thereof into or exchange the same for, shares of
any other class or classes or of any series of the same or any other class or
classes of capital stock of the Bank or any other corporation and the terms and
conditions of such conversion or exchange;
(d) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or times at
which, and the terms and conditions on which, the shares of such series may be
redeemed;
(e) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the Bank (subject,
however, to the provisions of Section 36a-195(c) of the Connecticut General
Statutes, as the same may be amended or recodified from time to time and to any
lawful order or directive issued by the Commissioner); and
(f) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series.
5.3A 8.50% Noncumulative Convertible Preferred Stock Series A. The
------------------------------------------------------
Bank shall have the authority to issue, as part of the shares of Preferred Stock
authorized pursuant to Section 5.1(b) hereof, a series of Preferred Stock
designated as 8.50% Noncumulative Convertible Preferred Stock, Series A (the
"Series A Preferred Stock"), consisting of 1,380,000 shares, without par value.
The terms, limitations and relative rights and preferences of the Series A
Preferred Stock are as follows:
Section 1
---------
Rank
----
The shares of Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution of the
Bank, rank prior to the Bank's Common Stock and to all other classes and series
of equity securities of the Bank now or hereafter authorized, issued or
outstanding, other than any class or series of equity securities of the Bank
ranking on a parity with (the "Parity Stock") or senior to (the "Senior Stock")
shares of Series A Preferred Stock as to dividend right or rights upon
liquidation, winding up or dissolution of the Bank. The Common
3
<PAGE>
Stock and any other class or series of equity securities of the Bank other than
Parity Stock or Senior Stock are referred to herein collectively as the "Junior
Stock."
The shares of Series A Preferred Stock shall be subject to the
creation of Parity Stock or Junior Stock, but not Senior Stock, without the
consent of the holders of shares of Series A Preferred Stock to the extent not
expressly prohibited by the Bank's Articles of Incorporation.
Section 2
---------
Dividend Rights
---------------
Holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors or a duly authorized
committee thereof out of funds of the Bank legally available for payment,
noncumulative cash dividends from the date of issue thereof, which dividends
shall accrue at the rate of $4.25 per share per annum, payable quarterly on the
15th day of February, May, August, and November of each year (each a "Dividend
Payment Date"), commencing on August 15, 1993; provided, however, that if any
such Dividend Payment Date falls on a day that is not a Business Day, the
dividend payment to be made on such Dividend Payment Date shall be made on the
next succeeding Business Day with the same force and effect as if made on such
Dividend Payment Date, and no interest or additional dividends will accrue as a
result of such delayed payment. "Business Day" means any day that is not a
Saturday, a Sunday or a day on which banking institutions or trust companies in
the City of New York or the State of Connecticut are authorized or obligated by
law or executive order to close. Each declared dividend shall be payable to
holders of record as they appear at the close of business on the stock books of
the Bank on record dates as determined by the Board of Directors or a duly
authorized committee thereof (each of such dates a "Record Date"). The Record
Date for any particular Dividend Payment Date may be no less than 10 and no more
than 30 days prior to the applicable Dividend Payment Date. Quarterly dividend
periods (each a "Dividend Period") shall commence on and include the 15th day of
February, May, August, and November of each year and shall end on and include
the day next preceding the next following Dividend Payment Date. The Series A
Preferred Stock shall not participate in dividends with Common Stock.
Dividends on shares of Series A Preferred Stock shall be
noncumulative. In the event a dividend on shares of Series A Preferred Stock is
not declared by the Board of Directors or any duly authorized committee thereof
with respect to any Dividend Period, the Bank shall have no obligation at any
time to pay a dividend on the shares of Series A Preferred Stock in respect of
such Dividend Period.
Any Parity Stock issued by the Bank shall not have any dividend
period that ends on any date other than a date that is the end of a Dividend
Period. No full dividends shall be declared or paid or set apart for payment on
any Parity Stock in respect of any such dividend period unless full dividends on
the Series A Preferred Stock for the Dividend Period ending on the same date as
such dividend period shall have been paid or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment. If, with respect to any Dividend Period, dividends are not paid in full
on the Series A Preferred Stock, dividends on shares of
4
<PAGE>
Series A Preferred Stock and Parity Stock shall not be declared except on a pro
rata basis, such that the ratio consisting of the amount of all dividends
declared on the Series A Preferred Stock relative to the amount of all dividends
declared on all Parity Stock shall be equal to the ratio consisting of the total
amount of accrued dividends for the Series A Preferred Stock for such Dividend
Period relative to the total amount of accrued dividends for all Parity Stock
for the applicable dividend period ending on the same date as such Dividend
Period.
Unless and until full dividends on the Series A Preferred Stock with
respect to any Dividend Period shall have been declared and paid or set apart
for payment, the Bank shall not (i) with respect to such Dividend Period,
declare or pay or set apart for payment any dividends on any Junior Stock, (ii)
during such Dividend Period, repurchase, redeem or otherwise acquire any Junior
Stock, except upon conversion into or exchange for other Junior Stock, or (iii)
repurchase, redeem or otherwise acquire (except by conversion into or exchange
for Junior Stock), directly or indirectly, any Parity Stock, except pursuant to
pro rata offers to purchase or a concurrent redemption of all or a pro rata
portion of the outstanding shares of Series A Preferred Stock.
The amount of dividends payable for the initial Dividend Period or
any period shorter than a full Dividend Period shall be computed on the basis of
twelve 30-day months, a 360-day year and the actual number of days elapsed in
the period. Dividends payable with respect to each full quarterly dividend
period shall be equal to the quotient derived by dividing the annual dividend
rate by four.
Section 3
---------
Conversion Rights
-----------------
The holders of the Series A Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
----------------
convertible, at any time and from time to time, without the payment of any
additional consideration by the holder thereof, at the option of the holder
thereof, at the office of the Bank or any transfer agent for the Series A
Preferred Stock, into such number of fully paid and nonassessable shares of
Common Stock as determined by dividing $50.00 by the Conversion Price,
determined as hereinafter provided, in effect at the time of conversion, except
that if any Series A Preferred Stock is called for redemption, the Conversion
Rights pertaining thereto will terminate at the close of business on the date
fixed for redemption, unless the Bank defaults in the payment of the redemption
price plus accrued and unpaid dividends for the then-current Dividend Period to
the date fixed for redemption. If more than one share of the Series A Preferred
Stock shall be surrendered for conversion at the same time by the same holder of
record, the number of full shares which shall be issuable upon the conversion
thereof shall be computed on the basis of the total number of shares of the
Series A Preferred Stock so surrendered. The price at which shares of Common
Stock shall be issued upon conversion of Series A Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Conversion
Price") shall initially be $8.25 per share of Common Stock. Such initial
Conversion Price shall be subject to adjustment, in order to adjust the number
of shares of Common Stock into which the Series A Preferred Stock is
convertible, as
5
<PAGE>
hereinafter provided. No fractional shares of Common Stock shall be issued upon
conversion of the Series A Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Bank shall pay cash equal to
such fraction multiplied by the then effective Conversion Price.
(b) Mechanics of Conversion. Any holder of shares of Series A
-----------------------
Preferred Stock shall be entitled to convert such shares into Common Stock only
upon surrender of the certificate or certificates therefor, duly endorsed, at
the office of the Bank or of any transfer agent for the Series A Preferred Stock
and such holder's submission of written notice to the Bank at such office of
such election to convert. Such notice shall indicate the name or names in which
such holder desires the certificate or certificates for shares of Common Stock
to be issued. The Bank shall, as soon as practicable thereafter (and, in any
event, within ten (10) days of such surrender), issue and deliver at such office
to such holder of Series A Preferred Stock, or to such holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled, together with cash in lieu of any
fraction of a share. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred Stock to be converted, and the party or parties
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
The holders of shares of Series A Preferred Stock at the close of
business on a Record Date shall be entitled to receive the dividend payable on
such shares at the corresponding Dividend Payment Date, notwithstanding the
conversion thereof or the Company's default in payment of any dividend declared
and due on such Dividend Payment Date; provided, however, that holders of shares
-------- -------
of Series A Preferred Stock subject to redemption on a date fixed for redemption
(any such date, a Redemption Date) between such Record Date and the
corresponding Dividend Payment Date shall not be entitled to receive such
dividend on such Dividend Payment Date; and further Provided, however, that
------- -------- -------
shares of Series A Preferred Stock surrendered for conversion during the period
after any Record Date and prior to the corresponding Dividend Payment Date must
be accompanied by payment of an amount equal to the dividend payable on such
shares on such Dividend Payment Date.
(c) Adjustments to Conversion Price.
-------------------------------
The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) In the event the Bank shall pay or make a dividend or
other distribution on shares of Common Stock in Common Stock, the Conversion
Price in effect at the opening of business on the day following the date fixed
for the determination of shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares plus the total number of
shares constituting such dividend or other distribution. Such reduction shall
become effective immediately after the opening of business on
6
<PAGE>
the day subsequent to the date fixed for such determination. For purposes of
calculating the amount of such reduction, the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of the
Bank.
The Bank shall not pay any dividend or make any other distribution in
respect of shares of Common Stock held in the treasury of the Bank.
(ii) In the event that outstanding shares of Common Stock are
subdivided into a greater number of shares of Common Stock, or combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day immediately subsequent to the day on which such
subdivision or combination becomes effective shall be, in the case of any such
subdivision, proportionately reduced, and, in the case of any such combination,
proportionately increased, such that the ratio consisting of the Conversion
Price in effect prior to such subdivision or combination event, as the case may
be, shall be equal to the ratio consisting of the total number of shares of
Common Stock outstanding immediately subsequent to such event relative to the
total number of shares of Common Stock outstanding immediately prior to such
event, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day immediately subsequent to
the day on which such subdivision or combination becomes effective.
(iii) In the event the Common Stock shall be changed into the
same or a different number of shares of any class or series of stock, whether by
capital reorganization, reclassification or otherwise (other than a stock
dividend that is provided for in subclause 3(c)(i), a subdivision or combination
of shares that is provided for in subclause 3(c)(ii) or a reorganization,
merger, consolidation or sale of assets provided for in clause (d)), then and in
such event, the holders of shares of Series A Preferred Stock shall have the
right thereafter to convert such shares into the kind and amount of shares of
stock and other securities and property received upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such shares of Series A Preferred Stock could have been
converted immediately prior to such reorganization, reclassification or change.
(iv) In the event the Bank shall issue rights or warrants to all
holders of Common Stock that entitle such holders (within a 45 calendar-day
period after the date fixed for the determination of shareholders entitled to
receive such rights or warrants) to subscribe for or purchase shares of Common
Stock at a price per share less than the current Market Price (defined below)
per share of the Common Stock on the date fixed for the determination of
shareholders entitled to receive such rights or warrants, the Conversion Price
in effect at the opening of business on the day subsequent to the date fixed for
such determination shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the sum of the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock that the aggregate of
the offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current Market Price and the
denominator shall be the sum of the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination plus the
number of
7
<PAGE>
shares of Common Stock so offered for subscription or purchase would purchase at
such current Market Price and the denominator shall be the sum of the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately
subsequent to the opening of business on the day subsequent to the date fixed
for such determination. For purposes of calculating such reduction, the number
of shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Bank.
The Bank shall not issue any rights or warrants in respect of shares
of Common Stock held in the treasury of the Bank.
(v) In the event the Bank shall, by dividend or
otherwise, distribute to all holders of shares of Common Stock shares of its
capital stock (other than a dividend or distribution of Common Stock described
in subclause 3(c)(i)), evidences of indebtedness or assets (other than any
dividend or distribution paid in cash out of the retained earnings or
consolidated net income of the Bank), or rights or warrants to subscribe for or
purchase such shares, evidences of indebtedness or assets (excluding any rights
or warrants referred to in subclause 3(c)(iii)), then in each such case the
Conversion Price shall be adjusted by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution by a
fraction of which the numerator shall be the current Market Price per share of
the Common Stock less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so distributed allocable to one share of Common
Stock, in each case on the date fixed for such determination, and the
denominator shall be such current Market Price per share of the Common Stock,
such adjustment to become effective immediately subsequent to the date fixed for
the determination of the shareholders entitled to receive such distribution.
(vi) "Market Price" shall mean the average of the daily
closing prices of the Common Stock for the 30-day period ending 15 days prior to
the date as of which the Market Price is being determined, as reported by the
NASDAQ National Market System or by any national securities exchange on which
the Common Stock is admitted for trading.
(vii) No adjustment in the Conversion Price for the Series
A Preferred Stock shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Conversion Price then
in effect; provided, however, that any adjustment that would otherwise be
-------- -------
required to be made shall be carried forward and taken into account in
determining whether and the extent to which any subsequent adjustment is
required. Except as set forth above, the Conversion Price will not be adjusted
for the issuance of the Common Stock or any securities convertible into or
exchangeable or exercisable for the Common Stock, or carrying the right or
option to purchase or otherwise acquire the foregoing, in exchange for cash,
other property or services. The Bank has the option, exercisable at any time and
from time to time, to reduce the Conversion Price (effectively permanently or
for such period of time as the Bank may determine), so long as such reduction is
effective for a minimum period of twenty days and is irrevocable during such
period and the Bank notifies holders of Series A Preferred Stock at least
fifteen days prior to the date on which the reduced Conversion Price takes
effect. All calculations under this Section 3 shall be made to the nearest cent
or to the nearest one-hundredth of a share, as the case may be.
8
<PAGE>
(d) Consolidation. Merger. Sale of Assets or
----------------------------------------
Reorganization. In the event of any (i) consolidation or merger of the Bank with
- --------------
or into any other entity (other than a consolidation or merger in which the Bank
is the surviving entity), (ii) sale, transfer, lease or other conveyance of all
or substantially all of the assets of the Bank to any other entity, (iii)
capital reorganization, reclassification or change of the Common Stock (to the
extent not otherwise provided for in clause 3(c) or solely a change in par
value) or (iv) consolidation or merger of another entity into the Bank in which
there is a reclassification or change of the Common Stock (to the extent not
otherwise provided for in clause 3(c) or solely a change in par value), each
share of Series A Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock or other securities, cash or other property to
which a holder of the number of shares of Common Stock deliverable upon
conversion of such Series A Preferred Stock would have been entitled upon such
consolidation, merger, conveyance, reorganization or reclassification; and, in
any such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth with respect
to the rights and interest thereafter of the holders of the Series A Preferred
Stock, to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock. If the consideration into which the Series A
Preferred Stock is convertible subsequent to any such event consists of the
Common Stock or common stock of the surviving entity, then from and after the
occurrence of such event, the Conversion Price for each share of Series A
Preferred Stock into such common stock shall be subject to the anti-dilution and
other adjustments described herein, applied as if such common stock were the
Common Stock. The provisions of this clause 3(d) shall also apply to successive
consolidations, mergers, sales or exchanges. The Bank shall not effect any such
consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the holder of
the Series A Preferred Stock such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder is entitled to receive.
(e) No Impairment. The Bank will not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Bank but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(f) Certificates as to Adjustments. Upon the occurrence of
------------------------------
each adjustment or readjustment of the Conversion Price pursuant to this Section
3, the Bank at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the transfer
agent for the Series A Preferred Stock and, by first-class mail, postage
prepaid, to each holder of Series A Preferred Stock, a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Bank
9
<PAGE>
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) all such adjustments and readjustments theretofore made, (ii)
the Conversion Price at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at such time would
be received upon the conversion of Series A Preferred Stock.
(g) Common Stock Reserved. The Bank shall reserve and at
---------------------
all times keep available out of its authorized but unissued Common Stock, free
from preemptive or other preferential rights, restrictions, reservations,
dedications, allocations, options, other warrants and other rights under any
stock option, conversion option or similar agreement, such number of shares of
Common Stock as shall from time to time be sufficient to effect conversion of
the Series A Preferred Stock.
(h) Other Permitted Adjustments. The Bank may make such
---------------------------
reductions in the Conversion Price, in addition to those otherwise required or
permitted herein, as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(i) Notice. In the event the Bank shall (i) declare a
------
dividend or any other distribution on its Common Stock, payable otherwise than
in cash out of funds legally available therefor, (ii) authorize the granting to
the holders of its Common Stock of rights to subscribe for or purchase any
shares of capital stock of any class or of any other rights or (iii) propose to
effect any consolidation of the Bank with or merger of the Bank with or into any
other entity or a sale of the assets of the Bank substantially as an entirety or
any statutory exchange of securities with another entity that would result in an
adjustment to the Conversion Price as provided in this Section 3, the Bank shall
cause to be mailed to the holders of record of the Series A Preferred Stock at
least 15 days prior to the applicable date hereinafter specified a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or, if the holders of Common Stock of record
are entitled to such dividend, distribution or rights are to be determined or
(y) the date on which such consolidation, merger or sale is expected to become
effective, and the date as of which it is expected that holders of Common Stock
for securities or other property deliverable upon such consolidation, merger,
share exchange or sale. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
consolidation, merger or sale.
Section 4
---------
Optional Redemption
-------------------
The shares of Series A Preferred Stock may be redeemed for cash at
the option of the Bank, in whole or in part, at any time on or after May 15,
1996. Notice of redemption shall be mailed by first class mail to the holders of
the shares of Series A Preferred Stock to be redeemed, at least fifteen (15) but
no more than sixty (60) days prior to the date fixed for redemption. The
redemption price shall be $50.00 plus accrued and unpaid dividends (whether or
not declared) to the date fixed for redemption. If less than all of the
outstanding shares of Series A Preferred Stock
10
<PAGE>
are to be redeemed, the Bank will select those to be redeemed by lot or a
substantially equivalent method. Any shares of Series A Preferred Stock for
which a notice of redemption has been given may be converted into shares of
Common Stock at any time before the close of business on the date three (3)
business days prior to the date fixed for redemption. All dividends upon the
shares of Series A Preferred Stock called for redemption will cease to accrue
and all rights of the holders thereof as shareholders of the Bank (except the
right to receive the redemption price without interest upon the presentation of
certificates representing the redeemed shares) will terminate on the redemption
date, unless the Bank defaults in making payment of the amount payable upon such
redemption. The Series A Preferred Stock is not subject to any mandatory
redemption at the election of the holder, nor is there any sinking fund
provision.
The notice of redemption shall state: (i) the date fixed for
redemption, (ii) the redemption price, (iii) that the holder has the right to
convert such shares into Common Stock until the close of business on the date
three (3) days prior to the redemption date, (iv) the then-effective Conversion
Price and the place where certificates for such shares may be surrendered for
conversion, (v) if less than all the shares held by such holder are to be
redeemed, the number of shares to be redeemed from such holder, (vi) the place
where certificates for such shares are to be surrendered for payment of the
redemption price and (vii) that after the date fixed for redemption, the shares
to be redeemed shall cease to accrue dividends or be entitled to any other
rights (other than the right to receive the redemption price).
If such notice is mailed as aforesaid, and if on or before the date
fixed for redemption funds sufficient to redeem the shares called for redemption
are set aside by the Bank in trust for the account of the holders of the shares
to be redeemed, notwithstanding the fact that any certificate for shares called
for redemption shall not have been surrendered for cancellation, on and after
the redemption date, unless default shall be made by the Bank in providing for
the payment of the redemption price plus accrued and unpaid dividends (whether
or not declared) for the then current Dividend Period immediately preceding the
date fixed for redemption, dividends shall cease to accrue on the shares of the
Series A Preferred Stock called for redemption, and all rights of the holders
thereof (except the right to receive the redemption price) shall cease with
respect to such shares. Such redeemed shares of Series A Preferred Stock shall
not be reissued and shall resume the status of authorized but unissued shares of
serial Preferred Stock of the Bank, without designation as to series, upon the
filing of any required certificate with the Secretary of State, until such
shares are once more designated as part of a particular series by the Board of
Directors.
Section 5
---------
Liquidation Rights
------------------
(a) Liquidation. In the event of any liquidation, dissolution or
-----------
winding up of the affairs of the Bank, each holder of-shares of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Bank to the holders of
the Common Stock or of any Junior Stock by reason of their ownership thereof,
$50.00 per share (plus any accrued and unpaid dividends, whether or not
declared, for the then-current
11
<PAGE>
Dividend Period). After the payment to such holders of such preferential amount,
any remaining assets or surplus funds shall be distributed in accordance with
Section 5.2(b) of this Article V.
(b) Pro Rata Distribution. If the assets or surplus funds to be
---------------------
distributed to the holders of (i) the Series A Preferred Stock under
subparagraph (a) of this Section 5 and (ii) the holders of any Parity Stock are
insufficient to permit the payment to such holders of their full preferential
amount, the assets and surplus funds legally available for distribution shall be
distributed ratably among (i) the holders of the Series A Preferred Stock, and
(ii) the holders of any Parity Stock in proportion to the full preferential
amount each such holder is otherwise entitled to receive.
(c) Series A Preferred Stock Priority. All of the preferential
---------------------------------
amounts to be paid in connection with any liquidation, dissolution or winding up
of the affairs of the Bank to the holders of (i) the Series A Preferred Stock
under this Section 5, and (ii) the holders of any Parity Stock shall be paid or
set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution or any assets of that Bank to, the holders of
the Common Stock and any Junior Stock.
(d) Consolidation. Merger Sale of Assets. A consolidation or merger
------------------------------------
of the Bank with or into another entity, or a conveyance of all or substantially
all of the assets of the Bank, shall be regarded as a liquidation, dissolution
or winding up of the affairs of the Bank within the meaning of this Section 5
unless, upon consummation of such consolidation or merger or sale of assets, the
holders of voting securities of the Bank own directly or indirectly fifty-one
percent (51%) or more of the voting power to elect directors of the consolidated
or surviving or acquiring entity; provided, however, that each holder of Series
-------- -------
A Preferred Stock shall have the right to elect the benefits of the provisions
of Section 3(d) hereof in lieu of receiving payment in such liquidation,
dissolution or winding up of the Bank pursuant to this Section 5.
Section 6
---------
Voting Rights
-------------
The holders of shares of Series A Preferred Stock shall have no right
to vote on matters presented to the shareholders of the Bank for resolution by
vote, except as and to the extent voting rights are conferred on the holders of
shares of otherwise non-voting securities by the provisions of the Connecticut
Stock Corporation Act, as amended from time to time. In such event, the holders
of the Series A Preferred Stock shall each have one vote for each share so held,
and otherwise shall vote (whether as a separate class or together with the
holders of other classes of the Bank's capital stock) in accordance with the
provisions of the Connecticut Stock Corporation Act.
5.4 Vote Required. Except insofar as applicable provisions of Titles
-------------
33 or 36a of the Connecticut General Statutes, as the same may be amended or
recodified from time to time, require a greater percentage vote, all approvals,
authorizations, ratifications and determinations of any corporate or shareholder
action required by applicable law, these Articles of Incorporation, the Bylaws
of the Bank, or an order or directive of its Board of Directors to be submitted
for resolution by shareholder vote (including, but not limited to, any merger,
consolidation,
12
<PAGE>
amendment of these Articles of Incorporation, sale of all or substantially all
of the assets of the Bank, and dissolution of the Bank) shall be effective if
authorized by the vote of, or agreed or consented to by, the holders of shares
of capital stock having a majority of the voting power of all issued and
outstanding shares of capital stock entitled to vote upon such approval,
authorization, ratification or determination. The term "vote," as used in these
Articles of Incorporation, shall include any vote by ballot or proxy, or
otherwise and any shareholder consent, authorization, waiver or release.
5.5 Action Without Meeting. Subject to the limitations of Section
----------------------
33-698 of the Connecticut General Statutes, as the same may be amended or
recodified from time to time, any action which may be taken at a meeting of
shareholders of the Bank may be taken without a meeting by consent in writing,
setting forth the action to be taken, signed by persons (or their duly
authorized attorneys-in-fact) holding such designated proportion of the voting
power of shares, or of the shares of any particular class or series of a class,
entitled to vote thereon or to take such action, as may be provided in these
Articles of Incorporation or by applicable law.
5.6 Minimum Capital. The minimum capital stock with which the Bank
---------------
shall commence business is One Million Dollars and the minimum capital surplus
with which the Bank shall commence business is One Million Dollars.
ARTICLE VI
Subscription and Pre-emptive Rights
-----------------------------------
The Bank shall grant (a) in accordance with and to the extent
required by the provisions of Section 36a-196(a) of the Connecticut General
Statutes, as the same may be amended or recodified from time to time,
subscription rights to its eligible deposit account holders and (b) in
accordance with and to the extent required by the provisions of Section
36a-196(c) of the Connecticut General Statutes, as the same was in effect
immediately prior to its amendment by Section 203 of Connecticut Public Act No.
96-271, pre-emptive rights to the holders of its capital stock. Except as set
forth herein, no shareholder of the Bank shall have, by reason of his holding a
share or shares of the capital stock of the Bank of any class or series of a
class, now or hereafter authorized, any pre-emptive or preferential right to
purchase or subscribe to any shares of any class of capital stock of the Bank
now or hereafter to be authorized or issued, nor purchase or subscribe to any
notes, debentures, bonds or other securities of the Bank (whether or not
convertible into or carrying rights, options or warrants to purchase shares of
any class of capital stock) now or hereafter to be authorized or issued, whether
or not the issuance of such shares or other securities would adversely affect
any rights or privileges of such shareholder by virtue or his holding a share or
shares of any capital stock of the Bank (or any direct or indirect interest of
such shareholder in the asset, properties, business or affairs of the Bank),
excepting only such pre-emptive or preferential rights, warrants or options as
the Board of Directors, in its discretion, may grant from time to time.
13
<PAGE>
ARTICLE VII
Directors
---------
7.1 Board of Directors. The business and affairs of the Bank shall be
------------------
managed under the direction of its Board of Directors. The number of directors
of the Bank constituting the initial Board of Directors shall be fourteen and
shall thereafter be fixed from time to time at such number as the Board of
Directors may by resolution determine in accordance with the Bylaws of the Bank.
The Directors shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
reasonably possible, with the directors in each class to hold office until their
successors, if any, are elected and qualified. Each member of the Board of
Directors in the first class of directors shall hold office until the annual
meeting of shareholders in 1989, each member of the Board of Directors in the
second class of directors shall hold office until the annual meeting of
shareholders in 1990 and each member of the Board of Directors in the third
class of directors shall hold office until the annual meeting of the
shareholders in 1991. At each annual meeting of the shareholders of the Bank,
the successors, if any, to the class of directors whose terms expire at that
meeting shall be elected to hold office for terms expiring at the later of the
annual meeting of shareholders held in the third year following the year of
their election or the election and qualification of the successors, if any, to
such class of directors.
7.2 Initial Board. The name, address and principal occupation of each
-------------
prospective initial director of the Bank are set forth below:
14
<PAGE>
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
First Class
- -----------
<S> <C> <C>
George R. Dunbar 57 Grayrock Road Retired President
Trumbull, CT 06611 Bryant Electric
Division of
Westinghouse
Electric Corp.
Edward E. Harrison 108 Hill Brook Lane Chairman Emeritus
Fairfield, CT 06430 Bridgeport Area
Foundation
Betty R. Hollander Arbor Road Chairman
Stamford, CT 06903 The Omega Group
John J. Scanlon 2345 Redding Road Vice Chairman of
Fairfield, CT 06430 the Board, People's Bank
(Retired Executive Vice
President, American
Telephone & Telegraph)
Wilmot F. Wheeler, Jr. 328 Sasco Hill Road Chairman of the
Southport, CT 06490 Board, Jelliff Corp.
Second Class
- ------------
William H. Farley 16 Saw Mill Road President
W. Simsbury, CT 06902 The Farley Company
Samuel W. Hawley 2760 Congress St. Chmn. of the
Fairfield, CT 06430 Executive Committee,
People's Bank (Ret.
Chmn. of the Board)
Robert W. Huebner 206 Old Oaks Road Retired Executive
Fairfield, CT 06430 Vice President, Southern
New England Telephone
Company
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Name Address Principal occupation
- ---- ------- --------------------
<S> <C> <C>
Saul Kwartin 35 Very Merry Road Attorney, Wofsey,
Stamford, CT 06903 Rosen, Kweskin &
Kurianski
G. J. Ratcliffe, Jr. 278 Sherwood Drive Chairman,
Southport, CT 06490 President
& Chief Executive
Officer, Hubbell
Incorporated
Third Class
- -----------
David E. A. Carson 37 Beacon Street President &
Bridgeport, CT 06605 Chief Executive Officer
People's Bank
George P. Carter 971 Burr Street President
Fairfield, CT 06430 Connecticut Foods,
Inc.
Norwick R. Goodspeed 2821 Congress St. Chairman of the
Fairfield, CT 06430 Board
People's Bank
John F. Merchant 69 Parkway Attorney, Merchant
Fairfield, CT 06430 & Rosenblum
</TABLE>
7.3 Nominations to Board of Directors. Nominations for the election
---------------------------------
of directors may be made only by the Board of Directors or by a record owner of
Common Stock. Any such holder of Common Stock, however, may nominate one or more
persons for election as director at a meeting only if written notice of such
holder's intent to make such nomination or nominations has been given, either by
personal delivery or by United States mail, postage prepaid to the Secretary of
the Bank not later than: (a) with respect to an election to be held at an annual
meeting of shareholders, one hundred twenty (120) days in advance of such
meeting; and (b) with respect to an election to be held at a special meeting of
shareholders for the election of directors, the close of business on the seventh
day following the earlier of: (i) the date on which notice of such meeting is
first given to shareholder; or (ii) the date on which a public announcement of
such meeting is first made. Each such notice shall include: (1) the name and
address of each shareholder of record who intends to appear in person or by
proxy to make the nomination and of the person or persons to be nominated; (2) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (3) such other information regarding each nominee proposed by such
shareholder as would have been required to be included
16
<PAGE>
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission; and (4) the consent of each nominee to serve as a director
of the Bank if so elected. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
7.4 Vacancy on Board of Directors. Newly created directorships
-----------------------------
resulting from any increase in the number of directors or any vacancy on the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
director. Any director elected in accordance with preceding sentence shall hold
office for the remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such director's
successor, if any, shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director
7.5 Compensation. The Board of Directors of the Bank is hereby
------------
specifically authorized to make provision for compensation to its members for
their services as directors and to fix the basis and conditions upon which such
compensation shall be paid. Any director of the Bank may also serve the Bank in
any other capacity and receive additional compensation therefor in any form.
ARTICLE VIII
Business Combinations
---------------------
8.1 Evaluation of Business Combinations. In connection with the
-----------------------------------
exercise of its judgment in determining what is in the best interests of the
Bank and of the Bank's shareholders, when evaluating a Business Combination or a
proposal by another person or persons acting as a group to make a Business
Combination or a tender or exchange offer, the Board of Directors of the Bank
shall, in addition to considering the adequacy of the amount to be paid in
connection with any such transaction, consider all of the following factors and
any other factors which it deems relevant: (a) the social and economic effects
of the transaction on the Bank and its subsidiaries, affiliates, employees,
depositors, borrowers from and other customers of the Bank, creditors, and the
relevant constituencies of the communities in which the Bank and its
subsidiaries and affiliates operate or are located; (b) the business and
financial condition and earnings prospects (present and anticipated) of the Bank
and its subsidiaries and affiliates; (c) the business and financial condition
and earnings prospects of the acquiring person or group, including, but not
limited to debt service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition, and other
foreseeable financial obligations of the acquiring person or group, and the
possible effects of such conditions upon the Bank and its subsidiaries and
affiliates and the relevant constituencies of the communities in which the Bank
and its subsidiaries and affiliates operate or are located; and (d) the
competence, experience, and integrity of the acquiring person or group and its
management.
17
<PAGE>
8.2 Definition. For purposes of this Article VIII, a "Business
----------
Combination" means:
(a) The sale, exchange, lease, transfer or other disposition to or
with any person or group or any affiliate or associate of such person or group
by the Bank or any of its subsidiaries (in a single transaction or a series of
related transactions) of all or substantially all, or any substantial part, of
its or their assets or businesses (including, without limitation, any securities
issued by a subsidiary of the Bank);
(b) The purchase, exchange, lease or other acquisition by the Bank or
any of its subsidiaries (in a single transaction or a series of related
transactions) of all or substantially all, or any substantial part, of the
assets or business of any person or group or any affiliate or associate of such
person or group;
(c) Any merger or consolidation of the Bank or any subsidiary thereof
into or with any person or group or any affiliate or associate of such person or
group, irrespective of which person or group is the surviving entity in such
merger or consolidation; or
(d) The acquisition upon the issuance thereof, of beneficial
ownership by any person or group of Common Stock or securities convertible into
Common Stock or any voting securities or securities convertible into voting
securities of any subsidiary of the Bank, or the acquisition, upon the issuance
thereof, of beneficial ownership by any person or group of any rights, warrants
or options to acquire any of the foregoing or any combination of the foregoing
if such person or group prior to such acquisition owned, or as a result of such
acquisition would own, more than five percent (5%) of the Common Stock or more
than five percent (5%) of the voting securities of a subsidiary then issued and
outstanding (assuming full conversion of all securities owned or to be acquired
by such person or group which are or would be convertible into Common Stock or
into voting securities of a subsidiary).
As used in these Articles of Incorporation (i) a "series of related
transactions" shall be deemed to include not only a series of transactions with
the same person or group, but also a series of separate transactions with any
person or group or any affiliate or associate of such person or group; (ii)
"affiliate," "associate," "subsidiary," and "voting securities," shall have the
meanings defined in 17 CFR 230.405; (iii) "person," and "security" shall have
the meaning defined in 15 U.S.C. (S)78c; and (iv) "beneficial ownership" shall
have the meaning defined in 17 CFR 240.13d-3.
ARTICLE IX
Acquisition of Stock
9.1 Restrictions on Offers and Acquisitions. For a period of three
---------------------------------------
years from the date of the closing of the initial public offering of capital
stock of the Bank, no person (other than the Incorporator in its reorganized
form as a mutual holding company), acting singly or together with any
affiliates, associates or group of persons acting in concert with such person,
shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than five percent (5%) of
18
<PAGE>
the issued and outstanding shares of any class of voting securities of the Bank
or any securities convertible into, or entitling the holder thereof to purchase
or otherwise acquire (with or without consideration), more than five percent
(5%) of any class of an equity security of the Bank. For purposes hereof,
beneficial ownership by a person of securities shall include all securities
beneficially owned by the affiliates and associates of such person.
9.2 Definitions. For purposes of this Article IX, the following terms
-----------
shall have the same meanings as follows: "persons" shall include any individual,
group acting in concert, firm, corporation, partnership, association, joint
stock company, trust, unincorporated organization, syndicate, or other entity;
"group acting in concert" includes persons seeking to combine or pool their
voting or other interests in the securities of the Bank for a common purpose,
pursuant to any contract, trusts, understanding, relationship, agreement, or
other arrangement, whether written or otherwise; "offer" includes every offer to
buy or acquire, solicitation of an offer to sell, tender offer for, or request
or invitation for tender of, a security or interest in a security for value.
9.3 Exclusion for Underwriters, Directors, Officers and Employees.
-------------------------------------------------------------
The restriction contained in this Article IX shall not apply to any offer with a
view toward public resale made exclusively to the Bank or to underwriters or a
selling group acting on its behalf; in addition, the directors, officers, and
employees of the Bank or any subsidiary thereof shall not be deemed to be a
"person" solely by reason of their individual acquisitions of voting securities
of the Bank.
9.4 Readoption of Restriction by Shareholders. This Article IX may be
-----------------------------------------
readopted for additional one-year or longer periods by vote of the holders of a
majority of the outstanding voting securities of the Bank present or represented
at a duly convened annual or special meeting of shareholders of the Bank.
9.5 Exceptions. This Article IX shall not apply to any offer or
----------
acquisition referred to in Section 9.1 above if such offer or acquisition was
approved, in advance of such offer or acquisition, by the Board of Directors, or
if such acquisition results or would result solely from a person's exercise of
his subscription or pre-emptive rights granted pursuant to Article VI hereof.
9.6 Enforcement of this Article IX. When any person directly or
------------------------------
indirectly, acquires beneficial ownership of more than five percent (5%) of the
issued and outstanding shares of any class of voting securities of the Bank or
any securities convertible into, or entitling the holder thereof to purchase or
acquire (with or without consideration), more than five percent (5%) of any
class of an equity security of the Bank in violation of this Article IX, any
voting securities beneficially owned by said person in excess of said five
percent (5%) shall not be counted as shares of voting securities entitled to
notice, to vote or to take any other shareholder action and shall not be voted
by any person or be counted in determining the total number of outstanding
shares for purposes of any matter involving shareholder action.
19
<PAGE>
ARTICLE X
Indemnification
---------------
10.1 The Bank shall indemnify its directors, officers, employees,
agents, and all other persons eligible for indemnification by the Bank, to the
fullest extent permitted or required by Section 33-770 through 33-778
(inclusive) of the Connecticut General Statutes, as the same may be amended or
recodified from time to time to provide for indemnification on an equivalent or
expanded (but not more limited) basis, and as provided by the Bylaws of the
Bank.
10.2 No director of the Bank shall be personally liable to the 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 the
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 (2) of Section 33-840 of the Connecticut General Statutes, as the
same may be amended or recodified from time to time), 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 the Bank under circumstances in which the
director was aware that his conduct or omission created an unjustifiable risk of
serious injury to the Bank, (4) constitutes a sustained and unexcused pattern of
inattention that amounted to an abdication of the director's duty to the Bank,
or (5) creates liability under Section 36a-58 of the Connecticut General
Statutes, as the same may be amended or recodified from time to time. Any repeal
or modification of this Article 10.2 by the stockholders of the Bank shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a director of the Bank existing at the time of such repeal or
modification.
20
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PEOPLE'S BANK
(The Bank)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I OFFICES...................................................... 1
Section 1 Principal Office............................................. 1
Section 2 Additional Offices........................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS..................................... 1
Section 1 Place of Meetings............................................ 1
Section 2 Annual Meetings.............................................. 1
Section 3 Special Meeting.............................................. 2
Section 4 Notice of Annual or Special Meeting.......................... 2
Section 5 Waiver of Notice............................................. 2
Section 6 Quorum....................................................... 2
Section 7 Adjournment of Shareholders' Meeting......................... 2
Section 8 Proxies...................................................... 3
Section 9 Number of Votes of Each Shareholder.......................... 3
Section 10 Voting....................................................... 3
Section 11 Consent of Shareholders
in Lieu of Meeting........................................... 3
ARTICLE III DIRECTORS.................................................... 3
Section 1 Number and Election.......................................... 3
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 2 Classification............................................... 3
Section 3 Term of Office............................................... 4
Section 4 Nominees..................................................... 4
Section 5 Vacancies.................................................... 4
Section 6 Powers of Directors.......................................... 4
Section 7 Place of Meeting............................................. 4
Section 8 Organizational Meetings...................................... 4
Section 9 Regular Meetings............................................. 4
Section 10 Other Meetings............................................... 4
Section 11 Waiver of Notice............................................. 5
Section 12 Directors' Participation and Consents........................ 5
Section 13 Quorum....................................................... 5
Section 14 Compensation of Directors.................................... 5
Section 15 Removal of Directors......................................... 5
Section 16 Resignation.................................................. 5
Section 17 Limitation on Service by Directors........................... 5
Section 18 Committees................................................... 6
Section 19 Audit Committee.............................................. 7
ARTICLE IV EXECUTIVE COMMITTEE.......................................... 7
Section 1 Designation of Executive Committee........................... 7
Section 2 Powers of the Executive Committee............................ 7
Section 3 Record of Proceedings........................................ 7
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4 Place of Meetings............................................ 7
Section 5 Regular Meetings............................................. 7
Section 6 Special meetings............................................. 8
Section 7 Quorum....................................................... 8
Section 8 Compensation................................................. 8
ARTICLE V OFFICERS..................................................... 8
Section 1 Principal and Other Officers................................. 8
Section 2 General Authority and Duties................................. 8
Section 3 Election, Term of Office, and
Qualifications............................................... 8
Section 4 Removal...................................................... 9
Section 5 Resignations................................................. 9
Section 6 Vacancies.................................................... 9
Section 7 The Chairman and Vice Chairman
of the Board................................................. 9
Section 8 The President................................................ 9
Section 9 The Chief Executive Officer.................................. 9
Section 10 The Vice Presidents.......................................... 10
Section 11 Assistant Vice Presidents.................................... 10
Section 12 The Secretary................................................ 10
Section 13 The Assistant Secretaries.................................... 10
Section 14 The Treasurer................................................ 10
Section 15 The Comptroller.............................................. 11
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 16 Salaries..................................................... 11
ARTICLE VI INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES....................................... 11
Section 1 Direct Actions............................................... 11
Section 2 Derivative Actions........................................... 12
Section 3 Advances..................................................... 12
Section 4 Nonexclusivity............................................... 12
ARTICLE VII CONFLICTS OF INTEREST........................................ 12
ARTICLE VIII ISSUE AND TRANSFER OF CAPITAL STOCK.......................... 13
Section 1 Certificates................................................. 13
Section 2 Transfer..................................................... 14
Section 3 Lost Certificates............................................ 14
Section 4 Fixing Record Date........................................... 14
Section 5 Registered Shareholders...................................... 14
Section 6 List of Shareholders......................................... 14
Section 7 Inspection of Records........................................ 15
ARTICLE IX SEAL......................................................... 15
ARTICLE X SPECIAL CORPORATE ACTS....................................... 15
Section 1 Execution of Negotiable Instruments.......................... 15
Section 2 Execution of Deeds, Contracts, etc........................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 3 Endorsement of Stock Certificates............................ 15
Section 4 Voting of Shares Owned by Bank............................... 15
ARTICLE XI AMENDMENTS................................................... 16
Section 1 By the Board of Directors.................................... 16
Section 2 By the Shareholders.......................................... 16
</TABLE>
<PAGE>
BYLAWS
OF
PEOPLE'S BANK
(The Bank)
(A Reorganized Savings Bank)
ARTICLE I
OFFICES
1. Principal Office. The principal office of the Bank shall be located in the
----------------
City of Bridgeport, Connecticut.
2. Additional Offices. The Bank may have such additional offices, either within
------------------
or without the State of Connecticut, as the Board of Directors may from time to
time designate or the business of the Bank may require, subject, however, to the
approval of the Banking Commissioner of the State of Connecticut (the
"Commissioner") and of the Federal Deposit Insurance Corporation (the "FDIC").
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. Place of Meetings. All meetings of the shareholders shall be held either at
-----------------
the principal office or place of business of the Bank, or such other place
within or without the United States as from time to time may be designated by
the Board of Directors.
2. Annual Meetings. The annual meetings of shareholders shall be held on such
---------------
day (other than a legal holiday) in each calendar year and at such time and
place as may be designated by the Board of Directors, for the election of
Directors and for the transaction of such other business as may properly come
before such meeting. To be properly brought before an annual meeting, business
must be (a) specific in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a shareholder. In addition, any
business to be brought before an annual meeting by a shareholder must be
reasonably related to the business of the Bank. For business to be properly
brought before an annual meeting by a shareholder, a shareholder must have given
timely notice thereof in writing to the Secretary of the Bank. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the Bank not less than 30 days prior to the
meeting; provided, however, that in the event that less than 20 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the annual meeting: (a)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting; (b)
the
<PAGE>
2
name and address, as they appear on the Bank's books, of the shareholder
proposing such business; (c) the class and number of shares of the Bank which
are beneficially owned by the shareholder; and (d) any material interest of the
shareholder in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this section. The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this section, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
3. Special Meetings. Special meetings of the shareholders may be
----------------
called at any time by the Board of Directors, the Chairman or Vice Chairman of
the Board of Directors, or the President, and shall be called by the President
or the Secretary upon the written request of at least two-thirds of the
Directors then in office. Each such request shall state the purposes for which
the requested meeting is to be called. Business to be transacted at any special
meeting shall be limited to the purposes stated in the notice of such meeting.
4. Notice of Annual or Special Meeting. A notice setting forth the
-----------------------------------
day, hour and place of each annual or special meeting of shareholders shall be
mailed, postage prepaid, to each shareholder of record entitled to vote, at his
last known post office address as the same appears on the stock records of the
Bank, or such notice shall be left with each such shareholder at his residence
or usual place of business, not less than seven nor more than 50 days before
such annual or special meeting. In the case of a special meeting the notice
shall also state the purpose or purposes thereof.
5. Waiver of Notice. Notice of any shareholders' meeting may be
----------------
waived in writing by any shareholder either before or after the time stated
therein for convening of the meeting and, if any person present in person or by
proxy at a shareholders' meeting does not protest, prior to or at the
commencement of the meeting, the lack of proper notice, such person shall be
deemed to have waived notice of such meetings.
6. Quorum. The holders of a majority of the issued and outstanding
------
stock entitled to vote, present either in person or by proxy, shall constitute a
quorum for the transaction of business at any meeting of the shareholders.
7. Adjournment of Shareholders' Meeting. If a quorum is not present
------------------------------------
at any meeting of the shareholders, the holders of a majority of the voting
power of the shares entitled to vote who are present, in person or by proxy, may
adjourn the meeting to such future time as shall be agreed upon by them and
announced at the meeting, and no notice of such adjournment need be given to the
shareholders not present or represented at the meeting unless the adjournment is
for more than 30 days or if, after the adjournment, a new record date is fixed
for the adjourned meeting; in either of the latter two events, a notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting.
<PAGE>
3
8. Proxies. At all meetings of the shareholders, any shareholder
-------
entitled to vote may vote either in person or by written proxy signed by such
shareholder or by his duly authorized attorney-in-fact or other legal
representative.
9. Number of Votes of Each Shareholder. Each outstanding share,
-----------------------------------
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders unless, and except to the extent that, voting
rights of shares of any class are increased, limited or denied in the Bank's
Articles of Incorporation, or as may otherwise be required by law.
10. Voting. In voting on any question on which a vote by ballot is
------
required by law, the voting shall be by ballot; on all other questions it may be
viva voce.
11. Consent of Shareholders in Lieu of Meeting. Subject to applicable
------------------------------------------
provisions of the Articles of Incorporation of the Bank, and except as otherwise
provided therein, any action required to be or which may be taken at any annual
or special meeting of the shareholders of the Bank may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders (or their duly
authorized attorneys) of all of the validly issued and outstanding shares of
stock which would be entitled to vote upon such action at such meeting.
ARTICLE III
DIRECTORS
1. Number and Election. The property, business and affairs of the
-------------------
Bank shall be managed by a Board of Directors consisting of at least nine
members but no more than sixteen members, with the precise number of Directors
to be fixed, changed and reestablished from time to time at such number as the
Board of Directors may by resolution determine. The initial Board of Directors
shall consist of those persons named in the Articles of Incorporation.
Thereafter, Directors shall be elected by the shareholders at the annual meeting
or at-any special meeting called for the election of directors, and it shall not
be a qualification of office that the directors be shareholders of the Bank or
residents of any of the United States. Each Director shall hold office for the
term for which he is elected and until his successor, if any, has been elected
and qualified except that a Director shall cease to be in office upon his death,
resignation, retirement, disqualification, removal, or court order decreeing
that he is no longer a Director in office.
2. Classification. The Board of Directors shall be classified, with
--------------
respect to the time for which they severally hold office, into three classes as
nearly equal in number as reasonably possible, with the Directors in each class
to hold office until their successors, if any, are elected and qualified. When
the number of Directors is changed, the Board of Directors shall determine the
class or classes to which the increased or decreased number of
<PAGE>
4
Directors shall be apportioned; provided that no change in the number of
Directors shall affect the term of any Director then in office.
3. Term of Office. The term of office of Directors named in the
--------------
Articles of Incorporation of the Bank shall be as follows:
Each member of the Board of Directors in the first class of Directors shall hold
office until the annual meeting of shareholders in 1989, each member of the
Board of Directors in the second class of Directors shall hold office until the
annual meeting of shareholders in 1990 and each member of the Board of Directors
in the third class of Directors shall hold office until; the annual meeting of
shareholders in 1991. At each annual meeting of the shareholders of the Bank,
the successors, if any, to the class of Directors whose terms expire at the
meeting shall be elected to hold office for terms expiring at the later of the
annual meeting of shareholders held in the third year following the year of
their election or the election and qualification of the successors, if any, to
such class of Directors.
4. Nominees. Only persons who are nominated in accordance with the
--------
procedures set forth in Section 7.3 of the Articles of Incorporation shall be
eligible for election as Directors.
5. Vacancies. Any vacancy in the Board of Directors occurring by
---------
reason of death, resignation, retirement, disqualification, removal or other
cause, including an increase in the number of directorships, shall be filled in
accordance with Section 7.4 of the Articles of Incorporation.
6. Powers of Directors. The Directors shall have the general
-------------------
management and control of the property, business and affairs of the Bank and may
exercise all the powers;-that may be exercised or performed by the Bank under
laws of the State of Connecticut, the Articles of Incorporation, and these
Bylaws.
7. Place of Meeting. The Directors may hold their meetings at such
----------------
place or places within or without the United States as the Board may from time
to time determine.
8. Organizational Meetings. A meeting of the Directors for the
-----------------------
election of officers and the transaction of any other business that may come
before such meeting shall be held without other notice immediately following
each annual meeting of the shareholders, or as soon thereafter as is convenient,
at the place designated therefor.
9. Regular Meetings. Regular meetings of the Directors, of which no
----------------
notice shall be necessary, shall be held on such dates, at such times, and at
such places as may be established by resolution adopted by a majority of the
Board of Directors.
10. Other Meetings. Other meetings of the Directors may be held on
--------------
such dates, at such times, and at such places as the Chairman of the Board, the
President or a majority of the
<PAGE>
5
Directors may deem advisable, notice thereof to be given or mailed to each
director at least three (3) days prior to such meeting.
11. Waiver of Notice. Notice of any Directors' meeting may be waived
----------------
in writing by all the Directors and, if any Director present at a Directors'
meeting does not protest prior to or at the commencement of the meeting the lack
of proper notice, he shall be deemed to have waived notice of such meeting.
12. Directors' Participation and Consents. Any resolution, order,
-------------------------------------
directive, authorization, ratification or other actions in writing concerning
actions taken or to be taken by the Bank, which resolution, order, directive,
authorization, ratification or other action is signed by all the members of the
Board of Directors severally or collectively, shall have the same force and
effect as if such actions were authorized at a meeting of the Board of Directors
duly called and held for that purpose, and such resolution, together with the
Directors' written approval thereof, shall be recorded by the Secretary in the
minute book of the Bank. The members of the Board, or of any committee
designated by the Board of Directors, may participate in a meeting of the Board
or of such committee by means of conference, telephone or similar communications
equipment affording all persons participating in the meeting the ability to hear
each other, and participation in the meeting by means of such equipment shall
constitute presence in person at such meeting.
13. Quorum. The holders of a majority of the directorships entitled
------
to vote shall constitute a quorum for the transaction of business at all
meetings of the Board of Directors. The acts of a majority of the Directors
present at a meeting at which a quorum is present at the time of the act shall
be the acts of the Board of Directors.
14. Compensation of Directors. The Board of Directors shall have
-------------------------
authority to fix fees of Directors, including a reasonable allowance for
expenses actually incurred in connection with their duties.
15. Removal of Directors. Any Director or the entire Board of
--------------------
Directors may be removed at any time, with or without any assignment of cause,
by the affirmative vote of the holders of at least fifty-one per cent of the
outstanding shares entitled to vote for the election of Directors.
16. Resignation. Any Director may resign at any time by sending a
-----------
written notice of such resignation to the main office of the Bank addressed to
the Chairman of the Board, the President or the Secretary. Unless the resigning
Director otherwise specifies in the notice of resignation, such resignation
shall take effect upon receipt by the Chairman of the Board, the President or
the Secretary.
17. Limitation on Service by Directors. With the exception of the
----------------------------------
Chairman of the Executive Committee and the Vice Chairman of the Board of
Directors, who may continue to serve as Directors, a Director shall retire from
service as a Director of the Bank at the
<PAGE>
6
expiration of the term of office during which such Director has reached the age
of seventy-two.
18. Committees. In addition to the Executive Committee referred to in
----------
Article IV of these Bylaws and the Audit Committee referred to in Section 19 of
this Article III, the Board of Directors may, by resolution adopted by a
majority of the directorships, designate one or more committees, each committee
to consist of three or more Directors elected by the Board of Directors. The
Board of Directors may elect one or more Directors as alternate members of any
such committee, who may take the place of any absent member or members at a
meeting of such committee.
If a member of any such committee shall be absent from any meeting,
or disqualified from voting thereat, the remaining member or members present and
not disqualified from voting, whether or not such member or members constitute a
quorum, may, by unanimous vote, appoint another member of the Board of Directors
to act at the meeting in place of an absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise, when the Board of Directors is not in session, all
the powers and authority of the Board of Directors in the direction of the Bank,
except action in respect to dividends to shareholders, election of the principal
officers, the filling of vacancies in the Board of Directors or committees
created pursuant to the authority set forth in this section, the amendment of
the Articles of Incorporation of the Bank, or the amendment of these Bylaws.
Notwithstanding the foregoing, the Executive Committee or any other
committee designated by the Board of Directors may, when so authorized by
resolution adopted by the Board of Directors, exercise the powers and authority
of the Board of Directors in taking action to amend the Articles of
Incorporation of the Bank in connection with fixing the designations,
preferences and relative, optional and other special rights pertaining to one or
more series of Preferred Stock, establishing the number of shares of any such
series, and establishing the qualifications, limitations and restrictions of any
such series, all in accordance with and as contemplated by the provisions of
Section 5.3 of the Articles of Incorporation of the Bank.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Unless otherwise specified in the resolution of the Board of Directors
designating the committee, the majority of the total number of members of the
committee shall constitute a quorum for the transaction of business, and the
vote of the majority of the members of the committee present at any meeting of
which there is a quorum shall be the act of the committee.
Each such committee shall keep regular minutes of its meetings and
report the same to the Board of Directors, when required.
<PAGE>
7
19. Audit Committee. The Board of Directors shall, by resolution adopted by a
---------------
majority of the directorships, designate two or more Directors to constitute an
Audit Committee, all of whom shall be "independent," as that term is defined in
Section 33-318(b) of the Connecticut General Statutes. The Board of Directors
shall cause an annual audit to be made of the books, accounts, and securities
belonging to the Bank by certified public accountants under the supervision of
such Audit Committee, as of a date which coincides with the end of the Bank's
fiscal year. The Audit Committee shall perform such other functions as a duly
adopted resolution of the Board of Directors may provide.
ARTICLE IV
EXECUTIVE COMMITTEE
1. Designation of Executive Committee. The Board of Directors, by
----------------------------------
resolution adopted by the affirmative vote of Directors holding a majority of
the directorships, at a meeting at which a quorum is present, may designate two
or more Directors to constitute an Executive Committee. The designation of the
Executive Committee and the delegation of authority to it shall not operate to
relieve the Board of Directors or any member of it of any responsibility imposed
upon it or him by law. No member of the Executive Committee shall continue to be
such a member after he ceases to be a Director of the Bank. The Board of
Directors shall have the power at any time to increase or decrease the number of
members of the Executive Committee, to fill vacancies on it, to remove any
member of it, and to change its functions or terminate its existence.
2. Powers of the Executive Committee. During the intervals between
---------------------------------
meetings of the Board of Directors, subject to such limitations as may be
prescribed by the Board of Directors, the Executive Committee shall have and may
exercise all the authority of the Board of Directors, including power to
authorize the seal of the Bank to be affixed to all documents that may require
it. The Executive Committee may formulate and recommend to the Board of
Directors for approval general policies regarding the management of the business
and affairs of the Bank.
3. Record of Proceedings. The Executive Committee shall keep minutes
---------------------
of its acts and proceedings which shall be submitted to the next succeeding
meeting of the Board of Directors for approval; but failure to submit or to
receive approval of such minutes shall not invalidate any action taken upon an
authorization contained in them.
4. Place of Meetings. Meetings of the Executive Committee, regular or
-----------------
special, may be held either within or without the United States.
5. Regular Meetings. Regular meetings of the Executive Committee, of
----------------
which no notice shall be necessary, shall be held on such days and at such
places as shall be established by resolution adopted by a majority of the
Executive Committee.
<PAGE>
8
6. Special Meetings. Special meetings of the Executive Committee
----------------
shall be called at the request of any member of the Executive Committee and
shall be held upon notice by mail, telegram, cable, or comparable facility,
posted or delivered for transmission not later than during the third day
immediately preceding the day for the meeting, or by word of mouth, telephone,
or radiophone, received not later than the day immediately preceding the day for
the meeting. Notice of any special meeting of the Executive Committee may be
waived in writing, signed by the member or members entitled to the notice,
whether before or after the time of the meeting. Attendance of any member of the
Executive Committee at a special meeting shall constitute a waiver of notice of
the meeting.
7. Quorum. A majority of the Executive Committee shall be necessary
------
to constitute a quorum for the transaction of any business. The acts of a
majority of the members present at a meeting at which a quorum is present shall
be the acts of the Executive Committee.
8. Compensation. The Board of Directors may authorize payment to the
------------
members of the Executive Committee of a reasonable fee as compensation for
service as a member of the Executive Committee.
ARTICLE V
OFFICERS
1. Principal and Other Officers. The principal officers shall consist
----------------------------
of the Chairman of the Board, the President, the Secretary, and the Treasurer.
Principal officer classification shall also include, if appointed, a Chief
Executive Officer. The other officers shall consist of the Comptroller, one or
more Senior Executive Vice Presidents, one or more Executive Vice Presidents,
one or more Senior Vice Presidents, one or more First Vice Presidents, one or
more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, and such other officers, assistant officers and agents as
may be deemed necessary and appointed by the Board of Directors, the Executive
Committee, the President, the Chief Executive Officer or as may be chosen in
such other manner as may be prescribed or permitted by these Bylaws, as amended
from time to time. (All of such officers are referred to herein as "Other
Officers.") Any two or more principal offices may be held by the same person,
and any one or more Other Offices may be held by any principal or Other officer;
provided that the same individual shall not simultaneously occupy the offices of
both President and Secretary.
2. General Authority and Duties. All officers and agents of the Bank
----------------------------
shall have such authority and perform such duties in the management of the Bank
as may be provided in these Bylaws or as may be determined by resolution of the
Board of Directors not inconsistent with these Bylaws.
3. Election, Term of Officer, and Qualifications. The principal
---------------------------------------------
officers shall be elected annually by the Board of Directors at its annual
organization meeting or as soon
<PAGE>
9
thereafter as conveniently possible or at such other times as the Board of
Directors deems necessary. Other Officers not elected by the Board of Directors
or the Executive Committee may be appointed by the President, the Chief
Executive Officer, or any other principal officer to whom the President or the
Chief Executive Officer shall delegate the authority of appointment. Each
officer shall hold office until his successor, if any, is chosen and qualified
or until his death, his resignation, his retirement or his removal, whichever
event shall first occur. Each officer shall hold office at the discretion of the
Board of Directors and election or appointment of an officer or agent shall not
of itself create any contractual rights.
4. Removal. Any officer or agent may be removed by the Board of
-------
Directors whenever in its judgment the best interests of the Bank will be served
by so doing. Any officer or agent may also be removed by the Executive
Committee, the President, the Chief Executive Officer, or by any other principal
officer having authority to designate or appoint the officer or agent, with or
without cause. Any removal shall be without prejudice to the contract rights, if
any, of the person so removed.
5. Resignations. Any officer or agent may resign at any time by
------------
giving written notice to the Board of Directors or to the Chairman of the Board,
the President, the Chief Executive Officer, or the Secretary. The resignation
shall take effect at the time specified in the notice, and, unless otherwise
specified in it, acceptance of the resignation shall not be necessary to make it
effective.
6. Vacancies. Any vacancy in any office occurring by reason of death,
---------
resignation, removal, or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in these Bylaws for election or
appointment to the office.
7. The Chairman and Vice Chairman of the Board. The Chairman of the
-------------------------------------------
Board, who shall be chosen from among the Directors, shall preside at all
meetings of the Board of Directors, if present, and shall, in general, perform
all duties incident to the office of Chairman of the Board and such other duties
as may be assigned to him by the Board of Directors. The Vice Chairman shall
perform such duties as may be assigned to him by the Board of Directors.
8. The President. The President, which need not be chosen from among
-------------
the Directors, shall have active executive management of the operations of the
Bank, subject, however, to the control of the Board of Directors and the
Executive Committee, and to the restrictions or limitations imposed by any
applicable rules, regulations or contractual provisions.
9. The Chief Executive Officer. The President shall be the Chief
---------------------------
Executive Officer of the Bank unless the Board of Directors designates the
Chairman of the Board of Directors as Chief Executive Officer. The Chief
Executive Officer shall exercise general supervision of the business and affairs
of the Bank and over its officers and employees, and shall perform such other
duties as are incident to the office of the President or Chairman of the Board,
as the case may be, subject, however, to the control of the Board of Trustees
and the
<PAGE>
10
Executive Committee, and to the restrictions or limitations imposed by any
applicable rules, regulations or contractual provisions.
10. The Vice Presidents. Each Vice President shall have such powers
-------------------
and perform such duties as the Board of Directors or the Executive Committee may
prescribe or as the President or the Chief Executive Officer may delegate to
him. At the request of the President, any Vice President may, in the case of the
President's absence or inability to act, temporarily act in his s place. In the
case of death of the President, or in the case of his absence or inability to
act without having designated a Vice President to act temporarily in his place,
the Vice President or Vice Presidents to perform the duties of the President
shall be designated by the Board of Directors, the Executive Committee or the
Chairman of the Board of Directors.
11. Assistant Vice Presidents. Each Assistant Vice President (if one
-------------------------
or more Assistant Vice Presidents be elected or appointed) shall perform such
duties as are from time to time delegated to him by the Board of Directors, the
Executive Committee, the President, the Chief Executive Officer, or a Vice
President. At the request of one of the Vice Presidents, an Assistant Vice
President may temporarily perform the duties of the Vice President, and when so
acting shall have the powers of and be subject to the restrictions imposed upon
such Vice President.
12. The Secretary. The Secretary shall keep or cause to be kept in
-------------
books provided for that purpose the minutes of the meetings of the shareholders
and of the Board of Directors; shall see that all notices are duly given in
accordance with the provisions of these Bylaws and as required by law; shall be
custodian of the records and of the seal of the Bank and shall see that the seal
is affixed to all documents, the execution of which on behalf of the Bank under
its seal is required; and, in general, shall perform all duties incident to the
office of Secretary and such other duties as may be assigned to him by the Board
of Directors, the Executive Committee, the President or the Chief Executive
Officer.
13. The Assistant Secretaries. Each Assistant Secretary (if one or
-------------------------
more Assistant Secretaries be appointed) shall assist the Secretary in his
duties, and shall perform such other duties as the Board of Directors, the
Executive Committee, the President, the Chief Executive Officer or the Secretary
may from time to time assign to him. At the request of the Secretary, any
Assistant Secretary may, in the case of the absence or inability to act of the
Secretary, temporarily act in his place. In the case of the death of the
Secretary or in the case of his absence or inability to act without having
designated an Assistant Secretary to act temporarily in his place, the Assistant
Secretary to perform the duties of the Secretary shall be designated by the
President, the Chief Executive Officer, or any Vice President.
14. The Treasurer. The Treasurer shall have charge and custody of,
-------------
and be responsible for, all funds and deposit all such funds in the name of the
Bank in such banks, trust companies, or other depositories as shall be selected
by the Board of Directors; shall receive and give receipts for monies due and
payable to the Bank from any source whatsoever; and, in general, shall perform
all the duties incident to the office of Treasurer and such other duties as may
be assigned to him by the Board of Directors, the Executive Committee, the
<PAGE>
11
President or the Chief Executive Officer. The Treasurer shall render to the
Board of Directors, the Chairman of the Board, the President, and the Chief
Executive Officer t whenever the same shall be required, an account of all-his
transactions as Treasurer and of the financial condition of the Bank. He shall,
if required so to do by the Board of Directors, give the Bank a bond in such
amount and with such surety or sureties as may be ordered by the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Bank, in case of his death, resignation, retirement, or
removal from office, of all books, papers, vouchers, money, and other property
of whatever kind in his possession or under his control belonging to the Bank.
15. The Comptroller. The Comptroller shall keep full and : accurate
---------------
accounts of all assets, liabilities, commitments, receipts, disbursements, and
other financial transactions of the Bank in books belonging to the Bank; shall
cause regular audits of these books and records to be made; shall see that all
expenditures are made in accordance with procedures duly established, from time
to time, by the Bank; shall render financial statements at all regular meetings
of the Board of Directors, and a full financial report at the annual meeting of
shareholders if called upon so to do; and, in general, shall perform all the
duties ordinarily connected with the office of Comptroller and such other duties
as, from time to time, may be assigned to him by the Board of-Directors, the
Executive Committee, the President or the Chief Executive Officer.
16. Salaries. The salaries of the principal officers shall be fixed,
--------
from time to time, by the Board of Directors or the Executive Committee. The
salaries of the Other Officers shall be fixed, from time to time, by the
President of the Bank. No officer shall be prevented from receiving his salary
by reason of the fact that he is also a Director of the Bank.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
1. Direct Actions The Bank shall indemnify each person who was or is
--------------
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the Bank, by reason of
the fact that he or she is or was a Director, officer, employee or agent of the
Bank, or is or was serving at the request of the Bank as a Trustee, Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, other than an employee benefit plan or trust, or is
or was a Director, officer or employee of the Bank serving at the request of the
Bank as a fiduciary of an employee benefit plan or trust maintained for the
benefit of employees of the Bank or employees of any such other corporation,
partnership, joint venture, trust or other enterprise, against judgments, fines,
penalties, amounts paid in settlement and expenses, including attorneys' fees,
actually and reasonably incurred by him or her, in connection with such suit,
action or proceeding, or
<PAGE>
12
any appeal therein, to the full extent permitted by the Connecticut Stock
Corporation Act, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Bank to provide broader indemnification rights than such Act permitted the Bank
to provide prior to such amendment).
2. Derivative Actions. The Bank shall indemnify each person who was
------------------
or is a party, or was threatened to be made a party to any action, suit or
proceeding, by or in the right of the Bank, to procure a judgment in its favor
by reason of the fact that he or she (a) is or was a Director, officer,
employee, or agent of the Bank, or (b) is or was serving at the request of the
Bank (i) as a Trustee, Director, officer or employee of another corporation,
partnership, joint-venture, trust, or other enterprise, or (ii) as an agent of
such other corporation, partnership, joint venture, trust, or other enterprise
other than an employee benefit plan or trust, or (iii) is or was a Trustee,
officer or employee of the Bank serving as a fiduciary of an employee benefit
plan or trust maintained for the benefit of employees of the Bank or employees
of any such other corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees actually and reasonably
incurred by him or her in connection with such action, suit or proceeding, or
any appeal therein, to the full extent permitted by the Connecticut Stock
Corporation Act, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Bank to provide broader indemnification rights than such Act permitted the Bank
to provide prior to such amendment).
3. Advances. Expenses that may be indemnifiable under this Article
--------
and that are incurred in defending an action, suit or proceeding may be paid by
the Bank in advance of the final disposition of such action, suit or proceeding
as authorized by the Board of Directors in accordance with the provisions of the
Connecticut Stock Corporation Act, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Bank to provide broader indemnification rights than such
Act permitted the Bank to provide prior to such amendment), upon agreement by or
on behalf of the Director, Trustee, officer, employee or agent to repay such
amount if he is later found not entitled to be indemnified by the Bank.
4. Nonexclusivity The foregoing rights of indemnification shall in no
--------------
way be exclusive of any other rights of indemnification to which any person may
be entitled and shall inure to the benefit of the heirs, executors and
administrators of such person. Any such right of indemnification shall be
consistent with the statutes of Connecticut.
ARTICLE VII
CONFLICTS OF INTEREST
No contract or transaction between the Bank and one or more of its
Directors or officers, or between the Bank and any other corporation,
partnership, association, or other organization of which one or more of its
Directors, officers, partners, or members are Directors or officers of the Bank,
or in which one or more of the Bank's Directors or officers
<PAGE>
13
have a financial or other interest, shall be void or violable solely by reason
thereof, or solely because the Director or officer is present at or participates
in the meeting of the Board of Directors of the Bank or a committee thereof
which authorized the contract or transaction, if:
(1) Any duality of interest or possible conflict of interest on the
part of any Director or officer of the Bank is disclosed to the other members of
the Board or committee either through an annual questionnaire or at a meeting at
which a matter involving such duality or conflict of interest is considered or
acted upon, and
(2) Any Director having a duality of interest or possible conflict of
interest on any matter refrains from voting or using his personal influence on
the matter. The minutes shall reflect that a disclosure was made and the
abstention from voting.
The foregoing requirements shall not be construed as preventing a
Director from briefly stating his position in the matter, nor from answering
pertinent questions of other members of the Board or committee. Each Director
and officer of the Bank shall be advised of this policy upon entering on the
duties of his office and shall answer an annual questionnaire.
ARTICLE VIII
ISSUE AND TRANSFER OF CAPITAL STOCK
1. Certificates. Certificates of capital stock and other documentary
------------
evidences of equity securities shall be in the form authorized or adopted by the
Board of Directors or the Executive Committee and shall be consecutively
numbered. Each certificate shall set forth upon its face as at the time of
issue: the name of the Bank, a statement that the Bank is organized under the
laws of the State of Connecticut, the name of the person to whom issued, the
number, class and designation of series, if any, of shares or units represented
thereby and the par value of each share; and each certificate shall be signed by
the President, a Vice President or an Assistant Vice President, and by the
Secretary, the Treasurer, an Assistant Treasurer or an Assistant Secretary, and
shall be sealed with the seal of the Bank or a facsimile thereof; provided that
the certificate shall also contain such other recitals as may from time to time
be required by law. The signatures of any officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Bank itself or an employee of the
Bank. In case any officer who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Bank with the same effect as if
he were such officer at the date of its issue.
Whenever the Bank shall be authorized to issue more than one class of
stock or more than one series of any class of stock, the certificates
representing shares of any such class or series shall set forth thereon the
statements prescribed by the law of Connecticut. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such shares.
<PAGE>
14
2. Transfer. The capital stock or other equity securities of the Bank
--------
shall be transferred only upon the books of the Bank either by the shareholder
in person or by power of attorney executed by him for that purpose upon the
surrender for cancellation of the old stock certificate. Prior to due
presentment for registration of transfer of a certificate, the Bank may treat
the registered owner of such certificate as the person exclusively entitled to
vote, receive notifications and distributions, and otherwise to exercise all the
rights and powers of the shares represented by such certificate.
3. Lost Certificates. The Bank may issue a new certificate of stock
-----------------
in place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Board of Directors may require the owner of any
lost, stolen or destroyed certificate, or his legal representative, to give the
Bank a bond sufficient to indemnify the Bank against any claim that may be made
against it on account of the alleged loss, theft, or destruction or any such
certificate or the issuance of any such new certificate.
4. Fixing Record Date. The Board of Directors by resolution shall fix
------------------
a date as the record date for any determination of shareholders, such date in
any case to be not more than 70 days and, in case of a meeting of shareholders,
not less than 10 days prior to the date on which the particular action requiring
determination of shareholders is to be taken. When a record date has been
determined for shareholders entitled to vote in any meeting as provided in this
section, such record date shall apply to any adjournment thereof.
5. Registered Shareholders. The Bank shall be entitled to recognize
-----------------------
the exclusive right of a person registered on its books as the owner of shares
to receive dividends and to vote as such owner, and the Bank shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by statute.
6. List of Shareholders. The corporate officer having responsibility
--------------------
for the share transfer books for shares of the Bank shall make, or cause to be
made, for at least one business day before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of, and the number and class of shares held
by, each. Such list shall, for a period of at least one business day prior to
such meeting, be kept on file at the main office of the Bank and shall be
subject to inspection by any shareholder during usual business hours for any
proper purpose in the interest of the shareholder as such or the Bank and not
for speculative or trading purposes or for any purpose inimical to the interest
of the Bank or of its shareholders. Such list shall also be produced and kept
open at the time and place of each meeting of shareholders and shall be subject
for any such proper purpose to such inspection during the whole time of the
meeting. The original share transfer books shall be prima facie evidence as to
who are the shareholders entitled to inspect such list. Except as otherwise
required by law applicable to savings banks, shareholders shall be entitled to
inspect a list of shareholders of the Bank only as provided in this Section 6.
<PAGE>
15
7. Inspection of Records. Any shareholder of record upon written
---------------------
demand setting the purpose thereof shall have the right to examine in person or
by agent or attorney, at any reasonable time or times, for any proper purpose,
these Bylaws and minutes of meetings of shareholders and to make copies and
extracts thereof.
ARTICLE IX
SEAL
The seal of the Bank shall consist of the imprint of two concentric circles
between which shall be inscribed the name of the Bank. The year of incorporation
or an emblem may appear in the center.
ARTICLE X
SPECIAL CORPORATE ACTS
1 Execution of Negotiable Instruments. All checks, drafts, notes,
-----------------------------------
bonds, bills of exchange, and orders for the payment of money shall be signed by
such officer or officers of the Bank as the Board of Directors shall determine
from time to time. The Board of Directors may authorize the use of facsimile
signatures of any officer or employee in lieu of manual signatures.
2. Execution of Deeds, Contracts, etc. Subject always to the specific
----------------------------------
directions of the Board of Directors or the Executive Committee, all deeds and
mortgages made by the Bank and all other written contracts, agreements and
undertakings to which the Bank shall be a party shall be executed in its name by
the Chairman of the Board of Directors, the President or such other officer as
may be designated by the Chairman of the Board of Directors or the President,
and, when requested, the Secretary or an Assistant Secretary shall attest to
such signatures and affix the corporate seal to the instruments.
3. Endorsement of Stock Certificates. Subject always to the specific
---------------------------------
directions of the Board of Directors or the Executive Committee, any share or
shares of stock issued by any corporation and owned by the Bank (including
reacquired shares of stock of the Bank) may, for sale or transfer, be endorsed
in the name of the Bank by the Chairman of the Board of Directors, the President
or such other officer as may be designated by the Chairman of the Board of
Directors or the President, and his signature shall be attested to by the
Secretary or an Assistant Secretary who shall affix the corporate seal.
4. Voting of Shares Owned by Bank. Subject always to the specific
------------------------------
directions of the Board of Directors or the Executive Committee, any share or
shares of stock issued by any other corporation and owned or controlled by the
Bank may be voted at any shareholders' meeting of the other corporation by the
President or Chief Executive Officer of the Bank, or in their absence by such
other officer as may be designated by the President or Chief Executive Officer.
Whenever, in the judgment of the President or the Chief Executive Officer, or in
their
<PAGE>
16
absence, of any such other officer as may be designated by the President
or Chief Executive Officer, it is desirable for the Bank to execute a proxy or
give a shareholders' consent in respect to any share or shares of stock issued
by any other corporation and owned or controlled by the Bank, the proxy or
consent shall be executed in the name of the Bank by the President or Chief
Executive Officer or such other officer as may be designated by the President or
the name of the Bank by the President or Chief Executive Officer or such other
officer as may be designated by the President or Chief Executive Officer without
necessity of any authorization by the Board of Directors. Any person or persons
designated in the manner above stated as the proxy or proxies of the Bank shall
have full right power and authority to vote the share or shares of stock issued
by the other corporation.
ARTICLE XI
AMENDMENTS
1. The Board of Directors. The Board of Directors shall have the
----------------------
power to make, amend and repeal these Bylaws, in whole or in part, by the
affirmative vote of a majority of the Directors then in office cast at any
regular or special meeting of the Board, provided that notice of the intention
or proposal to make, amend or repeal the Bylaws previously shall have been given
to each member of the Board, or without any such notice, by the affirmative vote
of all of the Directors then in office.
2. By the Shareholders. The shareholders shall have the power to
-------------------
make, amend and repeal these Bylaws, in whole or in part, by the affirmative
vote of the holders of a majority of the capital stock of the Bank outstanding
and entitled to vote in the election of Directors of the Bank. Any such vote of
shareholders making, amending or repealing the Bylaws may be had at any annual
or special meeting of shareholders provided that notice of the intention or
proposal to make, amend or repeal the Bylaws at such meeting previously shall
have been given to the shareholders entitled to vote thereon. Action of the
shareholders in making, amending or repealing the Bylaws shall prevail over any
contrary or inconsistent action previously taken by the Board of Directors in
making, amending or repealing the Bylaws; provided, however, that any
proceedings had or action taken pursuant to the Bylaws made, amended or repealed
by action of the Board of Directors prior to contrary or inconsistent action by
the shareholders shall be valid in all respects.
------ooOoo------
<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
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of March 18, 1997
amending and restating in its entirety
the Pooling and Servicing Agreement
Dated as of June 1, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions............................................... 1
SECTION 1.2 Other Definitional Provisions............................. 23
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
SECTION 2.1 Conveyance of Receivables................................. 25
SECTION 2.2 Acceptance by Trustee..................................... 27
SECTION 2.3 Representations and Warranties of the Seller.............. 28
SECTION 2.4 Representations and Warranties of the Seller Relating
to the Agreement and the Receivables...................... 30
SECTION 2.5 Covenants of the Seller................................... 39
SECTION 2.6 Addition of Accounts...................................... 44
SECTION 2.7 Removal of Accounts....................................... 48
SECTION 2.8 Periodic Removal of Expired Accounts...................... 51
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
SECTION 3.1 Acceptance of Appointment and Other Matters Relating
to the Servicer.......................................... 55
SECTION 3.2 Servicing Compensation.................................... 56
SECTION 3.3 Representations and Warranties of the Servicer............ 57
SECTION 3.4 Reports and Records for the Trustee....................... 61
SECTION 3.5 Annual Servicer's Certificate............................. 62
SECTION 3.6 Annual Independent Accountants' Servicing Report.......... 62
SECTION 3.7 Tax Treatment............................................. 63
SECTION 3.8 Notices to the Seller..................................... 64
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.................. 65
SECTION 4.2 Collection and Allocations............................... 67
-1-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates.......................................... 73
SECTION 6.2 Authentication of Certificates............................ 73
SECTION 6.3 Registration of Transfer and Exchange of
Certificates.............................................. 74
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates......... 79
SECTION 6.5 Persons Deemed Owners..................................... 79
SECTION 6.6 Appointment of Paying Agent............................... 80
SECTION 6.7 Access to List of Certificateholders' Names and
Addresses................................................ 81
SECTION 6.8 Authenticating Agent...................................... 82
SECTION 6.9 Tender of Exchangeable Seller Certificate................. 83
SECTION 6.10 Global Certificate; Euro-Certificate Exchange Date........ 86
SECTION 6.11 Book-Entry Certificates................................... 87
SECTION 6.12 Notices to Clearing Agency................................ 87
SECTION 6.13 Definitive Certificates................................... 88
SECTION 6.14 Meetings of Certificateholders............................ 88
ARTICLE VII
OTHER MATTERS RELATING TO THE SELLER
SECTION 7.1 Liability of the Seller................................... 89
SECTION 7.2 Merger or Consolidation of, or Assumption of the
Obligation of, the Seller................................ 89
SECTION 7.3 Limitation on Liability of the Seller..................... 90
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
SECTION 8.1 Liability of the Servicer................................. 91
SECTION 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer............................. 91
-2-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
SECTION 8.3 Limitation on Liability of the Servicer and
Others................................................... 92
SECTION 8.4 Servicer Indemnification of the Trust and the
Trustee.................................................. 92
SECTION 8.5 Resignation of the Servicer............................... 93
SECTION 8.6 Access to Certain Documentation and Information Regarding
the Receivables.......................................... 94
SECTION 8.7 Delegation of Duties...................................... 94
SECTION 8.8 Examination of Records.................................... 95
ARTICLE IX
PAY OUT EVENTS
SECTION 9.1 Pay Out Events............................................ 96
SECTION 9.2 Additional Rights Upon the Occurrence of Certain
Events................................................... 96
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults........................................ 99
SECTION 10.2 Trustee to Act; Appointment of Successor................. 101
SECTION 10.3 Notification to Certificateholders....................... 104
SECTION 10.4 Waiver of Past Defaults.................................. 104
ARTICLE XI
THE TRUSTEE
SECTION 11.1 Duties of Trustee........................................ 105
SECTION 11.2 Certain Matters Affecting the Trustee.................... 107
SECTION 11.3 Trustee Not Liable for Recitals in Certificates.......... 108
SECTION 11.4 Trustee May Own Certificates............................. 109
SECTION 11.5 The Servicer to Pay Trustee's Fees and Expenses.......... 109
SECTION 11.6 Eligibility Requirements for Trustee..................... 109
SECTION 11.7 Resignation or Removal of Trustee........................ 110
SECTION 11.8 Successor Trustee........................................ 111
SECTION 11.9 Merger or Consolidation of Trustee....................... 111
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee............ 111
SECTION 11.11 Tax Returns.............................................. 113
SECTION 11.12 Trustee May Enforce Claims Without
Possession of Certificates.............................. 113
SECTION 11.13 Suits for Enforcement.................................... 113
-3-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
SECTION 11.14 Rights of Certificateholders to Direct Trustee........... 114
SECTION 11.15 Representations and Warranties of Trustee................ 114
SECTION 11.16 Maintenance of Office or Agency.......................... 114
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust..................................... 116
SECTION 12.2 Optional Purchase and Final Termination of Investor
Certificates of any Series............................... 117
SECTION 12.3 Final Payment with Respect to any Series.................. 117
SECTION 12.4 Seller's Termination Rights............................... 119
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment................................................. 120
SECTION 13.2 Protection of Right, Title and Interest to Trust.......... 122
SECTION 13.3 Limitation on Rights of Certificateholders................ 123
SECTION 13.4 GOVERNING LAW............................................. 124
SECTION 13.5 Notices................................................... 124
SECTION 13.6 Severability of Provisions................................ 125
SECTION 13.7 Certificates Non-Assessable and Fully Paid................ 125
SECTION 13.8 Further Assurances........................................ 125
SECTION 13.9 No Waiver; Cumulative Remedies............................ 125
SECTION 13.10 Counterparts.............................................. 125
SECTION 13.11 Third-Party Beneficiaries................................. 126
SECTION 13.12 Actions by Certificateholders............................. 126
SECTION 13.13 Rule 144A Information..................................... 126
SECTION 13.14 Merger and Integration.................................... 126
SECTION 13.15 Headings.................................................. 126
Exhibit A Form of Exchangeable Seller Certificate
Exhibit B Form of Assignment of Receivables in Additional Accounts
Exhibit C Form of Monthly Servicer's Certificate
Exhibit D Form of Annual Servicer's Certificate
Exhibit E Form of Seller Certificate Designating Banks and Agent Banks
the Accounts of which Constitute Automatic Additional
Accounts
Exhibit F Form of Opinion of Counsel Pursuant to Sections 2.6(g)(vi)
and 13.2(d)(i)
-4-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
PAGE
Exhibit G Form of Annual Security Interest Opinion Pursuant to Section
13.2(d)(ii)
Exhibit H Form of Depository Agreement
Exhibit I Form of Reassignment of Removed Accounts
Exhibit J Form of Officer's Certificate Pursuant to Section 2.8(d)(ii)
-5-
<PAGE>
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of March 18,
1997, 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.
WHEREAS, People's Bank, as Seller and Servicer, and the Trustee entered
into that certain Pooling and Servicing Agreement, dated as of June 1, 1993 (as
amended by an amendment dated as of December 15, 1995, the "Original Pooling and
--------------------
Servicing Agreement"); and
- -------------------
WHEREAS, People's Bank, as Seller and Servicer, and the Trustee desire to
amend and restate the Original Pooling and Servicing Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the Original Pooling and Servicing Agreement is hereby amended and restated in
its entirety as follows and 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. 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,
- ---------------
* VISA(R) and MasterCard(R) are registered trademarks of VISA USA, Inc. and of
MasterCard International Incorporated, respectively.
<PAGE>
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.
"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.
-2-
<PAGE>
"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 Amended and Restated Pooling and Servicing
---------
Agreement and all amendments hereof and supplements hereto, including, with
respect to any Series or Class, the related 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 amortization 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 applicable to an Account.
"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
-3-
<PAGE>
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 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.
"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;
(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;
(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; or
(c) each Visa(R) and MasterCard(R) consumer revolving credit card
account, now existing or hereafter arising, which (i) is included in a
"bank" or "agent bank" of credit card accounts (or other grouping of credit
card accounts,
-4-
<PAGE>
however denominated) maintained by Total Systems, Inc. (or its successor)
or another records processor on behalf of the Seller, which records
processor may be the Seller or an Affiliate of the Seller, (ii) is not, as
of the date of this Agreement, an existing Account or Additional Account,
and (iii) satisfies the following criteria:
(A) such account is an Eligible Account and an Eligible
Additional Account;
(B) any introductory pricing offer or "teaser rate" applicable to
such account will have expired during or prior to the Monthly Period
in which such account is added as an Automatic Additional Account;
(C) such account is an account that satisfies the criteria
specified in subclauses (i) through (iv) of clause (a) hereof;
-------------- ---- ----------
(D) 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
pool of accounts in which such account arises from the available pools
of accounts owned by the Seller;
(E) such account is not originated utilizing underwriting
criteria that (i) are materially different from the Seller's standard
underwriting criteria and (ii) would materially increase the
likelihood, as compared to the average expected probability of default
for an Account in the Trust portfolio, that such account would become
a Defaulted Account;
(F) such account is not originated as a "risk based" product; and
(G) the bank or agent bank (or other grouping) in which such
account is included has been designated by the Seller to the Trustee
as a bank or agent bank (or other grouping) the accounts in which
constitute Accounts, Additional Accounts, or Automatic Additional
Accounts, by delivery to the Trustee of a certificate of designation
substantially in the form annexed hereto as Exhibit E hereto or
---------
otherwise pursuant hereto.
"Banking Commissioner" shall mean the Banking Commissioner of the State of
--------------------
Connecticut.
-5-
<PAGE>
"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.
"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 Advance Fees" shall have the meaning specified in the Credit Card
-----------------
Agreement applicable to an Account.
"Cash Advances" shall have the meaning specified in the Credit Card
-------------
Agreement applicable to an Account.
"Certificate" shall mean any one of the Investor Certificates of any Series
-----------
or the Exchangeable Seller Certificate.
"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
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an
-6-
<PAGE>
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.
"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, and, as to any
Series, such other Person deemed to be a "Certificateholder," "Holder,"
"Investor Certificateholder" or "Investor Holder" in any related Supplement
except as otherwise provided in such Supplement.
"Certificateholders' Interest" shall, with respect to any Series, have the
----------------------------
meaning specified in Article IV of the Supplement for such Series.
"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).
------------------ --------------
-7-
<PAGE>
"Collections" shall mean all payments (including insurance proceeds on
-----------
Accounts that are not Defaulted Accounts and all Recoveries but excluding
drawings on any 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, 10th Floor, 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.
"Cut-Off Date" shall mean, with respect to each Account the Receivables of
------------
which are 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
-8-
<PAGE>
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 Certificates" shall have the meaning specified in Section 6.11.
----------------------- ------------
"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 or attached as an
---------
exhibit to 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
-9-
<PAGE>
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;
(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.
-10-
<PAGE>
"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;
(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
-11-
<PAGE>
than a defense arising out of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights in general; and
(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, collateral interest, surety bond, letter of credit, guaranteed rate
agreement, maturity guaranty facility, tax protection agreement, interest rate
swap or cap 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.
-------- -----------
-12-
<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.
-----------
"Expired Accounts" shall mean, with respect to any Expired Accounts Removal
----------------
Date, the Accounts listed in a computer file, microfiche list or printed copy
delivered by the Seller to the Trustee, pursuant to Section 2.8(b), not later
--------------
than five Business Days (or as soon as is reasonably practicable) after such
Expired Accounts Removal Date as Accounts that (i) have zero Receivables
balances as of such Expired Accounts Removal Date, (ii) have expired as of such
Expired Accounts Removal Date according to the records maintained by the
Seller's records processor (which may be the Seller or an Affiliate of the
Seller), and (iii) have been deleted from the records maintained by the Seller's
records processor and therefore cannot be reactivated.
"Expired Accounts Removal Date" shall mean each date occurring not less
-----------------------------
than five Business Days after the date of this Agreement and designated as a
date on which the Receivables from Expired Accounts shall be deleted and removed
from the Trust and reassigned to the Seller pursuant to Section 2.8.
-----------
"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, other fees and charges that are
treated as Finance Charge Receivables in the most recent monthly Servicer's
certificate forwarded to the Trustee pursuant to Section 3.4(b) hereof,
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.
-13-
<PAGE>
"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).
- ------
"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 (or forms in the case of Series with multiple Classes)
of investor certificate attached to the related Supplement and such other
interest in the Trust deemed to be an "Investor Certificate" in any related
Supplement except as otherwise provided in such Supplement.
"Investor Certificateholder" shall mean the holder of record of an Investor
--------------------------
Certificate.
-14-
<PAGE>
"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.
"Late Fees" shall have the meaning specified in the Credit Card Agreement
---------
applicable to an Account.
"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 on any date of determination, 7% or
-----------------------
such higher percentage as may be specified in any Supplement of the average
Aggregate Principal Receivables for such date of determination.
"Monthly Investor Servicing Fee" shall have the meaning specified in
------------------------------
Section 3.2.
- -----------
"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 Seller Servicing Fee" shall have the meaning specified in Section
---------------------------- -------
3.2.
- ---
-15-
<PAGE>
"Monthly Servicing Fee" shall have the meaning specified in Section 3.2.
--------------------- -----------
"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 applicable to an Account.
"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 an 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 guaranteed 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
- -------
-16-
<PAGE>
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 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
then outstanding (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.
-17-
<PAGE>
"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.
"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
-18-
<PAGE>
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 an equivalent rating from each other Rating Agency,
if so rated thereby, 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).
------------ -----------------
"Receivable" shall mean any amount owing in respect of the Accounts
----------
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 have the meaning specified in subsection 2.7(a).
------------ -----------------
"Removal Notice Date" shall have the meaning specified in subsection
------------------- ----------
2.7(a).
"Removed Accounts" shall have the meaning specified 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.
---------------
-19-
<PAGE>
"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).
"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 applicable to an Account.
"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.
--------------
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
-----------------------
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 subsection 6.9(b).
--------------- -----------------
"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.
-20-
<PAGE>
"Series" shall mean any series of Investor Certificates.
------
"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
specified in 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.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
-----------------
division of The McGraw Hill Companies, Inc.
"Subject Certificate" shall have the meaning specified in subsection
------------------- ----------
6.3(e).
"Successor Servicer" shall have the meaning specified in subsection
------------------ ----------
10.2(a).
-21-
<PAGE>
"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 subsection
------------------ ----------
10.1(d).
"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 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.
-22-
<PAGE>
"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, representations 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 certificate 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
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<PAGE>
Certificate as to such changes conforming to the requirements of this Agreement.
[End of Article I]
-24-
<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), (v) all funds deposited
-----------------
from time to time in any Series Account now existing or hereafter established,
including any reserve account, principal funding account, cash collateral
account or spread account, and (vi) 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, whichever is applicable)
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, 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
-----------
-25-
<PAGE>
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 Seller agrees, 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 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.
- -----------
-26-
<PAGE>
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 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.
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<PAGE>
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 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
-28-
<PAGE>
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) 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 as of the Initial Closing
--------
Date 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
- -----------
-29-
<PAGE>
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 of Certificates, as of its Closing Date,
unless otherwise stated in such Supplement, that the representations and
warranties of the Seller set forth in this 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 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
-30-
<PAGE>
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 reserve account, 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 State 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 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 reserve account, 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
-31-
<PAGE>
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 State 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 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
-32-
<PAGE>
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 Receivable 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).
------------------
(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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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 Connecticut or New York, whichever is
applicable.
(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 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
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<PAGE>
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 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
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<PAGE>
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 subsection 6(a)
or 6(e) of any Assignment of Receivables in Additional Accounts, in the form
attached hereto as Exhibit B, 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 subsection 6(a) or 6(e), as 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
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<PAGE>
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 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(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 subsection 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
------------------
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<PAGE>
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, 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
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<PAGE>
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 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 Receivables 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
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<PAGE>
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 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,
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<PAGE>
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 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
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<PAGE>
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.
(1) 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 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)
-----------------
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<PAGE>
since (i) the opening of business on 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 clauses (b) and (c) 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 clauses (b)
-----------
and (c) since the opening of business on 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 opening of business on the first day of such
eleventh 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
----------------- -----
opening of business on 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 at the opening of business on the first day of such eleventh preceding
Monthly Period (or the Cut-Off Date, as the case may be), and (ii) the opening
of business on 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 clauses (b) and (c) 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 clauses (b) and (c)
----------- ---
since the opening of business on 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 opening of business on 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 at the opening of business 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, identified by account number, added
during the preceding Monthly Period.
(e) If (i) on any Transfer Date the Seller Interest as of the last day of
the related Monthly Period (after giving effect to any deposits, withdrawals or
payments to be made on the following Distribution Date), is less than the
Minimum Seller Interest, the Seller shall designate additional credit card
accounts ("Additional Accounts") to be included as Accounts in a
-------------------
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<PAGE>
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. Receivables from such Additional Accounts shall be
transferred to the Trust on or before the tenth Business Day following such
Transfer 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 (each such assignment, an "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 (or as soon as is reasonably practicable) thereafter, the
Seller shall have delivered to the Trustee a computer file or microfiche
list containing a true and complete list of all Additional
-46-
<PAGE>
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, (E) all
funds deposited from time to time in any Series Account then existing,
including any reserve account, cash collateral account or spread account,
and (F) 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 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) 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
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<PAGE>
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;
----- ----
(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 and each other Rating
------ ---
Agency, as applicable, 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, including Expired Accounts
----------------
designated pursuant to Section 2.8; provided, however, that the Seller shall not
----------- -------- -------
make more than one such designation in any
-48-
<PAGE>
Monthly Period in addition to any such designation pursuant to
Section 2.8. 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, including any
reassignment pursuant to Section 2.8 (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; provided,
--------
however, that the provisions set forth in Section 2.8 shall constitute the
- ------- -----------
notice to the Trustee required by this Section 2.7(a) with respect to
--------------
Receivables from Expired Accounts to be designated from time to time for
deletion and removal from the Trust and for reassignment to the Seller on each
Expired Account Removal Date.
(b) The Seller shall be permitted to designate and require reassignment to
it of the Receivables from Removed Accounts, including any reassignment pursuant
to Section 2.8, only upon satisfaction of the following conditions:
-----------
(i) [reserved];
(ii) [reserved];
(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) (A) 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"); provided,
--------- ------------ --------
however, that the provisions set forth in Section 2.8 shall constitute such
------- -----------
a "Reassignment" with respect to Receivables from Expired Accounts to be
designated from time to time for deletion and removal from the Trust and
for reassignment to the Seller on each Expired Accounts Removal Date; and
(B) within five Business Days thereafter (or as soon as is reasonably
practicable) or, with respect to any removal and reassignment of Expired
Receivables pursuant to Section 2.8, after the applicable Expired Accounts
-----------
Removal Date, the Seller shall have delivered to the Trustee a computer
file or microfiche list
-49-
<PAGE>
or, in the case of a list delivered pursuant to Section 2.8(b), a printed
--------------
copy 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 (which certificate may, in the case of a
----- ------
removal and reassignment pursuant to Section 2.8, be substantially in the
-----------
form of Exhibit J hereto). 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;
(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 (which notice may, in the case of each removal and reassignment
pursuant to Section 2.8, be in the form of a single notice in respect of
-----------
all removals and reassignments of Expired Accounts under Section 2.8);
-----------
(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 (which notice may, in the case of
each removal and reassignment pursuant to Section 2.8, be in the form of a
-----------
single notice from the Rating Agency addressing all removals and
reassignments of Expired Accounts under Section 2.8); and
-----------
(ix) the Seller, the Trustee and the Rating Agencies shall have
received an Opinion of Counsel that the proposed removal (or, in the case
of removals pursuant to Section 2.8, all removals and reassignments under
-----------
Section 2.8) shall not adversely effect the federal income tax
-----------
characterization of the Trust.
Upon satisfaction of the above conditions with respect to any removal and
reassignment of Receivables other than a removal
-50-
<PAGE>
and reassignment pursuant to Section 2.8, 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 as of
the Removal Date. Upon satisfaction of the above conditions, as applicable, with
respect to any removal and reassignment of Receivables pursuant to Section 2.8,
-----------
the Receivables from the Removed Accounts shall no longer constitute a part of
the Trust as of the related Expired Accounts Removal Date.
SECTION 2.8 Periodic Removal of Expired Accounts.
------------------------------------
(a) Reassignment of Expired Accounts; Notice; Release of Liens.
----------------------------------------------------------
(i) The Trustee hereby transfers, assigns, sets-over and otherwise
conveys to the Seller, without recourse, representation or warranty, on
each Expired Accounts Removal Date, all right, title and interest of the
Trust in and to the Receivables from Expired Accounts now existing and
hereafter designated as Expired Accounts, all monies and investments due or
to become due with respect thereto (including all Finance Charge
Receivables and Recoveries), and all proceeds of such Receivables, and the
right to receive amounts paid as Interchange with respect to such Expired
Accounts, which Receivables shall have zero Receivables balances and which
monies, investments, proceeds and rights to receive amounts paid shall be
zero in aggregate amount.
(ii) In connection with the transfer described in Section 2.8(a)(i),
-----------------
the Trustee agrees to execute and deliver to the Seller such UCC
termination statements with respect to the Receivables now existing and
hereafter created in the Expired Accounts as the Seller may reasonably
request from time to time, evidencing the release by the Trust of its Lien
on the Receivables then existing and thereafter created in any such Removed
Accounts, in such manner and such jurisdictions as are necessary or
advisable to remove any such Lien, provided that such UCC termination
statements shall be prepared by the Servicer.
(b) Designation of Expired Accounts. The Seller shall, in accordance with
-------------------------------
Section 2.7(b)(iv)(B), deliver or cause to be delivered to the Trustee, not
- ---------------------
later than five Business days (or as soon as reasonably practicable) after each
Expired Accounts Removal Date, a computer file, microfiche list or printed copy
containing a true and complete list of all Accounts constituting Expired
Accounts with respect to such Expired Accounts Removal Date, identified by
Account number, and containing the aggregate
-51-
<PAGE>
amount of the Principal Receivables in such Expired Accounts as of such Removal
Date, which aggregate amount shall be zero.
(c) Representations and Warranties of the Seller Relating to the Expired
--------------------------------------------------------------------
Accounts. The Seller hereby represents and warrants to the Trustee and the
- --------
Trust as of the date hereof and as of each Expired Accounts Removal Date as
follows:
(i) Absence of Pay Out Event or Certain Other Events. The removal of
------------------------------------------------
any Receivables from any Expired Account on any Expired Accounts Removal
Date will not, in the reasonable belief of the Seller (1) cause a Pay Out
Event to occur (for which purposes the Receivables of each Expired Account
shall be considered to have been removed as of the corresponding Expired
Accounts Removal Date), (2) cause the Seller Interest as a percentage of
the Aggregate Principal Receivables to be less than 10% on any such Expired
Accounts Removal Date, or (3) result in the failure to make any payment in
the related Supplement with respect to any Series.
(ii) Selection Procedures. 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 or will
be utilized in selecting the Expired Accounts to be removed from the Trust.
(iii) Notice to the Rating Agency. The Seller has provided notice to
---------------------------
the Rating Agency of the proposed deletion and removal from the Trust of
Receivables from the Expired Accounts under this Section 2.8, such notice
being provided on or before the twentieth Business Day prior to any of the
Expired Accounts Removal Dates on which such Receivables will be deleted
and removed from the Trust and reassigned to the Seller.
(d) Conditions to Reassignment. The reassignment by the Trustee set forth
--------------------------
in Section 2.8(a) hereof with respect to any Expired Accounts Removal Date (and,
--------------
with respect to clause (i) below, each portion thereof, as applicable) is
subject to the satisfaction, on or prior to such Expired Accounts Removal Date
(or, in the case of Sections 2.7(b)(iv)(B) and 2.8(b), within five Business Days
---------------------- ------
after such Removal Date), of the conditions set forth in Section 2.7(b) and of
--------------
the following conditions:
(i) No Notice of Cancellation. The Seller shall not have notified the
-------------------------
Trustee on or prior to such Expired Accounts Removal Date that the deletion
and removal of Receivables from the related Expired Accounts as of such
date (or any portion thereof) has been cancelled or designated to occur on
a subsequent date set forth in such
-52-
<PAGE>
notice or to be set forth in a subsequent notice by the Seller to the
Trustee.
(ii) Officer's Certificate. The Seller shall have delivered to the
---------------------
Trustee within five (5) Business Days after such Expired Accounts Removal
Date an Officer's Certificate substantially in the form of Exhibit J
---------
hereto, certifying that (1) all requirements set forth in Section 2.7(a)
--------------
for the designation of Expired Accounts and the deletion and removal from
the Trust and reassignment to the Seller of Receivables from Expired
Accounts have been satisfied as of such Expired Accounts Removal Date, (2)
each of the representations and warranties made by the Seller in Section
-------
2.8(c) is true and correct as of such Expired Accounts Removal Date, and
------
(3) each of the conditions to the deletion and removal from the Trust and
reassignment to the Seller of Receivables from the related Expired Accounts
as of such Expired Accounts Removal Date, set forth in Section 2.7(b) and
--------------
this Section 2.8(d), have been satisfied as of such Expired Accounts
--------------
Removal Date. 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.
(iii) Rating Agency Confirmation On or Prior to Expired Accounts Removal
------------------------------------------------------------------
Dates. Each of the Seller and the Trustee shall have received notice (in
-----
addition to the notice specified in Section 2.7(b)(viii)) from each Rating
Agency on or prior to such Expired Accounts Removal Date that the proposed
deletion and removal from the Trust of Receivables from Expired Accounts on
such Expired Accounts Removal Date pursuant to this Section 2.8 will not
-----------
result in the reduction or withdrawal of its then existing rating of any
Series of Certificates then issued and outstanding; provided, however, that
-------- -------
such additional notice shall be required solely with respect to Expired
Accounts Removal Dates on which (1) the sum of (x) the number of Expired
Accounts the Receivables of which are proposed to be deleted and removed
from the Trust on such Expired Accounts Removal Date pursuant to this
Section 2.8 and (y) the number of Expired Accounts the Receivables of which
-----------
have been deleted and removed from the Trust pursuant to this Section 2.8
-----------
since the last day of the quarterly period immediately preceding the
quarterly period in which such Expired Accounts Removal Date occurs (any
such quarterly period being, for purposes of this Section 2.8, January
-----------
through March, April through June, July through September or October
through December, as applicable, of the corresponding calendar year)
exceeds 15% of the number of Accounts as of such last day of such
immediately preceding quarterly period or (2) the sum of (x) the number of
Expired Accounts the
-53-
<PAGE>
Receivables of which are proposed to be deleted and removed from the Trust
on such Expired Accounts Removal Date pursuant to this Section 2.8 and (y)
-----------
the number of Expired Accounts the Receivables of which have been
deleted and removed from the Trust pursuant to this Section
-------
2.8 since the last day of the calendar year immediately preceding the
---
calendar year in which such Expired Accounts Removal Date occurs exceeds
20% of the number of Accounts as of such last day of the immediately
preceding calendar year.
(e) Reassignment Agreement Superseded. On and after the first Expired
---------------------------------
Accounts Removal Date, the provisions of this Section 2.8 shall supersede the
-----------
Omnibus Reassignment of Receivables Agreement, dated as of December 12, 1996,
between People's Bank and the Trustee, whereupon such agreement shall be of no
further force and effect with respect to all removals and reassignments of
Expired Accounts occurring on and after such Expired Accounts Removal Date.
[End of Article II]
-54-
<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 the covenants
of the Seller set forth in Section 2.5, including the covenants set forth in
-----------
Sections 2.5(e)(i) and (ii) (which the Servicer hereby agrees to perform in
- ------------------ ----
full), and the Servicer 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 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
-55-
<PAGE>
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) [Reserved]
(d) [Reserved]
(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 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
-56-
<PAGE>
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 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
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
-57-
<PAGE>
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.
(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
-58-
<PAGE>
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.
(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
- -----------------
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<PAGE>
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 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.
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<PAGE>
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 Receivables 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
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<PAGE>
interest and certificate principal, (ix) the excess, if any, of the Aggregate
Principal Receivables over the Aggregate Principal Receivables required 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 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
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<PAGE>
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 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 Investor Certificates
will qualify under applicable federal, state, local and foreign tax law as
indebtedness secured by the Receivables. The Seller, the Servicer, the Trustee,
the Holder of the Exchangeable Seller Certificate, each Investor
Certificateholder, and each Certificate Owner, agrees 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
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<PAGE>
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,
agrees 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]
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<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,
and an equivalent rating from each other Rating Agency, if so rated thereby, 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, and an equivalent rating from
each other Rating Agency, if so rated thereby, 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
---------------------
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
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<PAGE>
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 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) (i) 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
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<PAGE>
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".
(ii) The Collection Account, the Excess Funding Account and each
Series Account shall be established at a depository institution which agrees in
writing as follows: (i) all money, securities, instruments and other property
credited to such account shall be treated as "financial assets" within the
meaning of Section 8-102(a)(9) of the 1994 Official Text of the Uniform
Commercial Code and (ii) such depository institution will comply with
"entitlement orders" (within the meaning of Section 8-102(a)(8) of the 1994
Official Text of the Uniform Commercial Code) issued by the Trustee and relating
to such account without further consent by the Seller or any other person.
(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 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
-----------------
<PAGE>
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 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 then
outstanding or (b) the Servicer, or for so long as the Seller is the Servicer
and an Affiliate of People's Bank, People's Bank (unless the Rating Agency 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 an equivalent rating
from each other Rating Agency, if so rated thereby, 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
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<PAGE>
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.
(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 Receivables,
excluding Recoveries relating to such Defaulted Account, which shall remain
a part of the Trust Assets.
(ii) On each Determination Date, the Servicer shall calculate the
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 (A) 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, (B) which is reduced by
the Servicer by any charge-back or adjustment, (C) which was created as a
result of a fraudulent or counterfeit charge,
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<PAGE>
(D) which is reduced by adjustments relating to returned or dishonored
checks, or (E) 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 less than the Minimum Seller Interest, the
Holder of the Exchangeable Seller Certificate 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 account, principal funding
account or distribution account of such Series as and to the extent specified in
the related Supplement until the principal funding account of such Series (as
applicable) has been funded in full with respect to each Class of such Series 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 of 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 that matures at or prior to the date
required by this Agreement. If on any Business Day the Seller
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<PAGE>
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]
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<PAGE>
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL
BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
-72-
<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 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. Unless otherwise
provided in the related Supplement, 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
Certificates shall be dated the date of their authentication (as applicable)
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
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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.
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.
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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.
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.
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<PAGE>
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 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.
(2) 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, if applicable, (ii) if
required
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by the Supplement (if any), the form of Enhancement, (iii) if an Enhancement is
required by the Supplement (if any), 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 or transfer occurs,
after giving effect to such Exchange or transfer, 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
then outstanding, (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 secured by the Receivables, (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 for Federal income tax
purposes be treated as a taxable exchange, or otherwise affect the amount,
timing, character or source of income, gain or loss in respect of, 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(d)(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 Supplement) 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).
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(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).
-----------------
(e) Notwithstanding any other provision of this Agreement, any Certificate
for which an Opinion of Counsel has not been issued to the effect that such
Certificate constitutes debt for Federal income tax purposes (each, a "Subject
-------
Certificate") shall be subject to the limitations of this subsection 6.3(e). No
- ----------- ----------
Subject Certificates shall be issued in a transaction (or transactions) that is
required to be registered under the Securities Act or, to the extent any such
offering or sale of Subject Certificates is not required to be registered under
the Securities Act by reason of Regulation S (17 CFR 230.901 through 230.904) or
any successor thereto, that would be required to be registered under the
Securities Act if the interests so offered or sold were offered and sold within
the United States of America. No transfer (or purported transfer) of all or any
part of a Subject Certificate (or any economic interest therein), whether to
another Certificateholder or to a Person that is not a Certificateholder, shall
be effective, and any such transfer (or purported transfer) shall be void ab
--
initio, and no Person shall otherwise become a Holder of a Subject Certificate
- ------
if (i) at the time of such transfer (or purported transfer) any Subject
Certificates or interests therein are traded on an established securities market
or (ii) after such transfer (or purported transfer) the Trust would have more
than 100 Holders of Subject Certificates. For purposes of clause (i) of the
----------
immediately preceding sentence, an established securities market is (A) a
national securities exchange that is either registered under Section 6 of the
Exchange Act or exempt from registration because
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<PAGE>
of the limited volume of transactions, (B) a foreign securities exchange that,
under the law of the jurisdiction where it is organized, satisfies regulatory
requirements that are analogous to the regulatory requirements of the Exchange
Act, (C) a regional or local exchange, or (D) an interdealer quotation system
that regularly disseminates firm buy or sell quotations by identified brokers or
dealers by electronic means or otherwise. For purposes of determining whether
the Trust will have more than 100 Holders of Subject Certificates, each Person
indirectly owning an interest in a Subject Certificate through a partnership
(including any entity treated as a partnership for federal income tax purposes),
a grantor trust or an S corporation (each such entity a "flow-through entity")
-------------------
shall be treated as a Holder of a Subject Certificate unless the Servicer
determines in its sole discretion, after consulting with qualified tax counsel,
or in the documentation relating to any Series, that less than substantially all
of the value of the beneficial owner's interest in the flow-through entity is
attributable to the flow-through entity's interest (direct or indirect) in the
Trust.
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 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
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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 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 than 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
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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 Supplement. The
provisions of Sections 11.1, 11.2 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
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 VII.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
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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, if holders of Investor Certificates
evidencing Undivided Interests aggregating not less than 10% of the Investor
Interest of the Investor Certificates of any Series then outstanding (the
"Applicants") apply in writing to the Trustee, 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 VII.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
execution or filing of any paper
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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
SECTION 6.9 Tender of Exchangeable Seller Certificate.
-----------------------------------------
(1) 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
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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.
(4) 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 Investor Certificates of such Series
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 an 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 Interest), 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 portion 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
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otherwise stated in the related Supplement, the newly issued Series of Investor
Certificates will be treated as debt secured by the Receivables 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 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 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, (x) the names of any accounts to be used by such Series and the terms
governing the operation of any such account, (xi) the
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Series Servicing Fee Percentage, (xii) the Minimum Seller Interest, (xiii) the
Minimum Aggregate Principal Receivables, (xiv) the Series Termination Date, (xv)
the terms or any Enhancement with respect to such Series, (xvi) the Enhancement
Provider, if applicable, (xvii) the Base Rate applicable to such Series, (xviii)
the Repurchase Terms or the terms on which the Certificates of such Series may
be remarketed to other investors, (xix) any deposit into any account maintained
for the benefit of the Certificateholders of such Series, (xx) the number of
Classes of such Series, and if more than one Class, the rights and priorities of
each such Class, (xxi) 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 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, (xxii) whether the Certificates
may be issued in bearer form and any limitations imposed thereon, (xxiii)
whether Interchange or other fees will be included in the funds available to be
paid for such Series, (xxiv) the priority of any Series with respect to any
other Series, (xxv) the Pool Factor, (xxvi) the Pool Amount and (xxvii) 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 then outstanding 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").
----------------------------
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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 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 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
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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 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]
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ARTICLE VIII
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 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.
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(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 then outstanding,
(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 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]
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ARTICLE IX
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, 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.
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(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 then
outstanding, (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
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 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
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respect to activities of the Trust pursuant to this Agreement and, with
respect to the Trustee, from and against any reasonable loss, liability,
expense, damage or injury suffered or sustained by the Trustee in connection
with the transactions contemplated herein and/or the Trustee's administration of
the Trust, 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 Certificateholders 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 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
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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 then outstanding 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
clause (a) above the Trustee is unable to appoint 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
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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.
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]
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ARTICLE X
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 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
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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 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
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<PAGE>
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]
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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 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
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<PAGE>
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 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
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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 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
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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 principal 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
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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, 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
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<PAGE>
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 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]
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<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 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
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<PAGE>
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, 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 Section 2.7, 9.2, 10.2, 12.1 or 12.2 or
----------- --- ---- ---- ----
subsection 2.4(d) or 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
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<PAGE>
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 relating 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
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<PAGE>
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;
(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
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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 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 annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this
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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.
(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.
------------
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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 consolidation 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
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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 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
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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.
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
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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 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:
(a) the Trustee is a banking corporation organized, existing and in good
standing under the laws of the State of New York;
(b) 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
(c) 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
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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]
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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 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.
- ----------
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<PAGE>
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 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
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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.
(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,
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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.
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 Holder of the Exchangeable Seller Certificate to vest in the Holder of the
Exchangeable Seller Certificate all right, title and interest which the Trust
had in the Receivables.
[End of Article XII]
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<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 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
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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.
(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.
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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, 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 Article 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
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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 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
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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 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 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
-124-
<PAGE>
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
--------------
Section 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 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.
-125-
<PAGE>
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 Certificateholders,
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 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 agrees to cooperate with the others 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]
-126-
<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:
-----------------------------
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
--------------------------------
Name:
Title:
-127-
<PAGE>
EXHIBIT A
---------
FORM OF EXCHANGEABLE SELLER CERTIFICATE
---------------------------------------
No. 7 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 MasterCard1 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 STRUCTURED FINANCE CORP. (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 Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1997 and the Series 1997-1 Supplement dated as
of March 18, 1997 or any other Supplement (the "Agreement", such term to include
any Supplement thereto), by and among the Holder, as seller and servicer, and
Bankers Trust Company, as Trustee (the "Trustee"). The corpus of the Trust (a)
as of December 31, 1996 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 (including all Finance
Charge Receivables), (iii) all proceeds of such Receivables, (iv) Recoveries
allocable to the trust, (v) Interchange relating to the Receivables and all
proceeds thereof, (vi) all monies and investments on deposit in certain accounts
of the Trust, and (b) will from time to time consist of (vii) the
- ------------
* VISA and Mastercard are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
A-1
<PAGE>
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 (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, 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, New York 10006; Attention: Corporate Trust
Office. To the extent not defined herein, capitalized terms used herein have
the meanings assigned thereto 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 OBLIGATIONS, 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 Charge
Receivables and 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
A-2
<PAGE>
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 plus the amount on deposit in the Excess
----
Funding Account 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 or any Affiliate thereof, and neither the
Certificates nor the Accounts or Receivables are insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental 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
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 (among other things) the
payment of Investor Certificateholders of each Series then issued and
outstanding sufficient to pay in full 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 (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 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 the
Agreement. 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 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
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 Exchangeable Seller
Certificate to vest in such Holder all right, title and interest which the Trust
had in the Receivables.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual
A-3
<PAGE>
signature, this Certificate shall not be entitled to any benefit under
the Agreement, or be valid for any purpose.
A-4
<PAGE>
IN WITNESS WHEREOF, People's Bank, has caused this Certificate to be
duly executed by its duly authorized officer.
PEOPLE'S BANK
By:____________________________
Dated March 27, 1997
A-5
<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-6
<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 E T H:
-------------------
WHEREAS, the Seller and the Trustee are parties to the Amended and Restated
Pooling and Servicing Agreement, dated as of March 18, 1997 (as heretofore
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:
SECTION 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, ____________________, _________________________.
"Addition Notice Date" shall mean, with respect the Additional 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.)
B-1
<PAGE>
SECTION 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 I to this Agreement and, as of the
Addition Date, shall be incorporated into and made a part of this Assignment.]
SECTION 3. Deposits into the Collection Account.
------------------------------------
(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 the
Date of Processing immediately preceding the Addition Date.
SECTION 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-2
<PAGE>
(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.
SECTION 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.
SECTION 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 (i) 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'
B-3
<PAGE>
rights in general and the rights of creditors of Connecticut
stock savings banks, (ii) as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity),
(iii) subject to the unenforceability of provisions indemnifying a party
against liability where such indemnification is contrary to public policy,
(iv) 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 (v) 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.
(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
B-4
<PAGE>
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 State 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 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 Connecticut or New York, whichever is
applicable.
SECTION 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:
(1) 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
B-5
<PAGE>
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 forth therein, and shall incur
no liability in so relying.
(2) 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.
(3) 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.
(4) 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.
SECTION 8. Amendment of the Pooling and Servicing Agreement. The Pooling
------------------------------------------------
and Servicing Agreement is hereby amended to provided that all references
therein 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 a 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.
SECTION 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.
SECTION 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.
B-6
<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:
B-7
<PAGE>
Schedule 1
to Assignment of
Receivables in
Additional Accounts
-------------------
ADDITIONAL ACCOUNTS
[Deemed Incorporated]
B-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
---------
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
1. Trust Activity Series 1997-1
Beginning of Month - Aggregate Principal Receivables 0.00
Principal Collections on the Receivables 0.00
Finance Charge Collections 0.00
Receivables in Defaulted Accounts 0.00
End of Month - Aggregate Principal Receivables 0.00
Investor Interest Series 1994-1 0.00
Investor Interest Series 1994-2 0.00
Investor Interest Series 1995-1 0.00
Investor Interest Series 1996-1 0.00
Investor Interest Series 1997-1 0.00
Seller Principal Receivables 0.00
Total Investor Percentage with respect to............................
Finance Charges 0.0000000%
Charged-Off Accounts 0.0000000%
Principal Receivables 0.0000000%
Adjusted Investor Interest 0.00
Class A Adjusted Investor Interest 0.00
Class B Investor Interest 0.00
Collateral Interest 0.00
Class A Percentage with respect to....................................
Finance Charges 0.0000000%
Charged-Off Accounts 0.0000000%
Principal Receivables 0.0000000%
Class B Percentage with respect to...................................
Finance Charges 0.0000000%
Charged-Off Accounts 0.0000000%
Principal Receivables 0.0000000
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
1. Trust Activity Series 1997-1 (con't)
Collateral Interest Percentage with respect to.......................
Finance Charges 0.0000000%
Charged-Off Accounts 0.0000000%
Principal Receivables 0.0000000%
Seller Percentage with respect to....................................
Finance Charges 0.0000000%
Charged-Off Accounts 0.0000000%
Principal Receivables 0.0000000%
2. Allocation of Funds in Collection Account
Class A Available Funds 0.00
Class A Monthly Cap Interest Payable to Class A Certificateholders
(See "Calculation of Certificate Interest" #4) 0.00
Unpaid Class A Monthly Cap Interest 0.00
Class A Monthly Servicing Fee
(See "Calculation of Monthly Servicing Fee" #7) 0.00
Unpaid Class A Monthly Servicing Fee 0.00
Class A Investor Default Amount
Class A Investor Charge-Offs 0.00
0.00
Excess Spread from Class A Finance Charge Collections 0.00
Class A Required Amount 0.00
Class B Available Funds 0.00
Class B Monthly Cap Interest Payable to Class B Certificateholders
(See "Calculation of Certificate Interest" #4) 0.00
Unpaid Class B Monthly Cap Interest 0.00
Class B Monthly Servicing Fee
(See "Calculation of Monthly Servicing Fee" #7) 0.00
Unpaid Class B Monthly Servicing Fee 0.00
Class B Investor Default Amount 0.00
Class B Investor Charge-Offs 0.00
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
2. Allocation of Funds in Collection Account (con't)
Excess Spread from Class B Finance Charge Collections 0.00
Class B Required Amount 0.00
Collateral Available Funds 0.00
Collateral Interest Monthly Servicing Fee
(See "Calculation of Monthly Servicing Fee" #7) 0.00
Unpaid Collateral Interest Monthly Servicing Fee 0.00
Excess Spread from Collateral Interest Finance Charge Collections 0.00
Total Excess Spread 0.00
Excess Spread used to satisfy Class A Required Amount 0.00
Excess Spread used to satisfy remaining Class A Monthly Cap Interest 0.00
Excess Spread used to satisfy remaining Class A Monthly Servicing Fee 0.00
Excess Spread used to satisfy remaining Class A Investor Default Amount 0.00
Excess Spread used to satisfy Unreimbursed Class A Investor Charge-Offs 0.00
Remaining Class A Required Amount 0.00
Excess Spread used to satisfy Class B Required Amount 0.00
Excess Spread used to satisfy remaining Class B Monthly Cap Interest 0.00
Excess Spread used to satisfy remaining Class B Monthly Servicing Fee 0.00
Excess Spread used to satisfy remaining Class B Investor Default Amount 0.00
Excess Spread used to satisfy Unreimbursed Class B Investor Charge-Offs 0.00
Remaining Class B Required Amount 0.00
Shared Finance Charges used to satisfy Remaining Class A Required Amount 0.00
Shared Finance Charges used to satisfy remaining Class A Monthly Cap Interest 0.00
Shared Finance Charges used to satisfy remaining Class A Monthly Servicing Fee 0.00
Shared Finance Charges used to satisfy remaining Class A Investor Default Amount 0.00
Shared Finance Charges used to satisfy Unreimbursed Class A Investor Charge-Offs 0.00
Remaining Class A Required Amount 0.00
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
- -----------------------------------------------------------------------------------------------------------------------------------
2. Allocation of Funds in Collection Account (con't)
Reallocated Collateral Principal used to satisfy Remaining Class A 0.00
Required Amount
Reallocated Collateral Principal Collections used to satisfy remaining Class A 0.00
Monthly Cap Interest
Reallocated Collateral Principal Collections used to satisfy remaining Class A
Monthly Servicing Fee 0.00
Reallocated Collateral Principal Collections used to satisfy remaining Class A
Investor Default Amount 0.00
Reallocated Collateral Principal Collections used to satisfy Unreimbursed
Class A Charge-Offs 0.00
Remaining Class A Required Amount 0.00
Reallocated Class B Principal Collections used to satisfy remaining
Class A Required Amount 0.00
Reallocated Class B Principal Collections used to satisfy remaining
Class A Monthly Cap Interest 0.00
Reallocated Class B Principal Collections sued to satisfy remaining
Class A Monthly Servicing Fee 0.00
Reallocated Class B Principal Collections used to satisfy remaining
Class A Investor Default Amount 0.00
Reallocated Class B Principal Collections used to satisfy Unreimbursed
Class A Investor Charge-Offs 0.00
Remaining Class A Required Amount 0.00
Collateral Interest used to satisfy Unreimbursed Class A
Investor Charge-Offs 0.00
Class B Investor Interest used to satisfy Unreimbursed Class A
Investor Charge-Offs 0.00
Shared Finance Charges used to satisfy Remaining Class B Required Amount 0.00
Shared Finance Charges used to satisfy remaining Class B Monthly
Cap Interest 0.00
Shared Finance Charges used to satisfy remaining Class B Monthly
Servicing Fee 0.00
Shared Finance Charges used to satisfy remaining Class B Investor
Default Amount 0.00
Shared Finance Charges used to satisfy Unreimbursed Class B Investor
Charge-Offs 0.00
Remaining Class B Required Amount 0.00
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
- ----------------------------------------------------------------------------------------------------------------
2. Allocation of Funds in Collection Account (con't)
Reallocated Collateral Principal used to satisfy Remaining Class B 0.00
Required Amount
Reallocated Collateral Principal Collections used to satisfy remaining Class B 0.00
Monthly Cap Interest
Reallocated Collateral Principal Collections used to satisfy remaining Class B 0.00
Monthly Servicing Fee
Reallocated Collateral Principal Collections used to satisfy remaining Class B 0.00
Investor Default Amount
Reallocated Collateral Principal Collections used to satisfy Unreimbursed Class B 0.00
Charge-Offs
Remaining Class B Required Amount 0.00
Collateral Interest used to satisfy Unreimbursed Class B Investor Charge-Offs 0.00
Excess Spread used to satisfy interest on overdue Class A
(See "Calculation of Certificate Interest" #4) 0.00
Excess Spread used to satisfy interest on overdue Class B
(See "Calculation of Certificate Interest" #4) 0.00
Excess Spread used to satisfy unreimbursed reductions to Class B 0.00
Investor Interest from prior periods
Excess Spread used to pay Collateral Monthly Interest 0.00
Excess Spread used to satisfy excess of Class A Monthly Interest 0.00
over Class A Monthly Cap Rate (other than Class A Excess Interest)
Excess Spread used to satisfy excess of Class B Monthly Interest 0.00
over Class B Monthly Cap Rate (other than Class B Excess Interest)
Excess Spread used to satisfy Aggregate Collateral Default Amount from previous periods 0.00
Excess Spread used to satisfy Unreimbursed Reductions to Collateral Invested Amount 0.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
2. Allocation of Funds in Collection Account (con't)
Excess Spread used to fund Reserve Account up to Required Reserve Account 0.00
Excess Spread used to satisfy payments per Loan Agreement 0.00
Excess Spread used to satisfy Class A Excess Interest 0.00
Excess Spread used to satisfy Class B Excess Interest 0.00
Excess Spread used for Shared Finance Charge Collections for Other Series 0.00
Excess Spread used to pay other accrued and unpaid expenses of the Trust 0.00
Excess Spread paid to Holder of Exchangeable Seller Certificate (dollars) 0.00
Excess Spread paid to Holder of Exchangeable Seller
Certificate (percentage of Investor Interest) 0.0000%
Unreimbursed Class A Charge-Offs 0.00
Unreimbursed Class A Charge-Offs per $1,000 Original Investment 0.00
Unreimbursed Class B Charge-Offs 0.00
Unreimbursed Class B Charge-Offs per $1,000 Original Investment 0.00
Available Principal Collections 0.00
Monthly Principal Payable To Class A Certificateholders
(See "Calculation of Monthly Principal" #5) 0.00
Monthly Principal Payable To Class B Certificateholders
(See "Calculation of Monthly Principal" #5) 0.00
Monthly Principal Payable To Collateral Interest Holders
(See "Collateral Interest Amount Activity" #8) 0.00
Monthly Principal Reinvested In Receivables
(See "Calculation of Monthly Principal" #5) 0.00
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
2. Allocation of Funds in Collection Account (con't)
(Net Deposit)/Draws on Shared Principal Collections 0.00
Required Shared Finance Charge Collections from other Series 0.00
Draw on Shared Finance Charge Collections from other Series 0.00
Required Shared Finance Charge Collections for other Series 0.00
Deposit of Shared Finance Charge Collections for other Series 0.00
Total Distribution to Class A Investors 0.00
Total Distribution to Class A Investors per $1,000 Invested 0.00
Total Distributions to Class B Investors 0.00
Total Distribution to Class B Investors per $1,000 Invested 0.00
Total Distribution to Collateral Interest Holders 0.00
Total Distribution to Collateral Interest Holders per $1,000 Invested 0.00
3. Principal Funding Account and Reserve Account
Beginning Balance of Principal Funding Account 0.00
Deposits into Principal Funding Account 0.00
Withdrawals from Principal Funding Account 0.00
Ending Balance of Principal Funding Account 0.00
Accumulation Shortfall 0.00
Principal Funding Investment Proceeds 0.00
Principal Funding Investment Shortfall 0.00
Beginning Balance of Reserve Account 0.00
Available Reserve Account Amount 0.00
Required Reserve Account Amount 0.00
Reserve Account Investment Proceeds 0.00
Deposits from Excess Spread into Reserve Account 0.00
Reserve Account Draws 0.00
Ending Balance of Reserve Account 0.00
4. Calculation of Certificate Interest
Class A Certificate Rate 0.00000%
Previous Month's Class A Deficiency Amount 0.00
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
4. Calculation of Certificate Interest (con't)
Class A Interest at the Certificate Rate + 0.5% on Deficiency Amount 0.00
Covered Amount 0.00
Principal Funding Investment Proceeds 0.00
Principal Funding Investment Shortfall 0.00
Reserve Account Draws 0.00
Class A Investor Certificate Interest Shortfall (Deficiency Amounts) 0.00
This Month Class A Certificate Interest 0.00
Expected Class A Principal 0.00
This Month Class A Cap Shortfall 0.00
Class A Excess Interest 0.00
Total Class A Interest Distributable to Class A Certificateholders 0.00
Total Class A Interest Distributable per $1,000 of Class A Original Investment 0.00
Class B Certificate Rate 0.00000%
Previous Month's Class B Deficiency Amount 0.00
Class B Interest at the Certificate Rate + 0.5% on Deficiency Amount 0.00
Class B Investor Certificate Interest Shortfall 0.00
This Month Class B Certificate Interest 0.00
Expected Class B Principal 0.00
This Month Class B Cap Shortfall 0.00
Class B Excess Interest 0.00
Total Class B Interest Distributable to Class B Certificateholders 0.00
Total Class B Interest Distributable per $1,000 of Class B Original Investment 0.00
Total Certificate Interest Distributable to Class A and Class B Certificateholders 0.00
Total Interest Distributable per $1,000 of Original Investment to Class A 0.00
and Class B Certificateholders
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
5. Calculation of Monthly Principal
Beginning Investor Interest 0.00
Beginning Class A Investor Interest 0.00
Class A Available Principal Collections 0.00
Maximum Monthly Principal to Class A Certificateholders 0.00
Monthly Principal Payable to Class A Certificateholders 0.00
Class A Controlled Deposit Amount 0.00
Class A Controlled Accumulation Amount 0.00
Class A Monthly Unreimbursed Charge-Offs 0.00
Total Class A Monthly Principal 0.00
Ending Class A Investor Interest 0.00
Class A Monthly Principal Payable per $1,000 of Original Investment 0.00
Class A Monthly Principal Reinvested in Receivables 0.00
Beginning Class B Investor Interest 0.00
Class B Available Principal Collections 0.00
Maximum Monthly Principal to Class B Certificateholders 0.00
Class B Monthly Principal 0.00
Monthly Principal Payable to Class B Certificateholders 0.00
Class B Monthly Unreimbursed Charge-Offs 0.00
Total Class B Monthly Principal 0.00
Ending Class B Investor Interest 0.00
Class B Monthly Principal Payable per $1,000 of Original Investment 0.00
Class B Monthly Principal Reinvested in Receivables 0.00
Class B Reallocated Principal 0.00
Prior Month's Cumulative Class B Reallocated Principal 0.00
Class B Investor Interest used to satisfy Unreimbursed Class A 0.00
Investor Charge-Offs
Prior Month's Cumulative Class B Investor Interest used to satisfy 0.00
Unreimbursed Class A Investor Charge-Offs
Required Shared Principal Collections for other Series 0.00
Deposit of Shared Principal Collections for other Series 0.00
Required Shared Principal Collections from other Series 0.00
Draw on Shared Principal Collections from other Series 0.00
Ending Investor Interest 0.00
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
6. Calculation of Pool Factor
(Ending Certificate Balance divided by Initial Principal Amount to 7 decimal places) 0.000000
7. Calculation of Monthly Servicing Fee
Class A Servicing Fee Percentage 0.00%
Class B Servicing Fee Percentage 0.00%
Collateral Interest Amount Servicing Fee Percentage 0.00%
Beginning Class A Investor Interest 0.00
Beginning Class B Investor Interest 0.00
Beginning Collateral Investor Interest 0.00
Beginning Investor Interest 0.00
Class A Monthly Servicing Fee 0.00
Class B Monthly Servicing Fee 0.00
Collateral Interest Monthly Servicing Fee 0.00
Total Monthly Servicing Fee 0.00
Class A Monthly Servicing Fee Shortfall 0.00
Class B Monthly Servicing Fee Shortfall
Collateral Interest Amount Monthly Servicing Fee Shortfall 0.00
8. Collateral Interest Amount Activity
Beginning of Month Balance 0.00
Required Collateral Interest Amount 0.00
Collateral Interest Amount Monthly Interest 0.00
Collateral Interest Amount Certificate Interest Shortfall 0.00
Collateral Monthly Principal 0.00
Collateral Monthly Principal Payable per $1,000 of Original Investment 0.00
Collateral Interest Monthly Interest Payable per $1,000 of Original Investment 0.00
Excess Spread used to satisfy payments per Loan Agreement 0.00
Collateral Interest Amount Deposits 0.00
End of Month Balance 0.00
Reinvestment Income Received on Collateral Interest Amount 0.00
Aggregate Collateral Interest Amount Draws 0.00
Available Collateral Interest Amount (Dollars) 0.00
Available Collateral Interest Amount (Percentage) 0.00%
Ratio of Collateral Interest to Investor Interest 0.00%
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NUMBER OF MONTHS SERIES IN EXISTENCE 1
MONTHLY PERIOD ENDED MARCH 31, 1997
DISTRIBUTION DATE APRIL 15, 1997
DETERMINATION DATE APRIL 10, 1997
Number of Days in Period 19
9. Past Due Statistics
(past due on a contractual basis)
1-30 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
31-60 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
61-90 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
91-120 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
121-150 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
151-180 days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
181 + days past due Dollars 0
Percent Dollars 0.00%
Number of Accts 0
Percent Number of Accts 0.00%
10. Base Rate Calculation
Base Rate 0.00%
Portfolio Yield (net of losses) 0.00%
Excess of Portfolio Yield over Base Rate 0.00%
11. Number of Accounts in the Trust
Number of Additional Accounts 0
Number of Removed Accounts 0
Number of Automatic Additional Accounts 0
Ending Number of Accounts 0
</TABLE>
C-11
<PAGE>
EXHIBIT D
---------
FORM OF ANNUAL SERVICER'S CERTIFICATE
-------------------------------------
PEOPLE'S BANK
__________________________________
People's Bank Credit Card Master Trust Series
__________________________________
The undersigned, a duly authorized representative of People's Bank, as
Servicer pursuant to the Amended and Restated Pooling and Servicing Agreement
dated as of March 18, 1997 (as heretofore amended, supplemented or otherwise
modified, 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 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."]
D-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this ____ day of _______________, _______.
PEOPLE'S BANK
By:
Name:
Title:
D-2
<PAGE>
EXHIBIT E
---------
FORM OF
SELLER CERTIFICATE DESIGNATING BANKS AND
AGENT BANKS THE ACCOUNTS OF WHICH
CONSTITUTE AUTOMATIC ADDITIONAL ACCOUNTS
----------------------------------------
This Certificate is delivered pursuant to that certain Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1997 (as heretofore
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement") by and between People's Bank, a Connecticut stock savings bank, as
seller and servicer (the "Seller"), and Bankers Trust Company, a banking
corporation organized and existing under the laws of the State of New York, as
trustee (the "Trustee"). Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to such terms in the Pooling and
Servicing Agreement.
Pursuant to the Pooling and Servicing Agreement, the Seller is hereby
designating to the Trustee the following ["banks" and "agent banks"] [insert
name of other applicable grouping] of credit card accounts maintained by [Total
Systems, Inc. (or its successor)] [insert name of other records processor] on
behalf of the Seller as [banks and agent banks] [name of other grouping] the
accounts in which (other than existing Accounts or Additional Accounts)
constitute Automatic Additional Accounts:
[insert bank and agent bank (or other grouping) identification codes]
E-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this __ day of _____.
PEOPLE'S BANK
By:
Name:
Title:
Acknowledged by:
BANKERS TRUST COMPANY,
as Trustee under the
Pooling and Servicing
Agreement
By:
Name:
Title:
E-2
<PAGE>
EXHIBIT F
---------
FORM OF
OPINION OF COUNSEL PURSUANT TO
SECTIONS 2.6(G)(VI) AND 13.2(D)(I)
OF THE POOLING AND SERVICING AGREEMENT
--------------------------------------
[ON LETTERHEAD OF PULLMAN & COMLEY, LLC]
Reply to: Bridgeport
Telephone: (203) 330-2000
Bankers Trust Company
Four Albany Street Moody's Investors Service, Inc.
New York, New York 10006 99 Church Street
New York, New York 10004
Standard & Poor's Ratings Services,
a division of the McGraw-Hill Goldman, Sachs & Co.
Companies, Inc. 85 Broad Street
25 Broadway New York, New York 10004
New York, New York 10004
RE: PEOPLE'S BANK CREDIT CARD MASTER TRUST
--------------------------------------
Ladies and Gentlemen:
We have been asked, in our capacity as special Connecticut counsel for
People's Bank, a Connecticut capital stock savings bank ("Seller"), to provide
an opinion to you pursuant to Section 2.6(g)(vi) of the Pooling and Servicing
Agreement dated as of June 1, 1993, between the Seller, as seller and servicer,
and Bankers Trust Company, as Trustee on behalf of the Certificate holders of
the Trust (the "Pooling and Servicing Agreement").
In connection with this opinion, we have examined the following documents:
(a) the Pooling and Servicing Agreement;
(b) Assignment No. 4 of Receivables in Additional Accounts, dated as
of October 1, 1996 (the "Assignment"); and
F-1
<PAGE>
(c) a UCC-1 financing statement and Annex I thereto, copies of which
are attached hereto as Exhibit A (the "Financing Statement"). (All of the
documents listed or described in this paragraph are referred to collectively,
sometimes, as the "Operative Documents".) Unless otherwise specified,
capitalized terms used herein shall have the same meanings as set forth in the
Pooling and Servicing Agreement.
We have also examined and are relying upon opinions of Mayer, Brown &
Platt, dated the date of this opinion letter and addressed to you, as to certain
matters including, but not limited to, the authorization, creation, validity,
binding effect, and enforceability of the security interest in Seller's rights
in the Receivables from Additional Accounts (the "New Receivables") granted
pursuant to the Assignment and the Pooling and Servicing Agreement. Our opinions
are subject to the assumptions, limitations and qualifications set forth
therein.
References to the validity of the Operative Documents are made on the
assumption, without investigation, that the transactions and documents, where
applicable, have been duly authorized and executed by and are binding upon the
Trustee, and that the Trustee will act in a commercially reasonable manner and
deal fairly in enforcing the Operative Documents.
This opinion is provided as of the date above first set forth. We disclaim
any obligation to advise you as to changes in the status of any of the matters
set forth herein. We express no opinion as to prospective events anticipated or
contemplated by the Operative Documents. We have relied exclusively upon the
representations made in the Operative Documents, and we have no reason to
believe that any of such representations are not complete and accurate (although
we have not conducted any review of documents or inquiry of any persons with
respect thereto). We have not conducted an audit or investigation of the assets,
liabilities, operations or affairs of Seller and thus do not assume
responsibility for any event, occurrence or circumstance relating to Seller or
to any of such assets, liabilities, operations or affairs, or for the inaccuracy
of or other deficiency affecting any information provided by or on behalf of
Seller.
We express no opinion, directly or impliedly, as to any provisions of any
of the Operative Documents that: (a) purport to govern choice of applicable
law; (b) provide for severability of terms or conditions; (c) purport to govern
venue or jurisdiction of the person or subject matter; or (d) provide for any
restriction of remedies, establishment of remedies or waivers of substantive
rights to the extent that the same are held by a court of competent jurisdiction
to contravene public policy or to be inequitable in the context of the facts
presented to such court.
F-2
<PAGE>
In rendering the opinions expressed herein, we have assumed that: (a) each
person authorizing such execution, delivery, performance and consummation of
such transactions did not violate any fiduciary or other duty owed by such
person; (b) no event has taken place after such authorization, execution,
delivery or performance, or will take place before, in the course of, or after
consummation of, the transactions contemplated by the Operative Documents that
would cause any such execution, delivery, performance or consummation of such
transactions not to comply with any law, statute, ordinance, rule, regulation,
award, order, decree, judgment or duty, or that would permit any party to such
transactions at any time thereafter to cancel, rescind or otherwise avoid any
such execution, delivery, performance consummation or any document or
instrument made the subject thereof; (c) at the time thereof and at all times
thereafter, such execution, delivery, performance and consummation by any party
thereto did not, does not now, and shall not violate, result in a breach of, or
constitute a default under, any indenture, agreement, contract or other
instrument to which such other party is or becomes a party, or by which it or
any of its assets are or shall be bound; (d) there was no misrepresentation or
omission of a material fact by Seller or any other person or entity in
connection with such execution, delivery, performance or consummation; and (e)
the interpretation, application and enforceability of the Operative Documents
would be identical in all material respects if the laws of the State of
Connecticut rather than the laws of the State of New York were to govern the
Operative Documents.
All of the opinions expressed herein with regard to enforceability of
Seller's security interest are subject to (a) the limitations of federal and
state bankruptcy, insolvency, reorgani zation, receivership, conservatorship,
fraudulent conveyance, moratorium or other similar laws now or hereafter in
effect, affecting the rights or remedies of creditors or obligees in general, or
(except as to the opinions expressed in paragraphs 3 and 4 hereof) the rights of
creditors or obligees of banks, the deposits of which are insured by the Federal
Deposit Insurance Corporation; (b) the availability of equitable remedies or
other forms of equitable relief; and (c) the discretion of any court before
which any proceeding for such equitable relief may be brought (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Based upon the foregoing and subject to the qualifications set forth in
this letter, we are of the opinion that:
1. Assuming that the transfer and assignment on the date hereof of the New
Receivables under the Assignment and the Pooling and Servicing Agreement
constitutes a grant of a security interest in such of the New Receivables as
constitute "accounts" or "general intangibles" (as defined in the UCC (defined
below)) or a sale of
F-3
<PAGE>
"accounts", filing a UCC-1 financing statement in the Office of the Secretary of
State of the State of Connecticut, Uniform Commercial Code Division (the "Filing
Office"), in the form of the Financing Statement, executed by Seller, is
required and sufficient to perfect the status of the Trust's security interest
in such of the New Receivables and the proceeds thereof as constitute "accounts"
or "general intangibles", other than any part of the New Receivables (a) that is
maintained in any account in the name of the Trustee or any other person, (b)
that is determined to constitute an interest or claim in or under a policy of
insurance, or (c) that is determined to constitute an interest in a deposit
account.
2. Based solely upon searches conducted of the Filing Office by Data
Reporting Corp., index dates June 24, 1996 as to form UCC-1 financing statements
and May 10, 1996 as to forms UCC-3, no other currently effective financing
statement covering the New Receivables and the proceeds thereof is on file in
the Filing Office. Assuming that the transfer and assignment of the New
Receivables, and the proceeds thereof, under the Assignment and the Pooling and
Servicing Agreement constitutes a grant of a security interest in such of the
New Receivables as constitute "accounts" or "general intangibles", and the
proceeds thereof, the Trust has a perfected first priority security interest in
such of the New Receivables as constitute "accounts" or "general intangibles" as
defined in the UCC, and the proceeds thereof, except for: (a) Liens permitted
under Section 2.5(b) of the Pooling and Servicing Agreement; (b) the interest of
the Seller and its assignees as permitted under the Pooling and Servicing
Agreement in the New Receivables as the holder of the Exchangeable Seller
Certificate; and (c) the right of the Seller and its assignees as permitted
under the Pooling and Servicing Agreement to receive interest accruing on and
investment earnings in respect of the Collection Account.
3. If a receiver (a "Receiver") or conservator (a "Conservator") were to
be appointed for the Seller pursuant to the provisions of the Banking Law of
Connecticut (the "Banking Law"), the Receiver would have the powers and duties
conferred upon it by Chapter 664c of the Banking Law. A Receiver or Conservator
is specifically empowered to sell (subject to judicial approval) any and all
real and personal property of the bank for which he acts as Receiver or
Conservator, and a Receiver is further specifically empowered to "make all
proper conveyances" of the bank's assets. The Banking Law does not explicitly
grant a Receiver or Conservator the general power to avoid valid perfected
security interests, and does not otherwise address the manner in which a
Receiver or Conservator is to resolve the claims of persons holding security
interests in assets of the bank in receivership or conservatorship. Although we
have found no case law on point, we are of the view that under Connecticut law,
a Receiver or Conservator would be
F-4
<PAGE>
bound by the provisions of the Connecticut Uniform Commercial Code (the "UCC")
and, except as noted in paragraph 4 below, could not avoid a valid perfected
security interest in assets of the bank for which he serves as Receiver or
Conservator.
4. Section 36a-235 of the Banking Law declares as void all payments or
conveyances made in contemplation of insolvency by a Connecticut bank to or for
the use of the bank's creditors, with the fraudulent intent to prevent the
application of the bank's assets in the manner prescribed upon the winding up of
the bank's affairs by a Receiver. We have assumed based upon representations
made to us by the Seller that the grant of an interest in the New Receivables to
the Trustee pursuant to the Assignment and the Pooling and Servicing Agreement
is not being made in contemplation of Seller's insolvency or with any fraudulent
intent. On that basis, we are of the opinion that a Receiver could not avoid the
effect of the transactions contemplated by the Assignment and by the Pooling and
Servicing Agreement by application of Section 36a-235 of the Banking Law.
Our opinions with respect to the perfection of the Trust's security
interest in paragraphs 1 and 2 above is subject to the following:
(a) The limitations contained in Section 9-103a of the UCC with
respect to perfection of a security interest in collateral that is removed from
a jurisdiction in which a financing statement has been filed;
(b) The limitations in Sections 9-302(1), 9-302(3) and 9-302(4) of the
UCC relating to situations in which filing is not required to perfect a security
interest and in which filing is not effective to perfect a security interest;
(c) The limitations in Section 9-304 of the UCC on perfection of a
security interest in money or instruments that do not constitute part of chattel
paper;
(d) The limitations in Section 9-306 of the UCC on the continuation of
a perfected security interest in proceeds under certain circumstances;
(e) The limitations contained in Section 9-402(7) of the UCC regarding
the effect of a change in name, identity or corporate structure that results in
a filed financing statement's becoming misleading;
(f) The requirement that a continuation statement be filed within the
time limits prescribed by Section 9-403 of the UCC;
F-5
<PAGE>
(g) As used herein, the term "security interest" means "security
interest" as defined in Section 1-201(37) of the UCC, and we express no opinion
as to whether the transfer pursuant to the Assignment or the Pooling and
Servicing Agreement should or would be characterized as a sale or a financing
transaction;
(h) The Trust's security interest may be subject to the rights of
account debtors, claims and defenses of the account debtors against the original
assignor and the terms of each agreement with respect to such New Receivables;
and
(i) The effect of a "purchase money security interest," as defined in
Section 9-107 of the UCC.
Our opinion with respect to the priority of the Trust's security interest
in paragraph 2 above is subject to the following:
(i) We have assumed that no financing statements have been
improperly filed, indexed or recorded, that the search by Data
Reporting Corp. has been accurately conducted and reported to us,
and that no financing statements have been filed in the Filing
Office covering any portion of the New Receivables and naming the
Seller as "debtor," after the index date of the search conducted
by Data Reporting Corp.;
(ii) The rights of a lien creditor who attached or levied
before the perfection of the security interest or to the extent
set forth in Section 9-301(4) of the UCC;
(iii) The effect of Section 9-306 of the UCC with respect
to "proceeds," as such term is defined in the UCC;
(iv) The rights set forth in Section 9-308 of the UCC of
certain purchasers of chattel paper and instruments;
(v) The rights set forth in Section 9-309 of the UCC with
respect to certain holders in due course and purchasers of
instruments, documents and securities;
F-6
<PAGE>
(vi) The rights of another secured creditor with respect to
future advances to the extent set forth in Section 9-312 of the
UCC;
(vii) Liens that could be perfected by methods other than
filing a financing statement in the Filing Office; and
(viii) Liens or claims that arise by the operation of law
that do not require filing of a financing statement in the Filing
Office or possession for perfection.
We have expressed no opinion as to:
(1) the description of, title to, or the rights or interest of Seller
in the New Receivables, noting that the liens, rights, and security
interests granted under the Assignment and the Pooling and Servicing
Agreement are valid and attachable only to the extent of Seller's rights in
the New Receivables;
(2) the validity, binding effect or enforceability of any provision in
the Assignment or the Pooling and Servicing Agreement that purports to
allow the Trustee or any other person (a) to sell, dispose of, or enforce
any other remedy except as such complies with the UCC, applicable federal
laws of the United States of America, and other state and local laws; (b)
to allow for perfection of a security interest in the proceeds of the New
Receivables other than in compliance with and subject to the limitations to
provisions in the Connecticut General Statutes; or (c) to in any way limit
Seller's ability to transfer its right, title, or interest in or to the New
Receivables;
(3) the validity, binding effect or enforceability of any purported
waiver under the Assignment or the Pooling and Servicing Agreement relating
to the rights of the Seller that exist as a matter of law; and
(4) the validity, binding effect or enforceability of any provision of
the Assignment or the Pooling and Servicing Agreement that in general
restricts access to legal or equitable redress, waives access to rights or
otherwise elects any right, remedy, or option under the Assignment or the
Pooling and Servicing Agreement.
F-7
<PAGE>
The opinions expressed herein are qualified to the extent that the
undersigned is only licensed to practice law in the State of Connecticut and
that no opinion is expressed on the laws of any other jurisdiction, and the
opinions expressed herein are accordingly based solely on our knowledge of
Connecticut law and, except as to the opinions expressed in paragraphs 3 and 4
above which pertain exclusively to Connecticut law, the federal laws of the
United States. The opinions expressed herein are therefore subject to the effect
of the laws of any other jurisdiction on the transactions contemplated by the
Operative Documents or upon the opinions set forth herein. To the extent that
provisions of the Assignment or the Pooling and Servicing Agreement pertain to
matters of the law of, or are governed by the laws of, the State of New York, we
understand that you have relied on the opinion of Mayer, Brown & Platt of even
date herewith, and we express no opinion with respect thereto.
This opinion is rendered to you in compliance with Section 2.6(g)(vi) of
the Pooling and Servicing Agreement, is intended solely for your benefit, and is
not intended for the use, benefit or reliance of any other person, and may not
be relied upon by you or any other person for any other purpose. Your acceptance
of or reliance on this opinion, or any part thereof, will be presumed
conclusively to evidence Seller's compliance with the provisions of Section
2.6(g)(vi) of the Pooling and Servicing Agreement and the satisfaction of you
and your counsel with the form, scope and substance of this letter.
This opinion constitutes a single integrated document, and no portion
hereof may be relied upon without reference to the entirety of this opinion and
each other part.
Very truly yours,
PULLMAN & COMLEY, LLC
cc: William T. Kosturko, Esq.
Executive Vice President
People's Bank
850 Main Street
Bridgeport, Connecticut 06604
F-8
<PAGE>
EXHIBIT G
---------
FORM OF
ANNUAL SECURITY INTEREST OPINION PURSUANT TO
SECTIONS 13.2(D)(II) OF THE
POOLING AND SERVICING AGREEMENT
-------------------------------
[ON LETTERHEAD OF PULLMAN & COMLEY, LLC)
Reply to: Bridgeport
Telephone: (203) 330-2000
[date]
Bankers Trust Company
Four Albany Street
New York, NY 10006
RE: PEOPLE'S BANK CREDIT CARD MASTER TRUST (THE "TRUST")
----------------------------------------------------
Ladies and Gentlemen:
We have been asked, in our capacity as special Connecticut counsel for
People's Bank, a Connecticut capital stock savings bank (the "Servicer"), to
provide an opinion to you pursuant to Section 13.2(d)(ii) of an Amended and
Restated Pooling and Servicing Agreement dated as of March 18, 1997 (the
"Pooling and Servicing Agreement") by and between you, as Trustee, and the
Servicer.
In connection with this opinion, we have had reference to: our opinion
dated July 9, 1993 delivered to you in connection with the issuance by the Trust
of its 4.80% Asset Backed Certificates, Series 1993-1; our opinion dated
February 16, 1994 delivered to you in connection with the issuance by the Trust
of its 5.10% Asset Backed Certificates, Series 1994-1; our opinion dated October
4, 1994 delivered to you in connection with the transfer and assignment of New
Receivables to the Trust; our opinion dated October 27, 1994 delivered to you
in connection with the issuance by the Trust
G-1
<PAGE>
of its Floating Rate Class A Asset Backed Certificates, Series 1994-2 and its
Floating Rate Class B Asset Backed Certificates, Series 1994-2; our opinion
dated March 28, 1995 delivered to you in connection with the issuance by the
Trust of its Floating Rate Class A Asset Backed Certificates, Series 1995-1 and
its Floating Rate Class B Asset Backed Certificates, Series 1995-1; our opinion
dated July 14, 1995 delivered to you in connection with the transfer and
assignment of additional New Receivables to the Trust; our opinion dated July 2,
1996 delivered to you in connection with the issuance by the Trust of its
Floating Rate Class A Asset Backed Certificates, Series 1996-1 and Floating Rate
Class B Asset Backed Certificates, Series 1996-1; our opinion dated October 1,
1996 delivered to you in connection with the transfer and assignment of
additional New Receivables to the Trust; [insert any relevant subsequent
opinions] (collectively, the "Prior Opinions"). Copies of the Prior Opinions are
attached hereto.
We have also had reference to copies of (i) a Form UCC-1 filed with the
Office of the Secretary of State of the State of Connecticut, UCC Division (the
"Connecticut Secretary of State") on July 9, 1993 in connection with the initial
transfer and assignment of Receivables to the Trust, (ii) a Form UCC-1 filed
with the Connecticut Secretary of State on October 4, 1994 in connection with
the transfer and assignment of certain New Receivables to the Trust, (iii) a
Form UCC-3 filed with the Connecticut Secretary of State on October 28, 1994,
amending the Form UCC-1 filed with the Connecticut Secretary of State on October
4, 1994, (iv) a Form UCC-1 filed with the Connecticut Secretary of State on July
13, 1995, in connection with the transfer and assignment of certain additional
New Receivables to the Trust, and (v) a Form UCC-1 filed with the Connecticut
Secretary of State on September 23, 1996, in connection with the transfer and
assignment of certain additional New Receivables [insert any relevant subsequent
filings] (collectively, the "UCC Financing Statements"). Copies of the UCC
Financing Statements described in the immediately preceding sentence are also
attached hereto.
Unless otherwise specified, capitalized terms used herein shall have the
same meanings as set forth in the Prior Opinions, and capitalized terms defined
differently in one or more of the Prior Opinions shall have the meanings set
forth in the Prior Opinion bearing the most recent date. This opinion is
rendered subject to all of the qualifications, assumptions, limitations and
exceptions taken or made in the Prior Opinions, whether expressly stated or
incorporated by reference therein.
This opinion is provided as of the date above first set forth. We disclaim
any obligation to advise you as to subsequent changes of facts, circumstances,
or applicable law or regulation that might affect the validity of the opinion
set forth herein.
Based upon the foregoing, we are of the opinion that no filing or other
action is necessary from the date hereof through March 1, 1998 to continue the
perfected status of the interest of the Trust in such of the Receivables and the
proceeds thereof as constitute "accounts" or "general intangibles". This
opinion is subject to
G-2
<PAGE>
the limitations noted in the Prior Opinions as to Receivables and the proceeds
thereof generally, and as to Receivables that are generated in connection with
Automatic Additional Accounts.
This opinion is rendered to you in compliance with Section 13.2(d)(ii) of
the Pooling and Servicing Agreement, is intended solely for your benefit, and is
not intended for the use, benefit or reliance of any other person, and may not
be relied upon by you or any other person for any other purpose. Your
acceptance of this letter or reliance on this opinion, or any part thereof, will
be presumed conclusively to evidence the Servicer's compliance with the
provisions of Section 13.2(d)(ii) of the Pooling and Servicing Agreement and the
satisfaction of you and your counsel with the form, scope and substance of this
letter.
This letter, together with each of the Prior Opinions, constitutes a single
integrated document, and no portion hereof may be relied upon without reference
to the entirety of this letter and each of the Prior Opinions, and each other
part hereof and thereof.
Very truly yours,
PULLMAN & COMLEY, LLC
P&C/nadh:dc
cc: William T. Kosturko, Esquire
Laura DeFelice, Esquire
G-3
<PAGE>
EXHIBIT H
---------
FORM OF DEPOSITORY AGREEMENT
----------------------------
H-1
<PAGE>
EXHIBIT I
---------
FORM OF REASSIGNMENT OF REMOVED ACCOUNTS
----------------------------------------
REASSIGNMENT No. ___ of RECEIVABLES, dated as of ______________, ___ (this
"Reassignment"), by and between PEOPLE'S BANK, a Connecticut capital stock
savings bank (the "Transferor"), and BANKERS TRUST COMPANY, a banking
corporation organized and existing under the laws of the State of New York (the
"Trustee"), pursuant to the Pooling and Servicing Agreement referred to below.
WHEREAS, the Transferor and the Trustee are parties to the Amended and
Restated Pooling and Servicing Agreement, dated as of March 18, 1997
(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 Transferor
wishes to remove all Receivables (such term and other capitalized terms used
herein without definition being defined in Section 1 hereof) from the Accounts
designated pursuant to Section 3 hereof (the "Removed Accounts") and to cause
the Trustee to reconvey the Receivables of such Removed Accounts, whether now
existing or hereafter created, from the Trust to the Transferor; and
WHEREAS, the Trustee is willing to accept such designation and to reconvey
the Receivables in the Removed Accounts subject to the terms and conditions
hereof;
NOW THEREFORE, the Transferor and the Trustee hereby agree as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined herein
-------------
shall have the meanings assigned to such terms in the Pooling and Servicing
Agreement.
"Removal Date" shall mean, with respect to the Removed Accounts designated
------------
hereby, _____________, 19___.
"Removal Notice Date" shall mean, with respect to the Removed Accounts
-------------------
designated hereby, _____________, 19___, which shall be a date on or prior to
the fifth Business Day prior to the Removal Date).
2. Conveyance of Receivables. (a) The Trustee does hereby transfer,
-------------------------
assign, set-over and otherwise convey to the Transferor without recourse, on and
after the Removal Date, all right, title and interest of the Trust in and to the
Receivables now existing and hereafter created in the Removed Accounts
designated hereby,
I-1
<PAGE>
all monies due or to become due with respect thereto (including all Finance
Charge Receivables), all proceeds (as defined in Section 9-306 of the UCC as in
effect in the State of Connecticut or New York) of such Receivables and the
right to receive amounts paid as Interchange with respect to such Removed
Accounts pursuant to the Pooling and Servicing Agreement.
(b) In connection with such transfer, the Trustee agrees to execute
and deliver to the Transferor of the Removed Accounts, on or prior to the date
of this Reassignment, a termination statement with respect to the Receivables
now existing and hereafter created in the Removed Accounts designated hereby
(which may be a single termination statement with respect to all such
Receivables) evidencing the release by the Trust of its lien on the Receivables
in the Removed Accounts, and meeting the requirements of applicable state law,
in such manner and such jurisdictions as are necessary to remove such lien,
provided that such termination statement shall be prepared by the Transferor.
3. Designation of Removed Accounts. The Transferor of the Removed
-------------------------------
Accounts shall deliver to the Trustee, not later than five Business Days (or as
soon as reasonably practicable) after the Removal Date, a computer file or
microfiche list containing a true and complete list of each Account which as of
the Removal Date shall be deemed to be a Removed Account, such Accounts being
identified by account number and by the aggregate amount of Principal
Receivables in such Accounts as of the close of business on the Removal Date.
Such list shall be marked as Schedule 1 to this Reassignment and shall be
incorporated into and made a part of this Reassignment as of the Removal Date.
4. Acceptance by Trustee. The Trustee hereby acknowledges and agrees
---------------------
that, prior to or simultaneously with the execution and delivery of this
Reassignment, the Transferor delivered to the Trustee the computer file or
microfiche list described in Section 2 of this Reassignment.
5. Representations and Warranties of the Transferor. The Transferor
------------------------------------------------
hereby represents and warrants to the Trust as of the Removal Date as follows:
(a) Legal Valid and Binding Obligation. This Reassignment
----------------------------------
constitutes a legal, valid and binding obligation of such Transferor enforceable
against the Transferor 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 the rights of
creditors of state-chartered banking associations and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
I-2
<PAGE>
(b) Absence of Pay Out Event or Certain Other Events. The removal of
------------------------------------------------
any Receivables of any Removed Accounts on any Removal Date will not, in the
reasonable belief of the Transferor, (i) cause a Pay Out Event to occur (for
which determination the Receivables of each Removed Account shall be considered
to have been removed as of the Removal Date), (ii) cause the Seller Interest as
a percentage of Aggregate Principal Receivables to be less than 10% on such
Removal Date or (iii) result in the failure to make any payment specified in the
related Supplement with respect to any Series.
(c) Selection Procedures. No selection procedures believed by the
--------------------
Transferor to be materially adverse to the interests of the Investor
Certificateholders without regard to any Enhancement were utilized in selecting
the Removed Accounts designated hereby.
6. Conditions to Reassignment. The removal from the Trust and
--------------------------
reassignment to the Transferor of the Receivables in the Removed Accounts as of
the Removal Date is subject to the satisfaction, on or prior to the date hereof,
of the following conditions:
(a) Notice Designating Removed Accounts. Within five Business Days
-----------------------------------
(or as soon as is reasonably practicable) after the Removal Date, the Transferor
shall have delivered or caused to be delivered to the Trustee, pursuant to
Section 3 hereof, 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.
(b) Officer's Certificate. The Transferor shall have delivered to
---------------------
the Trustee an Officer's Certificate certifying that (i) as of the Removal Date,
all requirements set forth in Section 2.7 of the Pooling and Servicing Agreement
for designating Removed Accounts and reconveying the Receivables of such Removed
Accounts, whether now existing or hereafter created, have been satisfied, other
than the delivery by the Transferor to the Trustee within five Business Days
after the Removal Date of a computer file or microfiche list of the Removed
Accounts, and (ii) each of the representations and warranties made by the
Transferor of the Removed Accounts in Section 5 hereof is true and correct as of
the Removal Date. 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.
(c) Notice to Rating Agency. 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.
I-3
<PAGE>
(d) Rating Agency Confirmation. The Transferor 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 exiting
rating of any Series of Certificates then issued and outstanding.
(e) Opinion of Counsel The Transferor, 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.
7. Counterparts. This Reassignment 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.
IN WITNESS WHEREOF, the undersigned have caused this Reassignment to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
PEOPLE'S BANK,
as Transferor
By: ___________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity, but solely as
Trustee
By: ___________________________
Name:
Title:
I-4
<PAGE>
EXHIBIT J
---------
FORM OF
OFFICER'S CERTIFICATE PURSUANT TO
SECTION 2.8(d)(ii) OF THE
POOLING AND SERVICING AGREEMENT
-------------------------------
The undersigned, _________________, a duly authorized officer of People's
Bank, a Connecticut stock savings bank, hereby certifies, not in [his][her]
individual capacity, but solely as a duly authorized officer of People's Bank,
as follows:
(i) This Certificate is delivered pursuant to Section 2.8(d)(ii) of
the Amended and Restated Pooling and Servicing Agreement dated as of March
18, 1997 (as heretofore amended, supplemented or otherwise modified, the
"Pooling and Servicing Agreement") by and between People's Bank, a
--------------------------------
Connecticut stock savings bank, as seller and servicer (the "Seller"), and
------
Bankers Trust Company, a New York banking corporation, not in its
individual capacity but solely as trustee (the "Trustee") of the People's
-------
Bank Credit Card Master Trust pursuant to the Pooling and Servicing
Agreement. Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Pooling and Servicing Agreement.
(ii) The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreement to execute and deliver this Certificate.
(iii) All requirements set forth in Sections 2.7(a) of the Pooling
and Servicing Agreement for the designation of Expired Accounts and the
deletion and removal from the Trust and reassignment to the Seller of
Receivables from Expired Accounts have been satisfied as of the date
hereof.
(iv) Each of the representations and warranties made by the Seller in
Section 2.8(c) of the Pooling and Servicing Agreement is true and correct
as of the Expired Account Removal Date occurring on ____________, ____; and
(v) Each of the conditions to the deletion and removal from the Trust
and reassignment to the Seller of Receivables from Removed Accounts set
forth in Sections 2.7(b) and 2.8(d) of the Pooling and Servicing Agreement
have been satisfied as of the Expired Account Removal Date.
J-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this certificate this ___ day of ________, ____.
PEOPLE'S BANK
By:
Name:
Title:
J-2
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
PEOPLE'S BANK
Transferor and Servicer
and
BANKERS TRUST COMPANY
Trustee
on behalf of the Series 1997-2 Investor Certificateholders
----------------------------------------
SERIES 1997-2 SUPPLEMENT
Dated as of [September __, 1997]
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of [September __, 1997]
----------------------------------------
[$ ]
-------------
PEOPLE'S BANK CREDIT CARD MASTER TRUST
[$ ] Floating Rate Class A
-------------
Asset Backed Certificates, Series 1997-2
[$ ] Floating Rate Class B
-------------
Asset Backed Certificates, Series 1997-2
[$ ] Collateral Interest, Series 1997-2
-------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS ................................................................. 1
SECTION 1. Designation. .................................................. 1
SECTION 2. Definitions. .................................................. 2
SECTION 2.1 Other Definitional Provisions. ................................ 27
SECTION 3. Conveyance of Interest in Series Accounts. .................... 27
SECTION 4. Minimum Seller Interest, Minimum Aggregate
Principal Receivables and Removal of Accounts. .............. 27
SECTION 5. Reassignment and Transfer Terms. .............................. 28
SECTION 6. Delivery and Payment for the Series 1997-2
Certificates. ............................................... 28
SECTION 7. Depositary; Form of Delivery of Series 1997-2
Certificates. ............................................... 29
SECTION 8. Enhancement. .................................................. 29
SECTION 9. Article IV of Agreement. ...................................... 29
SECTION 9.A Series 1997-2 Pay Out Events. ................................. 74
SECTION 10. Series 1997-2 Termination. .................................... 76
SECTION 11. Ratification and Reaffirmation of Pooling and
Servicing Agreement. ........................................ 77
SECTION 12. Ratification and Reaffirmation of
Representations and Warranties. ............................. 77
SECTION 13. [RESERVED] ................................................... 77
SECTION 14. No Subordination. ............................................ 77
SECTION 15. Repurchase of the Series 1997-2 Certificates. ................ 78
SECTION 16. Counterparts. ................................................ 79
SECTION 17. Additional Covenants of Transferor. .......................... 79
SECTION 18. Series 1997-2 Investor Exchange. ............................. 79
-i-
<PAGE>
Page
----
SECTION 19. Governing Law. ............................................... 80
SECTION 20. Notification to Luxembourg Stock Exchange. ................... 80
EXHIBIT 1-A Form of Class A Investor Certificate
EXHIBIT 1-B Form of Class B Investor Certificate
EXHIBIT 2 Form of Monthly Certificateholders' Statement
EXHIBIT 3 DTC Letter of Representations
EXHIBIT 4 Form of Monthly Payment Instructions to Trustee
EXHIBIT 5 Form of Notice to Trustee Regarding Completion of
Required Deposits and Withdrawals
EXHIBIT 6 Form of Notification to Trustee Regarding Failure
to Make Payment
-ii-
<PAGE>
SERIES 1997-2 SUPPLEMENT, dated as of [September , 1997] (as the same may
---
be amended, supplemented or otherwise modified from time to time in accordance
with the Pooling and Servicing Agreement referenced below, 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 Amended and Restated
Pooling and Servicing Agreement dated as of March 18, 1997 between People's Bank
and the Trustee (as the same may be amended, supplemented or otherwise modified
from time to time in accordance with its terms, 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 Investor 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. (a) The Series 1997-2 Investor Certificates
-----------
shall be issued in two Classes, which shall be designated generally as the
Floating Rate Class A Asset Backed Certificates, Series 1997-2 and the Floating
Rate Class B Asset Backed Certificates, Series 1997-2. In addition, there is
hereby authorized a third Class which constitutes an uncertificated interest in
the Trust, which shall be deemed to be an "Investor Certificate" for all
purposes under the Pooling and Servicing Agreement and this Series Supplement,
except as expressly provided herein, and shall be known as the Collateral
Interest, Series 1997-2 and have the rights assigned to the Collateral Interest
in this Series Supplement.
(b) The Collateral Interest Holder, as holder of an "Investor Certificate"
under the Pooling and Servicing Agreement, shall be entitled to the benefits of
the Pooling and Servicing Agreement and this Series Supplement upon payment by
the Collateral Interest Holder of amounts owing on the Closing Date pursuant to
the Loan Agreement. Notwithstanding the foregoing, except as expressly provided
herein, (i) the provisions of Article VI and Article XII of the Pooling and
Servicing Agreement relating to the registration, authentication, delivery,
<PAGE>
presentation, cancellation and surrender of Registered Certificates shall not be
applicable to the Collateral Interest and (ii) the Opinion of Counsel specified
in clause (d) of the sixth sentence of subsection 6.9(h) of the Agreement shall
not be required with respect to the Collateral Interest.
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 1997-2 Investor Certificates and to no other Series of Certificates
issued by the Trust.
"Accumulation Shortfall" shall mean (a) with respect to the Transfer Date
----------------------
occurring immediately prior to the Initial Class A Accumulation Date, zero, and
(b) with respect to each Transfer Date thereafter during the Controlled
Accumulation Period occurring prior to the Class A Scheduled Payment Date, the
excess, if any, of the applicable Controlled Deposit Amount for the immediately
preceding Transfer Date over the amount deposited into the Principal Funding
Account pursuant to subsection 4.8(a)(ii)(A) on such preceding Transfer Date.
"Adjusted Investor Interest" shall mean, on any date of determination, an
--------------------------
amount equal to the sum of (a) the Class A Adjusted Investor Interest, (b) the
Class B Investor Interest and (c) the Collateral Interest, in each case as of
such date of determination.
"Agent" shall have the meaning specified in the Loan Agreement.
-----
"Agreement" shall mean the Pooling and Servicing Agreement, as the same may
---------
be amended, supplemented or otherwise modified from time to time in accordance
with its terms, including by this Series Supplement thereto.
"Available Investor Principal Collections" shall mean, with respect to any
----------------------------------------
Monthly Period, an amount equal to (a) Principal Collections 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(c)(ii), 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
-2-
<PAGE>
4.2(a) of the Agreement and will be allocated to the Investor Interest pursuant
to subsection 4.4(c)(ii), 4.4(d)(ii) or 4.4(e)(ii) as if they had been deposited
in the Collection Account during such Monthly Period), plus (b) the sum of the
amounts allocated on such related Transfer Date to Investor Default Amounts and
Investor Charge-Offs pursuant to subsections 4.6(a)(iii), 4.6(a)(iv),
4.6(b)(iii), 4.6(b)(iv), 4.6(d)(i), 4.6(d)(ii), 4.6(d)(ix), 4.6(d)(x) and 4.12,
as applicable, minus (c) the amount of Reallocated Principal Collections with
respect to such Monthly Period which pursuant to Section 4.12 are required to
fund the Class A Required Amount and the Class B Required Amount (other than any
portions thereof that are applied pursuant to (x) subsection 4.6(a)(iii),
4.6(a)(iv), 4.6(b)(iii) or 4.6(b)(iv) and (y) subsection 4.6(d)(i) or 4.6(d)(ii)
(to the extent such portions pursuant to subsection 4.6(d)(i) or 4.6(d)(ii) are
available to pay Investor Default Amounts or Investor Charge-Offs), which shall,
without duplication, be included as Available Investor Principal Collections
pursuant to clause (b) above), plus (d) Available Shared Principal Collections
with respect to such Monthly Period.
"Available Reserve Account Amount" shall mean, as to any Transfer Date, the
--------------------------------
lesser of (a) the amount on deposit in the Reserve Account on such date (after
taking into account any interest and earnings retained in the Reserve Account
pursuant to subsection 4.9(b) on such date, but before giving effect to any
deposit made or to be made pursuant to subsection 4.6(d)(xi) to the Reserve
Account on such date) and (b) the Required Reserve Account Amount.
"Available Shared Principal Collections" shall mean, with respect to any
--------------------------------------
Monthly Period, Shared Principal Collections available to be allocated to the
Series 1997-2 Investor Certificates from each other Series.
"Base Rate" shall mean, with respect to any Monthly Period, the Certificate
---------
Rate plus 2.00% per annum.
"Calculation Period" shall have the meaning specified in the applicable
------------------
Interest Rate Cap.
"Certificate Rate" shall mean, with respect to the Series 1997-2 Investor
----------------
Certificates and any Monthly Period, the weighted average of (i) the lesser of
the Class A Certificate Rate and the Class A Cap Rate, (ii) the lesser of the
Class B Certificate Rate and the Class B Cap Rate and (iii) the Collateral Rate
(weighted based on the Class A Investor Interest, the Class B Investor Interest
and the Collateral Interest, respectively, as of the last day of the preceding
Monthly Period).
-3-
<PAGE>
"Class A Adjusted Investor Interest" shall mean, on any date of
----------------------------------
determination, an amount equal to the Class A Investor Interest minus the
Principal Funding Account Balance on such date of determination.
"Class A Available Funds" shall mean, with respect to any Monthly Period,
-----------------------
an amount equal to the sum of (a) the Class A Floating Allocation of Finance
Charge Collections (other than the proceeds of the sale of any Interest Rate Cap
pursuant to Section 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 (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) of the Agreement and will
be allocated to the Investor Interest pursuant to subsection 4.4(c)(i),
4.4(d)(i) or 4.4(e)(i) as if they had been deposited in the Collection Account
during such Monthly Period), (b) the Principal Funding Investment Proceeds, if
any, arising pursuant to subsection 4.3(c) with respect to the related Transfer
Date which are to be applied as Class A Available Funds pursuant to such
subsection (or which will be required to be deposited in the Finance Charge
Account pursuant to such subsections on the related Transfer Date), (c) amounts,
if any, to be withdrawn from the Reserve Account which will be deposited into
the Finance Charge Account on the related Transfer Date pursuant to subsections
4.9(b) and 4.9(d) and (d) the proceeds from the sale of all or any portion of
the Class A Interest Rate Cap deposited into the Collection Account during such
Monthly Period pursuant to subsection 4.11(g).
"Class A Cap Rate" shall mean [ %] per annum.
---------------- ----
"Class A Certificate Rate" shall mean, with respect to the period from and
------------------------
including the Closing Date through and including October 14, 1997, [ %] per
----
annum, and with respect to each Interest Accrual Period thereafter, a per annum
rate equal to [ %]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 Certificates" shall mean any of the Floating Rate Class A Asset
--------------------
Backed Certificates, Series 1997-2, executed by the Transferor and authenticated
by or on behalf of the Trustee, substantially in the form of Exhibit 1-A hereto.
"Class A Covered Amount" shall mean an amount determined as of each
----------------------
Transfer Date with respect to any Interest Accrual Period
-4-
<PAGE>
as the product of (a) a fraction, the numerator of which is the actual number of
days in such Interest Accrual Period and the denominator of which is 360, (b)
the Class A Certificate Rate in effect with respect to such Interest Accrual
Period, and (c) the Principal Funding Account Balance as of the Distribution
Date preceding such Transfer Date after giving effect to all payments, deposits
and withdrawals on such Distribution Date.
"Class A Excess Interest" shall mean, with respect to any Distribution
-----------------------
Date, an amount equal to the product of (a) the amount by which the Class A
Certificate Rate exceeds the Class A Cap Rate with respect to the immediately
preceding Interest Accrual Period, (b) the Class A Excess Principal, if any, as
of the preceding Distribution Date (after giving effect to all payments,
deposits and withdrawals on such Distribution Date), and (c) the actual number
of days in such 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 Floating Allocation" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class A Adjusted Investor Interest as
of the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided that, with respect to the first Monthly
Period, the Class A Floating Allocation means the percentage equivalent of a
fraction, the numerator of which is the Class A Initial Investor Interest and
the denominator of which is the Initial Investor Interest.
"Class A Initial Investor Interest" shall mean, on any date of
---------------------------------
determination, 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 1997-2 Investor Exchange occurring prior to such date of
determination.
"Class A Interest Rate Cap" shall mean the master agreement dated as of
-------------------------
[September , 1997] between the Trustee and the Interest Rate Cap Provider, as
--
supplemented by the schedule attached thereto and the confirmation dated
[September , 1997] 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 (unless context requires otherwise) any Replacement
Interest Rate Cap or Qualified Substitute Arrangement with respect thereto, as
the same may in
-5-
<PAGE>
each case be amended, supplemented or otherwise modified from time to time in
accordance with its terms upon ratings confirmation by the Rating Agency.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
subsection 4.5(a).
"Class A Investor Default Amount" shall mean, (i) with respect to the
-------------------------------
period from and including the Closing Date through and including [September 30,
1997], an amount equal to the Class A Investor Default Amount (calculated
pursuant to clause (ii) of this definition) for the full [September 1997]
Monthly Period, multiplied by [ /30], and (ii) with respect to each Monthly
--
Period thereafter, an amount equal to the product of (a) the Investor Default
Amount for such Monthly Period and (b) the Class A Floating Allocation for such
Monthly Period.
"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 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(d)(i) and 4.6(e) prior to such date of determination; provided, however,
-------- -------
that upon the tender and cancellation of any Class A Certificates pursuant to a
Series 1997-2 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 1997-2 Investor Exchange; provided further, however,
---------------- -------
that such Class A Investor Interest may not be reduced below zero.
"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 with respect to the immediately
preceding Interest Accrual Period, (b) the Class A Adjusted 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 such 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 with respect to the immediately preceding Interest Accrual
Period and (ii) the lesser of the Class A Adjusted Investor Interest as of the
preceding Distribution Date (after giving effect to all payments, deposits and
withdrawals on such Distribution Date) and the Expected Class
-6-
<PAGE>
A Principal as of the preceding Distribution Date, or, for the first
Distribution Date, the Class A Initial Investor Interest, and (iii) the actual
number of days in such Interest Accrual Period divided by 360, (b) the Class A
Covered Amount for such Interest Accrual Period, and (c) the product of (i) the
Class A Excess Principal as of such preceding Distribution Date, (ii) the lesser
of the Class A Certificate Rate and Class A Cap Rate with respect to such
Interest Accrual Period and (iii) the actual number of days in such Interest
Accrual Period divided by 360.
"Class A Monthly Principal" shall mean, with respect to each Transfer Date
-------------------------
relating to the Controlled Accumulation Period or the Rapid Amortization Period,
prior to the payment in full of the Class A Investor Interest, an amount equal
the least of (i) Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date, (ii) for each Transfer
Date with respect to the Controlled Accumulation Period, prior to the Class A
Scheduled Payment Date, the applicable Controlled Deposit Amount for such
Transfer Date, and (iii) the Class A Adjusted Investor Interest prior to any
deposits on such Transfer Date.
"Class A Monthly Servicing Fee" shall mean (a) with respect to the first
-----------------------------
Transfer Date, an amount equal to the Class A Monthly Servicing Fee (calculated
pursuant to clause (b) of this definition) for the full [September 1997] Monthly
Period, multiplied by [ /30], and (b) with respect to any subsequent Transfer
--
Date, one-twelfth of the product of 2.00% and the Class A Adjusted Investor
Interest on the last day of the preceding Monthly Period.
"Class A Notional Amount" shall mean, on any date of determination, the
-----------------------
notional amount of the Class A Interest Rate Cap on such date, which shall be an
amount equal to the Expected Class A Principal with respect to such date of
determination, calculated based upon a Controlled Accumulation Period commencing
[ ] (with a Controlled Accumulation Period Length of four months),
------------
less the aggregate notional amount of any portions of the Class A Interest Rate
Cap sold on or prior to such date pursuant to Section 4.11(g).
"Class A Required Amount" shall have the meaning specified in subsection
-----------------------
4.6(e).
"Class A Scheduled Payment Date" shall mean the [August 2002] Distribution
------------------------------
Date.
"Class B Available Funds" shall mean, with respect to any Monthly Period,
-----------------------
an amount equal to the sum of (a) the Class B Floating Allocation of Finance
Charge Collections (other than the proceeds of the sale of any Interest Rate Cap
pursuant to Section
-7-
<PAGE>
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 (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) of the Agreement and will be allocated to
the Investor Interest pursuant to subsection 4.4(c)(i), 4.4(d)(i) or 4.4(e)(i)
as if they had been deposited in the Collection Account during such Monthly
Period) and (b) the proceeds from the sale of all or any portion of the Class B
Interest Rate Cap deposited into the Collection Account during such Monthly
Period pursuant to subsection 4.11(g).
"Class B Cap Rate" shall mean [ %] per annum.
---------------- ----
"Class B Certificate Rate" shall mean, with respect to the period from and
------------------------
including the Closing Date through and including October 14, 1997, [ %] per
-----
annum, and with respect to each Interest Accrual Period thereafter, a per annum
rate equal to [ ]% 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 Certificates" shall mean any of the Floating Rate Class B Asset
--------------------
Backed Certificates, Series 1997-2, executed by the Transferor and authenticated
by or on behalf of the Trustee, substantially in the form of Exhibit 1-B hereto.
"Class B Excess Interest" shall mean, with respect to any Distribution
-----------------------
Date, an amount equal to the product of (a) the amount by which the Class B
Certificate Rate exceeds the Class B Cap Rate with respect to the immediately
preceding Interest Accrual Period, (b) the Class B Excess Principal, if any, as
of the preceding Distribution Date (after giving effect to all payments,
deposits and withdrawals on such Distribution Date), and (c) the actual number
of days in such 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 Fixed Allocation" shall mean, with respect to any Monthly Period
------------------------
following the Revolving Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the Class B
Investor Interest as of the close of business on the last day of the Revolving
-8-
<PAGE>
Period and the denominator of which is equal to the Investor Interest as of the
close of business on such day.
"Class B Floating Allocation" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class B Investor Interest as of the
close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided that, with respect to the first Monthly
Period, the Class B Floating Allocation means the percentage equivalent of a
fraction, the numerator of which is the Class B Initial Investor Interest and
the denominator of which is the Initial Investor Interest.
"Class B Initial Investor Interest" shall mean, on any date of
---------------------------------
determination, 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 1997-2 Investor Exchange occurring prior to such date of
determination.
"Class B Interest Rate Cap" shall mean the master agreement dated as of
-------------------------
[September , 1997] between the Trustee and the Interest Rate Cap Provider, as
--
supplemented by the schedule attached thereto and the confirmation dated
[September __, 1997] 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 (unless context requires otherwise) any Replacement
Interest Rate Cap or Qualified Substitute Arrangement with respect thereto, as
the same may in each case be amended, supplemented or otherwise modified from
time to time in accordance with its terms upon ratings confirmation by the
Rating Agency.
"Class B Investor Allocation" shall mean, with respect to any Monthly
---------------------------
Period, (a) with respect to Default Amounts and Finance Charge Receivables at
any time and Principal Receivables during the Revolving Period, the Class B
Floating Allocation, and (b) with respect to the Principal Receivables during
the Controlled Accumulation Period or Rapid Amortization Period, the Class B
Fixed Allocation.
"Class B Investor Charge-Offs" shall have the meaning specified in
----------------------------
subsection 4.5(b).
"Class B Investor Default Amount" shall mean, (i) with respect to the
-------------------------------
period from and including the Closing Date through and including [September 30,
1997], an amount equal to the Class B Investor Default Amount (calculated
pursuant to clause (ii) of this definition) for the full [September 1997]
Monthly Period,
-9-
<PAGE>
multiplied by [ /30], and (ii) with respect to each Monthly Period thereafter,
--
an amount equal to the product of (a) the Investor Default Amount for such
Monthly Period and (b) the Class B Floating Allocation for such Monthly Period.
"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
-----
aggregate amount of Reallocated Class B Principal Collections allocated on all
prior Transfer Dates pursuant to Section 4.12 with respect to which the
Collateral Interest was not reduced pursuant to such Section 4.12, minus (d) the
-----
aggregate amount of Class B Investor Charge-Offs with respect to all prior
Transfer Dates, minus (e) the amount by which the Class B Investor Interest has
-----
been reduced on all prior Transfer Dates pursuant to the third sentence of
subsection 4.5(a) plus (f) the aggregate amount allocated and available on all
----
prior Transfer 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 1997-2
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 1997-2 Investor Exchange; provided further,
----------------
however, that such Class B Investor Interest may not be reduced below zero.
- -------
"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 with respect to the immediately
preceding Interest Accrual Period, (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 such preceding 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 with respect to the immediately preceding Interest Accrual
Period, (ii) the lesser of the Class B Investor Interest as of the preceding
Distribution 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, for the first Distribution Date, the Class B
Initial Investor Interest, and (iii) the actual number of days in such Interest
Accrual Period divided by 360 and (b) the product of (i) the Class B
-10-
<PAGE>
Excess Principal as of such preceding Distribution Date,(ii) the lesser of the
Class B Certificate Rate and the Class B Cap Rate with respect to such Interest
Accrual Period and (iii) the actual number of days in such Interest Accrual
Period divided by 360.
"Class B Monthly Principal" shall mean, with respect to each Transfer Date
-------------------------
relating to the Controlled Accumulation Period immediately following the Class A
Scheduled Payment Date, or with respect to any Transfer Date relating to the
Rapid Amortization Period, beginning with the Transfer Date on which the Class A
Investor Interest has been paid in full (after taking into account payments to
be made on the related Distribution Date), an amount equal to the lesser of (i)
Available Investor Principal Collections on deposit in the Principal Account
(minus the portion of such Available Investor Principal Collections applied to
Class A Monthly Principal on such Transfer Date) and (ii) the Class B Investor
Interest for such Transfer Date.
"Class B Monthly Servicing Fee" shall mean (a) with respect to the first
-----------------------------
Transfer Date, an amount equal to the Class B Monthly Servicing Fee (calculated
pursuant to clause (b) of this definition) for the full [September 1997] Monthly
Period, multiplied by [ /30], and (b) with respect to any subsequent Transfer
--
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, the
-----------------------
notional amount of the Class B Interest Rate Cap on such date, which shall be an
amount equal to the Expected Class B Principal with respect to such date of
determination, less the aggregate notional amount of any portions of the Class B
Interest Rate Cap sold on or prior to such date pursuant to Section 4.11(g).
"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 Scheduled Payment Date and the
Rapid Amortization Period has not commenced, the Distribution Date following the
Class A Scheduled Payment Distribution Date.
"Class B Required Amount" shall have the meaning specified in subsection
-----------------------
4.6(f).
"Class B Scheduled Payment Date" shall mean the [September 2002]
------------------------------
Distribution Date.
"Closing Date" shall mean [September , 1997].
------------ --
-11-
<PAGE>
"Collateral Allocation" shall mean, with respect to any Monthly Period, (a)
---------------------
with respect to Default Amounts and Finance Charge Receivables at any time and
Principal Receivables during the Revolving Period, the Collateral Floating
Allocation, and (b) with respect to Principal Receivables during the Controlled
Accumulation Period or Rapid Amortization Period, the Collateral Fixed
Allocation.
"Collateral Available Funds" shall mean, with respect to any Monthly
--------------------------
Period, the Collateral Floating Allocation of Finance Charge Collections
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 (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) of the Agreement and will be allocated to the Investor
Interest pursuant to subsection 4.4(c)(i), 4.4(d)(i) or 4.4(e)(i) as if they had
been deposited in the Collection Account during such Monthly Period).
"Collateral Default Amount" shall mean, (i) with respect to the period from
-------------------------
and including the Closing Date through and including [September 30, 1997], an
amount equal to the Collateral Default Amount (calculated pursuant to clause
(ii) of this definition) for the full [September 1997] Monthly Period,
multiplied by [ /30], and (ii) for each Monthly Period thereafter, an amount
--
equal to the product of (a) the Investor Default Amount for such Monthly Period
and (b) the Collateral Floating Allocation for such Monthly Period.
"Collateral Fixed Allocation" shall mean, with respect to any Monthly
---------------------------
Period following the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Collateral Interest as of the close of business on the last day of the Revolving
Period and the denominator of which is equal to the Investor Interest as of the
close of business on such day.
"Collateral Floating Allocation" shall mean, with respect to any Monthly
------------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Collateral Interest as of the close of
business on the last day of the preceding Monthly Period and the denominator of
which is equal to the Adjusted Investor Interest as of the close of business on
such day; provided that, with respect to the first Monthly Period, the
Collateral Floating Allocation means the percentage equivalent of a fraction,
the numerator of which is the Initial Collateral Interest and the denominator of
which is the Initial Investor Interest.
-12-
<PAGE>
"Collateral Interest" shall mean, on any date of determination, a
-------------------
fractional undivided interest in the Trust which shall consist of the right to
receive, to the extent necessary to make the required payments to the Collateral
Interest Holder under this Series Supplement, the portion of Collections
allocable thereto under the Agreement and this Series Supplement, and funds on
deposit in the Collection Account allocable thereto pursuant to the Agreement
and this Series Supplement. On any date of determination, for purposes of all
calculations in the Agreement and this Series Supplement, the amount of the
Collateral Interest shall be an amount equal to (a) the Initial Collateral
Interest, minus (b) the aggregate amount of payments of principal paid to the
-----
Collateral Interest Holder pursuant to Section 4.8 prior to such date of
determination, minus (c) the aggregate amount of Reallocated Principal
-----
Collections allocated on all prior Transfer Dates pursuant to Section 4.12,
minus (d) the aggregate amount of Collateral Interest Charge-Offs with respect
- -----
to all prior Transfer Dates, minus (e) the amount by which the Collateral
-----
Interest has been reduced on all prior Transfer Dates pursuant to the second
sentence of subsection 4.5(a) plus (f) the aggregate amount allocated and
----
available on all prior Transfer Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e); provided, however,
-------- -------
that such Collateral Interest may not be reduced below zero.
"Collateral Interest Charge-Offs" shall have the meaning specified in
-------------------------------
subsection 4.5(c).
"Collateral Interest Holder" shall mean the entity so designated in the
--------------------------
Loan Agreement.
"Collateral Interest Monthly Servicing Fee" shall mean (a) with respect to
-----------------------------------------
the first Transfer Date, an amount equal to the Collateral Interest Monthly
Servicing Fee (calculated pursuant to clause (b) of this definition) for the
full [September 1997] Monthly Period, multiplied by [ /30], and (b) with
--
respect to any subsequent Transfer Date, one-twelfth of the product of 2.00% and
the Collateral Interest on the last day of the preceding Monthly Period.
"Collateral Interest Surplus" shall mean, with respect to any date of
---------------------------
determination, the amount, if any, by which the Collateral Interest as of such
date (after giving effect to reductions in the Collateral Interest for any
Collateral Interest Charge-Offs and Reallocated Principal Collections and any
further adjustments to the Collateral Interest for the benefit of the Class A
Certificateholders and the Class B Certificateholders as of such date) exceeds
the Required Collateral Interest as of such date.
-13-
<PAGE>
"Collateral Monthly Interest" shall mean, with respect to any Transfer
---------------------------
Date, an amount equal to the product of (i) the Collateral Rate with respect to
the related Interest Accrual Period, (ii) the Collateral Interest as of the
preceding Distribution Date (after giving effect to all payments, deposits and
withdrawals on such Distribution Date) or, for the first Distribution Date, the
Initial Collateral Interest, and (iii) the actual number of days in the related
Interest Accrual Period divided by 360.
"Collateral Monthly Principal" shall mean (a) with respect to any Transfer
----------------------------
Date relating to the Revolving Period, following any reduction of the Required
Collateral Interest effected as described in clause (x) of the proviso of the
definition of "Required Collateral Interest", an amount equal to the lesser of
(x) the Collateral Interest Surplus as of such Transfer Date and (y) the
Available Investor Principal Collections on such Transfer Date, (b) with respect
to any Transfer Date relating to the Controlled Accumulation Period or the Rapid
Amortization Period, as the case may be, an amount equal to the lesser of (x)
the Collateral Interest Surplus as of such Transfer Date and (y) the excess, if
any of (i) the Available Investor Principal Collections over (ii) the sum of the
Class A Monthly Principal and the Class B Monthly Principal on such Transfer
Date.
"Collateral Rate" shall mean for any Interest Accrual Period, the rate
---------------
specified in the Loan Agreement.
"Controlled Accumulation Amount" shall mean (a) for any Transfer Date with
------------------------------
respect to the Controlled Accumulation Period prior to the payment in full of
the Class A Investor Interest, [$ ]; provided that if the Controlled
-----------
Accumulation Period Length is modified pursuant to subsection 4.8(d), (i) the
Controlled Accumulation Amount for each Transfer Date with respect to the
Controlled Accumulation Period shall mean the amount determined in accordance
with subsection 4.8(d) on the date on which the Controlled Accumulation Period
has most recently been modified and (ii) the sum of the Controlled Accumulation
Amounts for all Transfer Dates with respect to the modified Controlled
Accumulation Period shall not be less than the Class A Investor Interest, and
(b) for any Transfer Date with respect to the Controlled Accumulation Period
after the payment in full of the Class A Investor Interest, an amount equal to
the Class B Investor Interest on such Transfer Date.
"Controlled Accumulation Date" shall mean June 2001.
----------------------------
"Controlled Accumulation Period" shall mean, unless a Pay Out Event has
------------------------------
occurred prior to such date, a period commencing on the Controlled Accumulation
Date or such later day as is determined in accordance with subsection 4.8(d) and
continuing
-14-
<PAGE>
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 1997-2 Termination Date.
"Controlled Accumulation Period Length" shall have the meaning specified in
-------------------------------------
subsection 4.8(d).
"Controlled Deposit Amount" shall mean, with respect to any Transfer Date,
-------------------------
the sum of (a) the Controlled Accumulation Amount for such Transfer Date and (b)
the Accumulation Shortfall, if any, as of such date.
"Definitive Certificates" shall have the meaning specified in Section 6.11
-----------------------
of the Agreement.
"Discount Option" shall have the meaning specified in Section 4.14.
---------------
"Discounted 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 [October 15, 1997] 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 1997-2
Termination Date.
"Enhancement" shall mean, with respect to the Series 1997-2 Investor
-----------
Certificates, the subordination of the Collateral Interest to the extent
provided herein, the Interest Rate Caps and, with respect to the Class A
Certificates, the funds and securities on deposit in the Reserve Account, up to
the Available Reserve Account Amount, and the subordination of the Class B
Certificates to the extent provided herein.
"Enhancement Provider" shall mean, with respect to the Series 1997-2
--------------------
Certificates, the Collateral Interest Holder, and with respect to any other
Series, the applicable provider of credit enhancement, if any.
"Excess Principal Funding Investment Proceeds" shall mean, with respect to
--------------------------------------------
each Transfer Date relating to the Controlled Accumulation Period, the amount,
if any, by which the Principal
-15-
<PAGE>
Funding Investment Proceeds for such Transfer Date exceed the Covered Amount
determined on such Transfer Date.
"Excess Spread" shall mean the sum of the amounts specified pursuant to
-------------
subsections 4.6(a)(v), 4.6(b)(v) and 4.6(c)(ii).
"Expected Class A Principal" shall mean, with respect to any date of
--------------------------
determination, (a) on each date to but excluding the Initial Class A
Accumulation Date, the Class A Initial Investor Interest, (b) on each date
thereafter to but not including the Class A Scheduled Payment Date, the Class A
Initial Investor Interest less the product of (i) the Controlled Accumulation
Amount and (ii) the number of Distribution Dates that have occurred from and
including the Initial Class A Accumulation Date, and (c) on each date
thereafter, zero.
"Expected Class B Principal" shall mean, with respect to any date of
--------------------------
determination, (a) on each date to but excluding the Class B Scheduled Payment
Date, the Class B Initial Investor Interest, 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.
"Fitch" shall mean Fitch Investors Service, L.P.
-----
"Fixed Investor Percentage" shall mean, with respect to any date of
-------------------------
determination, 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 canceled pursuant to any Investor Exchange) and the
denominator of which is the greater of (a) the Aggregate Principal Receivables
as of such date of determination and (b) the sum of the numerators used to
calculate the Investor Percentages for all outstanding Series with respect to
Principal Receivables on such date of determination.
"Floating Investor Percentage" shall mean, with respect to any date of
----------------------------
determination, the percentage equivalent of a fraction, the numerator of which
is the Adjusted Investor Interest determined as of the close of business on the
last day of the Monthly Period immediately preceding such date of determination
(or with respect to the first Monthly Period, the Initial Investor Interest) and
the denominator of which is the
-16-
<PAGE>
greater of (a) the Aggregate Principal Receivables as of such date of
determination (or with respect to the first Monthly Period, the aggregate amount
of Principal Receivables in the Trust as of the beginning of the day on the
Closing Date), and (b) the sum of the numerators used to calculate the Investor
Percentages for all outstanding Series on such date of determination with
respect to Finance Charge Receivables, Default Amounts or Principal Receivables,
as applicable, on such date of determination.
"Initial Class A Accumulation Date" shall mean the first Distribution Date
---------------------------------
occurring after the Monthly Period in which the Controlled Accumulation Period
commences.
"Initial Collateral Interest" shall mean the aggregate initial principal
---------------------------
amount of the Collateral Interest on the Closing Date, which is [$ ].
----------
"Initial Investor Interest" shall mean the sum of the Class A Initial
-------------------------
Investor Interest, the Class B Initial Investor Interest and the Initial
Collateral 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) through 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 the 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 Caps" shall mean, collectively, the Class A Interest Rate
------------------
Cap and the Class B Interest Rate Cap.
"Investor Accounts" shall mean the Series 1997-2 Collection Subaccount
------------------
established under Section 4.2B, the Principal Account, the Principal Funding
Account and the Finance Charge Account established under subsection 4.3(a), the
Distribution Account established under subsection 4.3(b) and the Reserve Account
established under subsection 4.9(a).
-17-
<PAGE>
"Investor Charge-Offs" shall mean, with respect to any Transfer Date, the
--------------------
sum of the Class A Investor Charge-Offs, the Class B Investor Charge-Offs and
the Collateral Interest Charge-Offs, in each case with respect to such Transfer
Date.
"Investor Default Amount" shall mean, with respect to any Monthly Period,
-----------------------
an amount equal to the product of (a) the sum of the Default Amounts for all
Defaulted Accounts during such Monthly Period and (b) the Floating Investor
Percentage for such Monthly Period.
"Investor Interest" shall mean for any date of determination, the sum of
-----------------
the Class A Investor Interest, the Class B Investor Interest and the Collateral
Interest, each as of such date.
"Investor Percentage" shall mean, for any date of determination, (a) with
-------------------
respect to Finance Charge Receivables and Default Amounts at any time and
Principal Receivables during the Revolving Period, the Floating Investor
Percentage and (b) with respect to Principal Receivables during the Controlled
Accumulation Period or the Rapid Amortization Period, the Fixed Investor
Percentage.
"LIBOR" shall mean, for any Interest Accrual Period, the London interbank
-----
offered quotations rate 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 (a) for the initial Interest Period,
------------------------
[September , 1997] (for the period from and including the Closing Date through
--
and including October 14, 1997) and (b) for each subsequent Interest Accrual
Period, the second London Banking Day preceding the first day of such Interest
Accrual Period.
"Loan Agreement" shall mean the agreement among the Transferor, the
--------------
Servicer, the Trustee, the Agent and the other financial institutions party
thereto, dated as of [September , 1997], as such agreement may be amended,
--
supplemented or otherwise modified from time to time in accordance with its
terms.
"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.
-18-
<PAGE>
"Minimum Seller Interest" shall have the meaning specified in Section 4
-----------------------
hereof.
"Monthly Investor Servicing Fee" shall mean (a) with respect to the first
------------------------------
Monthly Period, an amount equal to the Monthly Investor Servicing Fee
(calculated pursuant to clause (b) of this definition) for the full [September
1997] Monthly Period, multiplied by [ /30], and (b) with respect to each
--
subsequent Monthly Period, an amount equal to one twelfth of the product of
2.00% and the Adjusted Investor Interest as of the last day of the preceding
Monthly Period.
"Monthly Total Principal Allocation" shall mean (a) 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 (b) with
respect to any Monthly Period, 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.
"Pay Out Commencement Date" shall mean, with respect to the Series 1997-2
-------------------------
Investor 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 1997-2 Pay
Out Event is deemed to occur or occurs pursuant to Section 9A hereof.
"Permitted Investments" shall mean with respect to the Investor Accounts,
---------------------
(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 from Fitch (if rated by Fitch) of F-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 unsecured debt obligations of such
depositary
-19-
<PAGE>
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, Standard & Poor's and Fitch (if rated by Fitch) of P-1 and A-1+ and F-
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,
Standard & Poor's and Fitch (if rated by Fitch) of P-1, A-1+ and F-1,
respectively; or (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, Moody's and Fitch (if rated by Fitch), 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 1997-2 Investor
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 Series 1997-2
Investor Certificates is not Standard & Poor's, Moody's or Fitch, any
investments specified in this definition of "Permitted Investments" as requiring
a specific credit rating from Standard & Poor's, Moody's or Fitch (if rated by
Fitch) must also have a comparable credit rating from, or otherwise be
acceptable to, the Rating Agency rating the Series 1997-2 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 Standard & Poor's, Moody's or Fitch must also receive
written approval from such other Rating Agency.
-20-
<PAGE>
"Pool Amount" shall mean, with respect to any Monthly Period, the aggregate
-----------
amount of Principal Receivables as of the close of business on the last day of
such Monthly Period.
"Pool Factor" shall mean, with respect to any Record Date, a number carried
-----------
out to seven decimal places representing the ratio of the 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 Investor Interest which
will occur on the following Distribution Date) to the Initial Investor Interest.
"Pooling and Servicing Agreement" shall have the meaning specified in the
-------------------------------
preamble to this document.
"Portfolio Yield" shall mean, with respect to the Series 1997-2 Investor
---------------
Certificates and any Monthly Period, the annualized percentage equivalent of a
fraction the numerator of which is equal to the sum of (i) the lesser of (x) the
Finance Charge Receivables allocable to the Investor Interest for such Monthly
Period, calculated on a billed basis, after subtracting therefrom an amount
equal to the Investor Default Amount with respect to such Monthly Period, and
(y) the aggregate amount of Collections with respect to such Monthly Period,
(ii) the Principal Funding Investment Proceeds deposited into the Finance Charge
Account on the Transfer Date related to such Monthly Period, (iii) the amount of
the Reserve Draw Amount (up to the Available Reserve Account Amount), if any,
with respect to such Monthly Period, and (iv) any amounts of interest and
earnings described in Section 4.9, each deposited or required to be deposited
into the Finance Charge Account on the Transfer Date relating to such Monthly
Period (without duplication of amounts referenced in clauses (i), (ii) and (iii)
above), 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 Collections" shall mean Collections in respect of Principal
---------------------
Receivables.
"Principal Funding Account" shall have the meaning specified in subsection
-------------------------
4.3(a).
"Principal Funding Account Balance" shall mean, with respect to any date of
---------------------------------
determination, the amount of funds, if any, on
-21-
<PAGE>
deposit in the Principal Funding Account on such date of determination (other
than Principal Funding Investment Proceeds).
"Principal Funding Investment Proceeds" shall mean, with respect to each
-------------------------------------
Transfer Date, the investment earnings on funds in the Principal Funding Account
(net of investment expenses and losses) for the period from and including the
immediately preceding Transfer Date to but excluding such Transfer Date.
"Principal Funding Investment Shortfall" shall mean, with respect to each
--------------------------------------
Transfer Date relating to the Controlled Accumulation Period, the amount, if
any, by which the Principal Funding Investment Proceeds for such Transfer Date
are less than the Class A Covered Amount determined as of such Transfer Date.
"Principal Shortfall" shall mean (i) on any Date of Processing for the
-------------------
Series 1997-2 Investor Certificates, the excess of (x) an amount equal to the
sum of (A) during the Controlled Accumulation Period, the Controlled Deposit
Amount, and during the Rapid Amortization Period, the Investor Interest, in each
case with respect to the related Monthly Period, and (B) at any time, the
Collateral Interest Surplus with respect to the related Monthly Period over (y)
the Monthly Total Principal Allocation for such Date of Processing, or (ii) 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, Standard & Poor's and Fitch (if rated by Fitch) of
at least Baa3, BBB- and 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 1997-2
Termination Date.
-22-
<PAGE>
"Rating Agency" shall mean, with respect to the Series 1997-2 Certificates,
-------------
each of Moody's, Standard & Poor's and Fitch, and with respect to the Collateral
Interest means Fitch.
"Reallocated Class B Principal Collections" shall mean, with respect to any
-----------------------------------------
Transfer Date, Principal Collections (including amounts specified pursuant to
subsections 4.6(b)(iii) and (iv), 4.6(d)(ii) and 4.6(f) to be treated as
Available Investor Principal Collections) applied in accordance with subsection
4.12(a) in an amount not to exceed the product of (a) the Class B Investor
Allocation for the Monthly Period relating to such Transfer Date, (b) the
Investor Percentage for the Monthly Period relating to such Transfer Date and
(c) the amount of Principal Collections for the Monthly Period relating to such
Transfer Date; provided, that such amount shall not exceed the Class B Investor
Interest after giving effect to any Class B Investor Charge-Offs for such
Transfer Date.
"Reallocated Collateral Principal Collections" shall mean, with respect to
--------------------------------------------
any Transfer Date, Principal Collections (including amounts specified pursuant
to subsections 4.6(d)(ix) and (x) to be treated as Available Investor Principal
Collections) applied in accordance with subsections 4.12(a) and (b) in an amount
not to exceed the product of (a) the Collateral Allocation for the Monthly
Period relating to such Transfer Date, (b) the Investor Percentage for the
Monthly Period relating to such Transfer Date and (c) the amount of Principal
Collections for the Monthly Period relating to such Transfer Date; provided,
--------
that such amount shall not exceed the Collateral Interest after giving effect to
any Collateral Interest Charge-Offs for such Transfer Date.
"Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Transfer Date, the sum of (a) the Reallocated Class B Principal Collections and
(b) the Reallocated Collateral Principal Collections with respect to such
Transfer Date.
"Reference Banks" shall mean four major banks in the London interbank
---------------
market selected by the Trustee.
"Replacement Interest Rate Cap" shall mean, with respect to the Class A
-----------------------------
Interest Rate Cap or the Class B Interest Rate Cap, any substitute interest rate
cap having substantially the same terms and conditions as such Interest Rate Cap
and with respect to which the Interest Rate Cap Provider party thereto (a) is
reasonably acceptable to the Trustee, (b) has either (i) a counterparty rating
of at least Aa3 by Moody's and AAA by Standard & Poor's, or (ii) if not a
counterparty rating, a long term unsecured debt or long term certificate of
deposit rating of at least Aa3 by Moody's and a short term unsecured debt or
short
-23-
<PAGE>
term certificate of deposit rating of A-1+ by Standard & Poor's, and (c) is
acceptable to Moody's and Standard & Poor's.
"Required Collateral Interest" shall mean, (a) with respect to the Closing
----------------------------
Date, the Initial Collateral Interest and (b) with respect to any Transfer Date
thereafter, an amount equal to the product of (1) the Required Collateral
Percentage and (2) the Adjusted Investor Interest on such Transfer Date after
taking into account all deposits in the Principal Funding Account on such date
and payments to be made on the related Distribution Date, but not less than
[$ ]; provided that (x) if either (i) there is a reduction in the
---------- --------
Collateral Interest pursuant to clause (c), (d) or (e) of the definition of such
term or (ii) a Pay Out Event with respect to the Series 1997-2 Investor
Certificates has occurred, the Required Collateral Interest for any Transfer
Date shall (subject to clause (y) below) equal the Required Collateral Interest
for the Transfer Date immediately preceding such reduction or Pay Out Event and
(y) in no event shall the Required Collateral Interest exceed the sum of the
outstanding principal amounts of (i) the Class A Certificates and (ii) the Class
B Certificates, each as of the last day of the Monthly Period preceding such
Transfer Date, less cash held in the Principal Funding Account as of such
Transfer Date, in each case after taking into account deposits, withdrawals and
payments to be made on the related Distribution Date.
"Required Collateral Percentage" shall mean, with respect to any Transfer
------------------------------
Date, [ %] or, at the Transferor's option, a lesser percentage if on or prior
----
to such Transfer Date the Transferor, the Servicer, the Agent and the Trustee
shall each have received a copy of a written notice from the Rating Agency to
the effect that such action will not result in such Rating Agency reducing or
withdrawing its then existing rating of the Class A Certificates or the Class B
Certificates.
"Required Reserve Account Amount" shall mean, with respect to any Transfer
-------------------------------
Date on or after the Reserve Account Funding Date, an amount equal to (a)
[____%] of the Class A Investor Interest or (b) any other amount designated by
the Transferor; provided that if such designation is less than the amount
--------
determined pursuant to clause (a), Transferor shall (i) provide the Servicer,
the Collateral Interest Holder and the Trustee with notification in writing by
the Rating Agency addressed to the Transferor, the Servicer and the Trustee that
such action will not result in such Rating Agency reducing or withdrawing its
then existing rating of the Class A Certificates or the Class B Certificates and
(ii) deliver to the Trustee a certificate of an authorized officer to the effect
that, based on the facts known to such officer at such time, in the reasonable
belief of the Transferor, such designation will not cause a Pay Out Event or an
-24-
<PAGE>
event that, after the giving of notice or the lapse of time, would cause a Pay
Out Event to occur with respect to the Series 1997-2 Investor Certificates.
"Reserve Account" shall have the meaning specified in subsection 4.9(a).
---------------
"Reserve Account Funding Date" shall mean the Transfer Date which occurs
----------------------------
not later than the earliest of (a) the Transfer Date with respect to the Monthly
Period which commences no later than three months prior to the commencement of
the Controlled Accumulation Period, or such earlier date as the Servicer may
determine, (b) the first Transfer Date for which the Portfolio Yield is less
than 2.00%, but in such event the Reserve Account Funding Date shall not be
required to occur earlier than the Transfer Date with respect to the Monthly
Period which commences twelve months prior to the commencement of the Controlled
Accumulation Period, (c) the first Transfer Date for which the Portfolio Yield
is less than 3.00%, but in such event the Reserve Account Funding Date shall not
be required to occur earlier than the Transfer Date with respect to the Monthly
Period which commences six months prior to the commencement of the Controlled
Accumulation Period and (d) the first Transfer Date for which the Portfolio
Yield is less than 4.00%, but in such event the Reserve Account Funding Date
shall not be required to occur earlier than the Transfer Date with respect to
the Monthly Period which commences four months prior to the commencement of the
Controlled Accumulation Period.
"Reserve Account Surplus" shall mean, as of any Transfer Date following the
-----------------------
Reserve Account Funding Date, the amount, if any, by which the amount on deposit
in the Reserve Account exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in subsection
-------------------
4.9(c).
"Revolving Period" shall mean the period from and including the Closing
----------------
Date to, but not including, the earlier of (a) the day the Controlled
Accumulation Period commences and (b) the Pay Out Commencement Date.
"Scheduled Series 1997-2 Termination Date" shall mean the [April 2005]
----------------------------------------
Distribution Date.
"Series 1997-2" shall mean the Series represented by the Series 1997-2
-------------
Investor Certificates.
"Series 1997-2 Certificates" shall mean the Class A Certificates and the
--------------------------
Class B Certificates.
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<PAGE>
"Series 1997-2 Collection Subaccount" shall have the meaning specified in
-----------------------------------
Section 4.2B.
"Series 1997-2 Investor Certificateholders" shall mean the Class A
-----------------------------------------
Certificateholders, the Class B Certificateholders and the Collateral Interest
Holder.
"Series 1997-2 Investor Certificates" shall mean the Class A Certificates,
-----------------------------------
the Class B Certificates and the Collateral Interest.
"Series 1997-2 Investor Exchange" shall mean an Investor Exchange pursuant
-------------------------------
to Section 6.9(b) of the Agreement and Section 18 hereof.
"Series 1997-2 Pay Out Event" shall have the meaning specified in Section
---------------------------
9A hereof.
"Series 1997-2 Termination Date" shall mean the earlier to occur of (i) the
------------------------------
day after the Distribution Date on which the Series 1997-2 Investor Certificates
are paid in full or (ii) the Scheduled Series 1997-2 Termination Date.
"Series Servicing Fee Percentage" shall mean 2.00%.
-------------------------------
"Series Supplement" shall have the meaning specified in the preamble to
-----------------
this document.
"Shared Finance Charge Collections" shall mean, with respect to any
---------------------------------
Transfer Date, as the context requires, either (a) the amount described in
subsection 4.6(d)(xv) allocated to the Series 1997-2 Investor Certificates but
available to cover shortfalls, if any, in amounts paid from Finance Charge
Collections for other Series, or (b) the aggregate amount allocated to Investor
Certificates of all other Series which the related Supplements specify are to be
treated as "Shared Finance Charge Collections" and which are available for
application pursuant to subsections 4.6(e), 4.6(f) and 4.6(g) on such Transfer
Date.
"Shared Principal Collections" shall mean, as the context requires, either
----------------------------
(a) the amounts allocated to the Series 1997-2 Investor 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 to cover Principal Shortfalls with respect to the Series 1997-2 Investor
Certificates.
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<PAGE>
"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 Series 1997-2 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 Series Accounts. (a) The
-----------------------------------------
Transferor and the Trustee intend that the Series Accounts and all property
credited thereto be the property of the Trust for the benefit of the
Certificateholders. If and to the extent the Series Accounts 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
Certificateholders, in all of the Transferor's right, title and interest (if
any) in and to the Series Accounts and the amounts on deposit in the Series
Accounts 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 Certificateholders.
(b) The Series Accounts shall be established at a depository institution
which agrees in writing as follows: (i) all money, securities, instruments and
other property credited to any such account shall be treated as "financial
assets" within the meaning of Section 8-102(a)(9) of the 1994 Official Text of
the Uniform Commercial Code and (ii) such depository institution will comply
with "entitlement orders" (within the meaning of Section 8-102(a)(8) of the 1994
Official Text of the Uniform Commercial Code) issued by the Trustee and relating
to such account without further consent by the Transferor or any other person.
SECTION 4. Minimum Seller Interest, Minimum Aggregate Principal
----------------------------------------------------
Receivables and Removal of Accounts. (a) The Minimum Seller Interest
- -----------------------------------
applicable to the Series 1997-2 Investor Certificates on any date of
determination shall be 7% of the average Aggregate Principal Receivables for
such date of determination. The Minimum Aggregate Principal Receivables shall
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<PAGE>
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 1997-2 Investor Certificates, the Minimum Aggregate
Principal Receivables shall be computed in a manner consistent with the
Agreement or any future Supplement, as appropriate.
(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 deposit of a Controlled Deposit
Amount or a payment of Collateral Monthly Principal.
SECTION 5. Reassignment and Transfer Terms. The Series 1997-2 Investor
-------------------------------
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 [ %] of the Initial
----
Investor Interest. The Series 1997-2 Investor 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 1997-2 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) of the
Agreement 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 1997-2 Investor Certificates through
and including the day preceding the day on which such purchase occurs, plus (c)
all additional amounts then due and payable to the Collateral Interest Holder
under the Loan Agreement, 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 1997-2 Certificates. The
-------------------------------------------------------
Transferor shall execute and deliver the
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<PAGE>
Series 1997-2 Certificates to the Trustee for authentication in accordance with
Section 6.1 of the Agreement. The Trustee shall deliver the Series 1997-2
Certificates when authenticated in accordance with Section 6.2 of the Agreement.
SECTION 7. Depositary; Form of Delivery of Series 1997-2 Certificates.
----------------------------------------------------------
(a) The Series 1997-2 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 the Series 1997-2 Certificates 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 1997-2 Investor Certificates, Class A Certificates or Class B
Certificates having Undivided Interests aggregating a specified percentage, such
direction or consent, with respect to the Class A Certificates and the Class B
Certificates, may be given by Certificate Owners having interests in the
requisite percentage of Series 1997-2 Certificates, Class A Certificates or
Class B Certificates, as the case may be, acting through the Clearing Agency and
the Clearing Agency Participants; provided, however, that so long as the Class A
-------- -------
Certificates and Class B Certificates are in book-entry form, 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 1997-2 Certificates
-----------
shall be the subordination of the Collateral Interest to the extent provided
herein, the Interest Rate Caps 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 1997-2 Investor 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 1997-2 Investor Certificates:
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<PAGE>
ARTICLE IV
RIGHTS OF SERIES 1997-2 INVESTOR CERTIFICATEHOLDERS
AND ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2A Rights of Series 1997-2 Investor Certificateholders.
---------------------------------------------------
The Series 1997-2 Investor Certificates shall represent fractional
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 1997-2 Investor 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 1997-2 Investor Certificates, (c) funds and securities on deposit in
the Finance Charge Account, the Principal Account, the Distribution Account
and the Series 1997-2 Collection Subaccount, (d) with respect to the Class
A Certificates only, funds and securities on deposit in the Reserve
Account, up to the Available Reserve Account Amount, and the Principal
Funding Account and (e) with respect to the Class A Certificates and the
Class B Certificates only, the right to receive payments pursuant to the
Interest Rate Caps in accordance with Section 4.11. The Collateral
Interest shall be subordinate to the Class A Certificates and the Class B
Certificates to the extent described herein. The Class B Certificates
shall be subordinate to the Class A Certificates to the extent described
herein. The Exchangeable Seller Certificate shall represent the ownership
interest in the Trust Assets not allocated to the Series 1997-2 Investor
Certificates or 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
1997-2 Collection Subaccount, the Principal Funding Account, the Reserve
Account or the Interest Rate Caps, except as specifically provided in this
Article IV.
SECTION 4.2B The Series 1997-2 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 1997-2 Investor
Certificateholders, bearing a designation clearly
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<PAGE>
indicating that the funds therein are held in trust for the benefit of the
Series 1997-2 Investor Certificateholders (the "Series 1997-2 Collection
Subaccount"). Funds allocable to the Series 1997-2 Investor Certificates
which are deposited into the Collection Account will be transferred to the
Series 1997-2 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 1997-2 Collection Subaccount and
that funds held therein shall at all times be held in trust for the benefit
of the Series 1997-2 Investor 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 1997-2 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 entitled to give instructions to
-------- -------
the Trustee by facsimile. Funds on deposit in the Series 1997-2 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 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 1997-2 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 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 1997-2 Investor
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
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<PAGE>
is continuing, but shall be retained in, or deposited into, the Finance
Charge Account and shall be treated as Finance Charge Collections allocable
to the Series 1997-2 Investor Certificateholders. The Qualified Trust
Institution shall maintain, either on its own or through its nominee or
custodian for the benefit of the Series 1997-2 Investor 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 1997-2 Collection Subaccount. For purposes of determining
the availability of funds or the balances in the Series 1997-2 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 their maturity other than as provided above with respect to
short term U.S. treasury securities.
SECTION 4.3 Establishment of Series 1997-2 Investor Accounts. (a)
------------------------------------------------
The Finance Charge Account, the Principal Account and the Principal Funding
---------------------------------------------------------------------------
Account. The Servicer, for the benefit of the Series 1997-2 Investor
-------
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, three 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", and the "Principal Funding Account",
respectively), bearing a designation clearly indicating that the funds
therein are held in trust for the benefit of the Series 1997-2 Investor
Certificateholders. The Servicer, on behalf of the Trustee (or the Trustee
so long as the Finance Charge Account, the Principal Account or the
Principal Funding Account, are established with the Trustee) at all times
shall maintain accurate records reflecting each transaction in the
Principal Account, the Finance Charge Account and the Principal Funding
Account, and that funds held therein shall at all times be held in
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<PAGE>
trust for the benefit of the Series 1997-2 Investor 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, Principal Account and the Principal Funding 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 1997-2 Investor 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 1997-2 Investor Certificateholders. 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, Principal Account and
-------------------------------------------------------------------
Principal Funding Account.
-------------------------
(i) Funds on deposit in the Finance Charge Account, the Principal
Account and the Principal Funding 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
Monthly Period in which such funds were processed for collection. The
Qualified Trust Institution which holds the Finance Charge Account, the
Principal Account and the Principal Funding Account shall maintain
either on its own or through its nominee or custodian for the benefit of
the Series 1997-2 Investor Certificateholders, possession of any
certificated negotiable instrument or security (other than certificated
securities held by a clearing
-33-
<PAGE>
corporation) evidencing the Permitted Investments relating to the
Principal Account, the Finance Charge Account or the Principal Funding
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. 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 Finance Charge Account, the Principal Account and the
Principal Funding Account in writing with respect to the investment of
funds on deposit in the Finance Charge Account and the Principal
Account. 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.
(ii) At the end of each month, all interest and earnings (net of
losses and investment expenses) on funds on deposit in the Finance
Charge Account and the Principal 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. For purposes of determining the availability of
funds or the balances in the Finance Charge Account or the Principal
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 on deposit.
(iii) On the Transfer Date occurring in the month following the
commencement of the Controlled Accumulation Period and on each Transfer
Date thereafter with respect to the Controlled Accumulation Period,
prior to the Class A Scheduled Payment Date, the Trustee, acting at the
Servicer's direction given on or before such Transfer Date, shall
transfer from the Principal Funding Account to the Finance Charge
Account the Principal Funding Investment Proceeds on deposit in the
Principal Funding Account, but not in
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<PAGE>
excess of the Class A Covered Amount, for application as Class A
Available Funds applied pursuant to subsection 4.6(a). Any Excess
Principal Funding Investment Proceeds shall be paid to the Holder of the
Exchangeable Seller Certificate on each Transfer Date. An amount equal
to any Principal Funding Investment Shortfall will be deposited in the
Finance Charge Account on each Transfer Date from the Reserve Account to
the extent funds are available pursuant to subsection 4.9. Except as
otherwise provided in this subsection 4.3(c)(iii), Principal Funding
Investment Proceeds (including reinvested interest) shall not be
considered part of the amounts on deposit in the Principal Funding
Account for purposes of this Agreement.
(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 such entity shall (i) 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 or the Principal Funding 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 Floating Investor Percentage on the Date
of Processing of such Collections and (B) the aggregate amount of
Finance Charge Collections processed on such
-35-
<PAGE>
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; provided,
--------
however, that with respect to the initial Interest Accrual Period an
-------
additional amount of [$___________] shall be deposited in the Finance
Charge Account from proceeds of the sale of the Series 1997-2 Investor
Certificates, and such deposit shall be deemed to have been made
pursuant to subsection 4.4(c)(i)(x) for all purposes under this
Agreement.
(ii) Deposit in the Principal Account an amount equal to the product
of (A) the Floating Investor Percentage on the Date of Processing of
such Collections and (B) the aggregate amount of such Principal
Collections processed on such Date of Processing; provided, however,
-------- -------
that if the amount deposited into the Principal Account pursuant to this
subsection 4.4(c)(ii) exceeds the Collateral Interest Surplus, if any,
as of such Date of Processing, then such excess shall not be treated as
a Principal Allocation and 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 amount of Collections deposited in the
Principal Account on such Date of Processing pursuant to this subsection
4.4(c)(ii) is less than an amount equal to the Collateral Interest
Surplus, then Shared Principal Collections from other Series, if any,
allocable to the Series 1997-2 Investor Certificates will be deposited
to the Principal Account in accordance with subsection 4.2(e) to the
extent of such shortfall.
(d) Allocations During the Controlled Accumulation Period.
-----------------------------------------------------
During the Controlled Accumulation 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 or the
Principal Funding Account) the following amounts as set forth below:
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<PAGE>
(i) Deposit in the Finance Charge Account an amount equal to the sum
of (x) the product of (A) the Floating 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 Principal Account an amount, if any,
equal to the product of (A) the Fixed Investor Percentage on the Date of
Processing of such Collections and (B) the aggregate amount of such
Principal Collections processed on such Date of Processing (for any such
Date of Processing, a "Principal Allocation"); provided, however, that
-------- -------
if the Monthly Total Principal Allocation on such Date of Processing
exceeds an amount equal to the sum of (x) the Controlled Deposit Amount,
if such Date of Processing is during the Controlled Accumulation Period
prior to the beginning of the Monthly Period in which the Class A
Scheduled Payment Date occurs, or the Class B Investor Interest if such
Date of Processing is in the Controlled Accumulation Period thereafter,
and (y) the Collateral Interest Surplus as of such Date of Processing,
then such excess 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 Principal Allocation for such
Date of Processing and for each prior Date of Processing in such Monthly
Period is less than an amount equal to the sum of the Controlled Deposit
Amount and the Collateral Interest Surplus, then Shared Principal
Collections from other Series, if any, allocable to the Series 1997-2
Investor 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
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<PAGE>
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 Floating 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 Principal Account an amount equal to the
Principal Allocation; provided, however, that if the Principal
-------- -------
Allocation on any date exceeds the Investor Interest, the amount of such
excess 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
-------- -------
Monthly Total Principal Allocation for such Date of Processing in such
Monthly Period is less than the aggregate outstanding principal amount
of the Series 1997-2 Investor Certificates, then Shared Principal
Collections from other Series, if any, allocable to the Series 1997-2
Investor Certificates pursuant to Section 4.2(e) of the Agreement will
be deposited 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 the
related Transfer 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(d)(i), 4.6(e) and 4.12(a)
with respect to such preceding Monthly Period, then the Collateral Interest
(after giving effect to reductions for
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<PAGE>
any Collateral Interest Charge-Offs and any Reallocated Principal
Collections on such Transfer Date) will be reduced by the amount of such
excess, but not by more than the Class A Investor Default Amount for such
Transfer Date. If such reduction would cause the Collateral Interest to be
a negative number, the Collateral Interest will be reduced to zero, and the
Class B Investor Interest (after giving effect to reductions for any Class
B Investor Charge-Offs and any Reallocated Class B Principal Collections on
such Transfer Date) will be reduced by the amount by which the Collateral
Interest would have been reduced below zero. If 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 (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(d)(i), 4.6(e) 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(d)(ii), 4.6(f) and 4.12(b),
the Collateral Interest (after giving effect to reductions for any
Collateral Interest Charge-Offs and any Reallocated Principal Collections
on such Transfer Date and any adjustments with respect thereto as described
in subsection 4.5(a)) will be reduced by the amount of such excess but not
by more than the Class B Investor Default Amount for such Transfer Date.
If such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest shall be reduced to zero and the Class B
Investor Interest shall be reduced by the amount by which the Collateral
Interest would have been reduced below zero (a "Class B Investor Charge-
Off"). The Class B Investor Interest will
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also be reduced by the amount of Reallocated Principal Collections in
excess of the Collateral Interest pursuant to subsection 4.12(a) 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 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 Transfer Date by amounts
allocated and available for that purpose as described under subsections
4.6(b)(iv), 4.6(d)(ii) and (v), 4.6(f) and 4.12(b).
(c) On each Determination Date, the Servicer shall calculate the
Collateral Default Amount for the preceding Monthly Period. If on any
Determination Date, the Collateral Default Amount for such Determination
Date exceeds the amount allocated and available to fund such amount
pursuant to subsections 4.6(d)(ix), (x) and (xii) and 4.6(g), the
Collateral Interest will be reduced by the amount of such excess but not by
more than the lesser of the Collateral Default Amount and the Collateral
Interest for such Transfer Date (a "Collateral Interest Charge-Off"). The
Collateral Interest will also be reduced by the amount of Reallocated
Principal Collections pursuant to subsections 4.12(a) and (b) and the
amount of any portion of the Collateral Interest allocated to the Class A
Certificates or the Class B Certificates to avoid a reduction in the Class
A Investor Interest, pursuant to subsection 4.5(a), or the Class B Investor
Interest, pursuant to subsection 4.5(b), respectively. The Collateral
Interest will thereafter be reimbursed (but not in the excess of the unpaid
principal balance of the Collateral Interest) on any Transfer Date by
amounts allocated and available for that purpose as described under
subsections 4.6(d)(ix) and (x) and 4.6(g).
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
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Account (or from the finance charge accounts for other Series, as applicable)
pursuant to subsections 4.6(a), (b), (c), (d), (e), (f) and (g). 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 Principal Funding Account and the Reserve Account, pursuant to subsections
4.6(c), 4.9(b) and 4.9(d).
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
(i) Class A Monthly Cap Rate Interest and the Class A Covered 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 and deposit to the Distribution Account, to the extent
funds are available from Class A Available Funds (i) first, an amount
equal to the sum of the Class A Monthly Cap Rate Interest and the Class
A Covered Amount for the related Distribution Date; and (ii) then, an
amount equal to the amount of any overdue Class A Monthly Cap Rate
Interest and overdue Class A Covered Amount, 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 1997-2 Investor Certificates,
the amount of Class A Monthly Cap Rate Interest 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 available from Class A Available Funds 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
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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 Funds 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 apply such amount, subject to Section 4.12, in accordance with
Section 4.8 as Available Investor Principal Collections.
(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 Funds
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 apply such amount, subject
to Section 4.12, in accordance with Section 4.8 as Available Investor
Principal Collections. 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 Funds, if any,
-------------
shall constitute Excess Spread and shall be allocated and distributed as
set forth in subsection 4.6(d).
(b) On each Transfer Date, an amount equal to Class B Available Funds
will be distributed in the following priority:
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(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 Funds, (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 1997-2 Investor 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 Funds 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.
(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 Funds 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, subject to Section 4.12, in
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accordance with Section 4.8 as Available Investor Principal Collections.
(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 Funds
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,
subject to Section 4.12, in accordance with Section 4.8 as Available
Investor Principal Collections. 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 Funds, if any,
-------------
shall constitute Excess Spread and shall be allocated and distributed as
set forth in subsection 4.6(d).
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) Collateral 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 Collateral Available Funds, an amount equal to
the Collateral Interest Monthly Servicing Fee accrued in respect of the
preceding Monthly Period plus all accrued and unpaid Collateral Interest
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.
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(ii) Excess Spread. The remaining Collateral Available Funds,
-------------
if any, shall constitute Excess Spread and shall be allocated and
distributed as set forth in subsection 4.6(d).
(d) On each Transfer Date, 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 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 Distribution Date, 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(d)(i), an amount equal to the Class B Required Amount, if any, with
respect to the related Distribution Date, 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(d)(i) and (ii), and shall deposit in the Distribution Account for
distribution to the Class A Certificateholders on the next succeeding
Distribution Date pursuant to Section 4.7, 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
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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(d)(i) through (iii), and shall deposit in the Distribution Account
for distribution to the Class B Certificateholders on the next
succeeding Distribution Date pursuant to Section 4.7, 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 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(d)(i) through (iv), an amount equal to any unreimbursed 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, which amount shall be applied, subject
to Section 4.12, in accordance with Section 4.8 as Available Investor
Principal Collections.
(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, and pay to the Collateral Interest Holder in
accordance with the Loan Agreement, to the extent funds are available
from Excess Spread after giving effect to the withdrawals pursuant to
subsections 4.6(d)(i) through (v), an amount equal to the sum of (x) the
Collateral Monthly Interest for the related
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Monthly Period and (y) the amount of any accrued and unpaid Collateral
Monthly Interest for any prior Monthly Periods.
(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(d)(i) through (vi), and shall deposit in the Distribution Account
for distribution to the Class A Certificateholders on the next
succeeding Distribution Date pursuant to Section 4.7, 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(d)(i) through (vii), and shall deposit in the Distribution Account
for distribution to the Class B Certificateholders on the next
succeeding Distribution Date pursuant to Section 4.7, 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
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<PAGE>
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(d)(i) through (viii), an amount equal to the
Collateral Default Amount for the preceding Monthly Period, which amount
shall be applied, subject to Section 4.12, in accordance with Section
4.8 as Available Investor Principal Collections.
(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(d)(i) through (ix), an amount equal to the aggregate amount by which
the Collateral Interest has been reduced below the Required Collateral
Interest for reasons other than the payment of principal to the
Collateral Interest Holder (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed), which amount
shall be applied, subject to Section 4.12, in accordance with Section
4.8 as Available Investor Principal Collections.
(xi) On each Transfer Date from and after the Reserve Account Funding
Date to but excluding the date on which the Reserve Account shall
terminate pursuant to subsection 4.9(f), 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(d)(i) through (x), and shall deposit in the Reserve
Account, an amount equal to the excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount (without giving
effect to any deposit made on such date hereunder).
(xii) On each Transfer Date, the Servicer or the Trustee, acting in
accordance with instructions from the Servicer, shall
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<PAGE>
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(d)(i) through (xi), an amount equal to the
aggregate amount of any additional amounts due and payable under the
Loan Agreement, which amount shall be applied and distributed in
accordance with and to the extent specified in the Loan Agreement.
(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(d)(i) through (xii), and shall deposit in the Distribution Account
for distribution to the Class A Certificateholders on the next
succeeding Distribution Date pursuant to Section 4.7, an amount equal to
the amount of any Class A Excess Interest which accrued during the
related Interest Accrual Period.
(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, to the extent funds are available from Excess
Spread after giving effect to the withdrawals pursuant to subsections
4.6(d)(i) through (xiii), and shall deposit in the Distribution Account
for distribution to the Class B Certificateholders on the next
succeeding Distribution Date pursuant to Section 4.7, an amount equal to
the amount of any Class B Excess Interest which accrued during the
related Interest Accrual Period.
(xv) 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(d)(i) through (xiv), and shall make such amounts available to be
applied as Shared Finance Charge Collections to pay to
Certificateholders of
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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.
(xvi) 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(d)(i) through (xv), the amounts of any accrued and unpaid expenses
of the Trust specified in writing by the Trustee to the Servicer, and
shall make such amounts available to the Trustee to pay such accrued and
unpaid expenses of the Trust, if any, not otherwise paid pursuant to
this Section 4.6.
(xvii) 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(d)(i) through (xvi), and
shall pay such amount to the holder of the Exchangeable Seller
Certificate.
(e) 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 Covered Amount for such Distribution
Date and Class A Covered Amounts previously due but not paid to the Class A
Certificateholders on a prior Distribution Date, (iv) 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, (v) the Class A
Investor Default Amount, if any, for the related Monthly Period and (vi)
the unreimbursed Class A Investor Charge-Offs, exceeds the Class A
Available Funds deposited in the Finance Charge Account for the
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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 of the Excess Spread
with respect to the related Monthly Period in an amount up to the Class A
Required Amount for such Distribution Date shall be distributed from the
Finance Charge Account on the related Transfer Date pursuant to subsection
4.6(d)(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, in accordance with the
related Supplements, withdraw on such Transfer Date 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
1997-2 Investor Certificates from other Series, in an amount up to the
remaining Class A Required Amount, and such amount shall be deposited into
the Distribution Account on such Transfer Date for distribution on the
related Distribution Date in accordance with the priorities set forth in
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
Shared Finance Charge Collections allocable to the Class A Certificates,
all or a portion of the Reallocated Principal Collections with respect to
such Monthly Period in an amount up to such excess shall be distributed on
such Transfer Date pursuant to subsection 4.12(a).
(f) With respect to each Distribution Date, on the related Determination
Date, the Servicer shall determine the amount (the "Class B Required
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
Distribution Date and any accrued and unpaid Class B Monthly Servicing Fees
from prior Monthly Periods, (iv) the Class B Investor Default Amount, if
any, for the related Monthly Period, and (v) the unreimbursed Class B
Investor Charge-
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Offs, exceeds the Class B Available Funds deposited in the Finance Charge
Account for the related Monthly Period. In the event that the Class B
Required Amount for the related Transfer 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 subsection 4.6(d)(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, in accordance with the related Supplements, withdraw on such
Transfer Date 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 1997-2 Investor Certificates from
other Series, after the application thereof pursuant to subsection 4.6(e),
in an amount up to the remaining Class B Required Amount, and such amount
shall be deposited to the Distribution Account on such Transfer Date on the
related Distribution Date in accordance with the priorities set forth in
subsections 4.6(b)(i) through (iv). In the event that the Class B Required
Amount for such Distribution Date exceeds the amount of Excess Spread and
Shared Finance Charge Collections allocable to the Class B Certificates on
such Transfer Date, all or a portion of the Reallocated Collateral
Principal Collections with respect to such Monthly Period, if any,
remaining after the application thereof pursuant to Section 4.6(e), in an
amount up to such excess, shall be distributed on such Transfer Date
pursuant to Section 4.12(b).
(g) On each Transfer Date, in the event that the amounts due on such
Transfer Date pursuant to subsections 4.6(c)(i) and 4.6(d)(v) through (xii)
exceed in whole or in part the Excess Spread allocable thereto on to such
Transfer Date, then the Trustee shall, in accordance with the related
Supplements, withdraw on such Transfer Date from the finance charge
accounts for other Series the
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amounts of Shared Finance Charge Collections with respect to the related
Monthly Period, if any, allocable to the Series 1997-2 Investor
Certificates from other Series, after the application thereof pursuant to
subsections 4.6(e) and (f), in an amount up to such excess or such lesser
amount as may be available after the application thereof pursuant to
subsections 4.6(e) and (f), and such amount shall be distributed to the
Servicer on such Transfer Date in accordance with Section 4.6(c)(i) and
then applied in accordance with the priorities set forth in subsections
4.6(d)(v) through (xii).
SECTION 4.7 Payment of Investor Certificate Interest. On each
----------------------------------------
Distribution Date, the Paying Agent shall pay in accordance with Section
5.1, (a) 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(d)(i), (iii),
(vii) and (xiii), 4.6(e), 4.11(a) and 4.12(a) on the related Transfer Date
and (b) 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(d)(ii), (iv), (viii)
and (xiv), 4.6(f), 4.11(a) and 4.12(b) on the related Transfer Date.
SECTION 4.8 Payment of Investor Certificate Principal.
-----------------------------------------
(a) On each Determination Date, the Servicer shall instruct the Trustee
to withdraw, and the Trustee, acting in accordance with such instructions,
shall withdraw on such Transfer Date or the related Distribution Date, as
applicable, to the extent of available funds, the amounts required to be
withdrawn from the Finance Charge Account, the Principal Account, the
Principal Funding Account and the Distribution Account as follows:
(i) on each Transfer Date with respect to the Revolving Period, an
amount equal to the Available Investor Principal Collections for the
related Monthly Period shall be distributed on each Transfer Date, to
the extent available, in the following priority:
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(A) an amount equal to the Collateral Monthly Principal with
respect to such Transfer Date shall be distributed to the
Collateral Interest Holder in accordance with the Loan Agreement;
and
(B) the remaining Available Investor Principal Collections, if
any, shall constitute Shared Principal Collections to be deposited
and applied in the manner specified in subsection 4.2(e) of the
Agreement.
(ii) on each Transfer Date with respect to the Controlled
Accumulation Period (beginning on the first Transfer Date following the
Monthly Period in which the Controlled Accumulation Period commences),
to the extent available, in the following priority:
(A) on each Transfer Date occurring prior to the Class A Scheduled
Payment Date, an amount equal to the Class A Monthly Principal shall
be deposited into the Principal Funding Account;
(B) on the Transfer Date immediately following the payment in full
of the Class A Investor Interest on the Class A Scheduled Payment
Date, an amount equal to the Class B Monthly Principal with respect
to such Transfer Date will be deposited in the Distribution Account;
(C) on each Transfer Date after giving effect to the distribution
referred to in clauses (A) and (B), if a reduction in the Required
Collateral Interest has occurred on or prior to such Transfer Date,
an amount equal to the Collateral Monthly Principal with respect to
such Transfer Date will be paid to the Collateral Interest Holder in
accordance with the Loan Agreement; and
(D) the remaining Available Investor Principal Collections, if any,
shall constitute Shared Principal Collections to be deposited and
applied in the
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manner specified in subsection 4.2(e) of the Agreement.
(iii) on each Transfer Date with respect to the Rapid Amortization
Period (beginning on the first Transfer Date following the Monthly
Period in which the Rapid Amortization Period commences), to the extent
available, in the following priority:
(A) an amount equal to the Class A Monthly Principal with respect
to such Transfer Date will be deposited in the Distribution Account;
(B) upon payment of the Class A Investor Interest in full, an
amount equal to the Class B Monthly Principal with respect to such
Transfer Date will be deposited in the Distribution Account;
(C) upon payment of the Class B Investor Interest in full, an
amount equal to the Collateral Monthly Principal with respect to such
Transfer Date will be paid to the Collateral Interest Holder in
accordance with the Loan Agreement; and
(D) the remaining Available Investor Principal Collections, if any,
shall constitute Shared Principal Collections to be deposited and
applied in the manner specified in subsection 4.2(e) of the
Agreement;
provided, further, that on each Transfer Date in the Controlled
-------- -------
Accumulation 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 Principal Funding 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 Deposit
Amount exceeds the Available Investor Principal Collections on such
Transfer Date; provided, further, that on the first Transfer Date in the
-------- -------
Rapid Amortization Period, the Servicer shall withdraw, or instruct the
Trustee to withdraw, and
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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).
(b)(i) On the earlier to occur of (i) the first Transfer Date with
respect to the Rapid Amortization Period and (ii) the Transfer Date
immediately preceding the Class A Scheduled Payment Date, the Trustee,
acting in accordance with instructions from the Servicer, shall withdraw
from the Principal Funding Account and deposit in the Distribution Account
the amount on deposit in the Principal Funding Account.
(ii) On the Determination Date preceding the Transfer Date
immediately prior to the Series 1997-2 Termination 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 Investor Interest as of the immediately
preceding Distribution Date, after giving effect to all payments,
deposits and withdrawals made on such 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).
(c) On each Distribution Date occurring after a deposit is made to the
Distribution Account pursuant to subsection 4.8(a) or (b) of the Agreement
or Section 5 or 15 of the Series Supplement, the Paying Agent shall pay, in
accordance with Section 5.1 to the Series 1997-2 Investor
Certificateholders from the Distribution Account, the amount so deposited
into the Distribution Account.
(d) The Controlled Accumulation Period is scheduled to commence at the
close of business on the Controlled Accumulation Date; provided that if the
Controlled Accumulation Period Length
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(determined as described below) on any Determination Date on or after the
Determination Date preceding the Reserve Account Funding Date is less than
fourteen months, the Servicer, at its option, may elect to modify the date
on which the Controlled Accumulation Period actually commences to the first
day of the month that is a number of months prior to the month in which the
Class A Scheduled Payment Date occurs at least equal to the Controlled
Accumulation Period Length (so that, as a result of such election, the
number of Monthly Periods in the Controlled Accumulation Period will at
least equal the Controlled Accumulation Period Length) and shall provide
prompt written notice of such action to the Trustee; provided that (i) the
length of the Controlled Accumulation Period will not be less than four
months; (ii) such determination of the Controlled Accumulation Period
Length shall be made on each Determination Date prior to the commencement
of the Controlled Accumulation Period, and any election to shorten the
Controlled Accumulation Period shall be subject to the subsequent
lengthening of the Controlled Accumulation Period to the Controlled
Accumulation Period Length determined on any subsequent Determination Date,
but the Controlled Accumulation Period shall in no event commence prior to
the Controlled Accumulation Date, and (iii) notwithstanding any other
provision of this Series Supplement to the contrary, no election to
postpone the commencement of the Controlled Accumulation Period shall be
made after a Pay Out Event shall have occurred and be continuing with
respect to any other Series. The "Controlled Accumulation Period Length"
will mean a number of months such that the amount available for
distribution of principal on the Class A Certificates on the Class A
Scheduled Payment Date is expected to equal or exceed the Class A Investor
Interest, assuming for this purpose that (1) the payment rate with respect
to Principal Collections remains constant at the lowest level of such
payment rate during the twelve preceding Monthly Periods (or such lower
payment rate as Servicer may select), (2) the total amount of Principal
Receivables in the Trust (and the principal amount on deposit in the Excess
Funding Account, if any) remains constant at the level on such date of
determination, (3) no Pay Out Event with respect to any Series will
subsequently occur
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during the Controlled Accumulation Period and (4) no additional Series
(other than any Series being issued on such date of determination) will
subsequently be issued during the Controlled Accumulation Period.
SECTION 4.9 Establishment of the Reserve Account
------------------------------------
(a) Reserve Account. The Servicer, for the benefit of the Class A
---------------
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 Class A Certificateholders,
the "Reserve 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 Class A Certificateholders. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Reserve Account and in all proceeds thereof. If, at any time, the
institution holding the Reserve Account ceases to be a Qualified Trust
Institution, the Servicer shall within 20 Business Days establish a new
Reserve Account meeting the conditions specified above with a Qualified
Trust Institution and shall transfer any cash and/or any investments that
are on deposit in the existing Reserve Account to such new Reserve Account.
From the date such new Reserve Account is established, it shall be the
"Reserve Account." The Trustee, acting in accordance with instructions
from the Servicer, shall (i) make withdrawals from the Reserve Account from
time to time in an amount up to the Available Reserve Account Amount at
such time, for the purposes set forth in this Series Supplement, and (ii)
on each Transfer Date (from and after the Reserve Account Funding Date)
prior to the termination of the Reserve Account pursuant to Section 4.9(f)
make a deposit into the Reserve Account in the amount specified in, and
otherwise in accordance with, subsection 4.6(d)(xi).
(b) Administration of the Reserve Account. Funds on deposit in the
-------------------------------------
Reserve Account on any Transfer Date, after giving effect to any deposits
to or withdrawals from the Reserve Account on such
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Transfer Date, shall be invested by the Trustee at the direction of the
Servicer in Permitted Investments that will mature so that such funds will
be available for withdrawal on or prior to the following Transfer Date; and
provided, further, that each Permitted Investment shall mature such that
-------- -------
such Permitted Investment shall be available for withdrawal on or prior to
the following Transfer Date. The Trustee shall maintain, either on its own
behalf or through its nominee or custodian, on behalf of the Class A
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. No Permitted Investment shall be disposed of prior to its
maturity. On each Transfer Date, all interest and earnings (net of losses
and investment expenses) accrued since the preceding Transfer Date on funds
on deposit in the Reserve Account shall be retained in the Reserve Account
to the extent that the Available Reserve Account Amount is less than the
Required Reserve Account Amount; and the balance, if any, shall be
deposited into the Finance Charge Account and included in Class A Available
Funds for such Transfer Date. For purposes of determining the availability
of funds or the balances in the Reserve Account for any reason under this
Agreement, except as otherwise provided in the preceding paragraph, all
investment earnings on such funds shall be deemed not to be available or on
deposit.
(c) Calculation of Reserve Draw Amount. On or before each Transfer Date
----------------------------------
with respect to the Controlled Accumulation Period prior to the payment in
full of the Class A Investor Interest and on or before the first Transfer
Date with respect to the Rapid Amortization Period, the Servicer shall
calculate the "Reserve Draw Amount" which shall be equal to the Principal
Funding Investment Shortfall with respect to each Transfer Date with
respect to the Controlled Accumulation Period or the first Transfer Date
with respect to the Rapid Amortization Period less, in each case, the
amount of funds deposited into the Finance
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Charge Account on such Transfer Date pursuant to subsection 4.9(b).
(d) Withdrawal of Reserve Draw Amount. If the Reserve Draw Amount for
---------------------------------
any Transfer Date is greater than zero, the Trustee, acting in accordance
with the instructions of the Servicer, shall withdraw from the Reserve
Account an amount equal to the lesser of (x) such Reserve Draw Amount and
(y) the Available Reserve Account Amount as of such Transfer Date, and
shall deposit such amount into the Finance Charge Account and included in
Class A Available Funds for such Transfer Date.
(e) Withdrawal of Reserve Account Surplus. If the Reserve Account
-------------------------------------
Surplus for any Transfer Date, after giving effect to all deposits to and
withdrawals from the Reserve Account with respect to such Transfer Date, is
greater than zero, the Trustee, acting in accordance with the instructions
of the Servicer, shall withdraw from the Reserve Account not later than
1:00 p.m. (New York City time) on such Transfer Date an amount equal to the
Reserve Account Surplus and pay such amount in accordance with the Loan
Agreement.
(f) Termination of the Reserve Account. Upon the earliest to occur of
----------------------------------
(i) the termination of the Trust pursuant to Article XII of the Agreement,
(ii) if the Controlled Accumulation Period has not commenced, the first
Transfer Date relating to the Rapid Amortization Period, and if the
Controlled Accumulation Period has commenced, the earlier to occur of (I)
the first Transfer Date with respect to the Rapid Amortization Period and
(II) the Transfer Date immediately preceding the Class A Scheduled Payment
Date, the Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the Class A
Certificateholders that are payable from the Reserve Account as provided in
this Series Supplement, shall withdraw from the Reserve Account and pay in
accordance with the Loan Agreement, all amounts, if any, on deposit in the
Reserve Account and the Reserve Account shall be deemed to have terminated
for purposes of this Series Supplement.
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SECTION 4.10 Transferor's or Servicer's Failure to Make a Deposit or
-------------------------------------------------------
Payment.
-------
(a) If the Servicer fails to make, or to give instructions to make, 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 this Series
Supplement (collectively, "Excluded Payments")) relating to the Series
1997-2 Investor Certificates required to be made or given by the Servicer
on the related Transfer Date at the time specified in the Agreement
(including applicable grace periods), the Trustee shall make such payment
or deposit from the applicable Investor Account without instruction from
the Servicer. 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), (b)(i) and (d)(vi) on each
Transfer Date, and (ii) payable to the Series 1997-2 Investor
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.
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 [ %] for the
----
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related Interest Accrual Period exceeds the Class A Cap Rate or LIBOR plus
[____%] 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 [____%] exceeds the Class A Cap Rate or, in
the case of the Class B Interest Rate Cap, LIBOR plus [____%] 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 Period,
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 counterparty rating of the Interest Rate Cap
Provider is withdrawn or reduced below Aa3 by Moody's or below AAA by
Standard & Poor's or, with respect only to an Interest Rate Cap Provider
for a Replacement Interest Rate Cap, (i) the long term unsecured debt or
long term certificate of deposit rating of such Interest Rate Cap Provider
is withdrawn or reduced below Aa3 by Moody's or (ii) the short term
unsecured debt or short term certificate of deposit rating of the Interest
Rate Cap Provider is withdrawn or reduced below A-1+ by Standard & Poor's,
then within 30 days after such withdrawal or reduction (notice of which the
Interest Rate Cap Provider is required, under each Interest Rate Cap, to
provide to the Trustee, Moody's and Standard & Poor's promptly upon
obtaining knowledge thereof), the Interest Rate Cap Provider, at its own
expense, is required, under each Interest Rate Cap, either to (x) obtain a
Replacement Interest Rate Cap for each such Interest Rate Cap to which it
is then currently a party or (y) enter into or establish, with respect to
each such Interest Rate Cap, any other arrangement satisfactory to Moody's
and Standard & Poor's, including collateral, guarantees or
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letters of credit, which arrangement will result in Moody's and Standard &
Poor's not reducing or withdrawing the ratings of the Class A Certificates
or the Class B Certificates in effect immediate prior to the ratings
downgrade of the Interest Rate Cap Provider (a "Qualified Substitute
Arrangement"). Upon receipt of notice of any such reduction or withdrawal,
the Trustee, at the direction of the Servicer, shall, unless such a
Replacement Interest Rate Cap Provider or Qualified Substitute Arrangement
has theretofore been established or obtained, use its best efforts to
establish or obtain or cause the Interest Rate Cap Provider to establish or
obtain, with respect to each such Interest Rate Cap, a Replacement Interest
Rate Cap or Qualified Substitute Arrangement; provided, however, that in
-------- -------
the event at any time any Qualified Substitute Arrangement established
pursuant to this Section 4.11 or pursuant to the applicable Interest Rate
Cap shall cease to be satisfactory to the Rating Agency or shall terminate
prior to the Class A Scheduled Payment Date (in the case of a Qualified
Substitute Arrangement with respect to the Class A Interest Rate Cap) or
the Class B Scheduled Payment Date (in the case of a Qualified Substitute
Arrangement with respect to the Class B Interest Rate Cap), 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. Subject to Section 4.11(c) below, the Trustee shall, with respect
to any Interest Rate Cap for which a Replacement Interest Rate Cap or
Qualified Substitute Arrangement has been or (with respect to clauses (A),
(C) and (D) below) will be obtained, (A) timely provide any written notice
required thereby to the Interest Rate Cap Provider of its intention to
terminate the Interest Rate Cap within such 30-day period, (B) terminate
such Interest Rate Cap within such 30-day period, (C) request the payment
to it of all amounts due to the Trust under such Interest Rate Cap through
the termination date and (D) 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.
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(c) The Trustee shall not at any time terminate any Interest Rate Cap
(including any Replacement Interest Rate Cap or Qualified Substitute
Arrangement with respect thereto) unless, prior to or simultaneously with
the termination thereof, the Interest Rate Cap Provider, 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 each of Moody's and Standard & Poor's confirming
that the termination of such Interest Rate Cap and its replacement with
such Replacement Interest Rate Cap or Qualified Substitute Arrangement will
not result in a reduction or withdrawal of its rating of the Class A
Certificates or the Class B Certificates. Notwithstanding anything to the
contrary in Section 4.11(b) above, the Trustee shall not at any time
terminate any such Interest Rate Cap (or such Replacement Interest Rate Cap
or Qualified Substitute Arrangement with respect thereto) that comprises
all or a portion of any Qualified Substitute Arrangement established
pursuant to subsection 4.11(b) unless the latter Qualified Substitute
Arrangement has been or is required to be terminated pursuant to this
Section 4.11.
(d) The Servicer shall notify the Trustee, the Rating Agency and the
Collateral Interest Holder 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 Moody's or Standard & Poor's.
(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 each of Moody's and Standard & Poor's
confirming that the termination of the then current Interest Rate Cap and
its replacement with such Replacement Interest Rate Cap will not
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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,
subject to the terms of the Interest Rate Cap and to any subsequent
replacement of the Interest Rate Cap pursuant to this Section 4.11, 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 Interest Cap Provider, prepared in
accordance with accounting principles that are generally accepted in its
place of domicile.
(g) The Trustee, on behalf of the Certificateholders, shall have the
right 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
Adjusted 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) The Trustee shall have received written confirmation from the
Rating Agency that such sale will not result in a reduction or
withdrawal of the then current rating on the relevant class of
Certificates by the Rating Agency.
(h) The Servicer shall have the duty of (i) obtaining a fair market value
price for the sale of the Trust's rights under any portion of an Interest
Rate Cap sold pursuant to the subsection 4.11(g), (ii) notifying the
Trustee of prospective purchasers and bids, (iii) selecting the purchaser
of such portion of the Interest Rate Cap, and
(iv) 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
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documentation, prepared by the Servicer, necessary to effect the transfer
of the Trust's rights under such portion of the Interest Rate Cap and to
release the lien of the Trustee thereon and proceeds thereof.
Funds deposited in the Collection Account in respect of the sale of all
or a portion of a Class A Interest Rate Cap or a Class B Interest Rate Cap
shall be applied on the next Transfer Date as, respectively, Class A
Available Funds or Class B Available Funds in accordance with subsections
4.6(a) and (b).
SECTION 4.12 Reallocated Principal Collections. On each Transfer Date,
---------------------------------
the Servicer shall apply, or shall cause the Trustee to apply, the
Reallocated Principal Collections (applying all Reallocated Collateral
Principal Collections in accordance with subsections 4.12(a) and (b) prior
to applying any Reallocated Class B Principal Collections in accordance
with subsection 4.12(a) for any amounts still owing after the application
of Reallocated Collateral Principal Collections) with respect to such
Transfer Date, to make the following distributions on each Transfer Date 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 Transfer Date over (ii) the amount of
Excess Spread and Shared Finance Charge Collections from other Series with
respect to the related Monthly Period, shall be applied pursuant to
subsections 4.6(a)(i) through (iv); and
(b) an amount equal to the excess, if any, of (i) the Class B Required
Amount, if any, with respect to such Transfer Date over (ii) the amount of
Excess Spread and Shared Finance Charge Collections from other Series
allocated and available to the Class B Certificates pursuant to subsection
4.6(d)(ii) and 4.6(f) on such Transfer Date shall be applied pursuant to
subsections 4.6(b)(i) through (iv).
On each Transfer Date, the Collateral Interest shall be reduced by the
amount of Reallocated Collateral Principal Collections and by the amount of
Reallocated Class B Principal Collections applied pursuant to subsections
4.12(a) and/or (b) on such Transfer Date. If such reduction would cause the
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Collateral Interest (after giving effect to any Collateral Interest Charge-
Offs for such Transfer Date) to be a negative number, the Collateral
Interest (after giving effect to any Collateral Interest Charge-Offs for
such Transfer Date) shall be reduced to zero and the Class B Investor
Interest shall be reduced by the amount by which the Collateral Interest
would have been reduced below zero. If the reallocation of Reallocated
Principal Collections would cause the Class B Investor Interest (after
giving effect to any Class B Investor Charge-Offs for such Transfer Date)
to be a negative number on any Transfer Date, Reallocated Principal
Collections shall be reallocated on such Transfer Date in an aggregate
amount not to exceed the amount which would cause the Class B Investor
Interest (after giving effect to any Class B Investor Charge-Offs for such
Transfer Date) to be reduced to zero.
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 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).
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SECTION 4.14 Discount Option.
---------------
(a) The Transferor may at its option (the "Discount Option"), at any
time, upon not less than 20 Business Days prior written notice to the
Servicer, the Trustee, the Interest Rate Cap Provider, the Collateral
Interest Holder, 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 in
Accounts designated in such notice to be treated on and after such
designation, or for the period specified in such notice, as Finance Charge
Receivables (it being understood and agreed that an increase in the
Discount Percentage shall constitute a new exercise of the Discount
Option); 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
Transferor 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 or reduction of its
rating of such Series of Certificates;
(ii) such exercise of the Discount Option shall not, in the
reasonable belief of the Transferor, 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;
(iii) the Transferor 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 Collections of the Principal Receivables of the Accounts
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designated pursuant to such notice, the Servicer shall deem the product of
the Discount Percentage and Collections of such Principal Receivables as
Finance Charge Collections.
(b) The Transferor may at its option, at any time, upon not less than 20
Business Days prior written notice to the Servicer, the Trustee, the
Collateral Interest Holder, and each Rating Agency, suspend or terminate
the Discount Option or reduce the Discount Percentage to a percentage
specified in such notice; provided, however, that such notice shall specify
-------- -------
the period of time for which the Discount Option shall be suspended, the
effective date of the termination of the Discount Option or the percentage
to which the Discount Option shall be reduced, as the case may be.
(c) Each Certificateholder by its acceptance of a beneficial interest in
a Certificate and the Collateral Interest Holder by its acceptance of the
Collateral Interest 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 1997-2]
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
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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 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 1997-2 Investor Certificateholder of record on the
immediately preceding Record Date and the Rating Agencies a statement
substantially in the form of Exhibit 2 to the Series Supplement relating to
Series 1997-2 and the Collateral Interest 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,
and to the Collateral Interest Holder on the preceding Transfer Date;
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(ii) the amount of such distribution, if any, allocable to principal
with respect to the Class A Certificates, the Class B Certificates and the
Collateral Interest, respectively;
(iii) the amount of such distribution allocable to Class A Monthly
Interest, Class B Monthly Interest, and Collateral Monthly Interest,
respectively;
(iv) the amount of Principal Collections processed during the preceding
Monthly Period, as appropriate, and allocated in respect of the Class A
Certificates, the Class B Certificates and the Collateral Interest,
respectively;
(v) the aggregate amount of Principal Receivables, the Investor Interest,
the Adjusted Investor Interest, the Class A Investor Interest, the Class A
Adjusted Investor Interest, the Class B Investor Interest, the Collateral
Interest, the Class B Fixed Allocation, the Collateral Fixed Allocation,
the Floating Investor Percentage, the Class A Floating Allocation, the
Class B Floating Allocation, the Collateral Floating Allocation and the
Fixed Investor Percentage, in each case 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 and 61 or more days delinquent in accordance with the Servicer's then
existing Account Guidelines by class of delinquency as of the close of
business on the last day of the preceding Monthly Period;
(vii) the Class A Investor Default Amount, the Class B Investor Default
Amount and the Collateral Default Amount for the preceding Monthly Period;
(viii) the aggregate amount of Class A Investor Charge-Offs, Class B
Investor Charge-Offs and Collateral Interest Charge-Offs for the preceding
Monthly Period;
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(ix) the aggregate amount of Investor Charge-Offs reimbursed to
the Class A Certificateholders, the Class B Certificateholders and the
Collateral Interest Holder on the Transfer Date immediately preceding such
Distribution Date;
(x) the amount of the Class A Monthly Servicing Fee, the Class B Monthly
Servicing Fee and the Collateral Interest Monthly Servicing Fee for the
preceding Monthly Period;
(xi) the Principal Funding Account Balance as of the related
Transfer Date;
(xii) the Accumulation Shortfall with respect to the related
Transfer Date;
(xiii) the amount of the Principal Funding Investment Proceeds
transferred to the Finance Charge Account on the related Transfer Date;
(xiv) the Class A Principal Funding Investment Shortfall on the
related Transfer Date;
(xv) the amount of Class A Available Funds, Class B Available
Funds and Collateral Available Funds on deposit in the Finance Charge
Account on the related Transfer Date;
(xvi) the Pool Factor as of the end of the last day of the preceding
Monthly Period;
(xvii) the aggregate amount of Finance Charge Collections during the
preceding Monthly Period (including amounts arising from the sale of either
Interest Rate Cap to be treated as Finance Charge Collections), as
appropriate, and allocated in respect of the Series 1997-2 Investor
Certificates;
(xviii) the Class A Required Amount, the Class B Required Amount, the
amount of Reallocated Collateral Principal Collections and Reallocated
Class B Principal Collections, if any, to be applied with respect to the
Required Amounts, and the amount of any reductions in the Collateral
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Interest and the Class B Investor Interest, if any, to satisfy the Required
Amounts, in each case with respect to the preceding Monthly Period;
(xix) the Reserve Account Draw and the Available Reserve Account
Amount with respect to the related Transfer Date; and
(xx) the ratio of the Collateral Interest to the Investor Interest 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 1998, 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 1997-2 Certificateholder, a statement prepared
by the Servicer containing the information required to be contained in the
regular monthly report to Series 1997-2 Investor 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 1997-2 Investor 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 1997-2 Investor Certificateholders to prepare their tax returns.
Such obligations of the Paying Agent shall be deemed to have been satisfied
to the extent that
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substantially comparable information shall be provided by the Paying Agent
pursuant to any requirements of the Internal Revenue Code.
SECTION 9.A Series 1997-2 Pay Out Events. If any one of the following
----------------------------
events shall occur during the Revolving Period or the Controlled Accumulation
Period with respect to the Series 1997-2 Investor 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 1997-2 Investor
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 Transferor set forth in the Agreement, which
failure has a material adverse effect on the Series 1997-2 Investor
Certificateholders (which determination shall be made without regard to whether
any funds are available pursuant to 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 1997-2 Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of each of the Class A Investor Interest, the
Class B Investor Interest and the Collateral Interest, and continues to affect
materially and adversely the interests of the Series 1997-2 Investor
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) of the Agreement, (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 1997-2 Investor
Certificates evidencing Undivided Interests aggregating not less than 50% of
each of the Class A Investor Interest, the Class B Investor Interest and the
Collateral Interest, and (ii) as a result of which the interests of the Series
1997-2 Investor Certificateholders are materially and adversely affected (which
determination
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shall be made without regard to whether any funds are available pursuant to the
Interest Rate Caps) and continue to be materially and adversely affected for
such period; provided, however, that a Series 1997-2 Pay Out Event pursuant to
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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) with respect to any Determination Date, the average of the Portfolio
Yields for the three consecutive Monthly Periods preceding such Determination
Date is a rate which is less than the average of the Base Rates for such Monthly
Periods;
(d) the Transferor shall fail to convey Receivables arising under
Additional Accounts to the Trust, as required by subsection 2.6(e) of the
Agreement;
(e) any Servicer Default shall occur which would have a material adverse
effect on the Series 1997-2 Investor Certificateholders (which determination
shall be made without regard to the subordination of the Collateral Interest or
whether funds are available pursuant to the Enhancement or the Interest Rate
Caps);
(f) failure to pay the Class A Certificates in full on the Class A
Scheduled Payment Date;
(g) failure to pay the Class B Certificates in full on the Class B
Scheduled Payment Date; or
(h) 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 1997-2 Investor Certificates evidencing Undivided
Interests aggregating more than 50% of each of the Class A Investor Interest,
the Class B Investor Interest and the Collateral Interest by notice then given
in writing to the Transferor and the Servicer (and to the Trustee if given by
the Certificateholders and the Collateral Interest Holder) may declare that a
pay out event (a "Series 1997-2 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) or (h) a Series 1997-2 Pay Out Event shall occur without any notice or
other action on the part of the
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Trustee or the Series 1997-2 Investor 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 Collateral Interest Holder, and each of 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 1997-2 Termination. All principal or interest with
-------------------------
respect to the Series 1997-2 Investor Certificates shall be due and payable no
later than the Scheduled Series 1997-2 Termination Date. In the event that the
Investor Interest is greater than zero on the Scheduled Series 1997-2
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 Series 1997-2 Investor Certificateholders pro rata in
final payment of all principal of and accrued interest on the Series 1997-2
Investor Certificates, an amount of Principal Receivables and the related
Finance Charge Receivables (or interests therein) 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 Finance Charge
Collections and the denominator of which is the sum of all Investor Percentages
with respect to Finance Charge Collections 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
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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 Collateral Interest
Holder to satisfy any amounts owing under the Loan Agreement and thereafter paid
to the Holder of the Exchangeable Seller Certificate. Upon such Scheduled
Series 1997-2 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.
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 Series 1997-2 Investor Certificateholders 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 Series 1997-2 Investor Certificateholders which
would, in either case, result in the subordination of the rights of the Series
1997-2 Investor Certificateholders to the rights of the Holders of any other
Series.
SECTION 15. Repurchase of the Series 1997-2 Certificates. In the event of
--------------------------------------------
a breach of any of the representations and warranties set forth in Section
12(a)(ii) hereof, either the
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Trustee or the Holders of Series 1997-2 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 1997-2
Certificateholders), may direct the Transferor to purchase the Series 1997-2
Investor 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 Series 1997-2 Investor Certificates in the Distribution Account,
for distribution to the Series 1997-2 Investor Certificateholders pursuant to
Article XII of the Agreement and Section 10 hereof. The reassignment deposit
amount for such reassignment shall be equal to the sum of (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 4.8(b)(ii) on the
related Transfer Date, (ii) an amount equal to all interest accrued but unpaid
on the Series 1997-2 Investor Certificates through and including the last day of
the Interest Accrual Period in which such Transfer Date occurs, less the amount
on deposit in the Finance Charge Account and, with respect to the Class A
Certificates, Principal Funding Investment Proceeds and amounts available to be
withdrawn from the Reserve Account on the related Transfer Date, which will be
transferred to the Distribution Account to pay interest pursuant to subsections
4.6(a) through (d), as applicable, on such Transfer Date and (iii) any
additional amounts owing to the Collateral Interest Holder pursuant to the Loan
Agreement. The deposit into the Distribution Account of the reassignment
deposit amount shall be considered a prepayment in full of the Series 1997-2
Investor Certificates. The Series 1997-2 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 1997-2 Investor Certificateholders give notice directing the Transferor
to purchase the Series 1997-2 Investor Certificates as provided above, the
obligation of the Transferor to purchase the Series 1997-2 Investor Certificates
and to pay the reassignment deposit amount pursuant to this Section 15 shall
constitute the
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sole remedy respecting a breach of the representations and warranties referenced
in Section 12(a)(ii) hereof available to the Series 1997-2 Investor
Certificateholders or the Trustee on behalf of the Series 1997-2 Investor
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 on the Transferor's reasonable
belief as to (x) the amount of the Investor Interest of each Series that will be
outstanding on such last day, (y) in the case of Series for which the
Certificate Rate is a floating rate, the Certificate Rate with respect to such
Monthly Period).
SECTION 18. Series 1997-2 Investor Exchange. Pursuant to subsection
-------------------------------
6.9(b) of the Agreement, the Series 1997-2 Investor Certificateholders may
tender their Series 1997-2 Investor 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 Series 1997-2 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 1997-2 Investor Certificateholders. Such notice of exchange will
specify, among other things: (a) the amount of Series 1997-2 Investor
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 of the tender and cancellation of the Series
1997-2 Investor 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
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Exchangeable Seller Certificate and the applicable Series 1997-2 Investor
Certificates, and shall issue such Series of Series 1997-2 Investor Certificates
and a new Exchangeable Seller Certificate, 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.
SECTION 20. Notification to Luxembourg Stock Exchange. On or prior to
-----------------------------------------
each Distribution Date the Servicer shall, or shall cause the Trustee to, send
written notice to the Luxembourg Stock Exchange specifying (i) the Class A
Certificate Rate for the immediately following Distribution Date, (ii) the
amount of interest to be distributed in respect of the Class A Certificates for
the immediately following Distribution Date and (iii) the Class A Investor
Interest on the Distribution Date on or prior to which such report is being
furnished (after giving effect to all payments of principal to be made on such
Distribution Date). Promptly following each Distribution Date the Servicer shall
cause a notice to be published in a daily newspaper, which initially shall be
the Luxemburger Wort, specifying the information described in clauses (i) and
----------------
(ii) of the preceding sentence.
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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:
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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 1997-2
Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA/1/ 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 "Receivables") 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
- ---------------------
/1/ VISA and MasterCard are registered trademarks of VISA USA, Inc., and
MasterCard International Incorporated, respectively.
<PAGE>
constituting the Trust pursuant to an Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1997, as supplemented by the Series 1997-2
Supplement dated as of [September __, 1997] (collectively, the "Agreement"), by
and between People's Bank, as 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 Transferor 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 Transferor, 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 (or a
beneficial interest therein) 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 Certificate
Owner acquiring an interest in a Certificate through it to comply with this
Agreement as to treatment as indebtedness under applicable tax law.
This Class A 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. Although a summary of certain
provisions of the Agreement is set forth below, this Class A Certificate does
not purport to summarize the Agreement and reference is made to the Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and obligations of
the Trustee. To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Agreement.
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.
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
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<PAGE>
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, and (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, and the Investor Accounts,
and (iii) 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
[$___________] Floating Rate Class A Asset Backed Certificates, Series 1997-2
(the "Class A Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class A Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders. The aggregate interest represented by
the Class A Certificates at any time in the Principal Receivables in the Trust
will not exceed an amount equal to the Class A Investor Interest at such time.
The Class A Initial Investor Interest is [$___________] 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; provided, however, that the Class A Investor
Interest may not be reduced below zero. 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
1997-2" (the "Class B Certificates") and an Undivided Interest in the Trust in
the initial amount of $41,250,000 (the "Collateral Interest," and together with
the Class A Certificates and the Class B Certificates, the "Certificates") will
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 Certificates or any other Series of
certificates.
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<PAGE>
Interest on the Class A Certificates will be distributed on October 15,
1997 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.
No principal will be payable to the Class A Certificateholders during the
Revolving Period, which begins on the date of issuance of this Class A
Certificate or during the Controlled Accumulation Period. During the Controlled
Accumulation Period, which is scheduled to begin with the June 2001 Monthly
Period but which may be postponed as provided in the Agreement, an amount equal
to the Controlled Deposit Amount will be deposited into the Principal Funding
Account on each Transfer Date commencing with the Transfer Date following the
Monthly Period in which the Controlled Accumulation Period commences. The
amount on deposit in the Principal Funding Account will be distributed as
principal to the Class A Certificateholders on the [August 2002] Distribution
Date (the "Class A Scheduled Payment Date"), unless paid earlier as the result
of the occurrence of a Pay Out Event and the commencement of the Rapid
Amortization Period, or later in accordance with the Agreement. During the
Rapid Amortization Period, if any, in addition to monthly payments of interest
on the Class A Certificates, 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 the Rapid Amortization Period commences.
The Servicer will 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 Transferor 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 Transferor
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 to the close of business on the day any Collections are
deposited in the Collection Account, but may make such pay-
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<PAGE>
ments 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 Distribution Date, to the extent funds are available on the terms
specified in the Agreement from available Finance Charge Collections, from
payments made pursuant to the Class A Interest Rate Cap and from Excess Spread,
interest will be distributed to the Class A Certificateholders in an amount
equal to the sum of: (i) the product of (a) the Class A Certificate Rate, (b)
the lesser of the Class A Adjusted Investor Interest determined as of the
preceding Distribution Date, after giving effect to all payments, deposits and
withdrawals on such Distribution Date or Closing Date, as applicable, and the
Expected Class A Principal as of the preceding Distribution Date or Closing Date
(or, for the initial Interest Accrual Period, the Class A Initial Investor
Interest), and (c) the actual number of days in the related Interest Accrual
Period divided by 360, plus (ii) the Class A Covered Amounts for such Interest
Accrual Period, plus (iii) 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 Accrual Period divided by 360,
plus (iv) 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 Interest Accrual Period which has not been
distributed to the Class A Certificateholders, plus, (v) 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
Accrual Period divided by 360.
On each Determination Date during the Revolving Period, the Controlled
Accumulation Period and the Rapid Amortization Period, if any, the Servicer will
determine the Class A Required Amount and the Class B Required Amount. If
either or both of the Required Amounts are greater than zero after application
of available Finance Charge Collections, Excess Spread and Shared Finance Charge
Collections, then Principal Collections allocable to the Collateral Interest
will be reallocated and applied first to fund the remaining Class A Required
Amount, if any, and second to fund the remaining Class B Required Amount, if
any, and to the extent that Reallocated Collateral Principal Collections are
less than such remaining Class A Required Amount, Principal Collections
allocable to the Class B Certificates will then be reallocated and applied to
fund the remaining Class A Required Amount. The Collateral Interest and (if the
Collateral Interest is reduced to zero) the Class B Investor Interest will be
reduced
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<PAGE>
by the amount of Reallocated Collateral Principal Collections and Reallocated
Class B Principal Collections applied to fund the Required Amounts.
If, on any Distribution Date, Reallocated Collateral Principal Collections
are insufficient to fund the remaining Class A Required Amount for the related
Monthly Period, then the Collateral Interest (after giving effect to reduction
for any Collateral Interest Charge-Offs and Reallocated Principal Collections)
will be reduced by the amount of such deficiency (but not by more than the Class
A Investor Default Amount for such Monthly Period). In the event that such
reduction would cause the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the Class B Investor Interest
(after giving effect to reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections in excess of the Collateral Interest
as of such Distribution Date) will be reduced by the amount by which the
Collateral Interest would have been reduced below zero. 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.
The Trustee has entered into the Class A Interest Rate Cap with the
Interest Rate Cap Provider for the exclusive benefit of the Class A
Certificateholders. On each Transfer Date that the Class A Certificate Rate for
the related Interest Accrual Period exceeds the Class A Cap Rate, 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 Class A
Interest Rate Cap. The Class A Notional Amount will at all times be equal to or
greater than the amount of the Expected Class A Principal. The Class A Interest
Rate Cap or its Replacement Interest Rate Cap or Qualified Substitute
Arrangement will terminate on the day immediately following the Class A
Scheduled Payment Date.
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 the preceding Monthly Period, payable on each succeeding
Distribution Date. With respect to any Distribution Date, the Class A Monthly
Servicing Fee will equal one-twelfth of the product of 2.00% per annum and the
Class A Adjusted Investor Interest as of the last day of the preceding Monthly
Period; provided that the Class Monthly Servicing Fee for the first Distribution
Date will be an amount equal to [____ thirtieth] of the foregoing amount.
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<PAGE>
On each Transfer Date, beginning with the Transfer Date following the
Monthly Period in which the Controlled Accumulation Period commences, an amount
equal to the Controlled Deposit Amount will be deposited in the Principal
Funding Account. The amounts on deposit in the Principal Funding Account will
be deposited in the Distribution Account for distribution to the Class A
Certificateholders on the Class A Scheduled Payment Date.
As provided in the Agreement, Principal Collections remaining after funding
of the Required Amounts during the Revolving Period and the Controlled
Accumulation Period and Principal Collections remaining after funding of the
Controlled Deposit Amount during the Controlled Accumulation Period will be
applied as Shared Principal Collections and distributed first to the
certificateholders of other Series to the extent of Principal Shortfalls, if
any, and then to the Holder of the Exchangeable Seller Certificate. In
addition, during the Controlled Accumulation Period and the Rapid Amortization
Period, Shared Principal Collections from other Series available to the
Certificates will be applied to pay the Certificateholders to the extent of
Principal Shortfalls, if any, with respect to Series 1997-2.
On each Distribution Date beginning with 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, and certain other amounts treated as
Available Investor Principal Collections 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 1997-2 Termination Date.
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 Transferor 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.
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<PAGE>
As provided in the Agreement, withdrawals from the Series 1997-2 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 Transferor 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.
The Agreement and any Supplement may be amended by the Transferor, 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
Transferor, the Servicer and the Trustee, and without the consent of any
Certificateholders, 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 may not adversely
affect in any material respect the interests of Certificateholders; provided
further 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.
The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee with the consent of the holders of certificates
evidencing undivided interests aggregating not less than 66-2/3% of the
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
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<PAGE>
without the consent of all certificateholders of all Series adversely affected.
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 1997-2 Supplement, the Transferor has the option
(the "Discount Option"), at any time to designate as Finance Charge Receivables
a fixed or variable percentage of Receivables in designated Accounts which
otherwise would be treated as Principal Receivables. The exercise by the
Transferor 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 will 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.
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 1997-2, the Agreement provides
that the right of the Class A
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<PAGE>
Certificateholders to receive payments from the Trust will terminate on the
Scheduled Series 1997-2 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 Interchange pursuant to subsections 2.5(k) and (l) of the Agreement.
The Trustee will 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.
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<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: [September __, 1997]
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<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)
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<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 1997-2
Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA/1/ 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 "Receivables") 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
- -----------------
/1/ VISA and MasterCard are registered trademarks of VISA USA, Inc., and
MasterCard International Incorporated, respectively.
<PAGE>
Finance Charge Receivables), and the other assets and interests constituting the
Trust pursuant to an Amended and Restated Pooling and Servicing Agreement, dated
as of March 18, 1997, and as supplemented by the Series 1997-2 Supplement, dated
as of [September __, 1997], (collectively, the "Agreement"), by and between
People's Bank, as 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 Transferor 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 Transferor, 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 (or a
beneficial interest therein) 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 Certificate
Owner acquiring an interest in a Certificate through it to comply with this
Agreement as to treatment as indebtedness under applicable tax law.
This Class B 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. Although a summary of certain
provisions of the Agreement is set forth below, this Class B Certificate does
not purport to summarize the Agreement and reference is made to the Agreement
for information with respect to the interests, rights, benefits, obligations,
proceeds, and duties evidenced hereby and the rights, duties and obligations of
the Trustee. To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Agreement.
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.
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
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<PAGE>
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, and the Investor Accounts and (iii) 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
[$__________] Floating Rate Class B Asset Backed Certificates, Series 1997-2
(the "Class B Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class B Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders. The aggregate interest represented by
the Class B Certificates at any time in the Principal Receivables in the Trust
will not exceed an amount equal to the Class B Investor Interest at such time.
The Class B Initial Investor Interest is [$__________] 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, Reallocated Principal Collections and other reductions
of the Class B Investor Interest in respect of the Class A Required Amount over
Class B Investor Charge-Offs, Reallocated Principal Collections and such other
reductions reimbursed prior to such date of determination; provided, however,
that the Class B Investor Interest may not be reduced below zero. In addition
to the Class B Certificates, a class of certificates entitled "People's Bank
Credit Card Master Trust [$__________] Floating Rate Class A Asset Backed
Certificates, Series 1997-2" (the "Class A Certificates") and an Undivided
Interest in the Trust in the initial amount of [$__________] (the "Collateral
Interest," and together with the Class A Certificates and the Class B
Certificates, the "Certificates") will be issued, and the Ex changeable 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
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<PAGE>
undivided interest in the Trust. The Exchangeable Seller Certificate will
represent the interest in the Principal Receivables not represented by the
Certificates or any other Series of certificates.
Interest on the Class B Certificates will be distributed on October 15,
1997 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. Principal with respect to the
Class B certificates is scheduled to be distributed on the [September 2002]
Distribution Date, (the "Class B Scheduled Payment Date"), but may be paid
earlier or later as provided in the Agreement. During the Rapid Amortization
Period, if any, interest and principal will be distributed to the Class B
Certificateholders on the Distribution Date of each calendar month until the
Class B Certificateholders have been paid in full.
The Servicer will 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 Transferor 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 Transferor
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 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 Distribution Date, to the extent funds are available on the terms
specified in the Agreement from available Finance Charge Collections, from
payments made pursuant to the Class B Interest Rate Cap and from Excess Spread,
interest will be
-4-
<PAGE>
distributed to the Class B Certificateholders in an amount equal to 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, 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 (or, for the initial Interest Accrual Period, the Class B Initial
Investor Interest), as applicable, and (c) the actual number of days in the
related Interest Accrual 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 Accrual
Period divided by 360, 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 Interest 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
Accrual Period divided by 360.
On each Determination Date during the Revolving Period, the Controlled
Accumulation Period and the Rapid Amortization Period, if any, the Servicer will
determine the Class A Required Amount and the Class B Required Amount. If
either or both of the Required Amounts are greater than zero after application
of available Finance Charge Collections, Excess Spread and Shared Finance Charge
Collections, then Principal Collections allocable to the Collateral Interest
will be reallocated and applied first to fund the remaining Class A Required
Amount, if any, and second to fund the remaining Class B Required Amount, if
any, and to the extent that Reallocated Collateral Principal Collections are
less than such remaining Class A Required Amount, Principal Collections
allocable to the Class B Certificates will then be reallocated and applied to
fund the remaining Class A Required Amount. The Collateral Interest will be
reduced by the amount of Reallocated Collateral Principal Collections and
Reallocated Class B Principal Collections applied to fund the Required Amounts.
The Class B Investor Interest will be reduced by the amount of Reallocated Class
B Principal Collections in excess of the Collateral Interest (after giving
effect to reductions for an Collateral Interest Charge-Offs and any reallocated
Collateral Principal Collections as of the related Distribution Date) applied to
fund the Class A Required Amount.
If, on any Distribution Date, Reallocated Collateral Principal Collections
are insufficient to fund the remaining Class A Required Amount for the related
Monthly Period, then the Collateral Interest (after giving effect to reduction
for any
-5-
<PAGE>
Collateral Interest Charge-Offs and Reallocated Principal Collections) will be
reduced by the amount of such deficiency (but not by more than the Class A
Investor Default Amount for such Monthly Period). In the event that such
reduction would cause the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the Class B Investor Interest
(after giving effect to reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections in excess of the Collateral Interest
as of such Distribution Date) will be reduced by the amount by which the
Collateral Interest would have been reduced below zero. 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.
If, on any Distribution Date, Reallocated Collateral Principal Collections
not required to fund the Class A Required Amount are insufficient to fund the
remaining Class B Required Amount for such Monthly Period, then the Collateral
Interest (after giving effect to reduction for any Collateral Interest Charge-
Offs, Reallocated Principal Collections and any adjustments made thereto for the
benefit of the Class A Certificateholders) will be reduced by the amount of such
deficiency (but not by more than the Class B Investor Default Amount for such
Monthly Period). In the event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral Interest will be reduced to
zero, and the Class B Investor Interest will be reduced by the amount by which
the Collateral Interest would have been reduced below zero.
The Trustee has entered into the Class B Interest Rate Cap with the
Interest Rate Cap Provider for the exclusive benefit of the Class B
Certificateholders. On each Transfer Date that the Class B Certificate Rate for
the related Interest Accrual Period exceeds the Class B Cap Rate, 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 Class B
Interest Rate Cap. The Class B Notional Amount will at all times equal the
amount of the Expected Class B Principal. 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 B Scheduled Payment Date.
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 the preceding Monthly Period, payable on each succeeding
Distribution Date. With respect to any Distribution Date, the Class B Monthly
-6-
<PAGE>
Servicing Fee will equal 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;
provided that the Class B Monthly Servicing Fee for the first Distribution Date
will be an amount equal to [____ thirtieth] of the foregoing amounts.
On the Transfer Date immediately preceding the Class B Scheduled Payment
Date, and on each Transfer Date thereafter until the Class B Investor Interest
has been reduced to zero, the Servicer or the Trustee acting in accordance with
instructions from the Servicer will 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 B Certificateholders on the next succeeding
Distribution Date, to the extent specified in the Agreement.
As provided in the Agreement, Principal Collections remaining after
funding of the Required Amounts during the Revolving Period and the Controlled
Accumulation Period and Principal Collections remaining after funding of the
Controlled Deposit Amount during the Controlled Accumulation Period will be
applied as Shared Principal Collections and distributed first to the
certificateholders of other Series to the extent of Principal Shortfalls, if
any, and then to the Holder of the Exchangeable Seller Certificate. In
addition, during the Controlled Accumulation Period and the Rapid Amortization
Period, Shared Principal Collections from other Series available to the
Certificates will be applied to pay the Certificateholders to the extent of
Principal Shortfalls, if any, with respect to Series 1997-2.
On each Distribution Date beginning with 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, and certain other amounts treated as
Available Investor Principal Collections 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 1997-2 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 1997-2 Termination Date.
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 Clear-
-7-
<PAGE>
ing 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 Transferor 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 1997-2 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 Transferor 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.
The Agreement and any Supplement may be amended by the Transferor, 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, 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
Transferor, the Servicer and the Trustee, and without the consent of any
Certificateholders, 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 may not adversely
affect in any material respect the interests of Certificateholders; provided
further 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.
The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee with the consent of the holders of certificates
evidencing undivided interests aggregat-
-8-
<PAGE>
ing 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.
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 1997-2 Supplement, the Transferor has the option
(the "Discount Option"), at any time to designate as Finance Charge Receivables
a fixed or variable percentage of Receivables in designated Accounts which
otherwise would be treated as Principal Receivables. The exercise by the
Transferor 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 will 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.
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.
-9-
<PAGE>
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 1997-2, the Agreement provides
that the right of the Class B Certificateholders to receive payments from the
Trust will terminate on the Scheduled Series 1997-2 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 Agreement. The Trustee will 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.
-10-
<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: [September __, 1997]
-11-
<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)
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<PAGE>
EXHIBIT 2
---------
FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT
---------------------------------------------
PEOPLE'S BANK
PEOPLE'S BANK CREDIT CARD MASTER TRUST, SERIES 1997-2
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 1997-2 and
may not correspond to Monthly Period numbers used for other Series of
the Trust.)
21. Information Regarding Distributions
to Certificateholders _________________
21.1 Total amount distributed to
Certificateholders (per $1,000
Initial Investor Interest) _________________
21.2 Total principal amount
distributed to Certificateholders
(per $1,000 Initial Investor Interest) _________________
21.3 Total interest amount
distributed to Certificateholders
(Per $1,000 Initial Investor Interest) _________________
22. Receivables Balances
22.1 Aggregate Principal Receivables in
Trust, end of period ___ _________________
(a) Aggregate Principal Receivables
in Trust on Closing Date _________________
<PAGE>
22.2 Investor Interest, end of period ___ _________________
(a) Investor Interest as of Closing Date _________________
22.3 Investor Interest as a percentage
of Trust Principal Receivables
(a) Investor Interest as a percentage of
Trust Principal Receivables as of the
Closing Date _________________
22.4 Adjusted Investor Interest _________________
22.5 Floating Investor Percentage _________________
22.6 Fixed Investor Percentage _________________
23. Collections _________________
23.1 Aggregate amount of Collections Processed
during the Monthly Period allocated to
Certificateholders _________________
B. Monthly Pay Rate for:
(i) Period - 1 _________%
(ii) Period - 2 _________%
(iii) Period - 3 _________%
(iv) Period - 4 _________%
(v) Period - 5 _________%
(vi) Period - 6 _________%
(vii) 6 mo. Avg. _________%
23.2 Principal Collections during the Monthly
Period allocated to Certificateholders _________________
23.3 Amount by which Controlled Accumulation
exceeds principal allocated to Investors _________________
23.4 Finance Charge Collections during the Monthly
Period allocated to Certificateholders _________________
23.5 Annualized Gross Portfolio Yield for:
(i) Period - 1 _________%
(ii) Period - 2 _________%
(iii) Period - 3 _________%
(iv) 3 mo. avg. _________%
-2-
<PAGE>
24. Delinquent Balances*
Aggregate Percentage
Account Aggregate
Balances Receivables
--------- -----------
24.1 Less than 31 days delinquent ___________ ___________%
24.2 31-60 days delinquent ___________ ___________%
24.3 61-90 days delinquent ___________ ___________%
24.4 More than 90 days delinquent ___________ ___________%
24.5 Total ___________ ___________%
25. Default Summary
25.1 Aggregate Investor Default Amount _________________
Aggregate Percent of
Account Aggregate
Balances Receivables
--------- -----------
25.2 Investor default percentage for:
(i) Period - 1 _________%
(ii) Period - 2 _________%
(iii) Period - 3 _________%
(iv) 3 mo. avg. _________%
25.3 Investor Charge-Offs
(i) Aggregate dollar amount _________________
(ii) Per $1,000 of Initial Investor Interest _________________
25.4 Reimbursed Investor Charge-Offs
(i) Aggregate dollar amount _________________
(ii) Per $1,000 of Initial Investor Interest _________________
25.5 Reallocated Principal Collections
(i) Aggregate dollar amount _________________
(ii) Per $1,000 of Initial Investor Interest _________________
25.6 Base Rate _________________
-3-
<PAGE>
25.7 Portfolio Yield minus Base Rate for:
(i) Period - 1 _________%
(ii) Period - 2 _________%
(iii) Period - 3 _________%
(iv) 3 mo. avg. _________%
26. Monthly Investor Servicing Fee _________________
27. Accumulation Shortfall _________________
28.1 Principal Funding Investment Proceeds _________________
28.2 Principal Funding Investment Shortfall _________________
29. Withdrawal from Reserve Account under Section 4.6 _________________
30. Required Reserve Account Amount _________________
31. Available Reserve Account Amount _________________
32. Pool Factor _________________
33. Collateral Interest as a Percentage of
Investor Interest _________________
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 Accumulation 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 #_______
-4-
<PAGE>
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.
-5-
<PAGE>
EXHIBIT 3
---------
FORM OF DTC LETTER OF REPRESENTATION
<PAGE>
EXHIBIT 4
---------
FORM OF MONTHLY PAYMENT INSTRUCTIONS TO TRUSTEE
BANKERS TRUST COMPANY
ABA #021001033
A/C 01-419-647
CORPORATE TRUST AND AGENCY GROUP
ATTENTION: LOUIS BODI/KEITH SCHOTT
RE: PEOPLE'S BANK1997-2 FINANCE CHARGE ACCOUNT
ON _________________________ PLEASE PERFORM THE FOLLOWING TRANSACTIONS PURSUANT
TO THE SERIES 1997-2 SUPPLEMENT AND THE AMENDED AND RESTATED POOLING AND
SERVICING AGREEMENT DATED AS OF MARCH 18, 1997:
<TABLE>
<S> <C>
Per Section Please withdraw $0.00 from Finance
4.6 (a) (i) & Charge Account - 22756 and deposit into the
4.6 (d) (vii) Distribution Account - 22753 to pay Monthly
Certificate Interest to Class A Investors.
Per Section Please withdraw $0.00 from Finance
4.6 (b) (i) & Charge Account - 22756 and deposit into the
4.6 (d) (viii) Distribution Account - 22753 to pay Monthly
Certificate Interest to Class B Investors.
Per Section Please withdraw $0.00 from Finance
4.6 (d) (vi) Charge Account - 22756 and deposit into the
Distribution Account - 22753 to pay Collateral
Monthly Interest to the Collateral Interest Holder.
Per Section Please withdraw $0.00 from Finance
4.6 (a) (ii), Charge Account - 22756 to pay Monthly
4.6 (b) (ii), Investor Servicing Fee to People's Bank.
4.6 (c) (i) &
4.6 (d) (vii)
Per Section Please withdraw $0.00 from Finance
4.6 (a) (iii), Charge Account - 22756 to pay Investor Default
4.6 (c) (iii) & Amount to People's Structured Finance Corp.
4.6 (d) (ix)
4.6 (d) (ix)
Per Section Please withdraw $0.00 from Finance
4.6 (d) (xvii) Charge Account - 22756 and wire to People's
Structured Finance.
</TABLE>
<PAGE>
AUTHORIZED BY: _______________________________
LISA BROOKS, VICE PRESIDENT
-2-
<PAGE>
EXHIBIT 5
---------
Form of Notification to Trustee Regarding
Completion of Required Deposits and Withdrawals
PEOPLE'S BANK
PEOPLE'S BANK CREDIT CARD MASTER TRUST, SERIES 1997-2
This is to inform you that on the Transfer Date occurring on _________
we have made all deposits and withdrawals for the Monthly Period beginning on
________ and ending on _________.
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 6
---------
Form of Notification to Trustee Regarding
Failure to Make Payment
PEOPLE'S BANK
PEOPLE'S BANK CREDIT CARD MASTER TRUST, SERIES 1997-2
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:
<PAGE>
Exhibit 4.3
(Multicurrency-Cross Border)
ISDA
International Swap Dealer 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 (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 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.
(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.
<PAGE>
(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.
(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 representative 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.
2
<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 organised and validly existing under the laws
of the jurisdiction of its organisation or incorporation and, if
relevant under such laws, in good standing;
(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 authorise 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 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, reorganisation,
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)).
3
<PAGE>
(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 on
equity or before any court, tribunal, governmental body, agency of 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 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.
(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 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,
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organised, 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 compiled 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 compiled
with or performed by it in accordance with any Credit Support Document
if such failure is continuing after any applicable grace period has
elapsed;
(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) Misrepresentations. 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 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 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 or
other similar condition or event (however
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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 aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming capable at such time of
being declared, due and payable or (2) a default by such party 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 applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement of
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 represented 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 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 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.
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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 Docuement
relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or
brought in a court of competent juridiction, 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 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 accoount 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 of 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.
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6. Early Termination
(a) Right to Terminate Following Event of Default. If if 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
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)(l) 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 it 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)(l) 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
(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 to 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
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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 any Early
Termination Date which is designated as a result of a 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
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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 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 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 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 a a consequence of such
losses.
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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 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
imdemnities 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.
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9. Miscellaneous
(a) Entire Agreement. This Agreement constitues 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 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 the 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
facsimilie transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transmission 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 facsimilie
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which is 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 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
exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of the
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 organisation of such party, the obligations
of such party are the same as if it had entered 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 specifyed 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.
12
<PAGE>
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
(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 ("Proceeding"), 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
13
<PAGE>
reason any party's Process Agent is unable to act as 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;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Sections 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, authorisation, 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.
14
<PAGE>
"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 organised, 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 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 centre, 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, and 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 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
15
<PAGE>
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 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 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 remianing 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
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 criteria that
such party applies generally at the 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, organised 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
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 (in the reasonable belief of the party making the
determination) produce a commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
16
<PAGE>
"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, 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).
"Termination 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) if 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.
"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
17
<PAGE>
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 reasonable 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:
18
<PAGE>
SCHEDULE
to the
MASTER AGREEMENT
Dated as of September __, 1997
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
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("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, 3% of Party B's
stockholders' equity, as shown on the most recent annual audited financial
statements of J.P. Morgan & Co. Incorporated.
(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.
-2-
<PAGE>
(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 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 1997-2 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 1997-2 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
-3-
<PAGE>
required to be made by Party B hereunder, under the Agreement and under any
Confirmation shall be made without offset, counterclaim or defense.
(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 Section 3(f) of this
Agreement, Party A and Party B each make the following representation as to
itself:
Its country of domicile is the United States of America.
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:
-4-
<PAGE>
Party required to Form/Document/ Date by which
deliver document Certificate to be delivered
- ---------------- ----------- ---------------
Party A W-9 for the Trust Upon execution of this
Agreement.
(b) Other documents to be delivered are:
Party required Date by Covered by
to deliver Form/Document/ which to be Section 3(d)
document Certificate delivered Representation
- -------- ----------- --------- --------------
Party A A Certificate of an Upon execution Yes.
authorized officer of of this
the party, certifying Agreement.
the names, true
signatures and authority
of the officers of the
party signing this
Agreement.
Party A Opinion of counsel of Upon execution Yes.
Party A in form and of this
substance satisfactory Agreement.
to Party B.
Party B A certificate of an Upon execution Yes.
authorized officer of of this
the party, certifying Agreement.
the names, true
signatures and authority
of the officers of the
party signing this
Agreement.
Party B Opinion of counsel to Upon execution Yes.
Party B and addressed to of this
Party A, the rating Agreement.
agencies rating the
Certificates issued by
the Trust, covering such
other matters as
reasonably requested by,
and satisfactory to, the
addressees.
-5-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Party required Date by Covered by
to deliver Form/Document/ which to be Section 3(d)
document Certificate delivered Representation
- -------------- -------------- --------- --------------
Party B A copy of the annual 120 days after Yes.
report of J.P. Morgan & each fiscal
Co. Incorporated year of Party
containing audited B.
consolidated financial
statements for Party B
for such fiscal year
certified by independent
public accountants and
prepared in accordance
with generally accepted
accounting principles
consistently applied.
</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
-6-
<PAGE>
Address for notices or communications to Party B:
Address: Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Global Swaps Unit
Telex No.: WUD 649216 Answerback: MGT UI
Facsimile No.: (212) 648-5922
Telephone No.: [ ]
(For all purposes.)
(b) Process Agent. For the purpose of Section 13(c):
Not applicable.
(c) Multibranch Party. For the purpose of Section 10:
(i) Section 10(a) shall apply to Party B; and
(ii) For the purpose of Section 10(c):
(A) Party A is not a Multibranch Party.
(B) Party B is not a Multibranch Party.
(d) Calculation Agent. The Calculation Agent is Party B, unless
otherwise specified in a Confirmation in relation to the relevant Transaction.
(e) Credit Support Document. None, except as may be provided pursuant
to paragraph (g) of Part 1 of this Schedule.
(f) Credit Support Provider. None, except as may be applicable pursuant
to paragraph (g) of Part 1 of this Schedule.
(g) 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.
(h) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
(i) 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.
-7-
<PAGE>
PART 5
Other Provisions
----------------
(a) Recourse. Notwithstanding anything to the contrary contained in this
Agreement, but subject to paragraph (f) of this Part 5, 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.
(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
-8-
<PAGE>
(i) 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 (ii) Party B has given its consent to such transfer (which
consent shall not be unreasonably withheld by Party B). 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,
this Schedule or any Confirmation to the contrary, the terms 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 1997-2 Certificates.
-9-
<PAGE>
(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 Potential Event of 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 pursuant to Section 6(e)(ii)(1) as if Party A
were the sole Affected Party, 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
September __, 1997.
(k) Transactions. This Agreement and all Transactions relate to the
Trust's Series 1997-2 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 September __, 1997, 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 Amended
and Restated Pooling and Servicing Agreement, dated as of March 18, 1997,
amending and restating in the entirety, 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 1997-2 Supplement, dated as of
September __, 1997 (the "Supplement") and as otherwise amended to date (as so
amended and 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
-10-
<PAGE>
C.F.R. (S) 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.
[Remainder of page intentionally left blank]
-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 MORGAN GUARANTY TRUST COMPANY
individual capacity but solely OF NEW YORK
as Trustee for People's Bank
Credit Card Master Trust
By: By:
---------------------------------- ---------------------------------
Name: Name:
Title: Title:
DATE: DATE:
-------------------------------- -------------------------------
<PAGE>
[CLASS A]
CONFIRMATION
------------
Date: September ___, 1997
To: Bankers Trust Company,
not in its individual
capacity, but solely as
Trustee for People's Bank
Credit Card Master Trust
Attention:
From: , (the Cap Provider)
----------------------
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 September ___, 1997, 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 September ___, 1997, between
People's Bank and the Cap Provider, which supplements the Master Agreement dated
as of September ___, 1997, between People's Bank and the Cap Provider shall be
deemed canceled in its entirety, and all right, title, obligations and interest
created thereunder shall cease to exist, except that this Confirmation shall be
effective.
<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 the
Distribution Date in ________,_____ 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
---- ------
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
________ ___, ____ $___________
Trade Date: September ___, ____/1/
- --------------------
/1/ This Confirmation relates to an Interest Rate Cap Assignment and Assumption
Agreement, dated as of September ___, 1997 among People's Bank, the Trustee
and the Cap Provider (the "Assignment Agreement"), pursuant to which
People's Bank transferred all of its rights, title, obligations and
interest in and under two confirmations, dated September __, 1997 between
People's Bank and Cap Provider. Such confirmations had a "Trade Date" of
September ___, 1997 and an "Effective Date" of September ___. 1997.
-2-
<PAGE>
Effective Date: September ___, 1997/2/
Effective Date
of Assignment: September ___, 1997
Termination Date: The Distribution Date in _____,
____.
Fixed Rate Amounts:
Fixed Rate Payer: Bankers Trust Company, not in its
individual capacity, but solely as
Trustee for People's Bank Credit Card
Master Trust (the "Trustee")
Fixed Rate Payer
Payment Date: Not applicable.
Fixed Amount: Zero./3/
Floating Amounts:
Floating Rate Payer: The Cap Provider
Cap Rate: ___% per annum
Floating Rate Payer
Payment Dates: The third Business Day preceding each
Distribution Date. Early Payment
applies. No adjustment of Floating Rate
Payer Payment Dates, except for any
adjustment of any Distribution Date, as
provided in the definition of
"Distribution Dates".
Period End Dates: Each Distribution Date. No adjustment of
Period End Dates, except for any
adjustment of any Distribution Date, as
provided in the definition of
"Distribution Dates".
- -------------------------
/2/ See footnote 1.
/3/ Pursuant to the Assignment Agreement, under the [Class A] confirmation,
dated September ___, 1997 executed by People's Bank and the Cap Provider,
relating to this Confirmation, the Fixed Amount was U.S.$__________.
-3-
<PAGE>
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: The Cap Provider
(c) Account Details:
Payments to Bankers Trust
Company, as Trustee
Account for payments: Bankers Trust Company
ABA No.: __________
Account No.: _________
Reference: People's Bank 1997-2
Attention: Corporate Trust and
Agency Group
Payments to Cap Provider
Account for payments: ________________,
______________
ABA No.: ____________
Account No.: ______________
Account Name: __________
(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
-4-
<PAGE>
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:
Credit Support
Documents with
respect to Cap
Provider: See Master Agreement.
Counterparty Credit
Support Documents: None.
Certain Defined Terms:
"Distribution Dates" shall mean ________ ___, _____ and the fifteenth day
of each calendar month thereafter, or, if such fifteenth day is not a Business
Day, the next succeeding Business Day.
-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.
[CAP PROVIDER]
By:
-----------------------
[Name]
[Title]
<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:
-------------------------------
<PAGE>
[Class B]
CONFIRMATION
------------
Date: September __, 1997
To: Bankers Trust Company,
not in its individual
capacity, but solely as
Trustee for People's Bank
Credit Card Master Trust
Attention: Structured Finance Group
From:
---------------------------------
(the "Cap Provider")
Transaction
Reference Number: [ ]
The purpose of this letter agreement is to set forth the terms and
conditions of the Transaction entered into between us. 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 September __, 1997, 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 September __, 1997, between
People's Bank and the Cap Provider, which supplements the Master Agreement dated
as of September __, 1997, between People's Bank and the Cap Provider shall be
deemed cancelled in its entirety, and all right, title,
<PAGE>
obligations and interest created thereunder shall cease to exist, except that
this Confirmation shall be effective.
(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.$__________
Trade Date: _____ __, ____/1/
Effective Date: _____ __, ____/2/
Effective Date
of Assignment: _____ __, ____
Termination Date: The Distribution Date in
_____, ____.
Fixed Rate Amounts:
Fixed Rate Payer: Bankers Trust Company, not in
its individual capacity, but
solely as Trustee for People's
Bank Credit Card Master Trust
(the "Trustee")
Fixed Rate Payer
Payment Date: Not applicable.
Fixed Amount: Zero./3/
- --------------------
/1/ This Confirmation relates to an Interest Rate Cap Assignment and Assumption
Agreement, dated as of September __, 1997, among People's Bank, the Trustee
and the Cap Provider (the "Assignment Agreement"), pursuant to which
People's Bank transferred all of its rights, title, obligations and
interest in and under two confirmations, dated September __, 1997, between
People's Bank and the Cap Provider. Such confirmations had a Trade Date of
September __, 1997 and an Effective Date of September __, 1997.
/2/ See footnote 1.
/3/ Pursuant to the Assignment Agreement, under the [Class B] Confirmation,
dated September __, 1997, executed by People's Bank and the Cap Provider,
relating to this Confirmation, the Fixed Amount was U.S.$_______.
-2-
<PAGE>
Floating Amounts:
Floating Rate Payer: Cap Provider
Cap Rate: ____% per annum
Floating Rate Payer
Payment Dates: The fourth Business Day preceding
each Distribution Date. Early
Payment applies. No adjustment of
Floating Rate Payer Payment Dates,
except for any adjustment of any
Distribution Date, as provided in
the definition of "Distribution
Dates".
Period End Dates: Each Distribution Date. No
adjustment of Period End Dates,
except for any adjustment of any
Distribution Date, as provided in
the definition of "Distribution
Dates".
Floating Rate for Initial
Calculation Period: To be determined.
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: Cap Provider
(c) Account Details:
-3-
<PAGE>
Payments to Bankers Trust
Company, as Trustee:
Account for payments: Bankers Trust Company
ABA No.: _________
Account No.: ________
Reference: People's Bank 1997-2
Attention: Corporate Trust and
Agency Group
Payments to Cap Provider:
Account for payments: ________________________,
________
ABA No.: _________
Account No.: __________
Account Name: _____________
______________________________.
(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:
Credit
Support Documents with
respect to Cap Provider: See the Master Agreement.
Credit Support Documents with
respect to Trustee: None.
Certain Defined Terms:
-4-
<PAGE>
"Distribution Dates" shall mean ______, __, ____ and the fifteenth day of each
------------------
calendar month thereafter, or, if such fifteenth day is not a Business Day, the
next succeeding Business Day.
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.
[CAP PROVIDER]
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:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT 5.1
[Letterhead of Mayer, Brown & Platt]
[FILED WITH
SEC THROUGH
EDGAR FILING]
September 25, 1997
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 1997-2
--------------------------------------------------------------
Floating Rate Class B Asset Backed Certificates, Series 1997-2
--------------------------------------------------------------
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
August 8, 1997 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 1997-2 (the "Class A
Certificates") and the Floating Rate Class B Asset Backed Certificates, Series
1997-2 (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 the
Amended and Restated 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 authorized, executed and delivered by People's
<PAGE>
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.
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]
[FILED WITH SEC THROUGH
EDGAR FILING]
September 25, 1997
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 1997-2; Floating Rate Class B Asset Backed
Certificates, Series 1997-2
-------------------------------------------------
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 1997-2 (the "Class A Certificates") and the Floating Rate Class B Asset
Backed Certificates, Series 1997-2 (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 Amended and Restated Pooling and Servicing
Agreement, dated as of March 18, 1997, as amended from time to time, between the
Company, as Seller and Servicer, and Bankers Trust Company, a New York banking
corporation, as Trustee, and the Series 1997-2 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
<PAGE>
amended by Amendment No. 1 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, the Interest Rate Caps 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.
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]
Reply to: Bridgeport
Telephone: (203) 330-2000
September 25, 1997
People's Bank [
850 Main Street
Bridgeport, Connecticut 06604
]
J.P. Morgan Securities Inc., as
Representative of the Class A
Underwriters and as Class B
Underwriter
60 Wall Street Standard & Poor's Corporation
New York, New York 10260-0060 25 Broadway
New York, New York 10004
Bankers Trust Company Moody's Investors Service, Inc.
Four Albany Street 99 Church Street
New York, New York 10006 New York, New York 10004
RE: PEOPLE'S BANK CREDIT CARD MASTER TRUST
FLOATING RATE CLASS A ASSET BACKED CERTIFICATES, SERIES 1997-2
FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-2
--------------------------------------------------------------
Gentlemen:
You have requested our opinion as to certain Connecticut income tax
consequences of the issuance of Floating Rate Class A Asset Backed Certificates,
Series 1997-2 and Floating Rate Class B Asset Backed Certificates, Series 1997-2
(collectively, the "Certificates") pursuant to an Amended and Restated Pooling
and Servicing Agreement dated as of March 18, 1997, as amended from time to
time, by and between People's Bank ("People's"), as seller and servicer, and
Bankers Trust Company, a New York banking corporation, as trustee acting on
behalf of the holders of Certificates, as the same is supplemented by the Series
1997-2 Supplement by and between the same parties and dated as of September [ ],
1997 (collectively, the "Pooling and Servicing Agreement"). 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.
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In connection with your request, we have been furnished with copies of: (a)
the Registration Statement on Form S-1 (as amended by Amendment No. 1 thereto,
the "Registration Statement") relating to the Certificates; (b) the Pooling and
Servicing Agreement; and (c) 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.
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.
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.
This opinion is for your use, and may not be relied upon by any other
person without our prior written consent.
Very truly yours,
PULLMAN & COMLEY, LLC
