<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1997
REGISTRATION NO. 33-99508
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
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
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
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:
ANDREW M. FAULKNER, ESQ.
LAURA A. DEFELICE, ESQ.
MAYER, BROWN & PLATT SKADDEN, ARPS, SLATE,
1675 BROADWAY MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10019 919 THIRD AVENUE
(212) 506-2500 NEW YORK, NEW YORK 10022
(212) 735-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
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 PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) FEE(2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Floating Rate Class A
Asset Backed
Certificates, Series
1997-1................ $425,000,000 100% $425,000,000 $128,787.88
- --------------------------------------------------------------------------------------------
Floating Rate Class B
Asset Backed
Certificates, Series
1997-1................ $33,750,000 100% $33,750,000 $10,227.27
- --------------------------------------------------------------------------------------------
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) $70,000 of which has been previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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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; Risk Factors; The
Trust; The Receivables; Receivables
Yield Considerations; Certain Legal
Aspects of the Receivables
4. Use of Proceeds.................. Use of Proceeds
5. Determination of Offering Price.. *
6. Dilution......................... *
7. Selling Security Holders......... *
8. Plan of Distribution............. Underwriting
9. Description of Securities to be
Registered....................... Prospectus Summary; The Trust; The
Receivables; Maturity Considerations;
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
1997-1 and $33,750,000 aggregate principal amount of Floating Rate Class B
Asset Backed Certificates, Series 1997-1. 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 +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 18, 1997
$458,750,000
PEOPLE'S BANK CREDIT CARD MASTER TRUST
$425,000,000 FLOATING RATE CLASS A ASSET BACKED CERTIFICATES, SERIES 1997-1
$33,750,000 FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-1
[LOGO] PEOPLE'S BANK
TRANSFEROR AND SERVICER
----------
Each of the Floating Rate Class A Asset Backed Certificates, Series 1997-1
(the "Class A Certificates") and each of the Floating Rate Class B Asset Backed
Certificates, Series 1997-1 (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
"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 People's
Structured Finance Corp. ("PSFC"), a wholly-owned subsidiary of People's Bank,
owns the undivided interest in the Trust not represented by the Certificates or
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 April 15, 1997 and o n the 15th day of each month thereafter
(or, if such 15th day is not a business day, on the next succeeding
(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 23.
----------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR RECOURSE OBLIGATIONS OF PEOPLE'S BANK, PSFC OR ANY OF THEIR
AFFILIATES. A CERTIFICATE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THE RECEIVABLES ARE NOT INSURED
OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
PRICE TO PUBLIC(1) UNDERWRITING DISCOUNT(2) PROCEEDS TO PSFC(1)(3)
------------------ ------------------------ ----------------------
<S> <C> <C> <C>
Per Class A Certifi-
cate................... % % %
Per Class B Certifi-
cate................... % % %
Total................... $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, at the applicable Certificate Rate (as
defined herein) from the Closing Date.
(2) People's Bank and PSFC have agreed to indemnify the Underwriters (as
defined herein) against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
(3) Before deduction of expenses of the offering payable by People's Bank
estimated to be $750,125.
----------
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 March , 1997,
through the facilities of The Depository Trust Company, Cedel Bank, societe
anonyme, and the Euroclear System.
----------
UNDERWRITERS OF THE CLASS A CERTIFICATES
GOLDMAN SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
GOLDMAN, SACHS & CO.
----------
The date of this Prospectus is , 1997.
<PAGE>
(Continued from previous page)
business day) (each a "Distribution Date"). Interest will accrue on the Class
A Certificates from the Closing Date through and including April 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 April 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 February 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 March 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
Certificateholders until the final principal payment has been paid in respect
of the Class A Certificates. See "Description of the Certificates--Principal
Payments".
The fractional undivided interest in the Trust represented by the Class B
Certificates will be subordinated to the Class A Certificates to the extent
described herein. In addition, the Collateral Interest will be subordinated to
the Offered Certificates to the extent described herein.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports containing unaudited information concerning the
Trust and prepared by the Servicer will be sent on behalf of the Trust to Cede
& Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") and
registered holder of the Offered Certificates, pursuant to the Agreement. See
"Description of the Certificates--Book-Entry Registration", "--Reports to
Certificateholders" and "--Evidence as to Compliance". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Transferor does not intend to send any of its
financial reports to Certificateholders or to the owners of beneficial
interests in the 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.
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Commission on behalf of the Trust with respect to the Certificates
offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement and amendments thereof and exhibits
thereto, which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of the Registration Statement and amendments thereof and exhibits
thereto may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a Web site at "http://www.sec.gov" that
contains information regarding registrants that file electronically with the
Commission.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
CERTIFICATES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH OFFERED CERTIFICATES, AND THE IMPOSITION OF A PENALTY
BID, DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used herein are defined elsewhere in this Prospectus. A listing of the pages on
which some of such terms are defined is found in the "Index of Key Terms".
Unless the context requires otherwise, certain capitalized terms, when used
herein, relate only to the Certificates.
Title of Securities.....
$425,000,000 Floating Rate Class A Asset Backed
Certificates, Series 1997-1 (the "Class A
Certificates") and $33,750,000 Floating Rate Class B
Asset Backed Certificates, Series 1997-1 (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 1997-1 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
1997-1 Supplement; the term "Offered
Certificateholders" refers to holders of the Offered
Certificates; the term "Certificateholders" refers to
the Offered Certificateholders and the Collateral
Interest Holder collectively; the term "Class A
Certificateholders" refers to holders of the Class A
Certificates and the term "Class B
Certificateholders" refers to holders of the Class B
Certificates; the term "Series" refers to any series
of certificates issued by the Trust, including the
Certificates; and the term "Series 1997-1" 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.
3
<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 certificateholders of
any Series, an interest rate cap agreement for the
exclusive benefit of the Class A Certificateholders
(the "Class A Interest Rate Cap") and an interest
rate cap agreement for the exclusive benefit of the
Class B Certificateholders (the "Class B Interest
Rate Cap" and, together with the Class A Interest
Rate Cap, the "Interest Rate Caps"), each provided by
Lehman Brothers Financial Products Inc. (the
"Interest Rate Cap Provider"), and any other
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 Certificateholders will not be entitled
to the benefits of any Enhancement issued with
respect to any Series other than Series 1997-1, and
the holders of the certificates of other Series will
not be entitled to the benefits of 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, interest rate cap or swap or
other contract or agreement principally for the
benefit of certificateholders of such Series. The
term "Enhancement" shall mean, with respect to the
Offered Certificates, the Interest Rate Caps, the
subordination of the Collateral Interest and, in the
case of the Class A Certificates, the subordination
of the Class B Investor Interest.
Securities Offered......
The Class A Certificates and the Class B Certificates
will be issued on March , 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. An Offered Certificate Owner will not be
entitled to receive a definitive certificate
representing such person's interest, except in the
event that Definitive Certificates are issued under
the limited circumstances described herein. In such
- -------- event, interests in the Offered Certificates
* VISA (R) and MasterCard (R) are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
4
<PAGE>
will be available in minimum denominations of $1,000
and integral multiples thereof. All references herein
to Offered Certificateholders, Class A
Certificateholders or Class B Certificateholders
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
Certificateholders, 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;
Transferor Interest.....
On the Closing Date, the amount of the Class A
Certificateholders' interest in Principal Receivables
will equal $425,000,000 (the "Class A Initial
Investor Interest"), the amount of the Class B
Certificateholders' 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
5
<PAGE>
to an Investor Exchange. The Class A
Certificateholders' interest in Principal Receivables
on any date after the Closing Date (the "Class A
Investor Interest") will equal the Class A Initial
Investor Interest, less 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 Certificateholders' interest in Principal
Receivables on any date after the Closing Date (the
"Class B Investor Interest") will equal the Class B
Initial Investor Interest, less all payments in
respect of principal made on the Class B
Certificates, 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 the Transferor Interest,
the principal amount of the Transferor Interest will
fluctuate. The Holder of the Exchangeable Transferor
Certificate may tender the Exchangeable Transferor
Certificate or, if provided in the relevant
Supplement, the Transferor may tender certificates
representing all or a portion of any Series of
certificates and the Holder of the Exchangeable
Transferor Certificate may tender the Exchangeable
Transferor Certificate, to the Trustee and, upon
satisfying certain conditions, cause the Trustee to
issue one or more new Series, as described in
"Description of the Certificates--Exchanges", which
Exchange may have the effect of decreasing the
Transferor Interest. As of the date hereof, five
other Series have been issued by the Trust, one of
which has been paid in full. See "Annex I: Prior
Series Issued and Outstanding".
6
<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
Certificateholders 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 Certificateholders, the Class B
Certificateholders 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 Certificateholders 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
Certificateholders, the Class B Certificateholders
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 April 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 (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
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 period which has
not been
7
<PAGE>
distributed to the Class A Certificateholders, plus,
to the extent that there is available Excess Spread,
(z) an amount equal to the product of (a) the amount
by which the Class A Certificate Rate exceeds %, (b)
the Class A Excess Principal and (c) the actual
number of days in the related Interest Period divided
by 360 (the "Class A Excess Interest"). In the case
of the Class B Certificates, interest will be
distributed in an amount equal to the sum of (w) the
product of (a) LIBOR, determined as described herein,
plus % (the "Class B Certificate Rate"; the Class A
Certificate Rate and the Class B Certificate Rate are
each sometimes referred to as 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
Certificateholders, plus, to the extent that there is
available Excess Spread, (z) an amount equal to the
product of (a) the amount by which the Class B
Certificate Rate exceeds %, (b) the Class B Excess
Principal and (c) the actual number of days in the
related Interest Period divided by 360 (the "Class B
Excess Interest"). For any Interest Period in which
the Class A Certificate Rate or the Class B
Certificate Rate, as the case may be, exceeds the
Class A Cap Rate or the Class B Cap Rate,
respectively, the portion of the Class A Monthly
Interest or the Class B Monthly Interest attributable
to the amount by which the Class A Certificate Rate
or the Class B Certificate Rate, as the case may be,
exceeds the Class A Cap Rate or the Class B Cap Rate,
respectively, will be funded from payments made
pursuant to the Class A Interest Rate Cap or the
Class B Interest Rate Cap, respectively, and from
Excess Spread. Interest distributable on April 15,
1997 will accrue from and including the Closing Date
to and including April 14, 1997 (the "Initial
Interest Period").
Revolving Period........
No principal will be payable to Offered
Certificateholders until the February 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 to and including the
day prior to the day on which the Controlled
Accumulation Period or the Rapid Amortization Period
commences
8
<PAGE>
(the "Revolving Period"), Available Investor
Principal Collections otherwise allocable to the
Certificateholders 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
December 1, 2000 (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 Certificateholders 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 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 Certificateholders on the Class B Scheduled
Payment
9
<PAGE>
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
Certificateholders 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 Amount on each Transfer
Date and that scheduled principal will be available
for distribution to the Class A Certificateholders on
the Class A Scheduled Payment Date, no assurance can
be given in that regard. See "Maturity
Considerations".
10
<PAGE>
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 the Rapid
Amortization Period has not commenced, Available
Investor Principal Collections will be used to pay
the Class B Certificateholders 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
Certificateholders 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
Certificateholders 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 1997-1 Termination Date (the
"Rapid Amortization Period"), the Principal
Allocation along with Shared Principal Collections
from other Series, if any, will be distributed
monthly to the Class A Certificateholders until the
Class A Investor Interest is paid in full and,
following the final principal payment to the Class A
Certificateholders, to the Class B Certificateholders
until the Class B Investor Interest is paid in full
and, following the final principal payment to the
Class B Certificateholders, 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.
Scheduled Payment of
Principal 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 February 2002 Distribution Date
(the "Class A Scheduled Payment Date") and the March
2002 Distribution Date (the "Class B Scheduled
Payment
11
<PAGE>
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 October 2004 Distribution Date
(the "Scheduled Series 1997-1 Termination Date").
After the Scheduled Series 1997-1 Termination Date,
neither the Trust nor the Transferor will have any
further obligation to pay principal or interest on
the Certificates.
Exchanges...............
The Agreement authorizes the Trustee to issue two
types of certificates: (i) one or more Series of
certificates transferable and having the
characteristics described below and (ii) the
Exchangeable Transferor Certificate, a certificate
evidencing the Transferor Interest, currently held by
PSFC and transferable only as provided in the
Agreement. The Agreement also provides that, pursuant
to any one or more supplements to the Agreement
(each, a "Supplement"), the 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 1997-1
Supplement permits an Investor Exchange with respect
to the Certificates. See "Description of the
Certificates--Exchanges". At all times, however, the
interest in the Principal Receivables in the Trust
represented by the Transferor Interest must equal or
exceed the Minimum Transferor Interest (as defined
below). Under the Agreement, the Supplement executed
by the Transferor and the Trust in conjunction with
an Exchange will define, with respect to any Series,
the Principal Terms of the Series. The Transferor and
the Holder of the Exchangeable Transferor Certificate
may offer any Series to the public or other investors
under a prospectus or other disclosure document (a
"Disclosure Document") in transactions either
registered under the Securities Act or exempt from
registration thereunder, directly or through the
Underwriters or one or more other underwriters or
placement agents, in fixed-price offerings or in
negotiated transactions or otherwise. The Transferor
and the Holder of the Exchangeable Transferor
Certificate may offer, from time to time, additional
Series issued by the Trust. See "Description of the
Certificates--Exchanges".
Under the Agreement and pursuant to a Supplement, an
Exchange may occur only upon delivery to the Trustee
of the following: (i) a Supplement specifying the
Principal Terms of such Series, (ii) an opinion of
counsel to the effect that the certificates of such
Series under existing law will be characterized as
indebtedness for Federal income tax purposes and that
the issuance of such Series
12
<PAGE>
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").
Proceeds from the sale of all or a portion of an
Interest Rate Cap will also be treated under the
Supplement as Finance Charge Collections, allocable
to the related class of Offered Certificates. In
addition, if the Transferor exercises the Discount
Option in accordance with the terms and conditions of
the Agreement, an amount equal to the product of the
Discount Percentage and the amount of Receivables
arising in designated Accounts on and after the date
such option is exercised that otherwise would be
Principal Receivables will be treated as Finance
Charge Receivables. See "Description of the
Certificates--Discount Option". "Accounts" means VISA
and MasterCard credit card accounts identified as
part of the accounts underlying the Receivables in
the Trust Portfolio as of December 31, 1996, (the
"Series Cut-Off Date"). "Recoveries" means amounts
received with respect to charged-off credit card
receivables of the Bank Portfolio
13
<PAGE>
allocable to the Trust. The aggregate amount of
Receivables in the Accounts as of the Series Cut-Off
Date was approximately $2,174,315,242. 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, and October 1,
1996.
Automatic Additional Accounts and Additional Accounts
will consist of certain of the Transferor's VISA
credit card accounts 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".
14
<PAGE>
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. 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 Offered Certificate Owners may elect to hold their
Settlement.............. certificates through DTC (in the United States) or
Cedel or Euroclear (in Europe), each of which in turn
hold through DTC. Transfers within DTC or Cedel or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC in the United States, on the
one hand, and counterparties holding directly or
indirectly through Cedel or Euroclear, on the other,
will be effected in DTC through the relevant
Depositaries of Cedel or Euroclear. See "Description
of the Certificates--Book-Entry Registration" and
Annex II.
Servicer................ The Servicer is People's Bank, a Connecticut
chartered stock savings bank. In certain limited
circumstances, People's Bank may resign or be removed
as Servicer, in which event the Trustee or a third
party servicer may be appointed as successor servicer
(People's Bank, 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
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 1997-1
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--
15
<PAGE>
Discount Option". In addition, pursuant to the Series
1997-1 Supplement, proceeds from any sale of the
Class A Interest Rate Cap or the Class B Interest
Rate Cap will be allocated as Finance Charge
Collections to the related class of Offered
Certificates. All such amounts will then be allocated
in accordance with the respective interests of the
Certificateholders, the certificateholders of any
other Series and the Holder of the Exchangeable
Transferor Certificate in the Principal Receivables
and in the Finance Charge Receivables in the Trust.
See "Description of the Certificates--Allocation
Percentages".
Subordination of the
Class B Certificates
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 Certificateholders 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 Certificateholders 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 Certificateholders 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 Certificateholders 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 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
16
<PAGE>
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 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
17
<PAGE>
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 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 (such
reduction, a "Class B Investor Charge-Off"). In the
event of a reduction of the Class A Investor
Interest, 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
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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
Interest................ 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."
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 Certificateholders
and the Class B Certificateholders, respectively. On
each Transfer Date that the Class A Certificate Rate
or the Class B Certificate Rate for the related
Interest Period exceeds the Class A Cap Rate or the
Class B Cap Rate, respectively, the Interest Rate Cap
Provider will make a payment to the Trustee, on
behalf of the Trust, based on the amount of such
excess and the notional amount of the applicable
Interest Rate Cap. The Class A
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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. 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 certificateholders 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
certificateholders 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 Certificateholders. 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 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 Certificateholders,
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
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<PAGE>
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 1997-1 Termination Date if the
Investor Interest is reduced to an amount less than
or equal to 5% of the Initial Investor Interest, if
certain conditions set forth in the Agreement are
met. The mandatory purchase requirement is in
addition to any other provisions and remedies
provided by the Agreement and will not serve to
relieve any party of obligations it may otherwise
have or waive any remedy that is otherwise provided.
The purchase price will equal the Investor Interest,
accrued and unpaid interest on the Certificates and
all other amounts owing under the Loan Agreement
among the Trustee, the Transferor, the Servicer and
the Collateral Interest Holder (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 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
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<PAGE>
conditions of the regulations will be met. The Class
B Certificates may not be acquired with the assets of
any employee benefit plan. If the Trust's assets were
deemed to be "plan assets" of such a plan, there is
uncertainty as to whether existing exemptions from
the "prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), would apply to all transactions involving
the Trust's assets. Regardless of whether the Trust's
assets are deemed to constitute "plan assets", an
employee benefit plan's purchase of 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 It is a condition to the issuance of the Class A
Rating.................. 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 It is a condition to the issuance of the Class B
Rating.................. 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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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 Certificateholders 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".
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<PAGE>
If a conservator or receiver were appointed for the Transferor, then a Pay
Out Event could occur with respect to all Series then outstanding and,
pursuant to the Agreement, new Principal Receivables would not be transferred
to the Trust and, unless holders of more than 50% of the investor interest of
each Series of certificates issued and outstanding (or with respect to any
Series with two or more classes, more than 50% of each class) instruct
otherwise, the Trustee would sell the portion of the Receivables allocable to
each Series that did not vote to disapprove of the sale of the Receivables in
accordance with the Agreement in a commercially reasonable manner and on
commercially reasonable terms, which may cause early termination of the Trust
and a loss to certificateholders of each such Series (including the
Certificateholders) if the proceeds from such early sale allocable to such
Series, if any, and the amounts available under any Enhancement applicable to
such Series were insufficient to pay certificateholders of such Series in
full. If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver would have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. A conservator or receiver may also have the power
to cause the early sale of the Receivables and the early retirement of the
Certificates, to prohibit the continued transfer of Principal Receivables to
the Trust, and to repudiate the servicing obligations of the Transferor. In
addition, in the event of a Servicer Default relating to the insolvency of the
Servicer, if no Servicer Default other than such conservatorship or
receivership or insolvency exists, the conservator or receiver for the
Servicer may have the power to prevent either the Trustee or the
certificateholders from appointing a successor Servicer. See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Conservatorship and
Receivership".
Consumer Protection Laws. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws imposing requirements on
the making, enforcement and collection of consumer loans. The United States
Congress ("Congress") and the states may enact laws and amendments to existing
laws to regulate further the credit card industry or to reduce finance charges
or other fees or charges applicable to credit card accounts. Such laws, as
well as any new laws or rulings which may be adopted, may adversely affect the
Servicer's ability to collect on the Receivables or maintain the required
level of periodic finance charges, annual membership fees and other fees. In
addition, failure by the Servicer to comply with such requirements could
adversely affect the Servicer's ability to enforce the Receivables. 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 Base
Rate for the last of such Monthly Periods and therefore a Pay Out Event would
occur with respect to the Certificates. See "Description of the Certificates--
Pay Out Events". In addition, during recent years, there has been increased
consumer awareness with respect to the level of finance charges and fees and
other practices of credit card issuers. As a result of these developments and
other factors, there can be no assurance as to whether any federal or state
legislation will be promulgated imposing additional limitations on the monthly
periodic finance charges or fees relating to the Accounts.
Pursuant to the Agreement, the Transferor covenants to accept reassignment
of each Receivable not complying in all material respects with all
requirements of applicable law as of the time of its creation if, as a result
of such noncompliance, the related Account becomes a Defaulted Account or the
Trust's rights in, to or under the Receivable or its proceeds are impaired or
unavailable. The Transferor makes certain other representations and warranties
relating to the validity and enforceability of the Receivables. The Trustee
has not, however, and it is not anticipated that it will, make any examination
of the Receivables or the records relating thereto for the purpose of
establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy if
any such representation or warranty is breached and such breach continues
beyond the applicable cure period is that the Transferor will be obligated to
accept
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<PAGE>
reassignment of the Investor Interest in the Receivables affected thereby. See
"Description of the Certificate--Representations and Warranties" and "Certain
Legal Aspects of the Receivables --Consumer Protection Laws".
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are
insufficient funds available to reimburse such losses. See "Description of the
Certificates--Defaulted Receivables; Adjustments and Fraudulent Charges".
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. People's Bank has traditionally competed as a low fixed-rate
provider of credit card services targeting highly credit-worthy customers who
carry balances on their credit cards. The growth of People's Bank's credit
card portfolio is largely due to customers who, attracted by People's Bank's
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 Certificateholders and the
commencement of the Rapid Amortization Period. Certificateholders should be
aware that the Transferor's ability to continue to compete in the current
industry environment will affect the Transferor's ability to generate new
Receivables to be conveyed to the Trust and may also affect payment patterns.
The minimum monthly payment currently required on the Accounts generally
approximates 3% of the statement balances (as of specific dates), plus past
due amounts. A portion of the Receivables volume is a result of convenience
use by obligors who pay their entire monthly statement balance on or prior to
its due date and do not incur finance charges thereon. A significant decrease
in the cardholder monthly payment rate or minimum required payment could slow
the 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".
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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 in recent months 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 14%. 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 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
principal payment with respect to the Class A Certificates has been made as
described herein. In addition, the Class B Investor Interest is subject to
reduction if the Class A Required Amount for any Monthly Period is not funded
from Collections allocable to the Class A Investor Interest, from payments
under the Class A Interest Rate Cap, from Excess Spread, from Shared Finance
Charge Collections 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
Certificateholders in future Monthly Periods will be reduced and principal and
interest payments on the Class B Certificates may be delayed or reduced. See
"Description of the Certificates--Subordination of the Class B Certificates".
Such reductions of the Class B Investor Interest will thereafter be reimbursed
and the Class B Investor Interest increased on each Distribution Date by the
amount, if any, of Excess Spread and Shared Finance Charge Collections from
other Series available for that purpose for such Distribution Date.
Further, in the event of a sale of the Receivables due to an Insolvency
Event, the portion of the net proceeds of such sale allocable to pay principal
of the Certificateholders' interest in such Receivables will first be used to
pay principal amounts due to the Class A Certificateholders and will then be
used to pay amounts due to the Class B Certificateholders, thereby causing a
loss to Class B Certificateholders if such remaining portion is insufficient
to pay the Class B Certificateholders in full. See "Description of the
Certificates--Principal Payments" and "--Pay Out Events". If the Class B
Investor Interest is reduced to zero, the Class A Certificateholders will bear
directly the credit and other risks associated with their undivided interest
in the Trust.
Ability to Change Terms of the Receivables. Pursuant to the Agreement, the
Transferor has not transferred, and will not transfer, the Accounts to the
Trust. Only the Receivables arising in the Accounts have been and will be so
transferred. As owner of the Accounts, the Transferor has the right (to the
extent provided in the applicable credit card agreements and the Agreement) to
determine the monthly periodic finance charge and other fees which will be
applicable from time to time to the Accounts, to alter the minimum monthly
payment required on the Accounts and to change various other terms with
respect to the Accounts. A decrease in the monthly periodic finance charges,
annual membership fees, cash advance fees or Interchange could decrease the
effective yield on the
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Accounts and could result in the occurrence of a Pay Out Event for the
Certificateholders and the commencement of the Rapid Amortization Period.
Under the Agreement, the Transferor has agreed that, except as otherwise
required by law or as is deemed by the Transferor to be necessary in order to
maintain its credit card business, based upon a good faith assessment by it,
in its sole discretion, of the nature of the competition in that business, the
Transferor will not (i) reduce the annual percentage rate which determines the
monthly periodic finance charges assessed on the Receivables or other fees on
the accounts, if as a result of such reduction, its reasonable expectation of
the Portfolio Yield as of such date would be less than the weighted average
base rates of all Series or (ii) unless required by law, reduce such periodic
finance charge if its reasonable expectation is that the Portfolio Yield would
be less than the highest certificate rate for any Series then issued and
outstanding. Such changes may include the reduction or waiver of annual
membership fees in connection with the Transferor's marketing effort. The term
"Base Rate" with respect to the Certificates generally means, with respect to
any Monthly Period, the weighted average of (x) the lesser of the Class A
Certificate Rate and Class A Cap Rate, (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, 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 period), 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 Certificateholders. In servicing
the Accounts, the Servicer is also required to exercise the same care and
apply the same policies that it exercises in handling similar matters for its
own comparable accounts. Except as specified above, there are no restrictions
on the Transferor's ability to change the terms of the Accounts. While the
Transferor has no current intention of decreasing the monthly periodic finance
charges on the overall Trust Portfolio, there can be no assurance that changes
in applicable law, changes in the marketplace or prudent business practice
might not result in a determination by the Transferor to take actions changing
this or other Account terms.
Master Trust Considerations. The Trust, as a master trust, will issue the
Certificates, has issued five prior Series of certificates, one of which has
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 1997-1 Supplement
will not permit the subordination of Series 1997-1 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
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<PAGE>
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
Certificateholder, including as a result of the refixing of the Investor
Percentage with respect to the allocation of the Principal Receivables. See
"Description of the Certificates--Exchanges" and "--Allocation Percentages".
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 People's Bank'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 certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Agreement or the related Supplement. Under certain circumstances, however,
the consent or approval of a specified percentage of the aggregate investor
interest of all Series or of the investor interest of each Series will be
required to take or direct certain actions, including requiring the
appointment of a successor Servicer following a Servicer Default, amending the
Agreement in certain circumstances and directing a repurchase of all
outstanding Series upon the breach of certain representations and warranties
by the Transferor. In such instances, the interests of the Holders of the
Certificates may not be aligned with the interests of the holders of
certificates of such other Series. Thus, even if the requisite majority of
Certificateholders votes to take or direct such action, the certificateholders
of such other Series may control whether or not such action occurs.
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 1997-1 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.
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<PAGE>
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 Certificateholders in future Monthly
Periods and in a reduction of the aggregate principal amount returned to the
Certificateholders. If the Collateral Interest and, with respect to the Class
A Certificates, the Class B Investor Interest are reduced to zero,
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust. See "Description of the
Certificates--Reallocation of Cash Flows" and "--Defaulted Receivables;
Adjustments and Fraudulent Charges".
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 1997-1 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. Because of this, unless and until
Definitive Certificates are issued, Offered Certificate Owners will not be
recognized by the Trustee as Offered Certificateholders, 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 Certificateholders indirectly
through DTC and its participating organizations. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates".
Reports to Certificateholders. Unless and until Definitive Certificates are
issued, monthly and annual reports, containing information concerning the
Trust and prepared by the Servicer, will be sent on behalf of the Trust to
Cede, as nominee for DTC and the registered holder of the 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 Certificateholders".
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
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<PAGE>
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 Certificateholders will not have the
benefit at 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.
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 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 December 31, 1996
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 $49.5 million at
December 31, 1996. 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
located in Bridgeport, Connecticut. Certain operations are performed on behalf
of People's Bank by Total System Services, Inc., of Columbus, Georgia ("Total
System"), which operations include statement processing, printing and mailing.
People's Bank has used Total System for such services since it launched its
credit card program in 1985. If Total System were to fail or become insolvent,
delays in processing and recovery of information with respect to charges
incurred by cardholders could occur, and the replacement of such services
provided to People's Bank could be time-consuming. As a result, delays in
payments to Certificateholders could occur.
The entire portfolio of People's Bank VISA and MasterCard credit card
accounts (the "Bank Portfolio"), of which the accounts giving rise to the
Trust Portfolio are a part, includes premium accounts (i.e., VISA Gold, Gold
MasterCard and business accounts) and standard accounts (i.e., VISA
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<PAGE>
Classic and standard MasterCard). The accounts from which Receivables arose in
the initial Trust Portfolio included only the standard accounts and not
premium accounts. Effective with the May 1, 1996 addition of Additional
Accounts, the Trust Portfolio includes both standard and premium accounts. As
of December 31, 1996, 4.98% of the accounts in the Bank Portfolio were premium
accounts and 95.02% 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 5.33% and 94.67%, 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 related 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 add to, change or terminate any terms,
conditions, services or features of its VISA or MasterCard credit card
accounts at any time, including increasing or decreasing the periodic finance
charges, other charges or the minimum monthly payment requirements.
The credit evaluation, collection and charge-off policies and servicing
practices of People's Bank, as well as the terms and conditions governing
cardholder agreements in effect as of the date hereof, are under continuous
review and may change at any time in accordance with its business judgment,
applicable law and guidelines established by regulatory authorities.
Transactions creating the Receivables through the use of the credit cards
are processed through the VISA and MasterCard systems. Should either system
materially curtail its activities, or should People's Bank cease to be a
member of VISA or MasterCard, for any reason, a Pay Out Event could occur, and
delays in payments on the Receivables and possible reductions in the amounts
thereof could also occur.
ACCOUNT ORIGINATION
The VISA and MasterCard credit card accounts owned by People's Bank were
principally generated through: (i) direct mail solicitations of individuals
who have been prescreened at credit bureaus on the basis of criteria furnished
by People's Bank; (ii) applicant-initiated requests; (iii) applications mailed
to customers of People's Bank and customers of certain agent banks for which
People's Bank acts as a sponsor with VISA and/or MasterCard pursuant to
People's Bank's Agent Bank Account program (the "Agent Bank Accounts"); and
(iv) affinity marketing programs which are originated by People's Bank by
soliciting prospective cardholders from identifiable groups with a common
interest or a common cause, and with the assistance of an organization of the
members of
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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.
Applications and prescreened direct mail candidates are evaluated by
utilizing a credit scoring system, which was installed in July 1992. New
scoring models for prescreened and nonprescreened business were also installed
in 1996. Prior to such installation, People's Bank's credit card accounts were
underwritten completely judgmentally. Since July 1992, the judgmental
underwriting has been used to evaluate only those who score above a preset
level. The credit scoring model used by People's Bank was developed with Fair,
Isaac Companies, which has extensive experience in developing credit scoring
models. Credit scoring is intended to provide a general indication, based on
the information available, of the applicant's willingness and ability to repay
his or her obligations. Credit scoring evaluates a potential cardholder's
credit profile and certain application information in order to statistically
quantify credit risk. Models for credit scoring are developed by using
statistics to evaluate common characteristics and their correlation with
credit risk. From time to time, the credit scoring models used by People's
Bank are reviewed and are periodically updated to reflect more current
statistical data. Based on statistical analysis, People's Bank established a
policy, as of August 1, 1994, that certain accounts receiving high credit
scores may be automatically approved without judgmental review.
In the case of prescreened direct mail solicitations, selection criteria
established by People's Bank are used by credit bureaus to generate or screen
lists of qualifying individuals. Members of People's Bank's 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
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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. With certain exceptions, the current
fixed annual percentage rate for purchases is 13.9%; however, periodically
People's Bank will offer introductory rates below the standard rate. An
increase in the fixed annual percentage rate for purchases might have the
result of decreasing the volume of Receivables generated. The current fixed
annual percentage rate for cash advances is generally 19.8%. For a break-down
of the yield from finance charges and fees billed, see the table titled
"Revenue Experience Representative Portfolio" included under "Receivable Yield
Considerations".
People's Bank may, at its option, reduce the minimum payment requirements
and monthly periodic finance charges described above for the accounts of
cardholders who are members of Consumer Credit Counseling Services, an
organization which assists financially troubled cardholders with outstanding
credit card balances to devise a repayment program. Such repayment program
generally involves reducing the minimum monthly payment and/or reducing the
finance charges assessed. People's Bank may, but is not obligated to, accept
such repayment program.
People's Bank generally assesses a non-refundable annual membership fee of
$25 for standard accounts, $30 for business accounts and $40 for premium
accounts. In response to market trends commencing in 1995, People's Bank
originated a proportionately larger amount of credit card accounts that did
not require payment of an annual membership fee. In addition, People's Bank
may waive the annual membership fee, or a portion thereof, in connection with
certain solicitations, affinity programs
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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.
Payments on People's Bank accounts are generally applied, in the following
order, to: finance charges, promotional balance transfers, the balance of cash
advances previously billed, the balance of new cash advances, convenience
checks, the balance of purchases previously billed, and the balance of new
purchases.
There can be no assurance that periodic finance charges, fees, and other
charges imposed by People's Bank will remain at current levels in the future,
or that the order of application of payments made on People's Bank's accounts
will remain as described above. See "Risk Factors--Consumer Protection Laws".
Collection of Delinquent Accounts. An account is initially considered
delinquent if the minimum monthly payment indicated on the accountholder's
statement is not received within one calendar month from the statement date.
Efforts to collect delinquent credit card receivables are made by People's
Bank's personnel and collection agencies and attorneys retained by People's
Bank. Under current practice, accountholders that become one to ten days
delinquent are sent a notice on the billing statement and telephone calls to
the accountholder begin once an account becomes delinquent. People's Bank uses
an automated dialer to telephone delinquent accountholders. People's Bank also
uses the on-line collections system of Total System and a Fair, Isaac
Companies scoring system to analyze the collection risk on such accounts.
Generally, within 31 days of contractual delinquency, no additional
extensions of credit through such account are authorized and, at 61 days of
contractual delinquency, the account is closed. Consistent with the credit and
collection policies of People's Bank, in certain infrequent circumstances,
People's Bank may enter into arrangements with cardholders to extend or
otherwise change payment schedules, which can include the suspension of
finance charge accruals or bringing current (or "reaging") accounts where
cardholders make three consecutive minimum monthly payments. People's Bank
will enter into such arrangements only in circumstances where it believes its
ability to collect on the account will be enhanced by such arrangements.
The current policy of People's Bank is to charge-off, as a loan loss, the
principal portion of the receivables balance for both purchases and cash
advances at any time after the 210th through the 240th day of delinquency.
Charge-offs may occur earlier in some circumstances, as in the case of
bankrupt cardholders. At the time an account is charged off, an evaluation of
its collectibility is made on a case by case basis to determine whether
further remedies should be pursued by collection personnel at People's Bank,
outside collection agencies or, in some cases, outside attorneys. Delinquency
levels are monitored by collection managers and information is reported
regularly to senior management. Under the terms of the Agreement, any
Recoveries will be included in the assets of the Trust and considered Finance
Charge Receivables.
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LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for receivables in accounts which would have
substantially satisfied the criteria for inclusion of its related receivables
in the Trust Portfolio (the "Representative Portfolio") set forth in the
Agreement as applied on each date listed in the tables below. 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.
LOSS EXPERIENCE
REPRESENTATIVE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding(1)........ $2,108,835 $1,649,780 $1,182,028
Gross Charge-Offs(2)(3)................... 99,533 56,101 27,858
Recoveries................................ 8,327 5,175 3,876
Net Charge-Offs(3)........................ 91,206 50,926 23,982
Net Charge-Offs as Percentage of Average
Receivables Outstanding(3)............... 4.32% 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.
DELINQUENCY EXPERIENCE
REPRESENTATIVE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
1996 1995 1994
NUMBER OF DAYS ------------------- ------------------ ------------------
DELINQUENT(1) AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- ------------- -------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
31 to 60 days........ $ 30,477 1.40% $23,227 1.27% $13,888 0.92%
61 to 90 days........ 19,514 0.90 13,292 0.73 7,476 0.50
91 to 120 days....... 15,216 0.70 11,397 0.62 5,178 0.34
121 to 150 days...... 12,650 0.58 9,032 0.49 4,069 0.27
151 to 180 days...... 9,808 0.45 7,384 0.40 3,124 0.21
181 days or greater.. 14,665 0.68 10,613 0.58 4,498 0.30
-------- ---- ------- ---- ------- ----
Total(2)........... $102,330 4.71% $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.
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The rise in delinquencies and charge-offs as a percentage of the
Representative Portfolio in 1995 and in 1996 are the result of a variety of
factors. Among them are: (i) the reduction in the rate of growth in the
Receivables in the Representative Portfolio in calendar years 1995 and 1996 as
compared to the rate of growth in the Receivables in the Representative
Portfolio that occurred in 1994 (the rate of delinquency on new accounts
typically being below the rate of delinquency on seasoned accounts; the
average receivables outstanding for the year ended December 31, 1993, was
approximately $794,728,000); (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 $102
million of receivables as of December 31, 1996. People's Bank will not add
additional receivables of this type to the Trust without rating agency
approval.
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.
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
Certificateholders and calculating the Portfolio Yield.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts from the Bank
Portfolio of VISA and MasterCard credit card accounts satisfying eligibility
criteria set forth in the Agreement (the "Trust Portfolio"). Such criteria do
not create a selection adverse to the Certificateholders. Pursuant to the
Agreement, the Transferor has the right (and, under certain circumstances, the
obligation), subject to certain limitations and conditions set forth therein,
to designate from time to time Additional Accounts and to transfer to the
Trust all Receivables of such Additional Accounts, whether such Receivables
are then existing or thereafter created. Any Additional Accounts designated
pursuant to the Agreement must be Eligible Additional Accounts as of the date
the Transferor designates such accounts as Additional Accounts. The Agreement
also provides that the Transferor will add as Automatic Additional Accounts
certain new accounts opened in the ordinary course of its business. Automatic
Additional Accounts will be added to the Trust on the business day that they
are originated if certain requirements are satisfied. See "Description of the
Certificates--Addition of Accounts". Automatic Additional Accounts will
consist of certain of the Transferor's VISA and MasterCard credit card
accounts, constituting Eligible Automatic Additional Accounts and satisfying
certain other criteria, and arising in Accounts designated by the Transferor
from time to time. The Transferor may designate additional categories of
Automatic Additional Accounts; provided, however, that the Transferor shall
have received notice from each Rating Agency that such designation will not
result in a downgrading or withdrawal of its rating of any certificates of any
Series outstanding. In addition, the Transferor is
36
<PAGE>
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
totalled $2,174,315,241.66. The Accounts had, as of the December 1996 Monthly
Period, an average outstanding balance of $1,611 and an average credit limit
of $5,393. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was 29.87%, and the weighted average age of the
Accounts was approximately 35 months. As of the December 1996 Monthly Period,
cardholders whose Accounts giving rise to the Receivables are included in the
Trust Portfolio have billing addresses in all 50 States and the District of
Columbia.
37
<PAGE>
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 December 1996 Monthly Period for each of the Accounts. 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 December 1996 Monthly Period.
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......... 23,608 1.75% $ (2,338,352.86) (0.11)%
Zero Balance........... 475,463 35.22 0.00 0.00
$0.01-$500.00.......... 167,263 12.39 32,059,607.74 1.47
$500.01-$1,000.00...... 91,524 6.78 68,320,030.42 3.14
$1,000.01-$3,000.00.... 268,079 19.86 529,653,872.47 24.36
$3,000.01-$5,000.00.... 211,931 15.70 833,181,636.29 38.32
$5,000.01-$10,000.00... 109,623 8.12 685,282,359.98 31.52
Over $10,000.00........ 2,376 0.18 28,156,087.62 1.30
--------- ------ ----------------- ------
Total................ 1,349,867 100.00% $2,174,315,241.66 100.00 %
========= ====== ================= ======
</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........ 50,587 3.75% $ 13,688,605.73 0.63%
$1,000.01-$2,000.00.... 71,932 5.33 48,383,538.53 2.23
$2,000.01-$3,000.00.... 107,004 7.93 109,217,851.22 5.02
$3,000.01-$4,000.00.... 136,363 10.10 179,441,762.88 8.25
$4,000.01-$5,000.00.... 239,347 17.73 398,642,835.14 18.33
$5,000.01-$10,000.00... 708,821 52.51 1,339,793,850.85 61.62
Over $10,000.00........ 35,813 2.65 85,146,797.31 3.92
--------- ------ ----------------- ------
Total................ 1,349,867 100.00% $2,174,315,241.66 100.00%
========= ====== ================= ======
</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................ 1,275,987 94.53% $1,949,023,112.04 89.64%
1-30 Days.............. 42,790 3.17 122,962,270.13 5.66
31-60 Days............. 10,135 0.75 30,476,975.96 1.40
61 or More Days........ 20,955 1.55 71,852,883.53 3.30
--------- ------ ----------------- ------
Total................ 1,349,867 100.00% $2,174,315,241.66 100.00%
========= ====== ================= ======
</TABLE>
38
<PAGE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL NUMBER PERCENTAGE OF TOTAL
ACCOUNT AGE ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE RECEIVABLES BALANCE
- ----------- --------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C>
0 to 6 Months........... 45,803 3.40% $ 63,392,957.57 2.92%
Over 6 to 12 Months..... 327,238 24.24 544,151,092.93 25.03
Over 12 to 24 Months.... 267,556 19.82 437,364,327.14 20.11
Over 24 to 48 Months.... 434,418 32.18 706,012,719.12 32.47
Over 48 Months.......... 274,852 20.36 423,394,144.90 19.47
--------- ------ ----------------- ------
Total................. 1,349,867 100.00% $2,174,315,241.66 100.00%
========= ====== ================= ======
</TABLE>
GEOGRAPHIC DISTRIBUTION BY RECEIVABLES BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF TOTAL NUMBER PERCENTAGE OF TOTAL
ACCOUNTS OF ACCOUNTS RECEIVABLES BALANCE RECEIVABLES BALANCE
--------- ------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Connecticut.... 183,740 13.61% $ 296,649,898.89 13.64%
California..... 116,838 8.66 198,723,669.84 9.14
Texas.......... 89,538 6.63 159,653,397.10 7.34
New York....... 82,290 6.10 127,462,691.32 5.86
Florida........ 64,544 4.78 98,684,036.54 4.54
Illinois....... 52,145 3.86 87,740,626.93 4.04
Ohio........... 54,665 4.05 84,291,064.33 3.88
Pennsylvania... 55,184 4.09 80,535,373.89 3.70
Michigan....... 42,812 3.17 70,401,803.85 3.24
New Jersey..... 43,697 3.24 66,685,250.18 3.07
Other(1)....... 564,414 41.81 903,487,428.79 41.55
--------- ------ ----------------- ------
Total........ 1,349,867 100.00% $2,174,315,241.66 100.00%
========= ====== ================= ======
</TABLE>
- --------
(1) States with less than 3.07% of the Percentage of Total Receivables Balance.
39
<PAGE>
MATURITY CONSIDERATIONS
The Agreement provides that the Class A Certificateholders and the Class B
Certificateholders 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 Certificateholders within the time periods stated in the Agreement, (b)
material breaches of certain representations, warranties or covenants of the
Transferor, (c) certain insolvency events involving the Transferor, (d) the
occurrence of a Servicer Default which would have a material adverse effect on
the Certificateholders, (e) the failure of the Transferor to convey
Receivables arising under Additional Accounts when required by the Agreement,
(f) the Trust becoming subject to regulation as an "investment company" by the
Commission within the meaning of the Investment Company Act of 1940, as
amended, (g) a reduction in the 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 Certificateholders
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 Distribution Account for distribution to the Class B Certificateholders 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 1997-1 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
40
<PAGE>
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 Certificateholders on the Class A Scheduled Payment Date and the Class
B Investor Interest will be paid to the Class B Certificateholders on the
Class B Scheduled Payment Date, respectively, no assurance can be given in
this regard. If the amount required to pay the Class A 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 1997-1 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 such
Transfer Date over the amount deposited in the Principal Funding Account as
Class A Monthly Principal for such Transfer Date.
Should the Rapid Amortization Period commence, the Certificateholders will
be entitled to receive monthly payments as provided herein of principal on
each Distribution Date (beginning with the Distribution Date in the month
following the month in which the Rapid Amortization Period commences) equal to
the product of the applicable Investor Percentage and 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 Certificateholders during
the Rapid Amortization Period greater, relative to the declining balance of
the Investor Interest, than would be the case if a percentage based on such
declining balance were used to determine the percentage of Collections to be
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
Certificateholders and the commencement of the Rapid Amortization Period, thus
shortening the maturity of the Certificates. Conversely, a significant decline
in the amount of Receivables generated during 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
Certificateholders upon reinvestment at the lower prevailing interest rates
may be lower than if the Certificates remained outstanding until the expected
maturity. Conversely, if the maturity of the Certificates is extended at a
time when interest rates generally available are higher than the Certificate
Rates, the yield to maturity
41
<PAGE>
realized by the Certificateholders may be lower than if the Certificates had
matured when expected and the Certificateholders had reinvested at the higher
prevailing interest rates.
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Representative Portfolio during any month in the period
shown and the average cardholder monthly payment rates for all months during
the periods shown, in each case calculated as a percentage of the prior
month's ending outstanding receivables balance during the periods shown.
Payment rates shown in the table are based on amounts which would be deemed
payments of Principal Receivables and Finance Charge Receivables with respect
to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES(1)
REPRESENTATIVE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Lowest............................................ 9.30% 9.12% 9.82%
Highest........................................... 11.21 11.19 13.02
Average(2)........................................ 10.43 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 Certificateholders 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
Certificateholders on the Class A Scheduled Payment Date and the Class B
Investor Interest will be paid to the Class B Certificateholders 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.
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Representative Portfolio for each of the three years ended December 31, 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,
accrual yields may exceed cash yields as amounts collected on credit card
receivables lag behind amounts accrued and billed to cardholders. Conversely,
as
42
<PAGE>
delinquencies decrease, cash yields may exceed accrual yields as amounts
collected in a current period may include amounts accrued during prior
periods. The Transferor believes, however, that during the periods shown, the
yields presented on an accrual basis closely approximated the yields on a cash
basis. The yield on both an accrual and a cash basis will be affected by
numerous factors, including the monthly periodic finance charges on the
Receivables, the amount of the annual membership fees and cash advance fees,
Interchange, changes in the delinquency rate on the Receivables and the
percentage of cardholders who pay their balances in full each month and do not
incur monthly periodic finance charges.
REVENUE EXPERIENCE
REPRESENTATIVE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Finance Charges and Fees Billed(1)..... $ 328,227 $ 263,583 $ 182,657
Average Receivables Outstanding(2)..... $2,108,835 $1,649,780 $1,182,028
Yield from Finance Charges and Fees
Billed(3)(4).......................... 15.56% 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.
(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.
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.
43
<PAGE>
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 December 31, 1996 owns 59.9% 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 $7.6 billion, total liabilities of approximately $7.0
billion, and total stockholders' equity of approximately $618 million as of
December 31, 1996. At December 31, 1996, People's Bank's Tier 1 leverage
capital ratio was 7.9%, satisfying the minimum ratio of 4.0% to 5.0% generally
required by the FDIC. People's Bank is also subject to the FDIC's risk-based
capital regulations, which require minimum ratios of Tier 1 capital and total
capital to risk-weighted assets of 4.0% and 8.0%, respectively. People's Bank
satisfied these requirements at December 31, 1996 with ratios of 10.0% and
13.9%, respectively. People's Bank's regulatory capital ratios at December 31,
1996 exceed the FDIC's numeric criteria for classification as a "well-
capitalized" institution.
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 1997-1 Supplement, entered into between People's Bank, as
Transferor of the Certificates and as Servicer of the Accounts and the
Receivables, and Bankers Trust Company, as Trustee for the certificateholders
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
five Supplements, four of which are currently outstanding in connection with
the issuance of other Series of certificates and may execute further
Supplements thereto between the Transferor and the Trustee in order to issue
additional Series. See "--Exchanges". The Trustee will provide a copy of the
Agreement (without exhibits or schedules), including each Supplement, to
certificateholders without charge upon written request. The following summary
describes certain terms of the Agreement (including the Series 1997-1
Supplement) and is qualified in its entirety by reference to the Agreement
(including the Series 1997-1 Supplement).
GENERAL
The Certificates will represent a fractional undivided interest in certain
assets of the Trust, including the right to receive the Collections received
with respect to the Receivables in the Trust allocable to the Certificates
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
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thereunder, all proceeds of the Receivables, Interchange, Recoveries, all
monies on deposit in the Collection Account and the Excess Funding Account,
funds on deposit in accounts established pursuant to the Series 1997-1
Supplement, funds on deposit in any Series accounts established for the
benefit of certificateholders other than the Certificateholders pursuant to
the related Supplement, funds on deposit and securities held in the Reserve
Account for the benefit of the Class A Certificateholders, 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
Certificateholders). The Trust will include the Receivables from Additional
Accounts and Automatic Additional Accounts which may be added from time to
time pursuant to the terms of the Agreement and will not include the
Receivables from any Removed Accounts which may be removed from the Trust from
time to time pursuant to the terms of the Agreement.
Payments of interest and principal will be made on each related Distribution
Date to Offered Certificateholders 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 Certificateholders,
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
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Offered Certificateholders
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
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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 Certificateholder before a
replacement Offered Certificate will be issued. The Certificateholder will be
required to pay any tax or other governmental charge imposed in connection
with such exchange or replacement and any other expenses (including the fees
and expenses of the Trustee and either the Transfer Agent and Registrar or the
co-transfer agent and co-registrar, as applicable) connected therewith.
DETERMINATION OF LIBOR
The Trustee will determine LIBOR for each Interest Period (as defined below)
following the Initial Interest Period. For purposes of calculating LIBOR,
"London Banking Day" is any day on which commercial banks are open for
business (including dealings in foreign exchange and deposits in U.S. dollars)
in London.
"LIBOR" means, for a specific Interest Period (other than the Initial
Interest Period), the rate for deposits in U.S. dollars for a period equal to
one month (commencing on the first day of an Interest Period) which appears on
Telerate Page 3750 (as defined below) as of 11:00 a.m., London time, on the
LIBOR Determination Date (as defined below) for such Interest Period. If such
rate does not appear on Telerate Page 3750, the rate for such Interest Period
will be determined on the basis of the rates at which deposits in U.S. dollars
are offered by the Reference Banks (as defined below) at approximately 11:00
a.m., London time, on such LIBOR Determination Date to prime banks in the
London interbank market for a period equal to one month (commencing on the
first day of such Interest Period). The Trustee will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, the rate for such Interest
Period will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for such Interest Period will
be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Trustee, at approximately 11:00 a.m., New York City time, on
the first day of such Interest Period for loans in U.S. dollars to leading
European banks for a period equal to one month (commencing on the first day of
such Interest Period).
"Interest Period" means, with respect to any Distribution Date, a period
from and including the preceding Distribution Date to and including the day
immediately preceding such Distribution Date; provided, however, that the
Initial Interest Period will commence on the Closing Date.
"LIBOR Determination Date" means with respect to any Interest Period, the
second London Banking Day preceding the first day of each Interest Period.
"Reference Banks" means four major banks in the London interbank market
selected by the Trustee.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
THE INTEREST RATE CAPS
On the Closing Date, the Trustee will enter into the Interest Rate Caps with
the Interest Rate Cap Provider. The Class A Interest Rate Cap and the Class B
Interest Rate Cap will be for the exclusive benefit of the Class A
Certificateholders and the Class B Certificateholders, respectively.
The notional amount of the Class A Interest Rate Cap (the "Class A Notional
Amount") will at all times be equal to or greater than the amount of the
Expected Class A Principal. Pursuant to the Class A Interest Rate Cap, on each
Transfer Date on which the Class A Certificate Rate for the related
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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").
The notional amount of the Class B Interest Rate Cap (the "Class B Notional
Amount") will at all times be equal to the amount of the Expected Class B
Principal. Pursuant to the Class B Interest Rate Cap, on each Transfer Date on
which the Class B Certificate Rate for the related Interest Period exceeds %
(the "Class B Cap Rate"), the Interest Rate Cap Provider will make a payment to
the Trustee, on behalf of the Trust, in an amount equal to the product of (i)
such excess, (ii) the Class B Notional Amount as of such Transfer Date and
(iii) the actual number of days in the related Monthly Period divided by 360.
The Class B Interest Rate Cap will terminate on the day following the Class B
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
Finance Charge Collections allocable to the related class of Offered
Certificates in accordance with the allocations described below in "--
Allocation of Funds."
THE INTEREST RATE CAP PROVIDER
The following information has been obtained from the Interest Rate Cap
Provider and has not been verified by People's Bank or the Underwriters. No
representation or warranty is made by People's Bank or the Underwriters with
respect thereto.
General. Lehman Brothers Financial Products Inc., ("The Cap Counterparty") is
a Delaware corporation and an indirect wholly owned subsidiary of Lehman
Brothers Inc. The Cap Counterparty currently has a long-term credit rating of
"AAA" from S&P and Fitch, and "Aaa" from Moody's. The
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Cap Counterparty will provide upon request, without charge, to each person to
whom this Prospectus Supplement is delivered, a copy of (i) the ratings
analysis from each of S&P, Fitch and Moody's evidencing those respective long-
term credit ratings and (ii) the annual reports of the Cap Counterparty.
Requests for such information should be directed to Client Services, Lehman
Brothers Financial Products Inc., 3 World Financial Center, 12th Floor, New
York, New York 10285, telephone (212) 526-1877.
Capitalization of Cap Counterparty. On November 30, 1996, total assets of
Lehman Brothers Financial Products Inc. were $1,690,407,867, total liabilities
were $1,466,940,683 and total Stockholder's Equity was $223,467,184.
BOOK-ENTRY REGISTRATION
Offered Certificateholders 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
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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 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 Certificateholder" (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
Certificateholders, as such term is used in the Agreement, and Offered
Certificate Owners will only be permitted to exercise the rights of Offered
Certificateholders indirectly through the Participants who in turn will
exercise the rights of Offered Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the 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 Certificateholder 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.
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Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled by Cedel in any of 36 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulations by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of certificates. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium 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
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Annex II. Cedel or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by an Offered Certificateholder under the
Agreement on behalf of a Cedel Participant or a Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of 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").
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 Certificateholders as provided herein on
each Distribution Date to the holders in whose names the Definitive
Certificates were registered at the close of business on the related Record
Date. Distributions will be made by check mailed to the address of such Holder
as it appears on the certificate register. The final payment on any 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 Certificateholders. The Trustee will provide such
notice to registered Offered Certificateholders not later than the fifth day
of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the "Transfer Agent and Registrar" (as defined in the Agreement), which
shall initially be Bankers Trust Company. No service charge will be imposed
for any registration of transfer or exchange, but the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith. The Transfer Agent and
Registrar, as the case may be, shall not be required to register the transfer
or exchange of Definitive Certificates for a period of 15 days preceding the
due date for any payment with respect to such Definitive Certificates.
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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 April 15, 1997,
and on each Distribution Date thereafter to Certificateholders. 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 Certificateholders, plus
(z) to the extent that there is available Excess Spread, an amount equal to
the product of (a) the amount by which the Class A Certificate Rate exceeds %
per annum, (b) the Class A Excess Principal, if any, and (c) the actual number
of days in the related Interest Period divided by 360 (the "Class A Excess
Interest").
In the case of the Class B Certificates, interest will be distributed in the
amount of the sum of (w) the product of (a) the Class B Certificate Rate, (b)
the lesser of the Class B Investor Interest as of the preceding Distribution
Date (or, in the case of the first Distribution Date, the Class B Initial
Investor Interest) after giving effect to all payments, deposits and
withdrawals on such Distribution Date and the Expected Class B Principal as of
the preceding Distribution Date, and (c) the actual number of days in the
related Interest Period divided by 360, plus (x) an amount equal to the
product of (a) the Class B Excess Principal, (b) the lesser of the Class B
Certificate Rate and % per annum, and (c) the actual number of days in the
related Interest Period divided by 360 (collectively, the "Class B Monthly
Interest"), plus (y) to the extent permitted by applicable law, any interest
accrued on such Certificates (including interest on any overdue Class B
Monthly Interest calculated at a default rate of interest) during any prior
accrual period not distributed to the Certificateholders, plus (z) to the
extent that there is available Excess Spread, an amount equal to the product
of (a) the amount by which the Class B Certificate Rate exceeds % per annum,
(b) the Class B Excess Principal, if any, and (c) the actual number of days in
the related Interest Period divided by 360 (the "Class B Excess Interest").
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
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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 Certificateholders 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. Amounts in the Principal Funding Account will be deposited in the
Distribution Account for payment to the Class A Certificateholders 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
Certificateholders. Such amounts in the Distribution Account will be paid to
the Class B Certificateholders 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.
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"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 1997-1 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 Certificateholders 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 1997-1 Termination Date
and the termination of the Trust. After payment in full of the Class A
Investor Interest, the Class B Certificateholders 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 1997-1 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 1997-1 Termination Date) and on the Scheduled Series 1997-1 Termination
Date, the Available Investor Principal Collections until the earliest of the
date the Collateral Interest is paid in full, the Scheduled Series 1997-1
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 certificateholders of all Series, assuming a principal
payment rate no greater than the lowest monthly principal payment rate on the
Receivables for the preceding twelve months and (b) the amount of principal
expected to be distributable to certificateholders of 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.
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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
Certificateholders 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 Certificateholders and the
Class B Certificateholders 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 Certificateholders and Class B Certificateholders. In
addition, payment of the Required Amounts, which includes payments to cover
shortfalls in respect of (among other things) interest and Monthly Servicing
Fees, will be made on each Distribution Date first to the Class A
Certificateholders and then to the Class B Certificateholders. 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 Certificateholders may be reallocated to the Class A
Certificateholders, and certain principal payments otherwise allocable to the
Collateral Interest Holder may be reallocated to the Class B
Certificateholders; 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 Certificateholders 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 Certificateholders will be reduced. See
"--Allocation of Funds", "--Reallocation of Cash Flows".
CONVEYANCE OF RECEIVABLES
On July 9, 1993 the Transferor transferred and assigned to the Trust all of
its right, title and interest in and to the Receivables in the Accounts then
outstanding and all Receivables thereafter created in the Accounts and all
monies due or to become due with respect thereto (including Principal
Receivables, Finance Charge Receivables and all proceeds of such Receivables).
On October 4, 1994, on July 14, 1995, on May 1, 1996 and on October 1, 1996,
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
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 December 31, 1996, 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
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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
certificateholders of such Series; (ix) the names of any accounts to be used
by such Series and the terms governing the operations of any such accounts;
(x) the percentage used to calculate monthly servicing fees; (xi) the Minimum
Transferor Interest; (xii) the minimum amount of Aggregate Principal
Receivables required to be maintained by the Transferor through the
designation of Additional Accounts; (xiii) the enhancer and terms of the
Enhancement with respect thereto; (xiv) the base rate applicable to such
Series; (xv) the terms on which the certificates of such Series may be
repurchased by the Transferor or remarketed to other investors; (xvi) the
series termination date; (xvii) any deposit into any account maintained for
the benefit of certificateholders of such Series; (xviii) the number of
classes of such Series, and if more than one class, the rights and priorities
of each such class; (xix) the extent to which the certificates of such Series
will be issuable in temporary or permanent global form (and, in such case, the
depositary for such global certificate or certificates, the terms and
conditions, if any, upon which such global certificate may be exchanged, in
whole or in part, for definitive certificates, and the manner in which any
interest payable on a temporary or 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 certificateholders of such Series; (xxii)
the priority of any Series with respect to any other Series; (xxiii) the
rights of the Holder of the Exchangeable Transferor Certificate that have been
transferred to the holders of such Series; and (xxiv) any other relevant terms
(all such terms, the "Principal Terms" of such Series). None of the
Transferor, the Servicer, the Holder of the Exchangeable Transferor
Certificate, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder to issue any additional Series. As a
condition of an Exchange, however, the Trustee must receive written
confirmation that the Exchange will not result in the Rating Agency reducing
or withdrawing its rating of any outstanding Series, including the
Certificates. The Transferor and the Holder of the Exchangeable Transferor
Certificate may offer any Series to the public under a Disclosure Document in
transactions either registered under the Securities Act or exempt from
registration thereunder directly, through the Underwriters or one or more
other underwriters or placement agents, in fixed-price offerings or in
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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
1997-1 Supplement) an Investor Exchange by which the certificateholders of
such Series may elect to exchange their certificates for one or more newly
issued Series of certificates upon the satisfaction of certain conditions
specified in the Agreement and the related Supplement. Additionally, certain
Series may be subordinated to other Series, or classes within a Series may
have different priorities. The Series 1997-1 Supplement will not permit the
subordination of such Series to any other Series issued or which may hereafter
be issued by the Trust. There is no limit to the number of Exchanges that may
be performed under the Agreement. The Trust will terminate only as provided in
the Agreement.
Under the Agreement and pursuant to a Supplement, an Exchange may only occur
upon the satisfaction of certain conditions provided in the Agreement. Under
the Agreement, the Holder of the Exchangeable Transferor Certificate may
perform an Exchange by notifying the Trustee at least three days in advance of
the date upon which the Exchange is to occur. Under the Agreement, the notice
will state the designation of any Series to be issued on the date of the
Exchange and, with respect to each such Series: (i) its initial principal
amount (or method for calculating such amount) which amount may not be greater
than the current principal amount of the Exchangeable Transferor Certificate
plus, in the case of an Investor Exchange, the current principal amount of the
investor certificates to be exchanged, (ii) its certificate rate (or method
for calculating such rate) and (iii) the provider of the Enhancement, if any,
which is expected to provide credit support with respect to it. On the date of
the Exchange, the Agreement provides that the Trustee will authenticate any
such Series only upon delivery to it of the following, among others: (i) a
Supplement in form satisfactory to the Trustee signed by the Transferor and
specifying the Principal Terms of such Series, (ii) an opinion of counsel to
the effect that the certificates of such Series, unless otherwise stated, will
be characterized as indebtedness of the Transferor under existing law for
Federal, Connecticut and New York state income tax purposes, (iii) an opinion
of counsel to the effect that the issuance of such Series will not materially
adversely impact the Federal, Connecticut or New York state income tax
characterization of any outstanding Series or result in the Trust being
subject to Federal, New York or Connecticut tax at the entity level, (iv) the
Enhancement, if any, and an appropriate form of Enhancement agreement or
instrument with respect thereto executed by the Transferor and the issuer of
the Enhancement, (v) written confirmation from the Rating Agency that the
Exchange will not result in such Rating Agency reducing or withdrawing its
rating on any outstanding Series, (vi) the existing Exchangeable Transferor
Certificate and, if applicable, certificates of the Series to be exchanged,
and (vii) a certificate of an officer of the Transferor that on the date such
Exchange occurs, after giving effect to such Exchange, the Transferor Interest
will be at least equal to the Minimum Transferor Interest. Upon satisfaction
of
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such conditions, the Trustee will cancel the existing Exchangeable Transferor
Certificate and the certificates of the exchanged Series, if applicable, and
authenticate the new Series and a new Exchangeable Transferor Certificate.
REPRESENTATIONS AND WARRANTIES
The Transferor has made and will make upon execution of each Supplement
certain representations and warranties to the Trust to the effect that, among
other things, (a) as of the Closing Date and the closing date of the issuance
by the Trust of the initial Series of certificates, the Transferor was duly
incorporated and in good standing and that it has the authority to consummate
the transactions contemplated by the Agreement and (b) as of the Series Cut-
Off Date, or, with respect to any Additional Account or Automatic Additional
Account, the date on which such Additional Account or Automatic Additional
Account was transferred to the Trust, each Account was an Eligible Account (as
defined below). If (i) any of these representations and warranties proves to
have been incorrect in any material respect when made, and continues to be
incorrect for 60 days after notice to the Transferor by the Trustee or to the
Transferor and the Trustee by Certificateholders holding not less than 50% of
each of the Class A Investor Interest, the Class B Investor Interest and the
Collateral Interest and (ii) as a result the interests of the
Certificateholders are materially adversely affected, and continue to be
materially adversely affected during such period, then the Trustee or
Certificateholders holding not less than 50% of each of the Class A Investor
Interest, 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
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Transferor depositing in the Excess Funding Account (for allocation as a
Principal Receivable) in immediately available funds an amount equal to the
amount by which the Transferor Interest would be reduced below the Minimum
Transferor Interest. Any such deduction or deposit shall be considered a
repayment in full of the Ineligible Receivable. The obligation of the
Transferor to accept reassignment of any Ineligible Receivable is the sole
remedy respecting any breach of the representations and warranties set forth
in this paragraph with respect to such Receivable available to
Certificateholders or the Trustee on behalf of Certificateholders.
The Transferor has made and will make upon the execution of each Supplement
representations and warranties to the Trust to the effect, among other things,
that as of the Closing Date and the closing date of the issuance by the Trust
of the related Series of certificates (a) the Agreement, including the
Supplement, constitutes a legal, valid and binding obligation of the
Transferor and (b) the transfer of Receivables by it to the Trust under the
Agreement constitutes either a valid transfer and assignment to the Trust of
all right, title and interest of the Transferor in and to the Receivables
(other than Receivables in Additional Accounts), whether then existing or
thereafter created and the proceeds thereof (including amounts in any of the
accounts established for the benefit of the certificateholders), Recoveries
allocable to the Trust and Interchange with respect to the Trust or the grant
of a first priority security interest in such Receivables (except for certain
tax liens) and the proceeds thereof (including amounts in any of the accounts
established for the benefit of the certificateholders), which is effective as
to each such Receivable upon the creation thereof and which has been
perfected. The Transferor has made, and will make (or has been or will be
deemed to make), similar representations and warranties to the Trust in
connection with each assignment of Receivables in Additional Accounts or
Automatic Additional Accounts. In the event of a breach of any of the
representations and warranties described in the first sentence of this
paragraph, either the Trustee or the holders of certificates evidencing
undivided interests in the Trust aggregating more than 50% of the sum of the
investor interests of all Series issued and outstanding, by written notice to
the Transferor (and to the Trustee and the Servicer if given by the
certificateholders), may direct the Transferor to accept reassignment of the
Trust Portfolio within 60 days of such notice, or within such longer period
specified in such notice (but no longer than 120 days). The Transferor will be
obligated to accept reassignment of such Receivables on a Distribution Date
occurring within such applicable period. Such reassignment will not be
required to be made, however, if at any time during such applicable period, or
such longer period, the representations and warranties shall then be true and
correct in all material respects. The deposit amount for such reassignment
with respect to each Series of certificates required to be repurchased
following such notice, including the Certificates, will generally be equal to
the investor interest of each such Series on the last day of the Monthly
Period preceding the Distribution Date on which the reassignment is scheduled
to be made plus an amount equal to all interest accrued but unpaid on such
certificates at the applicable certificate rate (less the amounts previously
allocated for payment of interest and principal with respect to each such
Series of certificates) through the end of the interest accrual periods of
each such Series. The reassignment deposit amount shall equal the sum of the
reassignment deposits with respect to each Series then issued and outstanding
which is required to be repurchased following such notice. The payment of such
reassignment deposit amount into the Collection Account will be considered a
prepayment in full of all Receivables and will be paid in full to the
certificateholders of such Series upon presentation and surrender of their
certificates. In the Series 1997-1 Supplement, the Transferor represents and
warrants that, as of the Closing Date, the Agreement, as supplemented by such
Supplement, constitutes a legal, valid and binding obligation of the
Transferor. Upon a breach of this representation, either the Trustee or the
holders of Certificates evidencing aggregate undivided interests in the Trust
aggregating more than 50% of each of the Class A Investor Interest, 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
Certificateholders) may direct the Transferor to purchase the Certificates
(but not the certificates of any other Series) on terms and conditions
substantially similar to those set forth above. If the Trustee or the
certificateholders (including the Certificateholders) give a notice as
provided above, the obligation of the Transferor to
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make any such deposit or repurchase will constitute the sole remedy respecting
a breach of the representations and warranties (set forth in this paragraph)
available to the Trustee or the certificateholders.
An "Eligible Account" is defined to mean a VISA or MasterCard credit card
account owned by the Transferor which, as of the Series Cut-Off Date, (a) is
payable in United States dollars, (b) has not been identified on the computer
files of the Transferor as relating to a cardholder who has died or commenced
action relating to bankruptcy or who is the subject of an involuntary
bankruptcy, insolvency or similar action, (c) has not been classified by the
Transferor as counterfeit, fraudulent, stolen or lost, or as a corporate
business card, (d) has not been charged off by the Transferor in its customary
and usual manner for charging off such Account as of the Series Cut-Off Date,
(e) has not been (and no Receivables in such Account have been) sold or
pledged to any other person, (f) is not an account on which People's Bank or
an affiliate of People's Bank is the obligor and (g) as of the date of
origination of such account, the obligor of which had a billing address in the
United States, its territories or possessions.
An "Eligible Receivable" is defined to mean each Receivable (a) arising
under an Eligible Account, an Eligible Additional Account (in the case of
Additional Accounts) or an Eligible Automatic Additional Account (in the case
of Automatic Additional Accounts), as the case may be, (b) created in
compliance, in all material respects, with all requirements of law applicable
to the Transferor, and pursuant to a credit card agreement complying in all
material respects with all requirements of law applicable to the Transferor,
(c) with respect to which all consents or authorizations of, or registrations
with, any governmental authority required to be obtained or given by the
Transferor in connection with the creation of such Receivable or the
execution, delivery, creation and performance by the Transferor of the related
credit card agreement have been duly obtained or given and are in full force
and effect as of the date of the creation of such Receivable, (d) as to which,
at the time of its creation and at all times thereafter, the Transferor or the
Trust had good and marketable title free and clear of all liens and security
interests (other than certain tax liens for taxes not then due or which the
Transferor is contesting), (e) which is the legal, valid and binding payment
obligation of the cardholder thereof, legally enforceable against such
cardholder in accordance with its terms (with certain bankruptcy-related
exceptions), (f) which constitutes an "account" or "general intangible" under
and as defined in Article 9 of the UCC as then in effect in the State of New
York, (g) as to which as of the time of its transfer to the Trust, the
Transferor has satisfied all material obligations on its part with respect to
such Receivable required to be satisfied, (h) which is not, at the time of its
transfer to the Trust, subject to any right of rescission, setoff,
counterclaim or defense (including the defense of usury), other than certain
bankruptcy related defenses and (i) as to which the Transferor has done
nothing to impair, or omitted to take any action the omission of which would
impair, the rights of the Trust or the certificateholders.
The Trustee has not made, and it is not required or anticipated that the
Trustee will make, any general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence or
absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose. The Servicer, however, has delivered and
will deliver to the Trustee on or before March 31 of each year, beginning in
1994, an opinion of counsel with respect to the validity of the security
interest of the Trust in and to the Receivables and certain other components
of the Trust. The Transferor has undertaken to file any such opinion of
counsel delivered to the Trustee with the Commission as an exhibit to a report
on Form 8-K filed under the provisions of the Exchange Act.
SALE OF ACCOUNTS
The Transferor has the right to sell, transfer or pledge the Accounts;
provided, however, that (i) the Rating Agency has advised the Transferor and
the Trustee that such sale, transfer or pledge will
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not result in the reduction or withdrawal of the then-existing rating of the
certificates, (ii) the Transferor and the Servicer determine such sale,
transfer or pledge will not be materially adverse to the interests of the
certificateholders, (iii) such purchaser, transferee or pledgee shall
expressly assume in a supplemental agreement the applicable obligations and
covenants of the Transferor and (iv) certain other conditions specified in the
Agreement are satisfied.
ADDITION OF ACCOUNTS
On each day an Eligible Automatic Additional Account is originated (and on
any day such Account exists but has not been previously added to the Trust as
a result of the limitations expressed in the next succeeding sentence), the
Transferor will add the Receivables in each such account to the Trust and such
accounts shall be treated as Automatic Additional Accounts in an amount not in
excess of the Maximum Addition Amount. An "Eligible Automatic Additional
Account" is, as of the relevant date of addition, an Automatic Additional
Account that is (i) a VISA Account or MasterCard credit card account,
satisfying the criteria set forth in the definition of Eligible Account, or
(ii) any other consumer revolving credit account (x) satisfying the criteria
set forth in the definition of Eligible Account without regard to the
requirement that such account be a VISA or MasterCard credit card account, (y)
which would not cause the Rating Agency to indicate in writing that such
addition would result in the reduction or withdrawal of its then-existing
rating of any Series of certificates and (z) to which, to the extent provided
in any Supplement, the provider of any Enhancement for the related Series of
certificates consents, which consent shall not be unreasonably withheld. The
Agreement provides that Automatic Additional Accounts will be transferred to
the Trust only if the following conditions are met: the number of Automatic
Additional Accounts the Receivables of which are designated to be added to the
Trust since (i) the first day of the eleventh preceding Monthly Period minus
the number of 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
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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 Certificateholders, was used in selecting the
Additional Accounts and (iv) each Account was an Eligible Additional Account.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, on each
Determination Date on which the Transferor Interest for the related Monthly
Period exceeds 10% of Aggregate Principal Receivables on such Determination
Date, the Transferor may, but shall not be obligated to, designate Receivables
from Accounts for deletion and removal from the Trust without notice to the
certificateholders (the "Removed Accounts"). The Transferor is permitted to
designate and require reassignment of Receivables from Removed Accounts only
upon satisfaction of the following conditions, among others: (i) the
Transferor shall have delivered to the Trustee for execution a written
reassignment and a computer file or microfiche list containing a true and
complete list of all Removed Accounts, the Accounts to be identified by, among
other things, account number and their aggregate amount of Principal
Receivables as of the "Removal Date" (as defined in the Agreement); (ii) the
Transferor shall represent and warrant that no selection procedure used by the
Transferor which is materially adverse to the interests of the
certificateholders was utilized in selecting the Removed Accounts; (iii) the
removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, (a) cause a Pay Out Event to occur or (b)
cause the Transferor Interest as a percentage of Aggregate Principal
Receivables to be less than 10% on such Removal Date; (iv) the Transferor
shall have delivered prior written notice of the removal to the Rating Agency
and prior to the date on which such Receivables are to be removed, the
Transferor shall have received notice from the Rating Agency that such removal
will not result in the reduction or withdrawal of the then-existing rating of
any Series of certificates; (v) the Transferor shall have delivered to the
Trustee an officer's certificate confirming the items set forth in clauses (i)
through (iv) above; and (vi) the Transferor, the Trustee and the Rating Agency
will have received an opinion of counsel that the proposed removal will not
adversely affect the federal income tax characterization of the Trust.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Agreement, the Servicer will be responsible for servicing
and administering the Receivables in accordance with the Servicer's policies
and procedures for servicing credit card receivables comparable to the
Receivables. The Servicer maintains a blanket bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in
the servicing of credit card receivables covering such actions and in such
amounts as the Servicer believes to be reasonable from time to time.
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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
Certificateholder by its acceptance of a beneficial interest in a Certificate
shall be deemed to have consented to the exercise by the Transferor of the
Discount Option at such time as the Transferor determines to exercise such
option.
THE COLLECTION ACCOUNT
The Servicer has established and will maintain, or cause to be maintained,
in the name of the Trust, for the benefit of certificateholders, a "Collection
Account", which is a non-interest bearing segregated trust account established
with a "Qualified Institution", defined either as the corporate trust
department of a Qualified Trust Institution or as a depository institution
(which may include the Servicer, the Trustee or an affiliate of the Servicer),
organized under the laws of the United States or any one of the states
thereof, which at all times has a certificate of deposit rating of P-1 by
Moody's Investors 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 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
certificateholders in the manner provided in the related Supplement. The
Paying Agent shall initially be the Trustee. The Series 1997-1 Supplement
provides
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for the establishment of a Series 1997-1 Collection Subaccount and the
investment of certain funds therein in Permitted Investments. In addition, the
Servicer has established and will maintain or cause to be maintained with a
Qualified Institution (other than the Transferor) in the name of the Trustee,
on behalf of the Trust, a segregated trust account, the "Excess Funding
Account" for the benefit of the certificateholders of each Series and the
Holder of the Exchangeable Transferor Certificate. Amounts on deposit in such
Excess Funding Account will be invested in the manner directed by the
Transferor in Permitted Investments.
SERIES 1997-1 ACCOUNTS
The Servicer will establish and maintain with a Qualified Trust Institution
in the name of the Trustee for the benefit of the Certificateholders, 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 Certificateholders. The Distribution Account shall not contain any funds
of the Transferor or amounts allocable to the Transferor Interest, and no
amounts on deposit therein shall be made available to the Transferor.
The Finance Charge Account, the Principal Account, the Principal Funding
Account and the Distribution Account are collectively referred to as the
"Series 1997-1 Accounts".
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
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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 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 March 1997 and (ii) a fraction, the
numerator of which is the actual number of days from and including the Closing
Date through and including March 31, 1997, and the denominator of which is 31.
Such amounts so allocated will be further allocated between the Class A
Certificateholders, the Class B Certificateholders 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 cancelled pursuant to any Investor Exchange), and the denominator of which
is the greater of (a) the Aggregate Principal Receivables determined as of the
last day of the Monthly Period immediately preceding such date of
determination and (b) the sum of the numerators used to calculate the
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 Certificateholders, the Class B
Certificateholders 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
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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 Certificateholders 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 Certificateholders 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.
"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
Certificateholders based on the relationship of the amount of the Investor
Interest to the Aggregate Principal Receivables in the Trust (which may
fluctuate from month to month). As described above, during the Revolving
Period the Investor Percentage applied when allocating Principal Collections
is expected to vary from month to month
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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
Certificateholders 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 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.
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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.
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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
certificateholders 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 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 or, for the Initial
Interest Period, the Closing Date (after giving effect to all
payments, deposits and withdrawals made on such Distribution Date or
Closing Date) and (iii) the actual number of days in the related
Interest Period or the Initial Interest Period divided by 360 (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 Certificateholders has not been
made, will be deposited in the Distribution Account for distribution
to Class A Certificateholders on the next succeeding Distribution
Date;
(b) an amount equal to the Class A Monthly Servicing Fee for the
preceding Monthly Period and any accrued and unpaid Class A Monthly
Servicing Fees will be paid to the Servicer;
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(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.
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 or, for the Initial Interest Period,
the Closing Date (after giving effect to all payments, deposits and
withdrawals made on such Distribution Date or Closing Date) and (iii)
the actual number of days in the related Interest Period or the Initial
Interest Period divided by 360 ("Class B Monthly Cap Rate Interest"),
plus any overdue Class B Monthly Cap Rate Interest in respect of which
a distribution to Class B Certificateholders has not been made, will be
deposited in the Distribution Account for distribution to Class B
Certificateholders on the next succeeding Distribution Date;
(b) an amount equal to the Class B Monthly Servicing Fee for the
preceding Monthly Period and any accrued and unpaid Class B Monthly
Servicing Fees will be paid to the Servicer;
(c) an amount equal to the Class B Investor Default Amount for the
preceding Monthly Period will be treated as 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
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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 and (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 1997-1 Supplement with respect to such
Transfer Date. "Class B Available Funds" means, with respect to any Monthly
Period, an amount equal to 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. "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.
"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 Certificateholders 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 Certificateholders 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 % for the Initial Interest Period), 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 or, for
the Initial Interest Period, the Closing Date (after giving effect to all
payments, deposits and withdrawals made on such date), 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
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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 Certificateholders 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 Certificateholders 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;
(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
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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:
(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 Certificateholders 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
Certificateholders;
(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
Certificateholders 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 Certificateholders
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
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(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 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 Certificateholders and the
Class B Certificateholders 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 A 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 Certificateholders and the Class B
Certificateholders 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 Certificateholders 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
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principal distributions to certificateholders of other Series and to holders
of other undivided interests in the Trust, 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 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 Certificateholders, (ii) the Class A Covered Amount
and any Class A Covered Amount accrued during any prior period and not
distributed to the Class A Certificateholders, (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 Certificateholders, (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.
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"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 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.
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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
Certificateholders. 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 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
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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 1997-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificateholders (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."
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
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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 1997-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificateholders (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 1997-1. 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 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
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(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 1997-1 Termination Date if the
Investor Interest is reduced to an amount less than or equal to 5% of the
Initial Investor Interest, if certain conditions set forth in the Agreement
are met. The mandatory purchase requirement is in addition to any other
provisions and remedies provided by the Agreement and will not serve to
relieve any party of obligations it may otherwise have or waive any remedy
that is otherwise provided. The purchase price will be equal to the Investor
Interest, plus accrued and unpaid interest (other than Class A Excess Interest
or Class B Excess Interest, as the case may be) on the Certificates at the
applicable 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 certificateholders and holders of other undivided interests in the
Trust, including the Certificateholders, on the Distribution Date following
the Monthly Period in which such purchase occurs as final payment of the
Certificates. Subject to prior termination as provided above, the Agreement
provides that the final distribution of principal and interest on the Offered
Certificates will be made no later than the October 2004 Distribution Date
(the "Scheduled Series 1997-1 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).
In the event that the Investor Interest is greater than zero on the
Scheduled Series 1997-1 Termination Date, the Trustee will sell or cause to be
sold interests in the Receivables or certain
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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 1997-1 Termination
Date, as the final payment of the Certificates, first, pro rata to the Class A
Certificateholders in an amount sufficient to pay the Class A Investor
Interest in full, second, pro rata to the Class B Certificateholders 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 November 2000
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
Certificateholders (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 Certificateholders for
such period;
(ii) any representation or warranty made by the Transferor in the
Agreement, including the Series 1997-1 Supplement, or any information
required to be given by the Transferor to the Trustee to identify the
Accounts proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a period of 60
days after written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected (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 certificateholders (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
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(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.
In the case of any event described in clause (i), (ii) or (vii), a Pay Out
Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period described in such clauses, either the
Trustee or Certificateholders evidencing undivided interests aggregating more
than 50% of each of the Class A Investor Interest, 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 Certificateholders) declare
that, as of the date of such notice, a Pay Out Event has occurred. In the case
of either event described in clause (iii) or (v), a Pay Out Event with respect
to all Series, and in the case of any event described in clause (iv), (vi),
(viii), 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 Certificateholders or all certificateholders, as appropriate,
immediately upon the occurrence of such event. The Rapid Amortization Period
will commence on the date a Pay Out Event occurs or is deemed to have
occurred. Monthly distributions of principal to the Certificateholders will
begin (if they have not already) on the first Distribution Date in the Monthly
Period following the Monthly Period in which such Pay Out Event occurs. Thus,
Certificateholders may begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the final maturity of the
Certificates.
In addition to the consequences of a Pay Out Event discussed above, if
pursuant to certain provisions of federal or state law, the Transferor
voluntarily enters liquidation or a receiver is appointed for the Transferor
(an "Insolvency Event"), on the day of such event the Transferor will
immediately cease to transfer Principal Receivables to the Trust and promptly
give notice to the Trustee of such event. Under the terms of the Agreement,
within 15 days, the Trustee will publish a notice of the occurrence of the
Insolvency Event stating that the Trustee intends to sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner,
unless otherwise instructed within a specified period by the
certificateholders 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 certificateholders 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
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wrongdoing of its officers and employees who are involved in the servicing of
credit card receivables covering such actions and in such amounts as the
Servicer believes to be reasonable from time to time.
Servicing activities performed by the Servicer include collecting and
recording payments, communicating with cardholders, investigating payment
delinquencies, evaluations in relation to increasing credit limits and in
issuing credit cards, providing billing records to cardholders and maintaining
internal records with respect to each Account. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Accounts and Receivables by the Trustee pursuant to the Agreement, maintaining
the agreements, documents and files relating to the Accounts and Receivables
as custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
SERVICER COVENANTS
In the Agreement, the Servicer covenants with the certificateholders
(including the Certificateholders) and the Trustee, as to each Receivable and
related Account, that: (a) it will duly fulfill all obligations on its part to
be fulfilled under or in connection with the Receivables and the related
Accounts, and will maintain in effect all qualifications required in order to
service the Receivables and the related Accounts, the failure to comply with
which would have a material adverse effect on the certificateholders
(including the Certificateholders); (b) it will not permit any rescission or
cancellation of the Receivables, except in accordance with the credit and
collection policies of the Transferor or as ordered by a court of competent
jurisdiction or other governmental authority; (c) it will do nothing to impair
the rights of the certificateholders (including the Certificateholders) in the
Receivables or the related Accounts; and (d) it will not reschedule, revise or
defer payments due on the Receivables except in accordance with the credit and
collection policies of the Transferor for servicing receivables.
Under the terms of the Agreement, all Receivables in an Account will be
assigned and transferred or reassigned and transferred to the Servicer and
such account shall no longer be included as an Account if the Servicer
discovers, or receives written notice from the Trustee, that any covenant of
the Servicer set forth above has not been complied with and such noncompliance
has not been cured within 60 days thereafter and has a material adverse effect
on the certificateholders' interest in such Receivable. If the Transferor is
the Servicer, such reassignment and retransfer shall be made on or before the
end of the Monthly Period in which such reassignment obligation arises, by the
Servicer deducting the portion of any such Receivable which is a Principal
Receivable from the aggregate amount of Principal Receivables used to
calculate the Transferor Interest. In addition, if the Transferor Interest
would be reduced below the Minimum Transferor Interest, People's Bank as
Servicer will deposit into the Collection Account an amount equal to the
amount by which the Transferor Interest will be reduced below the Minimum
Transferor Interest (such reassignment and retransfer to the Servicer to be
effected only upon such deposit by the Servicer in the Excess Funding
Account). If the Transferor is not the Servicer, such assignment and transfer
will be made when the Servicer deposits an amount equal to the amount of such
Receivable in the Collection Account no later than the Transfer Date following
the Monthly Period during which such obligation arises. The amount of such
deposit shall be allocated as Collections pursuant to the Agreement. In either
case, this retransfer and reassignment or transfer and assignment to the
Servicer constitutes the sole remedy available to the certificateholders if
such covenant or warranty of the Servicer is not satisfied. In either case,
the Trust's interest in any such assigned Receivables shall be automatically
assigned to the Servicer.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the "Servicing Fee"). The
Servicing Fee will be allocated among the Transferor
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Interest (the "Transferor Servicing Fee"), the Certificateholders,
certificateholders 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
Certificateholders, the Class B Certificateholders 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 the related
Monthly Period. The Monthly Servicing Fees will be paid each month from the
Finance Charge Account; however, payment thereof will be made after payment to
Certificateholders of 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 certificateholders other than federal, state and local income and
franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that performance of its duties is no
longer permissible under applicable law and except as described below. No such
resignation will become effective until the Trustee or a successor to the
Servicer has assumed the Servicer's responsibilities and obligations under the
Agreement. Notwithstanding the foregoing, People's Bank may transfer its
servicing obligations to any of its affiliates (which meets certain
eligibility standards set forth in the Agreement) or, subject to certain
conditions set forth in the Agreement, to any other entity which the Rating
Agency has advised in writing will not result in the reduction or withdrawal
of its then-existing rating of the Certificates and be relieved of its
obligations and duties under the Agreement.
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of the certificateholders (including the Certificateholders), and the
Trustee from and against any reasonable loss, liability, expense, damage or
injury suffered or sustained by reason of any acts or omissions or alleged
acts or omissions of the Servicer with respect to the activities of the Trust
or the Trustee pursuant to the Agreement; provided, however, that the Servicer
shall not indemnify (a) the Trustee for liabilities imposed by reason of or
resulting from fraud, negligence, breach of fiduciary duty or willful
misconduct by the Trustee in the performance of its duties under the
Agreement, (b) the Trust, the Certificateholders or the Offered Certificate
Owners for liabilities arising from actions taken by the Trustee at the
request of Certificateholders, (c) the Trust, the Certificateholders or the
Offered Certificate Owners for any losses, claims, damages or liabilities
incurred by any Certificateholder in its capacity as an investor, including
without limitation, losses incurred as a result of defaulted Receivables or
Receivables which are written off as uncollectible or (d) the Trust, the
Certificateholders or the Offered Certificate Owners for any liabilities,
costs or expenses of the Trust, the Certificateholders 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 Certificateholders or the Offered Certificate Owners in connection
therewith to any taxing authority.
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The Agreement provides that neither the Transferor nor the Servicer nor any
of their respective directors, officers, employees or agents will be under any
other liability to the Trust, the Certificateholders or any other person for
any action taken, or for refraining from taking any action, in good faith
pursuant to the Agreement. Neither the Transferor, the Servicer nor any of
their respective directors, officers, employees or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer or
any such person in the performance of its duties or by reason of reckless
disregard of obligations and duties thereunder. In addition, the Agreement
provides that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
The Agreement provides that, in addition to Exchanges, the Holder of the
Exchangeable Transferor Certificate may transfer all or a portion of the
Exchangeable Transferor Certificate to any other party upon written consent of
the Transferor; provided, however, that, in each case, prior to any such
transfer (i) (a) the Trustee receives written notification from the Rating
Agency then rating each Series that such transfer will not result in a
lowering of its then-existing rating of the certificates rated by it and (b)
the Trustee receives (among other things) a written opinion of counsel
confirming that such transfer would not adversely affect the treatment of the
Certificates of each series as debt for Federal, New York or Connecticut state
income tax purposes or result in the trust being treated as a taxable entity
and will not be treated as a taxable exchange to Certificateholders or (ii)
such transfer complies with the provisions of the next succeeding paragraph.
The Transferor, in its capacity as the original holder of the Exchangeable
Transferor Certificate, transferred its interest in the Exchangeable
Transferor Certificate to PSFC in accordance with the requirements described
in clause (i) of the preceding sentence, pursuant to an Assignment and
Assumption Agreement dated as of December 15, 1995 by and between the
Transferor and PSFC.
Any person into which, in accordance with the Agreement, the Transferor or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Transferor or the Servicer is a party, or
any person succeeding to the business of the Transferor or the Servicer, upon
execution of a supplemental agreement 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
certificateholders of any Series; (b) the Rating Agency indicates that such
event will not adversely affect the then-existing rating of certificates of
any Series outstanding, including the Certificates; and (c) the purchaser,
transferee, pledgee or successor entity executes a supplemental agreement
whereby such entity agrees to assume the obligations of the Transferor.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or certificateholders 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
certificateholders 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
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such termination. The Trustee shall as promptly as possible appoint a
successor Servicer, which successor Servicer must satisfy certain eligibility
criteria contained in the Agreement. If no such Servicer has been appointed
and has accepted such appointment by the time the Servicer ceases to act as
Servicer, all authority, power and obligations of the Servicer under the
Agreement shall pass to and be vested in the Trustee. If the Trustee is unable
to obtain any bids from eligible servicers and the Servicer delivers an
officer's certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, and if the
Trustee is legally unable to act as successor Servicer, then the Trustee shall
give the Transferor the right to accept reassignment of the Receivables at a
price generally equal to the higher of the outstanding principal balance of
the certificates plus accrued interest through the date of reassignment and
the average bid quoted by two recognized dealers for a similar security rated
in the highest rating category by the Rating Agency and having a remaining
maturity approximately equal to the remaining maturity of such Series.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit or
to give instructions to the Trustee to make any withdrawal, on the date the
Servicer is required to do so under the Agreement (or within the applicable
grace period, which shall not exceed five business days);
(b) failure on the part of the Servicer duly to observe or perform in any
respect any other covenants or agreements of the Servicer which has a
material adverse effect on the holders of outstanding Series, including the
Certificateholders (which determination shall be made without regard to
whether funds are available in any Enhancement) and which continues
unremedied for a period of 60 days after written notice and continues to
have a material adverse effect on the certificateholders for such period;
or the delegation by the Servicer of its duties under the Agreement, except
as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer in
the Agreement or any Supplement, or in any certificate delivered pursuant
to the Agreement or any Supplement, proves to have been incorrect when made
which has a material adverse effect on the rights of certificateholders
(which determination shall be made without regard to whether funds are
available in any Enhancement) and which continues to be incorrect in any
material respect for a period of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or
the majority of the certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Paying Agent will forward to each
Certificateholder of record a statement (the "Monthly Servicer Report")
prepared by the Servicer setting forth among other things: (a) the total
amount distributed to Class A Certificateholders, the Class B
Certificateholders 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
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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, 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 Certificateholder of record a statement prepared
by the Servicer containing the information required to be contained in the
Monthly Servicer Report, as set forth in clauses (a), (b) and (c) above
aggregated for such calendar year or the applicable portion thereof during
which such person was an Offered Certificateholder, 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 Certificateholders to prepare their tax
returns.
The Trustee will publish or will cause to be published following each
Distribution Date (including the Scheduled Series 1997-1 Termination Date) in
a daily newspaper in Luxembourg (expected to be the Luxemburger Wort) a notice
to the effect that the information described in "Description of the
Certificates--Reports to Certificateholders" in the prospectus will be
available for review at the main office of the listing agent of the Trust in
Luxembourg.
Notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the certificate register.
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before March 31 of each calendar year,
beginning in 1994, the Servicer will cause a firm of independent accountants
to furnish a report to the effect that such firm has made a study and
evaluation of the Servicer's internal accounting controls relative to the
servicing
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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, beginning in 1994, such firm has compared or will compare
the amounts contained in the Servicer's statements and certificates delivered
during such year with the computer reports of the Servicer and statements of
any agents engaged by the Servicer to perform servicing activities which were
the source of such amounts and deliver a report confirming that such amounts
are in agreement except for such exceptions as it believes to be immaterial to
the financial statements of the Servicer and such other exceptions as shall be
set forth in such report.
The Agreement provides for delivery to the Trustee on or before March 31 of
each calendar year, beginning in 1994, of an annual statement signed by an
officer of the Servicer to the effect that the Servicer has fully performed,
or has caused to be performed, its obligations in all material respects under
the Agreement throughout the preceding year, or, if there has been a default
in the performance of any such obligation in any material respect, specifying
the nature and status of the default.
AMENDMENTS
The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee, without certificateholder consent, to cure any
ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, and to add any other provisions
with respect to matters or questions arising under the Agreement and any
Supplement which are not inconsistent with the provisions of the Agreement and
any Supplement. See "The Receivables". The Agreement may be amended from time
to time without the consent of the Certificateholders by the Trustee, and by
the Transferor or the Servicer with the consent of the Trustee, to (a) provide
for the transfer by the Transferor of its interest in and to all or part of
the Accounts in accordance with the provisions of the Agreement and (b)
provide for the purchase of Principal Receivables by the Trust at a price
which is less than 100% of the outstanding balance thereof, and to provide for
the treatment of 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 certificateholders (each Certificateholder will be deemed to have
agreed that the exercise of such option by the Transferor, at such time the
Transferor determines to exercise such options, will not adversely affect in
any material respects the interests of Certificateholders); provided, further,
however, that the Servicer and the Trustee shall have received notice from the
Rating Agency that any such amendment will not result in the reduction or
withdrawal of its then-existing rating of the certificates of any Series.
Moreover, any Supplement and any amendments regarding the addition or removal
of Receivables to or from the Trust will not be considered amendments
requiring certificateholder consent under the provisions of the Agreement or
any Supplement.
The Agreement may be amended by the Transferor, the Servicer and the Trustee
with the consent of the holders of certificates evidencing undivided interests
aggregating not less than 66 2/3% of the principal amount of all Series
adversely affected, for the purpose of adding any provisions to, changing in
any manner or eliminating any of the provisions of the Agreement or any
Supplement or of modifying in any manner the rights of certificateholders of
any Series. No such amendment, however, may (a) reduce in any manner the
amount of, or delay the timing of, distributions required to be made on such
Series, (b) change the definition of or the manner of calculating the interest
of any certificateholder of such Series or (c) reduce the aforesaid percentage
of undivided interests, the
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holders of which are required to consent to any such amendment, in each case
without the consent of all certificateholders of all Series adversely
affected. Promptly following the execution of any amendment to the Agreement
or any Supplement, the Trustee will furnish written notice of the substance of
such amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).
LIST OF CERTIFICATEHOLDERS
Upon written request of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the Investor Interest,
the Trustee after having been adequately indemnified by such
Certificateholders for its costs and expenses, and having given the Servicer
notice that such request has been made, will afford such Certificateholders
access during business hours to the current list of certificateholders of the
Trust for purposes of communicating with other Certificateholders with respect
to their rights under the Agreement. The Agreement generally does not provide
for any annual or other meetings of certificateholders. See "--Book-Entry
Registration" and "--Definitive Certificates" above.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor independently represents and warrants in the Agreement that
the transfer of Receivables, Interchange and Recoveries constitutes either a
valid transfer and assignment to the Trust of all right, title and interest of
the Transferor in and to the Receivables, Interchange and Recoveries, except
for the interest of the Transferor as the then current holder of the
Exchangeable Transferor Certificate, or the grant to the Trust of a security
interest in such property. The Transferor also independently represents and
warrants in the Agreement that, in the event the transfer of Receivables,
Interchange and Recoveries by the Transferor to the Trust is deemed to create
a security interest under the Uniform Commercial Code (the "UCC"), as in
effect in the State of New York, there will exist a valid, subsisting and
enforceable first priority perfected security interest in such property in
existence at the time of the formation of the Trust in favor of the Trust and
a valid, subsisting and enforceable first priority perfected security interest
in such property created thereafter in favor of the Trust on and after their
creation, except for certain tax and other customary liens. For a discussion
of the Trust's rights arising from a breach of these warranties, see
"Description of the Certificates--Representations and Warranties".
The Transferor independently represents that the Receivables are "accounts"
or "general intangibles" for purposes of the UCC as in effect in the States of
New York and Connecticut. The transfer and assignment of accounts and the
transfer of accounts and general intangibles as security for an obligation are
covered by Article 9 of the UCC, with the transfer and assignments of accounts
treated in the same fashion as the creation and perfection of a security
interest therein. The filing of an appropriate financing statement is required
to perfect the interest of the Trust therein. Financing statements covering
the Receivables have been filed with the appropriate governmental authority to
protect the interests of the Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after the closing
date of the issuance by the Trust of the initial Series of certificates could
have an interest in such Receivables with priority over the Trust's interest.
Under the Agreement, however, the Transferor represents and warrants that it
has transferred the Receivables to the Trust free and clear of the lien of any
third party. In addition, the Transferor covenants that it will not sell,
pledge, assign, transfer or grant any lien on any Receivable (or any interest
therein) other than to the Trust. A tax or other government lien on property
of the Transferor arising prior to the time a Receivable comes into existence
may also have priority over the interest of
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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 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
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the Southern District of New York held, in 1993, that the RTC was obligated to
pay holders the fair market value of repudiated bonds as of the date of
repudiation. The FDIC itself has not adopted a policy statement on payment of
interest on collateralized borrowings of banks. The FDIC, as conservator or
receiver, would also have the rights and powers conferred under Connecticut
law.
The Agreement provides that, upon the appointment of a conservator or
receiver or upon a voluntary liquidation with respect to the Transferor, the
Transferor will promptly give notice thereof to the Trustee and a Pay Out
Event will occur with respect to all Series then outstanding. Pursuant to the
Agreement, newly created Principal Receivables will not be transferred to the
Trust on and after any such appointment or voluntary liquidation (although
Finance Charge Receivables on existing balances will continue to be
transferred), and unless otherwise instructed within a specified period by
holders of more than 50% of the investor interest of each Series outstanding
(or, with respect to any Series with two or more classes, 50% of each class)
to the effect that such certificateholders disapprove of the liquidation of
the Receivables and wish to continue having Principal Receivables transferred
to the Trust as before such appointment or voluntary liquidation, the Trustee
will proceed to sell, dispose of or otherwise liquidate the portion of the
Receivables allocable to each Series that did not vote to disapprove of the
liquidation of the Receivables in accordance with the Agreement in a
commercially reasonable manner and on commercially reasonable terms. There can
be no assurance, however, that a receiver or conservator will allow and not
seek avoidance of continued transfer of Receivables to the Trust after
receivership or conservatorship of the Transferor. Under the Agreement, the
proceeds from the sale of the Receivables would be treated as Collections of
the Receivables and the Investor Percentage of such proceeds would be
distributed to the Certificateholders. This procedure could be delayed, as
described above. If the only Pay Out Event to occur is either the insolvency
of the Transferor or the appointment of a conservator or receiver for the
Transferor, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables, the commencement of
the Rapid Amortization Period and the transfer of servicing obligations from
the Transferor. A conservator or receiver would have the power to cause the
early sale of the Receivables and the early retirement of the Certificates, to
prohibit the continued transfer of Principal Receivables to the Trust, and to
repudiate the servicing obligations of the Transferor. See "Description of the
Certificates--Pay Out Events". In addition, the appointment of a receiver or
conservator could adversely affect the Transferor's ability to repurchase
ineligible Receivables from the Trust or make cash deposits in respect of
credits, adjustments or fraudulent charges and could result in administrative
expenses of the receiver or conservator having priority over the interest of
the Trust in the Receivables.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by federal and state consumer protection laws. With respect to
credit cards issued by the Transferor, the most significant laws include the
federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
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 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
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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 Certificateholders subject to special treatment under the
Federal income tax laws (for example, banks and life insurance companies).
Accordingly, investors should consult their own tax advisors regarding
Federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the 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 Certificateholders.
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 Certificateholders will express in the Agreement
the intent that, for Federal, state and local income and franchise tax
purposes, and for the purposes of any other tax imposed on or measured by
income, the 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
Certificateholder, 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,
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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 CERTIFICATEHOLDERS
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 Certificateholders 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
Certificateholder 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
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cash representing that 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 Certificateholder 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 Certificateholder at a
premium, such premium will be amortized as an offset to interest income (with
a corresponding reduction in the Offered Certificateholder'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 Certificateholder generally will recognize gain or loss in an amount
equal to the difference between the amount realized on the sale, exchange or
disposition and the Offered Certificateholder'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 Certificateholder,
increased by any OID or market discount previously includible in the Offered
Certificateholder'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 Certificateholder 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 Certificateholder as a capital
asset, except to the extent a holder realizes ordinary income attributable to
accrued interest. Capital gain or loss will be long-term if the Offered
Certificate is held by the Offered Certificateholder 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
Certificateholders and Offered Certificateholders might be liable for a share
of such a tax. Moreover, it is unlikely that distributions by the entity would
be deductible in computing the entity's taxable income (assuming that the
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
Certificateholders would generally be treated as dividend income to the
Offered Certificateholders.
If, alternatively, the Offered Certificates were treated as interests in a
partnership, the income reportable by the Offered Certificateholders as
partners could differ from the income reportable by the
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Offered Certificateholders as holders of debt obligations. For example, a cash
basis Offered Certificateholder might be required to report income when it
accrued to the partnership rather than when it is received by the Offered
Certificateholder. Moreover, an individual's share of expenses of the
partnership would be miscellaneous itemized deductions that, in the aggregate,
are allowed as deductions only to the extent they exceed two percent of the
individual's adjusted gross income, and would be subject to reduction under
Section 68 of the Code if the individual's adjusted gross income exceeded
certain limits. As a result, the individual might be taxed on a greater amount
of income than the stated rate on the 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 Certificateholder 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 Certificateholder complies with applicable
certification requirements (and does not actually or constructively own ten
percent or more of the voting stock of the Transferor or PSFC and is not a
controlled foreign corporation related to the Transferor or its affiliates).
If the 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 Certificateholder that is a nonresident alien, foreign corporation or
foreign estate or trust might be required to file a United States individual
or corporate income tax return and pay tax on its share of partnership income
at regular U.S. rates, including the branch profits tax in the case of an
Offered Certificateholder that is a corporation, and would be subject to
withholding tax on its share of partnership income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Servicer will be required to report annually to the IRS, and to each
Offered Certificateholder 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 Certificateholder will
be required to provide, under penalty of perjury, a certificate on IRS Form W-
9 containing his or her name, address, correct Federal taxpayer identification
number and a statement that he or she is not subject to backup withholding.
Should a nonexempt Offered Certificateholder fail to provide the required
certification, the Offered Certificateholder will be subject to backup
withholding of U.S. Federal income tax at a rate of 31% of the amounts
otherwise payable to the holder. Such amount would be remitted to the IRS as a
credit against the holder's Federal income tax liability.
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STATE AND LOCAL TAX CONSEQUENCES
GENERAL
State tax consequences to each Offered Certificateholder will depend upon
the provisions of the state tax laws to which the Offered Certificateholder is
subject. Most states modify or adjust the taxpayer's Federal taxable income to
arrive at the amount of income potentially subject to state tax. Resident
individuals generally pay state tax on 100% of such state-modified income,
while corporations and other taxpayers generally pay state tax only on that
portion of state-modified income assigned to the taxing state under the
state's own apportionment and allocation rules. Because each state's tax law
varies, it is impossible to predict the tax consequences to the Offered
Certificateholders 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
Certificateholders not otherwise subject to Connecticut tax would not become
subject to such tax solely because of their ownership of the Offered
Certificates. Offered Certificateholders 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
Certificateholder 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
Certificateholders. An Offered Certificateholder not otherwise subject to tax
in Connecticut would not become subject to Connecticut taxes as a result of
its mere ownership of such an interest.
Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the Offered Certificateholders in all of the state
taxing jurisdictions in which they are already subject to tax. There can be no
assurance that other states will not claim that the Servicer has undertaken
activities in such states. If such a claim were made, no assurances can be
given as to whether the Offered Certificates would be treated as indebtedness
by any particular state. Offered Certificateholders are urged to consult their
own tax advisors with respect to state taxes.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL OR FOREIGN INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE 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 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
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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 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.
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.
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 Goldman, Sachs & Co. are acting as
representatives, has severally agreed to purchase, the principal amount of
Class A Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A CERTIFICATES
------------ --------------------
<S> <C>
Goldman, Sachs & Co. ................................... $106,250,000
J.P. Morgan Securities Inc. ............................ 106,250,000
Morgan Stanley & Co. Incorporated....................... 106,250,000
Salomon Brothers Inc.................................... 106,250,000
------------
$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 Goldman, Sachs & Co. (the "Class B Underwriters" and together with the
Class A Underwriters, the "Underwriters"), and the Class B Underwriters have
agreed to purchase, the Class B Certificates.
Under the terms and conditions of the Underwriting Agreement, the Class B
Underwriters are committed to take and pay for all of the Class B Certificates,
if any are taken.
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PSFC and the Transferor have been advised by the Class A Underwriters that
they propose initially to offer the Class A Certificates to the public at the
price set forth on the cover page hereof and to certain dealers at such price
less concessions not in excess of % of the principal amount of the Class A
Certificates. The Class A Underwriters may allow, and such dealers may reallow,
concessions not in excess of % of the principal amount of the Class A
Certificates to certain brokers and dealers. After the Class A Certificates are
released for sale to the public, the public offering price and other selling
terms may from time to time be varied by the Class A Underwriters.
PSFC and the Transferor have been advised by the Class B Underwriters that
they propose initially to offer the Class B Certificates to the public at the
price set forth on the cover page hereof and to certain dealers at such price
less concessions not in excess of % of the principal amount of the Class B
Certificates. The Class B Underwriters may allow, and such dealers may reallow,
concessions not in excess of % of the principal amount of the Class B
Certificates to certain brokers and dealers. After the Class B Certificates are
released for sale to the public, the public offering price and other selling
terms may from time to time be varied by the Class B Underwriters.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
During and after the offering, the Underwriters may purchase and sell the
Offered Certificates in the open market in transactions in the United States.
These transactions may include overallotment and stabilizing transactions and
purchases to cover short positions created in connection with the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the Offered Certificates sold in the offering
for their account may be reclaimed by the Underwriters if such Offered
Certificates are repurchased by the Underwriters in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Offered Certificates, which may be higher than the price
that might otherwise prevail in the open market. These transactions may be
effected in the over-the-counter market or otherwise, and these activities, if
commenced, may be discontinued at any time.
Each Underwriter has represented and agreed that (a) it has not offered or
sold and will not offer or sell any Offered Certificates to persons in the
United Kingdom prior to the expiration of the period of six months from the
issue date of the Offered Certificates except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995: (b) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Certificates in, from or
otherwise involving the United Kingdom; and (c) 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 issuance 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 or is a person to whom such
document may otherwise lawfully be issued or passed on.
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.
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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.
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INDEX OF KEY TERMS
<TABLE>
<S> <C>
Accounts................................................................. 13
Accumulation Period Length............................................... 54
Accumulation Shortfall................................................... 9, 41
Additional Accounts...................................................... 14
Adjusted Investor Interest............................................... 6, 66
Affinity Program Accounts................................................ 32
Agent Bank Accounts...................................................... 31
Aggregate Principal Receivables.......................................... 37
Agreement................................................................ 3
Amortization Period...................................................... 69
Automatic Additional Accounts............................................ 14
Available Investor Principal Collections................................. 41, 54
Available Reserve Account Amount......................................... 79
Bank..................................................................... 47
Bank Portfolio........................................................... 30
Base Rate................................................................ 27
Benefit Plans............................................................ 97
Billing Cycle............................................................ 33
Cede..................................................................... 2
Cedel.................................................................... 50
Cedel Participants....................................................... 50
Certificateholders....................................................... 3
Certificates............................................................. 1, 3
Class A Adjusted Investor Interest....................................... 6, 66
Class A Available Funds.................................................. 70
Class A Cap Rate......................................................... 47
Class A Certificate Rate................................................. 7
Class A Certificateholders............................................... 3
Class A Certificates..................................................... 1, 3
Class A Covered Amount................................................... 10
Class A Excess Interest.................................................. 8, 52
Class A Excess Principal................................................. 52
Class A Fixed Allocation................................................. 65
Class A Floating Allocation.............................................. 65
Class A Initial Investor Interest........................................ 5
Class A Interest Rate Cap................................................ 4
Class A Investor Charge-Off.............................................. 17,77
Class A Investor Default Amount.......................................... 76
Class A Monthly Cap Rate Interest........................................ 69
Class A Investor Interest................................................ 6, 66
Class A Monthly Interest................................................. 7, 52
Class A Monthly Principal................................................ 74
Class A Monthly Servicing Fee............................................ 84
Class A Notional Amount.................................................. 46
Class A Payment Amount................................................... 17, 75
Class A Principal Funding Investment Shortfall........................... 10, 78
Class A Required Amount.................................................. 16, 75
Class A Scheduled Payment Date........................................... 2, 11
Class A Underwriters..................................................... 98
</TABLE>
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<TABLE>
<S> <C>
Class B Available Funds.................................................. 71
Class B Cap Rate......................................................... 47
Class B Certificate Rate................................................. 8
Class B Certificateholders............................................... 3
Class B Certificates..................................................... 1, 3
Class B Excess Interest.................................................. 8, 52
Class B Excess Principal................................................. 52
Class B Fixed Allocation................................................. 65
Class B Floating Allocation.............................................. 65
Class B Initial Investor Interest........................................ 5
Class B Interest Rate Cap................................................ 4
Class B Investor Charge-Off.............................................. 18, 77
Class B Investor Default Amount.......................................... 76
Class B Investor Interest................................................ 6, 66
Class B Monthly Cap Rate Interest........................................ 69
Class B Monthly Interest................................................. 8, 52
Class B Monthly Principal................................................ 74
Class B Monthly Servicing Fee............................................ 84
Class B Notional Amount.................................................. 47
Class B Payment Amount................................................... 18, 75
Class B Required Amount.................................................. 18, 75
Class B Scheduled Payment Date........................................... 2, 11
Class B Underwriters..................................................... 98
Closing Date............................................................. 4
Code..................................................................... 92
Collateral Available Funds............................................... 71
Collateral Default Amount................................................ 76
Collateral Fixed Allocation.............................................. 66
Collateral Floating Allocation........................................... 65
Collateral Interest...................................................... 6, 66
Collateral Interest Charge-Off........................................... 77
Collateral Interest Holder............................................... 5
Collateral Interest Monthly Servicing Fee................................ 84
Collateral Interest Surplus.............................................. 10, 68
Collateral Monthly Interest.............................................. 71
Collateral Monthly Principal............................................. 74
Collateral Rate.......................................................... 71
Collection Account....................................................... 15, 63
Collection Subaccount.................................................... 63
Collections.............................................................. 64
Commission............................................................... 2
Congress................................................................. 24
Controlled Accumulation Amount........................................... 41
Controlled Accumulation Date............................................. 9
Controlled Accumulation Period........................................... 9
Controlled Deposit Amount................................................ 9, 40
Cooperative.............................................................. 50
Defaulted Accounts....................................................... 64
Defaulted Receivables.................................................... 76
Definitive Certificates.................................................. 66
Depositaries............................................................. 48
Depository............................................................... 45
</TABLE>
102
<PAGE>
<TABLE>
<S> <C>
Determination Date..................................................... 76
Disclosure Document.................................................... 12
Discount Option........................................................ 63
Discount Percentage.................................................... 63
Distribution Account................................................... 64
Distribution Date...................................................... 2, 7
DOL.................................................................... 97
DTC.................................................................... 2, AII-1
DTC Participants....................................................... 48
Eligible Account....................................................... 60
Eligible Additional Account............................................ 61
Eligible Automatic Additional Account.................................. 61
Eligible Receivable.................................................... 60
Enhancement............................................................ 4
Enhancement Provider................................................... 58
ERISA.................................................................. 22
Euroclear.............................................................. 49
Euroclear Operator..................................................... 49
Euroclear Participants................................................. 49
Euroclear System....................................................... 49
Excess Funding Account................................................. 64
Excess Principal....................................................... 53
Excess Spread.......................................................... 71
Exchange............................................................... 12
Exchange Act........................................................... 2
Exchangeable Transferor Certificate.................................... 5
Expected Class A Principal............................................. 52
Expected Class B Principal............................................. 52
FDIA................................................................... 23
FDIC................................................................... 5
Finance Charge Account................................................. 64
Finance Charge Collections............................................. 64
Finance Charge Receivables............................................. 13
Fixed Investor Percentage.............................................. 65
Floating Investor Percentage........................................... 65
Global Securities...................................................... AII-1
Holder of the Exchangeable Transferor Certificate...................... 5
Holders................................................................ 51
Indirect Participants.................................................. 48
Ineligible Receivable.................................................. 58
Initial Class A Accumulation Date...................................... 52
Initial Collateral Interest............................................ 5
Initial Interest Period................................................ 8
Initial Investor Interest.............................................. 5
Insolvency Event....................................................... 82
Interchange............................................................ 36
Interest Period........................................................ 46
Interest Rate Cap Provider............................................. 4
Interest Rate Caps..................................................... 4
Investor Charge-Off.................................................... 78
Investor Default Amount................................................ 76
Investor Exchange...................................................... 12
</TABLE>
103
<PAGE>
<TABLE>
<S> <C>
Investor Interest..................................................... 6
Investor Percentage................................................... 7, 64, 65
IRS................................................................... 92
LIBOR Determination Date.............................................. 46
LIBOR................................................................. 7, 46
Loan Agreement........................................................ 21
London Banking Day.................................................... 46
MasterCard............................................................ 30
Maximum Addition Amount............................................... 61
Minimum Aggregate Principal Receivables............................... 37
Minimum Transferor Interest........................................... 37
Monthly Period........................................................ 7
Monthly Servicer Report............................................... 86
Monthly Servicing Fees................................................ 84
Moody's............................................................... 63
Offered Certificate Owners............................................ 2
Offered Certificate Rate.............................................. 8
Offered Certificate Rates............................................. 8
Offered Certificateholders............................................ 3, 49
Offered Certificates.................................................. 1, 3
OID................................................................... 93
Participants.......................................................... 48
Pay Out Event......................................................... 40
Paying Agent.......................................................... 51
Permitted Investments................................................. 63
Plan Asset Regulation................................................. 97
Pool Factor........................................................... 87
Portfolio Yield....................................................... 27
Principal Account..................................................... 64
Principal Allocation.................................................. 68
Principal Collections................................................. 64
Principal Funding Account Balance..................................... 9, 40
Principal Funding Account............................................. 9, 64, 78
Principal Funding Investment Proceeds................................. 10,78
Principal Receivables................................................. 13
Principal Shortfalls.................................................. 75
Principal Terms....................................................... 56
PSFC.................................................................. 1, 5, 44
Qualified Institution................................................. 63
Qualified Substitute Arrangement...................................... 47
Qualified Trust Institution........................................... 63
Rapid Amortization Period............................................. 11
Rating Agency......................................................... 28
Reallocated Class B Principal Collections............................. 76
Reallocated Collateral Principal Collections.......................... 76
Reallocated Principal Collections..................................... 76
Receivables........................................................... 1, 4
Record Date........................................................... 45
Recoveries............................................................ 13
Reference Banks....................................................... 46
Removal Date.......................................................... 62
Removed Accounts...................................................... 15, 62
</TABLE>
104
<PAGE>
<TABLE>
<S> <C>
Replacement Interest Rate Cap........................................ 47
Representative Portfolio............................................. 35
Required Amounts..................................................... 76
Required Collateral Interest......................................... 19, 78
Required Reserve Account Amount...................................... 79
Reserve Account...................................................... 79
Reserve Account Funding Date......................................... 79
Revolving Period..................................................... 9
RTC.................................................................. 23
RTC Policy Statement................................................. 90
Scheduled Payment Date............................................... 12
Scheduled Series 1997-1 Termination Date............................. 12, 80
Securities Act....................................................... 2, II-3
Series............................................................... 3
Series 1997-1........................................................ 3
Series 1997-1 Accounts............................................... 64
Series 1997-1 Supplement............................................. 3
Series Cut-Off Date.................................................. 13
Service Transfer..................................................... 86
Servicer............................................................. 15
Servicer Default..................................................... 85
Servicing Fee........................................................ 84
Servicing Fee Rate................................................... 83
Shared Finance Charge Collections.................................... 20, 72
Shared Principal Collections......................................... 20, 73, 74
Standard & Poor's.................................................... 63
Supplement........................................................... 12
Tax Counsel.......................................................... 92
Telerate Page 3750................................................... 46
Terms and Conditions................................................. 50
Total System......................................................... 30
Transfer Agent and Registrar......................................... 51
Transfer Date........................................................ 9
Transferor........................................................... 1
Transferor Exchange.................................................. 12
Transferor Interest.................................................. 6
Transferor Percentage................................................ 66
Transferor Servicing Fee............................................. 84
Trust................................................................ 1, 3
Trust Portfolio...................................................... 4, 36
Trustee.............................................................. 3
U.S. Person.......................................................... AII-4
UCC.................................................................. 89
Underwriters......................................................... 98
Underwriting Agreement............................................... 98
VISA................................................................. 30
</TABLE>
105
<PAGE>
ANNEX I
PRIOR SERIES ISSUED AND OUTSTANDING
The Trust has previously issued five Series of certificates, one of which
has 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 1994-1 Certificates, the Series 1994-2
Certificates, the Series 1995-1 Certificates and the Series 1996-1
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 1994-1
Initial Investor Interest................................... $200,000,000
Certificate Rate............................................ 5.10% per annum
Current Investor Interest................................... $200,000,000
Controlled Amortization Amount.............................. $16,666,666.67
Controlled Amortization Date................................ August 1, 1996
Monthly Servicing Fee....................................... 2% per annum
Initial Cash Collateral Amount.............................. $6,000,000
Surety Bond Initial Amount.................................. $19,000,000
Issuer of the Surety Bond................................... Financial Guaranty
Insurance Company
Expected Series Final Distribution Date..................... August 1997
Distribution Date
Scheduled Series Termination Date........................... August 2000
Distribution Date
Series Issuance Date........................................ February 16, 1994
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
Distribution Date
Class B Expected Final Distribution Date.................... June 1998
Distribution Date
Scheduled Series 1994-2 Termination Date.................... March 2001
Distribution Date
Series Issuance Date........................................ October 27, 1994
</TABLE>
AI-1
<PAGE>
<TABLE>
<S> <C>
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
Distribution Date
Class B Expected Final Distribution Date..................... November 2000
Distribution Date
Scheduled Series 1995-1 Termination Date..................... August 2003
Distribution Date
Series Issuance Date......................................... March 28 1995
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
Distribution Date
Class B Expected Final Distribution Date..................... February 2002
Distribution Date
Scheduled Series 1996-1 Termination Date..................... November 2004
Distribution Date
Series Issuance Date......................................... July 2, 1996
</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 1997-1 and Floating Rate Class B Asset Backed Certificates, Series
1997-1 (collectively, the "Global Securities") will be available only in book-
entry form. Investors in the Global Securities may hold such Global Securities
through The Depository Trust Company ("DTC"), Cedel or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations and prior People's Bank Credit Card Master Trust
issues.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding 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
AII-2
<PAGE>
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-
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.
AII-3
<PAGE>
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The 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 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>
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- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY PEOPLE'S BANK OR THE UNDERWRITERS. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Reports To Certificateholders............................................ 2
Available Information.................................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 23
The Trust................................................................ 30
The Credit Card Business Of People's Bank................................ 30
The Receivables.......................................................... 36
Maturity Considerations.................................................. 40
Receivable Yield Considerations.......................................... 42
Use Of Proceeds.......................................................... 43
People's Bank............................................................ 44
Description Of The Certificates.......................................... 44
Certain Legal Aspects Of The Receivables................................. 89
Certain Federal Income Tax Consequences.................................. 92
State And Local Tax Consequences......................................... 96
Certain Employee Benefit Plan Considerations............................. 97
Underwriting............................................................. 98
Legal Matters............................................................ 100
Index Of Key Terms....................................................... 101
Annex I Prior Series Issued.............................................. AI-1
Annex II Global Clearance, Settlement And Tax Documentation Procedures... AII-1
</TABLE>
-----------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN AD-
DITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$458,750,000
PEOPLE'S BANK CREDIT CARD
MASTER TRUST
$425,000,000 FLOATING RATE
CLASS A ASSET BACKED
CERTIFICATES, SERIES 1997-1
$33,750,000 FLOATING RATE
CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-1
[LOGO] PEOPLE'S BANK
TRANSFEROR AND SERVICER
-----------
PROSPECTUS
-----------
UNDERWRITERS OF THE CLASS A CERTIFICATES
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PRELIMINARY PROSPECTUS SUPPLEMENT
DATED MARCH , 1997 TO PROSPECTUS DATED MARCH , 1997
(THE "SEC PROSPECTUS")
$458,750,000
PEOPLE'S BANK CREDIT CARD MASTER TRUST
$425,000,000 FLOATING RATE CLASS A ASSET BACKED CERTIFICATES, SERIES 1997-1
$ 33,750,000 FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-1
PEOPLE'S BANK
TRANSFEROR AND SERVICER
Each of the Floating Rate Class A Asset Backed Certificates, Series 1997-1
offered hereby (the "Class A Certificates") and each of the Floating Rate
Class B Asset Backed Certificates, Series 1997-1 (the "Class B Certificates")
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" or "People's
Bank"), and Bankers Trust Company, as trustee. The Collateral Interest
(together with the Class A Certificates and the Class B Certificates, the
("Certificates")), representing an interest in the Trust which is not offered
hereby, will be issued in the initial amount of $41,250,000 and is subordinate
to the Class A Certificates and the Class B Certificates as and to the extent
described in the SEC Prospectus. The property of the Trust includes, among
other things, receivables (the "Receivables") generated from time to time in a
portfolio of VISA and MasterCard 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. People's
Bank services the Receivables and People's Structured Finance Corp. ("PSFC"),
a wholly-owned subsidiary of People's Bank, owns the undivided interest in the
Trust not represented by the Certificates or other interests issued by the
Trust. Principal with respect to the Class A Certificates is scheduled to be
distributed on the February 2002 Distribution Date, but may be paid earlier or
later under certain limited circumstances as described in the SEC Prospectus.
Principal with respect to the Class B Certificates is scheduled to be
distributed on the March 2002 Distribution Date, but may be paid earlier or
later under certain limited circumstances as described in the SEC Prospectus.
Interest on the Certificates will accrue from the Closing Date.
This Prospectus Supplement contains certain limited information about the
offering of the Class A Certificates which is relevant to non-U.S. persons.
Detailed information concerning the offering is contained in the SEC
Prospectus and purchasers are urged to read each of this Prospectus
Supplement, which is attached to the SEC Prospectus, and the SEC Prospectus
together and in full. Sales of the Class A Certificates may not be consummated
unless the purchaser has received this Prospectus Supplement and the SEC
Prospectus.
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange.
The distribution of this Prospectus Supplement and the SEC Prospectus and
the offering of the Class A Certificates in certain jurisdictions may be
restricted by law. Persons into whose possession this Prospectus Supplement
and the SEC Prospectus come are required by the Underwriters to inform
themselves about and to observe any such restrictions.
This Prospectus Supplement and the SEC Prospectus do not constitute an offer
to sell or the solicitation of an offer to buy the Certificates in any
jurisdiction in which such offer or solicitation is unlawful.
<PAGE>
No person has been authorized to give information or make statements other
than those of this Prospectus Supplement and of the SEC Prospectus and no
person may rely on such information or statements as having been authorized.
The publication of this Prospectus Supplement does not imply that the
information contained herein is still valid after the date of publication.
As used in this Prospectus Supplement and the SEC Prospectus, all reference
to "dollars" and "$" are to United States dollars.
DESCRIPTION OF CERTIFICATES
Reference should be made to the accompanying SEC Prospectus for a detailed
summary of the provisions of the Certificates. Certain terms used and not
defined in this Prospectus Supplement are defined in the SEC Prospectus.
DISTRIBUTIONS ON THE CERTIFICATES
Interest will accrue on the Class A Investor Interest at the Class A
Certificate Rate and on the Class B Investor Interest at the Class B
Certificate Rate during each Interest Period following the Initial Interest
Period and will accrue on the Class A Investor Interest at a rate of %
per annum and on the Class B Investor Interest at a rate of % per annum
during the Initial Interest Period. Interest will be distributed to
Certificateholders on April 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"). Certificateholders will receive all
distributions of principal of and interest on the Certificates in the manner
described under "Description of the Certificates--Book Entry Registration" and
"--Definitive Certificates" in the SEC Prospectus. For further discussion of
distributions of principal and interest with respect to the Certificates, see
"Prospectus Summary--Interest," "--Principal Payments; Controlled Accumulation
Period," "--Principal Payments; Rapid Amortization Period" and "--Scheduled
Payment of Principal and Interest" and "Description of the Certificates--
General," "--Interest Payments" and "--Principal Payments" in the SEC
Prospectus. "Interest Period" means, with respect to any Distribution Date, a
period from and including the preceding Distribution Date to and including the
day immediately preceding such Distribution Date; provided, however, that the
Initial Interest Period will commence on the Closing Date. A "Business Day"
for purposes other than determining LIBOR is any day other than a Saturday or
Sunday and other than a day on which banking institutions in New York, New
York or Connecticut are authorized or obligated by law or executive order to
be closed.
The Trustee will maintain a paying agency in Luxembourg for so long as the
Class A Certificates are outstanding. The name and address of the paying agent
are set forth at the end of this Prospectus Supplement. If Definitive
Certificates are issued, such paying agent also will act as co-transfer agent
and co-registrar with respect to the Definitive Certificates. In addition,
upon maturity or final payment, such Definitive Certificates may be presented
for payment at the offices of such paying agent in Luxembourg up to two years
after maturity or final payment.
No additional amounts will be payable to a Certificateholder in the event
any deduction or withholding for or on account of any present or future tax,
assessment or other governmental charge is imposed upon any payment to such
Certificateholder by the United States or any political subdivision or taxing
authority therein or thereof.
REPLACEMENT CERTIFICATES
In the event that Definitive Certificates are issued, a Class A Certificate
that is mutilated, destroyed, lost or stolen may be exchanged or replaced, as
the case may be, at the offices of the co-transfer agent and co-registrar in
Luxembourg upon presentation of the Class A Certificate or
2
<PAGE>
satisfactory evidence of the destruction, loss or theft thereof to the co-
transfer agent and co-registrar. An indemnity satisfactory to the co-transfer
agent and co-registrar and the Trustee may be required at the expense of the
Certificateholder before a replacement Class A Certificate will be issued. The
Certificateholder will be required to pay any tax or other governmental charge
imposed in connection with such exchange or replacement and any other expenses
(including the fees and expenses of the Trustee and the co-transfer agent and
co-registrar) connected therewith.
REPORTS; NOTICES
The Trustee will publish or will cause to be published following each
Distribution Date in a daily newspaper in Luxembourg (expected to be the
Luxemburger Wort) a notice to the effect that the information set forth in the
statement described under "Description of the Certificates--Reports to
Certificateholders" in the SEC Prospectus will be available at the main office
of the listing agent of the issuer in Luxembourg City, Bankers Trust
Luxembourg S.A., 14 Boulevard F.D. Roosevelt, Luxembourg.
Notices to Class A Certificateholders will be given by publication in a
daily newspaper in Luxembourg, which is expected to be the Luxemburger Wort.
In the event that Definitive Certificates are issued, notices to
Certificateholders will also be given by mail to the addresses of such holders
as they appear in the certificate register.
STATUS OF THE CERTIFICATES
The Class A Certificates and Class B Certificates constitute general
contractual obligations of the Trust and rank pari passu among themselves
within each respective class and collectively as a Series with other present
and future outstanding unsubordinated obligations of the Trust.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates, approximately
$ before deduction of expenses, will be paid to PSFC, 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 such proceeds to the
Transferor through the declaration and payment of a dividend and/or a
distribution of capital to the Transferor, and the Transferor will use such
proceeds for its general corporate purposes.
PAY OUT EVENTS
The rights of Certificateholders upon the occurrence of a Pay Out Event are
described under "Description of the Certificates--Pay Out Events" in the SEC
Prospectus. In addition to the consequences of a Pay Out Event described
therein, if a receiver or conservator is appointed for the Transferor, on the
day of such appointment the Transferor will (pursuant to the Agreement and
subject to the actions of the Certificateholders) immediately cease to
transfer Receivables to the Trust and promptly give notice to the Trustee of
such appointment. Under the terms of the Agreement the Trustee will publish a
notice of the appointment of a receiver or conservator stating that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in
a commercially reasonable manner and on commercially reasonable terms unless
within a specific period of time the holders of more than 50% of the principal
amount of each Series outstanding (or 50% of each class of each such Series
with more than one class) instruct the Trustee not to dispose of or liquidate
the Receivables and to continue having Principal Receivables transferred to
the Trust as before such appointment of a receiver or conservator. The
proceeds from the sale, disposition or liquidation of the Receivables
allocable to any Series that did not vote to disapprove the liquidation of the
Receivables will be treated as collections on the Receivables (payable solely
to such Series). If the portion of such proceeds allocated to the
Certificateholders and the proceeds of any collections on the Receivables in
the Distribution Account allocable to the Certificateholders are not
sufficient to pay the Certificateholders in full, the amount of principal
returned to Certificateholders will be reduced and the Certificateholders will
incur a loss.
3
<PAGE>
LIABILITY OF THE TRANSFEROR
The Agreement provides that the Servicer will indemnify the Trust, for the
benefit of the certificateholders (including the Certificateholders), and the
Trustee from and against any reasonable loss, liability, expense, damage or
injury suffered or sustained by reason of any acts or omissions or alleged
acts or omissions of the Servicer with respect to the activities of the Trust
or the Trustee pursuant to the Agreement; provided, however, that the Servicer
will not indemnify (a) the Trustee for liabilities imposed by reason of or
resulting from fraud, negligence, breach of fiduciary duty or willful
misconduct by the Trustee in the performance of its duties under the
Agreement, (b) the Trust, the Certificateholders or the Certificate Owners for
liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Trust, the Certificateholders or the Certificate
Owners for any losses, claims, damages or liabilities incurred by any
Certificateholder in its capacity as an investor, including without limitation
losses incurred as a result of defaulted Receivables or Receivables which are
written off as uncollectible or (d) the Trust, the Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation any federal, state or local income or franchise
tax or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
required to be paid by the Trust, the Certificateholders or the Certificate
Owners in connection therewith to any taxing authority.
The Agreement provides that neither the Transferor nor the Servicer nor any
of their respective directors, officers, employees or agents will be under any
other liability to the Trust, the Certificateholders or any other person for
any action taken, or for refraining from taking any action, in good faith
pursuant to the Agreement. Neither the Transferor, the Servicer, nor any of
their respective directors, officers, employees or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer or
any such person in the performance of its duties or by reason of reckless
disregard of obligations and duties thereunder. In addition, the Agreement
provides that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
PEOPLE'S BANK
People's Bank was formed in 1842 and is headquartered in Bridgeport,
Connecticut. People's Bank is a majority-owned subsidiary of People's Mutual
Holdings, which as of December 31, 1996 owns 59.9% 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 $7.6 billion, total liabilities of approximately $7.0
billion, and total stockholders' equity of approximately $618 million as of
December 31, 1996. At December 31, 1996, People's Bank's Tier 1 leverage
capital ratio was 7.9%, satisfying the minimum ratio of 4.0% to 5.0% generally
required by the FDIC. People's Bank is also subject to the FDIC's risk-based
capital regulations, which require minimum ratios of Tier 1 capital and total
capital to risk-weighted assets of 4.0% and 8.0%, respectively. People's Bank
satisfied these requirements at December 31, 1996 with ratios of 10.0% and
13.9%, respectively. People's Bank's regulatory capital ratios at December 31,
1996 exceed the FDIC's numeric criteria for classification as a "well-
capitalized" institution.
4
<PAGE>
LISTING AND GENERAL INFORMATION
Application will be made to list the Class A Certificates on the Luxembourg
Stock Exchange. In connection with the listing application, the Articles of
Association and By-laws of the Transferor, as well as legal notice relating to
the issuance of the Class A Certificates, will be deposited prior to listing
with the Chief Registrar of the District Court in Luxembourg, where copies
thereof may be obtained upon request. Once the Class A Certificates have been
so listed, trading of the Class A Certificates may be effected on the
Luxembourg Stock Exchange. The Class A Certificates and the Class B
Certificates will be accepted for clearance through the facilities of The
Depository Trust Company and Cedel Bank, societe anonyme, and the Euroclear
System (ISIN number US710318AJ59 with respect to the Class A Certificates and
ISIN number US710318AK23 with respect to the Class B Certificates and Common
Code number 7503024 with respect to the Class A Certificates and Common Code
number 7503032 with respect to the Class B Certificates).
The transactions contemplated in this Prospectus and the SEC Prospectus were
authorized by resolutions adopted by the Transferor on February 20, 1997 and
by PSFC on March 18, 1997.
The Trust was formed on June 1, 1993 pursuant to the Pooling and Servicing
Agreement. The Trust has no assets other than those described in the SEC
Prospectus.
Copies of the Pooling and Servicing Agreement, the Series 1997-1 Supplement,
the annual report of independent public accountants, the documents listed
under "Available Information" in the SEC Prospectus and the reports to
Certificateholders referred to in the second paragraph under "Description of
Certificates--Reports to Certificateholders" in the SEC Prospectus, will be
available at the office of Bankers Trust Luxembourg S.A., the Listing Agent of
the Issuer in Luxembourg, whose address is 14 Boulevard F.D. Roosevelt,
Luxembourg City, Luxembourg. Financial information regarding the Transferor is
included in the consolidated financial statements of People's Bank's Annual
Report and Form F-2 for the fiscal year ended December 31, 1996 and Form F-4
for the fiscal quarter ended March 31, 1997, each of which will be available
at the office of the Listing Agent in Luxembourg.
On or prior to each Distribution Date the Luxembourg Stock Exchange shall be
advised of (i) the Class A Certificate Rate as determined under "Prospectus
Summary--Interest" and "Description of Certificates--Determination of LIBOR"
in the SEC Prospectus, for the immediately following Distribution Date, (ii)
the amount of interest to be distributed in respect of the Class A
Certificates for the Distribution Date referred to in (i) above and (iii) the
principal amount of the Class A Certificates that will be outstanding after
the principal distribution made on the Distribution Date on which such report
is being furnished. Also, promptly following each Distribution Date a notice
will be published in a daily newspaper (expected to be the Luxemburger Wort)
specifying the information described above in Items (i) and (ii).
The Certificates, the Pooling and Servicing Agreement and the Series 1996-1
Supplement are governed by the laws of the State of New York.
5
<PAGE>
PRINCIPAL OFFICE OF PEOPLE'S BANK
Bridgeport Center
850 Main Street
Bridgeport, CT 06604-4913
TRUSTEE
BANKERS TRUST COMPANY
4 Albany Street
10th Floor
New York, New York 10005
PAYING AGENTS
BANKERS TRUST COMPANY BANKERS TRUST LUXEMBOURG,
4 Albany Street S.A.
10th Floor 14 Boulevard F.D. Roosevelt
New York, New York 10005 Luxembourg City
Luxembourg
LISTING AGENT
BANKERS TRUST LUXEMBOURG, S.A.
14 Boulevard F.D. Roosevelt
Luxembourg City
Luxembourg
LEGAL ADVISER TO THE BANK LEGAL ADVISER TO THE UNDERWRITERS
As to United States Law As to United States Law
MAYER, BROWN & PLATT SKADDEN, ARPS, SLATE,
1675 Broadway MEAGHER & FLOM LLP
New York, New York 10019-5820 919 Third Avenue
New York, New York 10022
ACCOUNTANTS TO THE BANK
KPMG PEAT MARWICK LLP
2001 M Street, N.W.
9th Floor
Washington, D.C. 20036
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee................................................ $137,625
Printing and Engraving.......................................... 70,000
Legal Fees and Expenses......................................... 175,000
Blue Sky Fees and Expenses...................................... 10,000
Accountants' Fees and Expenses.................................. 25,000
Rating Agency Fees.............................................. 232,500
Miscellaneous Fees.............................................. 100,000
--------
Total......................................................... $750,125
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article X of the Articles of Incorporation of People's Bank provides that
the Bank shall indemnify its directors, officers, employees, agents, and all
other persons eligible for indemnification by People's Bank, to the fullest
extent permitted or required by Section 33-320a of the Connecticut General
Statutes and as provided by the Bylaws of the Bank. Furthermore, no director
of People's Bank shall be personally liable to People's Bank or its
stockholders for monetary damages for breach of duty as a director in any
amount in excess of the compensation received by the director for serving
People's Bank in that capacity during the year such violation occurred, unless
such breach (1) involves a knowing and culpable violation of law by the
director, (2) enables the director or an associate of such director (as
defined in subdivision (3) of Section 33-374d of the Connecticut General
Statutes), to receive an improper personal economic gain, (3) shows a lack of
good faith and a conscious disregard for the duty of the director to People's
Bank under circumstances in which the director was aware that his conduct or
omission created an unjustifiable risk of serious injury to People's Bank, (4)
constitutes a sustained and unexcused pattern of inattention that amounted to
an abdication of the director's duty to People's Bank, or (5) creates
liability under Section 36-9 of the Connecticut General Statutes. Furthermore,
Article X of the Articles of Incorporation provides that any repeal or
modification of Article X by the stockholders of People's Bank shall be
prospective only and shall not adversely affect any limitation on the personal
liability of a director of People's Bank existing at the time of such repeal
or modification.
Article VI of the By-laws of People's Bank provides that the Bank shall
indemnify (a) its currently acting and its former directors, officers,
employees or agents to the fullest extent that indemnification of directors is
permitted by the Connecticut Stock Corporation Act and (b) its officers to the
same extent as its directors (and to such further extent as is consistent with
law). In addition, Article VI of such By-Laws provides that People's Bank
shall indemnify its directors and officers who, while serving as directors or
officers of People's Bank, also serve at the request of People's Bank as a
director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the fullest extent permitted by the Connecticut Stock
Corporation Act.
Article VI of People's Bank's By-laws also provides that any director or
officer seeking indemnification within the foregoing rights of indemnification
shall be entitled to advances from People's Bank for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is
seeking indemnification as authorized by the Board of Directors in accordance
with the provisions of and in the manner and to the fullest extent permissible
under the Connecticut Stock Corporation Act. Further, such Section provides
that the foregoing rights of indemnification shall not be deemed exclusive of
any other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled and shall inure to the benefit of the
heirs, executors and administrators of such director or officer. Furthermore,
any such right of indemnification shall be consistent with the laws of the
State of Connecticut.
II-1
<PAGE>
The Connecticut Stock Corporation Act was repealed effective January 1, 1997
and replaced by the Connecticut Business Corporation Act. Section 33-771 of
the Connecticut Business Corporation Act permits a corporation generally to
indemnify each of its directors and officers against liability (including
judgments, settlements, penalties and fines) if (i) he acted in good faith;
(ii) he reasonably believed (A) in the case of conduct in his official
capacity, that his conduct was in the corporation's best interests, and (B) in
all other cases, that his conduct was at least not opposed to its best
interests; and (iii) in the case of criminal proceedings, he had no reasonable
cause to believe his conduct was unlawful. A corporation may not indemnify a
director or officer if: (i) in connection with a proceeding by or in the right
of the corporation, he is adjudged liable to the corporation; or (ii) in
connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, he was adjudged
liable on the basis that personal benefit was improperly received by him. In
addition, Sections 33-772 and 33-776 of the Connecticut Business Corporation
Act provide that , unless limited by its certificate of incorporation, a
corporation shall indemnify an officer or director who is wholly successful,
on the merits or otherwise, in the defense of any proceeding to which he was a
party because he is or was a director or officer of the corporation, against
reasonable expenses incurred by him in connection with the proceeding. Section
33-773 of the Connecticut Business Corporation Act also permits a corporation
to pay or reimburse the reasonable expenses incurred by a director or officer
who is a party to an action, suit or proceeding (whether civil, criminal,
administrative or investigative) in advance of the final disposition of such
action, suit or proceeding, provided that (i) he affirms in writing his good
faith belief that the standard of conduct required under the statute has been
met; (ii) he furnishes a written undertaking to repay the corporation if it is
ultimately determined that such standard has not been met; and (iii) a
determination is made pursuant to the statute that the facts then known would
not preclude indemnification under the statute.
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. (Incorporated herein by
reference to Exhibit 3.1 of Registration Statement No. 33-63146 of
People's Bank)
3.2 --By-laws, as amended. (Incorporated herein by reference to Exhibit
3.2 of Registration Statement No. 33-90012 of People's Bank)
4.1 --Form of Amended and Restated Pooling and Servicing Agreement, and
certain other related agreements as Exhibits thereto.
4.2 --Form of Series 1997-1 Supplement, including form of Series 1997-1
Offered Certificate, and certain other related agreements as
Exhibits thereto.
4.3 --Form of Interest Rate Caps
5.1 --Opinion of Mayer, Brown & Platt with respect to legality.
8.1 --Opinion of Mayer, Brown & Platt with respect to tax matters.
8.2 --Opinion of Pullman & Comley, LLC with respect to tax matters.
23.1 --Consent of Mayer, Brown & Platt (included in its opinions filed as
Exhibit 5.1 and Exhibit 8.1).
23.2 --Consent of Pullman & Comley, LLC (included in its opinion filed as
an Exhibit to Exhibit 8.2.)
24.1 --Powers of Attorney.*
</TABLE>
- --------
* Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing specified in the
Underwriting Agreement Certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted
to directors, officers and controlling persons of the registrant pursuant
to the provisions described under Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 3 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 MARCH 18, 1997.
People's Bank, as originator of the
Trust (Registrant)
/s/ George W. Morriss
By: _________________________________
GEORGE W. MORRISS
Executive Vice President
and Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON MARCH 18,
1997 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
* President and Chief Executive
- ------------------------------------- Officer, Director
DAVID E.A. CARSON
* Executive Vice President,
- ------------------------------------- Director
JAMES P. BIGGS
/s/ George W. Morriss Executive Vice President and
- ------------------------------------- Chief Financial Officer
GEORGE W. MORRISS
* Senior Vice President,
- ------------------------------------- Comptroller, as Chief
CARLOS R. MELLO Accounting Officer
* Director
- -------------------------------------
GEORGE P. CARTER
* Director
- -------------------------------------
JOSEPH E. CLANCY
* Director
- -------------------------------------
GEORGE R. DUNBAR
II-4
<PAGE>
SIGNATURES TITLE
* Director
- -------------------------------------
NORWICK R.G. GOODSPEED
* Director
- -------------------------------------
SAMUEL W. HAWLEY
* Director
- -------------------------------------
BETTY RUTH HOLLANDER
* Director
- -------------------------------------
JEAN M. LAVECCHIA
* Director
- -------------------------------------
EUNICE S. GROARK
* Director
- -------------------------------------
SAUL KWARTIN
* Director
- -------------------------------------
JACK E. MCGREGOR
* Director
- -------------------------------------
JOHN F. MERCHANT
* Director
- -------------------------------------
WILMONT F. WHEELER, JR.
*By: /s/ George W. Morriss
- -------------------------------------
GEORGE W. MORRISS as attorney-in-
fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 --Form of Underwriting Agreement.
3.1 --Articles of Incorporation, as amended. (Incorporated herein by
reference to Exhibit 3.1 of Registration Statement No. 33-63146 of
People's Bank)
3.2 --By-laws, as amended. (Incorporated herein by reference to Exhibit 3.2
of Registration Statement No. 33-90012 of People's Bank)
4.1 --Form of Amended and Restated Pooling and Servicing Agreement, and
certain other related agreements as Exhibits thereto.
4.2 --Form of Series 1997-1 Supplement, including form of Series 1997-1
Offered Certificate, and certain other related agreements as Exhibits
thereto.
4.3 --Form of Interest Rate Caps.
5.1 --Opinion of Mayer, Brown & Platt with respect to legality.
8.1 --Opinion of Mayer, Brown & Platt with respect to tax matters.
8.2 --Opinion of Pullman & Comley, LLC with respect to tax matters.
23.1 --Consent of Mayer, Brown & Platt (included in its opinions filed as
Exhibit 5.1 and Exhibit 8.1).
23.2 --Consent of Pullman & Comley, LLC (included in its opinion filed as an
Exhibit to Exhibit 8.2).
24.1 --Powers of Attorney.*
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 1.1
PEOPLE'S BANK CREDIT CARD MASTER TRUST
$425,000,000 Floating Rate Class A
Asset Backed Certificates, Series 1997-1
$33,750,000 Floating Rate Class B
Asset Backed Certificates, Series 1997-1
Underwriting Agreement
GOLDMAN, SACHS & CO.,
as Representatives of
the Class A Underwriters and
as Class B Underwriters
85 Broad Street
New York, New York 10004
March __, 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 $425,000,000 principal amount of People's Bank Credit Card Master
Trust Floating Rate Class A Asset Backed Certificates, Series 1997-1 (the
"Class A Certificates") and $33,750,000 Floating Rate Class B Asset Backed
- ---------------------
Certif cates, Series 1997-1 (the "Class B Certificates" and, together with
--------------------
Class A Certificates, the "Certificates"). We refer to you herein in your
------------
capacities as Underwriters and as representatives of the Underwriters as the
"Representatives".
Each Certificate will represent an undivided interest in the People's
Bank Credit Card Master Trust (the "Trust") established pursuant to a Pooling
-----
and
1
<PAGE>
Servicing Agreement between the Bank, as Seller and as Servicer of the credit
card receivables transferred to the Trust, and Bankers Trust Company, as trustee
(the "Trustee"), dated as of June 1, 1993, as amended 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 ("Assign ment No. 3") and Assignment No. 4 between the
Bank and the Trustee dated as of October 6, 1996 ("Assignment No. 4"). 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 1997-1 Supplement be
tween People's Bank, as Transferor and Servicer, and Bankers Trust Company as
Trustee, dated as of March , 1997 (the "Series Supplement" and, together with
-- -----------------
the P&S Agreement, Assignment No. 1, Assignment No. 2, Assignment No. 3 and
Assignment No. 4, 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 $41,250,000 (the "Collateral
Interest"), which is subordinate to the Class A Certificates and the Class B
Certificates. To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement.
2
<PAGE>
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 herein after
called the "Registration Statement"; and such final prospectus, in the form
----------------------
first filed pursuant to Rule 424(b) under the Act, being hereinafter called the
"Prospectus");
----------
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this
3
<PAGE>
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to
either PSFC or the Bank by the Representatives expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supple ments 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
Representatives express ly 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 prospec tive 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 Certificates, otherwise than as set forth or contemplated in
the Prospectus;
4
<PAGE>
(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 neces sary 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 per form 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 Certificatehold ers or any Enhancement Provider;
(g) The Certificates have been duly authorized and, when executed,
issued and delivered pursuant to the Pooling and Servicing Agreement, duly
authenticated by the Trustee and paid for by the Underwriters in accordance
with the terms of this Agreement, will have been duly and validly executed,
authenticated, issued and delivered and will be entitled to the benefits
provided by the Pooling and Servicing Agreement; the
5
<PAGE>
Pooling and Servicing Agreement has been duly autho rized 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, reor ganization, 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 govern ing 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 autho rized, executed and
delivered by the Bank and consti tutes a valid and binding agreement of 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);
6
<PAGE>
(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 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;
7
<PAGE>
(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 govern ment 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 State ment, 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 and 3.3, respectively, of the Pooling and Servicing Agreement
shall be true and correct; and the representations and warranties of the
Seller relating to the Receivables made in Section 2.4 of the Pooling and
Servicing Agreement shall be true and correct; provided, however, that the
-------- -------
breach of any such representations and warranties in Section 2.4 of the Pooling
and Servicing Agreement shall not be deemed to be a breach hereunder unless
such breach materially adversely affects the interests of the holders of either
the Class A Certificates or the Class B Certificates;
8
<PAGE>
(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 and PSFC will not
have assigned to any Person any of its right, title or interest in the
Certificates being issued pursuant to the Pooling and Servicing Agreement
(other than, in each case, as con templated 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 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 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 (including Receivables in Additional Accounts
added on May 1, 1996) have an aggregate outstanding balance determined as of
December 31, 1996 ("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"
9
<PAGE>
within the meaning of the Investment Company Act of 1940, as amended (the "1940
----
Act"); and
---
(t) Neither the Pooling and Servicing Agree ment nor any indenture is
required to be qualified under the Trust Indenture Act of 1939.
2. Subject to the terms and conditions herein set forth, PSFC agrees
to sell and deliver to the Under writers, 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 deliv ered by or on behalf of PSFC
to the Underwriters against payment by the Underwriters or on behalf of the
Underwriters of the purchase price therefor, in immediately available funds,
drawn to the order of PSFC, at the office of Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, at 10:00 a.m. on March , 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:
10
<PAGE>
(a) To advise the Underwriters promptly of any proposal to amend or
supplement the Registration Statement as filed, or the Prospectus, and will
not effect such amendment or supplement without the consent of the
Representatives, which consent shall not be unreasonably delayed or withheld;
to prepare and file the Prospectus in a form approved by the Representatives
and to file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to advise the
Underwriters, promptly after it receives notice thereof, of the time when the
Registration Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish the Underwriters with copies thereof; to advise the
Underwriters, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the use
of any Preliminary Prospectus or Prospectus, of the suspension of the
qualification of the Certificates for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in the
event of the issuance of any stop order or any order preventing or suspending
the use of any Preliminary Prospectus or Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as the
Underwriters may reasonably request to qualify the Certificates for offering
and sale under the securities laws of such jurisdictions as the Underwriters
may request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Certificates, provided that in
connection therewith neither PSFC nor the Bank shall be required to qualify as
a foreign corporation or dealer in securities, or to file a general consent to
service of process, in any jurisdiction;
11
<PAGE>
(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;
(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 there
under (including, at the option of the Bank, Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the earlier of (i) the termination of trading restrictions on
the Certificates, as notified to PSFC and the Bank by the Representatives, and
(ii) the Time of Delivery, not to offer, sell, contract to sell or otherwise
dispose of
12
<PAGE>
any securities of PSFC or the Bank or a trust formed by the Bank which mature
more than one year after the Time of Delivery and which are substantially
similar to the Certificates, without the prior written consent of the
Representatives;
(f) So long as any Certificates are outstanding, to furnish to the
Underwriters copies of all reports or other written communications (financial
or other) furnished to holders of the Certificates, and deliver to the
Underwriters as soon as they are available, copies of any reports and
financial statements furnished to or filed by PSFC or the Bank with the
Commission, or any national securities exchange on which the Certificates or
any class of securities of the Bank are listed;
(g) So long as any Certificates are outstanding, to furnish to the
Underwriters copies of all such additional information concerning the business
and financial condition of the Trust as the Underwriters may from time to time
reasonably request; and
(h) To the extent, if any, that the rating provided with respect to
the Certificates by Standard & Poor's Ratings 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.
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,
disburse ments 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
13
<PAGE>
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
Under writers 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:
(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 suspend ing the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or, to the knowledge of PSFC, the Bank
or the Underwriters, threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to the reasonable satisfaction of the Representatives;
14
<PAGE>
(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 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 informa tion 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:
15
<PAGE>
(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) with respect to the Pooling and Servicing Agreement, to
the further qualification that certain remedial provisions in the
Pooling and Servicing Agreement may be limited or rendered ineffective
by the applicable laws of the State of New York or judicial decisions
governing such provisions or holding their enforcement to be
unreasonable under the then existing circumstances (but, in such
counsel's opinion, there exists in the Pooling and Servicing Agreement
or pursuant to applicable law legally adequate remedies for a
realization of the principal benefits purported to be provided
thereby);
(iv) The Assignment has been duly authorized, executed and
delivered by each of PSFC and the Bank and constitutes the legal,
valid and binding agreement of each of PSFC and the Bank enforceable
against PSFC and the Bank
16
<PAGE>
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, in
solvency, 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);
(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 State ment 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 fi-
17
<PAGE>
nancial 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 Pro spectus 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 manner and within the time
period required by Rule 424(b). To the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose are pending or threatened by the Commission. Such counsel does
not know of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement that are not described and
filed as required;
(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
(vi) 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
18
<PAGE>
participation and discussions described above, no facts have come to
such counsel's attention that cause it to believe that the
Registration Statement, as of its effective date (except for the
financial statements, financial schedules and other financial data
included therein as to all of which such counsel expresses no view),
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or that the Prospectus, as
of its date and as of the Closing Date (except for the financial
statements, financial schedules, and other financial data included
therein as to which such counsel expresses no view) 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
(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;
19
<PAGE>
(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 Connecticut 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:
20
<PAGE>
(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 retail installment sale
contract or any Receivable unenforceable by the Bank or the Trust or
would have a material adverse effect on the Certificateholders, or any
Enhancement Provider;
(ii) PSFC has been duly incorporated and is validly
existing as a Connecticut corporation in good standing under the laws
of the State of Connecticut, with all power, authority and legal right
necessary to own its properties and conduct its business as described
in the Prospectus, and to enter into and perform its obligations under
this Agreement and had at all relevant times, and now has, the power,
author ity 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 juris diction 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
21
<PAGE>
Assignment and the Loan Agreement have been duly authorized, executed
and delivered by the Bank;
(iv) This Agreement and the Assign ment have been duly
authorized, executed and delivered by PSFC;
(v) No consent, approval, authori zation 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 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
22
<PAGE>
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 con templated 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 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 re viewed
by such counsel and are correct in all material respects; and
23
<PAGE>
(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 in formation contained in the Registration State
ment and Prospectus. Based upon the participa tion and discussions
described in subsection 7(e)(vi) above, no facts have come to such
counsel's attention that cause him to believe that the Registration
Statement, as of its effective date (except for the financial state
ments, financial schedules and other financial data included therein
as to all of which such counsel expresses no view), contained any un
true 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 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,
24
<PAGE>
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 per form 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, Assignment No. 1,
Assignment No. 2, Assignment No.3, Assignment No. 4, 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 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 enforce ability 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;
25
<PAGE>
(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 con flict 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 Bayerische Vereinsbank AG and
of Cadwalader Wickersham & Taft counsel to Bayerische Vereinsbank AG, 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 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 (the
------------------------------------
"Interest
26
<PAGE>
Rate Cap Provider"), addressed to you, in form and substance satisfactory to
the Underwriters and their counsel regarding the due authorization, execution,
delivery and enforceability by or against the Interest Rate Cap Provider of
the interest rate cap agreements, the first to be dated , 1997, between
--------
People's Bank and the Interest Rate Cap Provider, and the second 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 Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Certificates on the terms and in the manner contemplated in
the Prospectus;
(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
27
<PAGE>
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 Representatives and their counsel and
the Underwriters and their counsel shall have received such information,
certificates or documents as the Underwriters or their counsel may reasonably
request.
8. (a) PSFC and the Bank will jointly and severally indemnify and
hold harmless the Underwriters against any losses, claims, damages or
liabilities, joint or several, to which the Underwriters may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Underwriters for any legal or other expenses reasonably
incurred by the Underwriters in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
neither PSFC nor the Bank shall be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration State ment or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written
28
<PAGE>
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 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 infor mation furnished to either PSFC or the Bank by
the Underwriters expressly for use therein; and will reim-
29
<PAGE>
burse 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 lia bility 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 there of, 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
indem nified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. Any
indemnify ing 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
30
<PAGE>
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 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
31
<PAGE>
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 contri bution 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 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 direc tor or controlling person of PSFC or the Bank, and
shall survive delivery of and payment for the Certificates.
Anything herein to the contrary notwithstanding, the indemnity agreement of PSFC
and the Bank in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (b) and (c) of Section 1 hereof and any
representation or warranty as to the accuracy of the Registration Statement or
the Prospectus contained in any certificate furnished by PSFC or the Bank
pursuant to Section 7 hereof, insofar as they may constitute a basis for
indemnification for liabilities (other than payment by PSFC or the Bank of
expenses incurred or paid in the successful defense of any action, suit or
proceeding)
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<PAGE>
arising under the Act, shall not extend to the extent of any interest therein of
a controlling person or partner of the Underwriters or a person who is a
director, offi cer or controlling person of PSFC or the Bank when the
Registration Statement has become effective, except in each case to the extent
that an interest of such character shall have been determined by a court of
appropriate jurisdiction as not against public policy as expressed in the Act.
Unless in the opinion of counsel for PSFC and the Bank the matter has been
settled by controlling precedent, PSFC or the Bank, as applicable, will, if a
claim for such indemnification is asserted, submit to a court of appropriate
jurisdiction the question whether such interest is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
10. (a) If any Underwriter shall default in its obligation to
purchase the Class A Certificates which it has agreed to purchase hereunder, the
non-defaulting Underwriters may in their discretion arrange for themselves as
they may agree or another party or other par ties 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 ar range 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 pur
chase 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.
33
<PAGE>
(b) If, after giving effect to any ar rangements for the purchase of
the Class A Certificates of a defaulting Underwriter by the non-defaulting Under
writers 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
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 Under
writers 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.
34
<PAGE>
12. All statements, requests, notices and agreements hereunder shall
be in writing, and if to the Underwriters shall be delivered or sent by mail,
telex or facsimile transmission to Goldman, Sachs & Co., at 85 Broad Street, New
York, New York 10004, Attention: Registration Department; if to PSFC shall be
delivered or sent by mail, telex or facsimile transmission to 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 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
35
<PAGE>
prohibition or unenforceability without invalidating the remaining provisions
hereof.
18. Each Underwriter represents and agrees that (a) it has not offered
or sold and will not offer or sell any Certificates to persons in the United
Kingdom prior to the expiration of the period of six months from the issue date
of the Certificates except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995: (b) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom; and (c) 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 issuance 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 is a
person to whom such document may otherwise lawfully be issued or passed on.
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:
_____________________________
GOLDMAN, SACHS & CO.,
as Representatives on
behalf of the Class A
Underwriters and as
Class B Underwriters
37
<PAGE>
SCHEDULE A
Aggregate
Principal
Amount of the
Class A
Underwriter Certificates
- ----------- -------------
Goldman, Sachs & Co. $
------------
$
Aggregate
Principal
Amount of the
Underwriter Class B
- ----------- Certificates
--------------
Goldman, Sachs & Co. $
--------------
$
38
<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 [ ], 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...................... 24
SECTION 2.2 Acceptance by Trustee.......................... 26
SECTION 2.3 Representations and Warranties of the Seller... 27
SECTION 2.4 Representations and Warranties of the Seller
Relating to the Agreement and the Receivables 29
SECTION 2.5 Covenants of the Seller........................ 38
SECTION 2.6 Addition of Accounts........................... 43
SECTION 2.7 Removal of Accounts............................ 47
SECTION 2.8 Periodic Removal of Expired Accounts........... 50
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
SECTION 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer...................... 54
SECTION 3.2 Servicing Compensation.......................... 55
SECTION 3.3 Representations and Warranties of the Servicer.. 56
SECTION 3.4 Reports and Records for the Trustee............. 60
SECTION 3.5 Annual Servicer's Certificate................... 61
SECTION 3.6 Annual Independent Accountants' Servicing
Report........................................ 61
SECTION 3.7 Tax Treatment................................... 62
SECTION 3.8 Notices to the Seller........................... 63
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.................................... 64
SECTION 4.2 Collection and Allocations..................... 66
-i-
<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............................. 71
SECTION 6.2 Authentication of Certificates............... 71
SECTION 6.3 Registration of Transfer and Exchange of
Certificates............................... 72
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen
Certificates............................... 77
SECTION 6.5 Persons Deemed Owners........................ 78
SECTION 6.6 Appointment of Paying Agent.................. 79
SECTION 6.7 Access to List of Certificateholders' Names
and Addresses.............................. 80
SECTION 6.8 Authenticating Agent......................... 81
SECTION 6.9 Tender of Exchangeable Seller Certificate.... 82
SECTION 6.10 Global Certificate; Euro-Certificate Exchange
Date....................................... 85
SECTION 6.11 Book-Entry Certificates...................... 85
SECTION 6.12 Notices to Clearing Agency................... 86
SECTION 6.13 Definitive Certificates...................... 86
SECTION 6.14 Meetings of Certificateholders............... 87
ARTICLE VII
OTHER MATTERS RELATING TO THE SELLER
SECTION 7.1 Liability of the Seller...................... 88
SECTION 7.2 Merger or Consolidation of, or Assumption of
the Obligation of, the Seller.............. 88
SECTION 7.3 Limitation on Liability of the Seller........ 89
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
SECTION 8.1 Liability of the Servicer.................... 90
SECTION 8.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer........... 90
-ii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
SECTION 8.3 Limitation on Liability of the Servicer and
Others.......................................... 91
SECTION 8.4 Servicer Indemnification of the Trust and
the Trustee..................................... 91
SECTION 8.5 Resignation of the Servicer....................... 92
SECTION 8.6 Access to Certain Documentation and
Information Regarding the Receivables........... 93
SECTION 8.7 Delegation of Duties.............................. 93
SECTION 8.8 Examination of Records............................ 94
ARTICLE IX
PAY OUT EVENTS
SECTION 9.1 Pay Out Events.................................... 95
SECTION 9.2 Additional Rights Upon the Occurrence of
Certain Events.................................. 95
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults................................. 98
SECTION 10.2 Trustee to Act; Appointment of Successor.......... 100
SECTION 10.3 Notification to Certificateholders................ 103
SECTION 10.4 Waiver of Past Defaults........................... 103
ARTICLE XI
THE TRUSTEE
SECTION 11.1 Duties of Trustee................................. 104
SECTION 11.2 Certain Matters Affecting the Trustee............. 106
SECTION 11.3 Trustee Not Liable for Recitals in
Certificates.................................... 107
SECTION 11.4 Trustee May Own Certificates...................... 108
SECTION 11.5 The Servicer to Pay Trustee's Fees and
Expenses........................................ 108
SECTION 11.6 Eligibility Requirements for Trustee.............. 108
SECTION 11.7 Resignation or Removal of Trustee................. 109
SECTION 11.8 Successor Trustee................................. 110
SECTION 11.9 Merger or Consolidation of Trustee................ 110
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee..... 110
SECTION 11.11 Tax Returns....................................... 112
SECTION 11.12 Trustee May Enforce Claims Without Possession
of Certificates................................. 112
SECTION 11.13 Suits for Enforcement............................ 112
-iii-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
---
SECTION 11.14 Rights of Certificateholders to Direct
Trustee.................................... 113
SECTION 11.15 Representations and Warranties of Trustee.... 113
SECTION 11.16 Maintenance of Office or Agency.............. 113
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust......................... 115
SECTION 12.2 Optional Purchase and Final Termination of
Investor Certificates of any Series........ 116
SECTION 12.3 Final Payment with Respect to any Series..... 116
SECTION 12.4 Seller's Termination Rights.................. 118
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment.................................... 119
SECTION 13.2 Protection of Right, Title and Interest to
Trust...................................... 121
SECTION 13.3 Limitation on Rights of Certificateholders... 122
SECTION 13.4 GOVERNING LAW................................ 123
SECTION 13.5 Notices...................................... 123
SECTION 13.6 Severability of Provisions................... 124
SECTION 13.7 Certificates Non-Assessable and Fully Paid... 124
SECTION 13.8 Further Assurances........................... 124
SECTION 13.9 No Waiver; Cumulative Remedies............... 124
SECTION 13.10 Counterparts................................. 124
SECTION 13.11 Third-Party Beneficiaries.................... 125
SECTION 13.12 Actions by Certificateholders................ 125
SECTION 13.13 Rule 144A Information........................ 125
SECTION 13.14 Merger and Integration....................... 125
SECTION 13.15 Headings..................................... 125
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
-iv-
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Exhibit F Form of Opinion of Counsel Pursuant to Sections
2.6(g)(vi) and 13.2(d)(i)
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)
-v-
<PAGE>
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of March [
], 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
- ---------------------
/*/ VISA(R) and MasterCard(R) are registered trademarks of VISA USA, Inc. and
of MasterCard International Incorporated, respectively.
<PAGE>
to refer to an Additional Account or Automatic Additional Account only from and
after the Addition Date or Automatic Addition Date, as the case may be, with
respect thereto, and the term "Account" shall be deemed to refer to any Removed
Account only prior to the Removal Date with respect thereto.
"Account Guidelines" shall mean the Seller's policies and procedures
------------------
relating to the operation of its credit card business, including, without
limitation, the policies and procedures for determining the creditworthiness of
credit card customers, the extension of credit to credit card customers, and
relating to the maintenance of credit card accounts and collection of credit
card receivables, as such policies and procedures may be amended from time to
time.
"Account Information" shall have the meaning specified in subsection
------------------- ----------
2.2(b).
"Accumulation Period" shall have the meaning specified in any applicable
-------------------
Supplement.
"Addition Date" shall mean each date as of which Additional Accounts will
-------------
be included as Accounts pursuant to Section 2.6.
-----------
"Addition Notice Date" shall have the meaning specified in subsection
-------------------- ----------
2.6(g)(i).
- ---------
"Additional Accounts" shall mean additional credit card accounts added as
-------------------
Accounts pursuant to subsections 2.6(e) and 2.6(f).
------------------ ------
"Affiliate" of any Person shall mean any other Person controlling,
---------
controlled by or under common control with such Person except that, for the
purposes of clause (f) of the definition of Eligible Account, "Affiliate" shall
----------
not mean a natural person.
"Affinity Program Account" shall mean an account originated by the Seller
------------------------
through the solicitation of prospective cardholders from identifiable groups
with a common interest or a common cause, with the assistance of an organization
or the members of such group.
"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
-2-
<PAGE>
Receivables as of the end of the Monthly Period immediately preceding such date
of determination.
"Aggregate Investor Interest" shall mean, as of any date of determination,
---------------------------
the sum of the Investor Interests of each Series of Certificates issued and
outstanding on such date of determination.
"Aggregate Investor Percentage" with respect to Principal Receivables,
-----------------------------
Finance Charge Receivables and Receivables in Defaulted Accounts, as the case
may be, shall mean, as of any date of determination, the sum of such Investor
Percentages of each Series of Certificates issued and outstanding on such date
of determination; provided, however, that the Aggregate Investor Percentage
-------- -------
shall not exceed 100%.
"Aggregate Principal Receivables" shall mean, as of any date of
-------------------------------
determination, the aggregate amount of Principal Receivables as of the end of
the Monthly Period immediately preceding such date of determination and the
amount on deposit in the Excess Funding Account (exclusive of any investment
earnings on such amount).
"Aggregate Receivables" shall mean, as of any date of determination, the
---------------------
sum of Aggregate Principal Receivables plus Aggregate Finance Charge
Receivables.
"Agreement" shall mean this 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).
---------- ---------------------
-3-
<PAGE>
"Authorized Newspaper" shall mean a newspaper of general circulation in the
--------------------
Borough of Manhattan, The City of New York printed in the English language (and,
with respect to any Series, any additional city specified in the Supplement for
such Series) and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
"Automatic 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,
-4-
<PAGE>
which (i) is included in a "bank" or "agent bank" of credit card accounts
(or other grouping of credit card accounts, 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) such account is an account that satisfies the criteria
specified in subclauses (i) through (iv) of clause (a) hereof;
-------------- ---- ----------
(C) 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;
(D) 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;
(E) such account is not originated as a "risk based" product; and
(F) 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.
"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.
-5-
<PAGE>
"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.
"Certificateholders' Interest" shall, with respect to any Series, have the
----------------------------
meaning specified in Article IV of the Supplement for such Series.
"Certificate Interest" shall mean interest payable in respect of the
--------------------
Investor Certificates of any Series pursuant to Article IV of the Supplement for
such Series.
"Certificate Owner" shall mean, with respect to a Book-Entry Certificate,
-----------------
the Person who is the beneficial owner of such Book-Entry Certificate, as may be
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.
"Class" shall mean, with respect to any Series, any one of the classes of
-----
Certificates of that Series as specified in the related Supplement.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the date of issuance
------------
of such Series of Certificates, as specified in the related Supplement.
"Collection Account" shall have the meaning specified in Section 4.1(a).
------------------ --------------
"Collections" shall mean all payments (including insurance proceeds on
-----------
Accounts that are not Defaulted Accounts and all Recoveries but excluding
drawings on any Enhancement) received by the Servicer in respect of the
Receivables, in the form of cash,
-7-
<PAGE>
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 consumer
revolving accounts, if any, in the Trust (without regard to the effective date
of such recordation.)
-8-
<PAGE>
"Default Amount" shall mean, with respect to any Defaulted Account, the
--------------
amount of Principal Receivables in such Defaulted Account on the day such
Account became a Defaulted Account.
"Default Percentage" shall mean on any Date of Processing a percentage, the
------------------
numerator of which shall be the Seller Percentage of the Default Amount on such
day and the denominator of which shall be the Aggregate Principal Receivables at
the end of the preceding Date of Processing minus the Aggregate Principal
-----
Receivables on the current Date of Processing prior to the deposit of any amount
in the Excess Funding Account.
"Defaulted Account" shall mean each Account with respect to which, in
-----------------
accordance with the Account Guidelines or the Servicer's customary and usual
servicing procedures for servicing credit card receivables comparable to the
Receivables (which as of the date hereof is more than 211 days delinquent from
the payment due date) the Servicer has charged off the Receivables in such
Account as uncollectible; an Account shall become a Defaulted Account on the day
on which such Receivables are recorded as charged off and as uncollectible on
the Servicer's computer master file of VISA(R) and MasterCard(R) accounts.
"Definitive Bearer Certificate" shall mean any Definitive Certificate
-----------------------------
issued in bearer form with Coupons attached.
"Definitive Certificate" shall have the meaning specified in Section 6.11.
---------------------- ------------
"Definitive Euro-Certificate" shall have the meaning specified in Section
--------------------------- -------
6.10.
- ----
"Definitive Registered Certificate" shall mean any Definitive Certificate
---------------------------------
issued in registered form.
"Depository Agreement" shall mean, with respect to each Series, the
--------------------
agreement among the Seller, the Trustee and the Clearing Agency, in the form
attached hereto as Exhibit H, or as otherwise provided in the related
---------
Supplement.
"Determination Date" shall mean the 8th Business Day of each calendar month
------------------
but not later than the tenth calendar day of such month (and if such day is not
a Business Day, the preceding Business Day).
"Distribution Date" shall mean, unless otherwise specified in any
-----------------
Supplement for the related Series, July 15, 1993 and the fifteenth day of each
calendar month thereafter, or, if such fifteenth day is not a Business Day, the
next succeeding Business Day.
-9-
<PAGE>
"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.
"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
-10-
<PAGE>
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 than a defense arising out of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general; and
-11-
<PAGE>
(i) as to which the Seller has done nothing to impair, or omitted to take
any action the omission of which would impair, the rights of the Trust or
the Certificateholders therein.
"Eligible Servicer" shall mean the Trustee or an entity which, at the time
-----------------
of its appointment as Servicer, (a) is servicing a portfolio of consumer
revolving credit card accounts, (b) is legally qualified and has the capacity to
service the Accounts, (c) is qualified to use the software that People's Bank,
in its capacity as Servicer hereunder, is then currently using to service the
Accounts or obtains the right to use or has its own software which is adequate
to perform its duties under this Agreement and (d) has either a net worth on a
consolidated basis of at least $50,000,000 as of the end of its most recent
fiscal quarter or is an Affiliate of the Seller which has a net worth of at
least $20,000,000.
"Enhancement" shall mean, with respect to any Series, the cash collateral
-----------
account, 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.
-------- -----------
"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.
-12-
<PAGE>
"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 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.
"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).
-13-
<PAGE>
"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.
"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.
-14-
<PAGE>
"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 for any 30-day period 7% or such
-----------------------
higher percentage as may be specified in any Supplement of the average Aggregate
Principal Receivables for each day during such 30-day period.
"Monthly 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.
- ---
"Monthly Servicing Fee" shall have the meaning specified in Section 3.2.
--------------------- -----------
"Moody's" shall mean Moody's Investors Service, Inc.
-------
-15-
<PAGE>
"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 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
-16-
<PAGE>
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.
"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
-17-
<PAGE>
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 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
-18-
<PAGE>
institution or trust company shall have a credit rating from Moody's and
Standard & Poor's of at least Baa3 and BBB-, respectively, and the deposits in
whose accounts are insured to the limits provided by law and as required by the
FDIC.
"Rating Agency" shall mean, with respect to each Series, the rating agency
-------------
or agencies, if any, specified in the related Supplement.
"Reassignment" shall have the meaning set forth in subsection 2.7(b).
------------ -----------------
"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.
---------------
"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
-19-
<PAGE>
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 Section 6.9.
--------------- -----------
"Seller Interest" shall mean, on any date of determination, the Aggregate
---------------
Principal Receivables at the end of the day immediately prior to such date of
determination, minus the Aggregate Investor Interest at the end of such day.
-----
"Seller Percentage" shall mean, on any date of determination, when used
-----------------
with respect to Principal Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts, a percentage equal to 100% minus the
-----
Aggregate Investor Percentage with respect to such categories of Receivables.
"Series" shall mean any series of Investor Certificates.
------
"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.
-20-
<PAGE>
"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 Section 10.2.
------------------ ------------
"Supplement" shall mean, with respect to any Series, a supplement to this
----------
Agreement complying with the terms of Section 6.9 of this Agreement, executed in
-----------
conjunction with any issuance of such Series of Certificates.
"Termination Notice" shall have the meaning specified in Section 10.1.
------------------ ------------
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<PAGE>
"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.
"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.
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<PAGE>
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 Certificate as to such changes conforming
to the requirements of this Agreement.
[End of Article I]
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<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 and 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
-----------
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<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.
- -----------
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<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 fulfillment of the terms hereof will not conflict with or
violate any Requirements of Law applicable to the Seller.
-27-
<PAGE>
(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 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
-----------
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<PAGE>
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
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 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
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<PAGE>
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 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
---
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<PAGE>
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 Requirements of Law
applicable to the Seller, (C) with respect to each such Receivable, all
consents, licenses, approvals or authorizations of or registrations or
-31-
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
-----------------
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<PAGE>
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 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
-37-
<PAGE>
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 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
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<PAGE>
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 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
-39-
<PAGE>
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 Principal Receivables, and all amounts which would have constituted
Collections with respect to Principal Receivables but for the Seller's
inability to transfer
-40-
<PAGE>
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, the Seller
agrees to account for payments received with respect to such
Ineligible Receivable separately from its accounting for Collections
on Principal Receivables
-41-
<PAGE>
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 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
----------
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<PAGE>
Interchange received with respect to the Accounts to be so included as
Collections of Finance Charge Receivables.
(l) Recoveries. On or prior to each Determination Date, the Seller
----------
shall notify the Servicer of the amount of Recoveries to be included as
collections of Finance Charge Receivables with respect to the preceding
Monthly Period, which shall be equal to the product of (y) the total amount
of Recoveries received by the Seller in the preceding Monthly Period, and
(z) a fraction, the numerator of which is the Aggregate Principal
Receivables and the denominator of which is the aggregate principal amount
of the credit card receivables owned by the Seller with respect to such
Monthly Period. On each Transfer Date, the Seller shall pay to the
Servicer and the Servicer shall deposit into the Collection Account, for
allocation as collections of Finance Charge Receivables in the manner
provided in Article IV (in immediately available funds) the amount of
----------
Recoveries to be so included as Collections of Finance Charge Receivables
with respect to the preceding Monthly Period.
SECTION 2.6 Addition of Accounts.
--------------------
(a) All Accounts which meet the definition of Automatic Additional
Accounts which are Eligible Accounts shall be included as Accounts from and
after the date upon which such eligible Automatic Additional Accounts are
created and all Receivables in such Automatic Additional Accounts, whether such
Receivables are then existing or thereafter created, shall be transferred
automatically to the Trust upon origination by the Seller. The Seller, at its
option, may, by providing written notice to the Trustee and the Servicer,
terminate or suspend the inclusion of Automatic Additional Accounts at any time.
For all purposes of this Agreement, all receivables of such Automatic Additional
Accounts shall be treated as Receivables upon their creation and shall be
subject to the eligibility criteria specified in the definitions of "Eligible
Receivable" and "Eligible Account."
(b) On any day Receivables in Automatic Additional Accounts are created,
the Seller will be deemed to have made the representations in Section 2.4.
-----------
(c) Receivables in Automatic Additional Accounts shall be transferred to
the Trust, as Accounts if, in addition to satisfying the requirements of clauses
-------
(a) through (g) of the definition of Eligible Accounts, the following conditions
- --- ---
are met: the number of Accounts the Receivables of which are designated to be
added to the Trust pursuant to subsection 2.6(a) since (i) the 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
-43-
<PAGE>
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 Record Date the Seller Interest for the related Monthly
Period, is less than the Minimum Seller Interest, the Seller shall designate
additional credit card accounts ("Additional Accounts") to be included as
-------------------
Accounts in a sufficient amount such that the Seller Interest as a percentage of
the Aggregate Principal Receivables for such Monthly Period after giving effect
to such addition is at least equal to the Minimum Seller Interest, or (ii) on
any date of determination the Aggregate Principal Receivables is less than the
Minimum
-44-
<PAGE>
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
Record Date.
(f) In addition to its obligation under subsection 2.6(e), the Seller may
-----------------
upon twenty Business Days' notice to the Trustee, any Enhancement Provider if so
provided in the applicable Supplement and each Rating Agency, but shall not be
obligated to, designate from time to time Additional Accounts of the Seller to
be included as Accounts.
(g) The Seller agrees that any such transfer of Receivables from
Additional Accounts, under subsection 2.6(e) or (f), shall satisfy the following
----------------- ---
conditions (to the extent provided below):
(i) on or before (A) the twentieth Business Day prior to the Addition
Date for Additional Accounts to be included as Accounts pursuant to
subsection 2.6(f) or (B) the fifth Business Day prior to the Addition Date
-----------------
for Additional Accounts to be included as Accounts pursuant to subsection
----------
2.6(e) (the "Addition Notice Date"), the Seller shall give the Trustee, the
------ --------------------
Rating Agency, any Enhancement Provider if so provided in the applicable
Supplement and the Servicer written notice that such Additional Accounts
will be included and specifying the approximate aggregate amount of the
Receivables to be transferred;
(ii) on or before the Addition Date the Seller shall have delivered
to the Trustee a written assignment (including an acceptance by the Trustee
on behalf of the Trust for the benefit of the Investor Certificateholders)
in substantially the form of Exhibit B (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 thereafter, the Seller shall have delivered to
the Trustee a computer file or microfiche list containing a true and
complete list of all Additional Accounts, identified by account number,
which computer file or microfiche list shall be as of the date of such
Assignment incorporated into and made a part of such Assignment and this
Agreement;
-45-
<PAGE>
(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 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
------ ---
-46-
<PAGE>
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 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 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
-47-
<PAGE>
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, 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 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;
-48-
<PAGE>
(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 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
-49-
<PAGE>
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 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 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:
-50-
<PAGE>
(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 Moody's and Standard and Poor's. The Seller has
-----------------------------------------
provided notice to each of Moody's and Standard and Poor's 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 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
-51-
<PAGE>
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 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
-52-
<PAGE>
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]
-53-
<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
-54-
<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
-55-
<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
-56-
<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
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<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
- -----------------
-58-
<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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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 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 measured by income. Each
Investor
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<PAGE>
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,
in the case of the certificates of deposit, or a rating from Moody's, of at
least Aa3 and from Standard & Poor's of at least AAA in the case of the long-
term unsecured debt obligations and the deposits in whose accounts are insured
to the limits provided by law and by the FDIC (each entity referred to in
clauses (i) and (ii) a "Qualified Institution"); provided further, that upon the
- ----------- ---- --------------------- -------- -------
insolvency of the Servicer, the Collection Account shall not be permitted to be
maintained with the Servicer. The Supplement for a Series may require the
Trustee to establish and maintain a subaccount of the Collection Account for
such a Series (such subaccount, a "Collection Subaccount") bearing a designation
---------------------
clearly indicating that the funds deposited therein are held in trust for the
benefit of the Certificateholders of such Series with a depository institution
or trust company meeting the criteria provided in the related Supplement. The
Collection Account or any Collection Subaccount may not be invested except as
provided in the related Supplement. The funds on deposit in such Collection
Subaccount may be invested in the manner provided in the related Supplement, and
any earnings resulting from such investment shall be applied as provided in such
Supplement. Pursuant to authority granted to it pursuant to subsection 3.1(b),
-----------------
the Servicer shall have the power,
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<PAGE>
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) If the entity with which any of the accounts established pursuant to
this Section 4.1 ceases to be a "Qualified Institution", then (i) such entity
-----------
shall provide the Trustee, each Enhancement Provider and the Servicer with
prompt written notice that it is no longer a "Qualified Institution" and (ii)
transfer the funds deposited in each of the accounts in the
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<PAGE>
manner directed by the Servicer within 10 Business Days of the day on which such
entity ceased to be a "Qualified Institution".
(d) Allocations for the Exchangeable Seller Certificate. Throughout the
---------------------------------------------------
existence of the Trust, the Servicer shall, prior to the close of business on
the day any Collections are deposited in the Collection Account, allocate to the
Holder of the Exchangeable Seller Certificate an amount equal to the product of
(A) the Seller Percentage for the current Monthly Period and (B) the aggregate
amount of such Collections allocated to Principal Receivables and Finance Charge
Receivables, respectively. The Servicer need not deposit this amount, and other
amounts so allocated to the Exchangeable Seller Certificate pursuant to any
Supplement, into the Collection Account, and shall pay, or be deemed to pay, to
the extent the Servicer is the holder of the Exchangeable Seller Certificate,
such amounts as collected to the Holder of the Exchangeable Seller Certificate;
provided, however, that such payments shall not be made to the Holder of the
- -------- -------
Exchangeable Seller Certificate if the Seller Interest is less than the Minimum
Seller Interest or if and to the extent that such payment would cause the Seller
Interest to be less than the Minimum Seller Interest but such amounts shall be
treated as Shared Principal Collections.
SECTION 4.2 Collection and Allocations.
--------------------------
(a) Collections. The Servicer shall, subject to subsection 4.1(d),
----------- -----------------
deposit all Collections in the Collection Account as promptly as possible after
the Date of Processing of such Collections, but in no event later than the
second Business Day following such Date of Processing. In the event of the
insolvency of the Servicer, then, immediately upon the occurrence of such event
and thereafter the Servicer shall deposit all Collections into the Collection
Account which shall be established and maintained with a Qualified Institution
other than the Servicer in accordance with subsection 4.1(a), and in no such
-----------------
event shall the Servicer deposit any Collections thereafter into any account
established, held or maintained with the Servicer.
Interchange shall be allocated, and deposited or paid, on the second
Business Day following the Business Day on which the Servicer receives the same
in the manner provided in subsection 2.5(k). Recoveries shall be allocated and
-----------------
deposited or paid, on each Transfer Date in the manner provided in subsection
----------
2.5(1). The Servicer shall notify the Trustee as to the amount of Recoveries
- ------
allocable to the Trust on each Determination Date and transfer such amount into
the Collection Account on the Transfer Date.
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<PAGE>
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 Moody's or Standard &
Poor's shall have notified the Servicer that making monthly deposits will result
in the reduction or withdrawal of its then-existing rating of the Certificates)
shall have and maintain a certificate of deposit or short-term deposit rating of
P-1 by Moody's and of at least A-1 by Standard & Poor's and deposit insurance as
required by law and by the FDIC, the Servicer need not deposit Collections to
the Collection Account in the manner provided in this Article IV or make
----------
payments to the Holder of the Exchangeable Seller Certificate prior to the close
of business on the day any Collections are deposited in the Collection Account
as provided in Article IV, but may make such deposits, payments and withdrawals
----------
on the Transfer Date in the Monthly Period following the Monthly Period in which
such amounts were collected in an amount equal to the net amount of such
deposits, payments and withdrawals which would have been made but for the
provisions of this paragraph.
(b) Allocation of Collections Between Finance Charge Receivables and
----------------------------------------------------------------
Principal Receivables. On each Business Day, the Servicer shall allocate
- ---------------------
Collections processed on the Accounts to Finance Charge Receivables to the
extent of the sum of (i) the amount of Finance Charge Receivables billed on such
Accounts on such day and (ii) the amount of any Finance Charge Receivables for
prior days which were not covered by Collections for such prior days or by
Collections thereafter allocated to Finance Charge Receivables; provided,
--------
however, that all Collections which constitute Recoveries and Interchange shall
- -------
be allocated to Finance Charge Receivables as shall investment earnings with
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<PAGE>
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, (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.
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<PAGE>
(e) Unallocated Principal Collections; Excess Funding Account. On each
---------------------------------------------------------
Business Day, Shared Principal Collections shall be allocated to outstanding
Series pro rata based on the Principal Shortfall, if any, for each such Series.
The Servicer shall pay any remaining Shared Principal Collections on such
Business Day to the holder of the Exchangeable Seller Certificate; provided that
--------
to the extent that the Seller Interest as determined on such Business Day does
not exceed the Minimum Seller Interest, such Shared Principal Collections shall
be deposited in the Excess Funding Account, or, on and after the first day of
the Amortization Period with respect to any Series, such Shared Principal
Collections shall be deposited in the principal funding account of such Series
to the extent specified in the related Supplement until the principal funding
account of such Series has been funded in full or the Holders of the Investor
Certificates of such Series have been paid in full; provided, further, that if
-------- -------
an Amortization Period has commenced and is continuing with respect to more than
one outstanding Series, such Shared Principal Collections shall be allocated to
such Series pro rata based on the Investor Percentage for Principal Receivables
applicable for such Series.
(f) Amounts in Excess Funding Account. Amounts on deposit in the Excess
---------------------------------
Funding Account on any Business Day will be invested by the Seller (or, at the
direction 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 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]
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<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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<PAGE>
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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<PAGE>
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.
(b) Except as provided in Section 6.9 or 7.2, in no event shall the
----------- ---
Exchangeable Seller Certificate or any interest therein be transferred
hereunder, in whole or in part, unless the Seller shall have consented in
writing to such transfer and unless the Trustee shall have received (i) a
Supplement specifying the Principal Terms of such Series, if applicable, (ii) if
required
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<PAGE>
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 be treated as an exchange
to any outstanding class of Investor Certificateholders, and (viii) in the case
of the transfer of the Exchangeable Seller Certificate as a whole, an agreement
supplemental hereto, executed and delivered to the Trustee in form satisfactory
to the Trustee, in which the transferee of the Exchangeable Seller Certificate
expressly assumes the performance of every covenant and obligation of the
Seller, as Holder of the Exchangeable Seller Certificate, as applicable
hereunder, and pursuant to which such transferee shall benefit from all the
rights granted to the Seller, as Holder of the Exchangeable Seller Certificate,
applicable hereunder; provided that a transfer of the Exchangeable Seller
Certificate shall not release the Seller from any of its obligations under this
Agreement unless effected pursuant to Section 7.2(b).
--------------
The Holder of the Exchangeable Seller Certificate, by its acceptance of the
Exchangeable Seller Certificate, acknowledges that its obligation to make the
payments required by Section 4.2(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).
(d) Unless otherwise provided in the related Supplement, registration of
transfer of Registered Certificates containing a
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<PAGE>
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 readily tradeable on a secondary market or the substantial equivalent thereof
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 of the limited volume of
transactions, (B) a
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<PAGE>
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 such clause (i), Subject Certificates are readily
----------
tradeable on a secondary market or the substantial equivalent thereof if (1)
Subject Certificates (or interests therein) are regularly quoted by any Person,
such as a broker or dealer, making a market in the interests; (2) any Person
regularly makes available to the public (including customers or subscribers) bid
or offer quotes with respect to Subject Certificates (or interests therein) and
stands ready to effect buy or sell transactions at the quoted prices for itself
or on behalf of others; (3) the Holders of Subject Certificates have a readily
available, regular, and ongoing opportunity to sell or exchange the Subject
Certificates (or interests therein) through a public means of obtaining or
providing information of offers to buy, sell, or exchange such interests; or (4)
prospective buyers and sellers otherwise have the opportunity to buy, sell, or
exchange the Subject Certificates (or interests therein) in a time frame and
with the regularity and continuity that is comparable to that described in
clauses (1), (2) and (3) of this sentence. 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,
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
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<PAGE>
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 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.
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<PAGE>
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 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 and
------------- ----
11.3 shall apply to the Trustee also in its role as Paying Agent for so long as
- ----
the Trustee shall act as Paying Agent. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding, the Seller shall maintain
a co-paying agent in New York City (for Registered Certificates only) or any
other city designated in such Supplement which, if and so long as any Series of
Investor Certificates is listed on the Luxembourg Stock Exchange or other stock
exchange and such exchange so requires, shall be in Luxembourg or the location
required by such other stock exchange.
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<PAGE>
(b) The Trustee shall cause the Paying Agent (other than itself) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree, and if the Trustee is the Paying Agent it
hereby agrees, that it shall comply with all requirements of the Internal
Revenue Code regarding the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate Owners.
SECTION 6.7 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
The Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to the Servicer or the Paying Agent, within five Business Days after
receipt by the Trustee of a request therefor from the Servicer or the Paying
Agent, respectively, in writing, a list of the names and addresses of the
Investor Certificateholders (other than Bearer Certificateholders) as of the
most recent Record Date for payment of distributions to Investor
Certificateholders. Unless otherwise provided in the related Supplement, 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.
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<PAGE>
SECTION 6.8 Authenticating Agent.
--------------------
(a) The Trustee may appoint one or more authenticating agents with respect
to the Certificates which shall be authorized to act on behalf of the Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Whenever
reference is made in this Agreement to the authentication of Certificates by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an authenticating
agent and a certificate of authentication executed on behalf of the Trustee by
an authenticating agent. Each authenticating agent must be acceptable to the
Seller.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Seller. The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Seller. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time an
authenticating agent shall cease to be acceptable to the Trustee or the Seller,
the Trustee promptly may appoint a successor authenticating agent. Any
successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No successor authenticating agent shall be appointed unless acceptable to the
Trustee and the Seller.
(d) The Trustee agrees to pay each authenticating agent from time to time
reasonable compensation for its services under this Section 6.8, and the Trustee
-----------
shall be entitled to be reimbursed and the Servicer shall reimburse the Trustee
for such reasonable payments actually made, subject to the provisions of Section
-------
11.5.
- ----
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable to
------------- ---- ----
any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
-----------
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
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<PAGE>
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.
-----------------------------------------
(a) Upon any Exchange, the Trustee shall issue to the Holder of the
Exchangeable Seller Certificate under Section 6.1, for execution and redelivery
-----------
to the Trustee for authentication under Section 6.2, one or more new Series of
-----------
Investor Certificates. Any such Series of Investor Certificates shall be
substantially in the form specified in the related Supplement and shall bear,
upon its face, the designation for such Series to which it belongs so selected
by the Seller. Except as specified in any Supplement for a related Series, all
Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof (except that the Enhancement provided for
any Series shall not be available for any other Series) without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Agreement
and the related Supplement.
(b) The Holder of the Exchangeable Seller Certificate may tender the
Exchangeable Seller Certificate to the Trustee in exchange for (i) one or more
newly issued Series of Investor Certificates and (ii) a reissued Exchangeable
Seller Certificate (any such tender, a "Seller Exchange"). In addition, to the
---------------
extent permitted for any Series of Investor Certificates as specified in the
related Supplement, the Seller may tender 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
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<PAGE>
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 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
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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 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.
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SECTION 6.10 Global Certificate; Euro-Certificate Exchange Date. If
--------------------------------------------------
specified in the related Supplement for any Series, the Investor Certificates
may be initially issued in the form of a single temporary Global Certificate
(the "Global Certificate") in bearer form, without interest coupons, in the
------------------
denomination of the Initial Investor Interest and substantially in the form
attached to the related Supplement. Unless otherwise specified in the related
Supplement, the provisions of this Section 6.10 shall apply to such Global
------------
Certificate. The Global Certificate will be authenticated by the Trustee upon
the same conditions, in substantially the same manner and with the same effect
as the Definitive Certificates. The Global Certificate may be exchanged in the
manner described in the related Supplement for Registered and/or Bearer
Certificates in definitive form (the "Definitive Euro-Certificates").
----------------------------
SECTION 6.11 Book-Entry Certificates. Unless otherwise provided in any
-----------------------
related Supplement, the Investor Certificates, upon original issuance, shall be
issued in the form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the depository specified in such Supplement
(the "Depository") which 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
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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 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
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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 VII
OTHER MATTERS RELATING TO THE SELLER
SECTION 7.1 Liability of the Seller. The Seller shall be liable in
-----------------------
accordance herewith to the extent of the obligations specifically undertaken by
the Seller.
SECTION 7.2 Merger or Consolidation of, or Assumption of the Obligation
-----------------------------------------------------------
of, the Seller.
- --------------
(a) The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which the
Seller is merged or the Person which acquires by conveyance or transfers
the properties and assets of the Seller substantially as an entirety shall
be, if the Seller is not the surviving entity, organized and existing under
the laws of the United States of America or any State or the District of
Columbia, and shall be a state or national banking association that is not
subject to the Bankruptcy Code of 1978, as amended from time to time, or to
any successor statute, if the Seller is not the surviving entity, and shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee and the Enhancement Provider, to the extent so
provided in the applicable Supplement, in form satisfactory to the Trustee,
the performance of every covenant and obligation of the Seller, as
applicable hereunder and shall benefit from all the rights granted to the
Seller, as applicable hereunder (to the extent that any right, covenant or
obligation of the Seller, as applicable hereunder, is inapplicable to the
successor entity (because such successor entity is not a Connecticut
capital stock savings bank), such successor entity shall be subject to such
covenant or obligation, or benefit from such right, as would 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 VIII
OTHER MATTERS RELATING
TO THE SERVICER
SECTION 8.1 Liability of the Servicer. The Servicer shall be liable in
-------------------------
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
SECTION 8.2 Merger or Consolidation of, or Assumption of the Obligations
------------------------------------------------------------
of, the Servicer.
- ----------------
(a) The Servicer shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfers
the properties and assets of the Servicer substantially as an entirety
shall be a corporation organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall be a
state or national banking association that is not subject to the Bankruptcy
Code of 1978, as amended from time to time, or to any successor statute or
other entity which is not subject to the bankruptcy laws of the United
States of America and shall be an Eligible Servicer, and, if the Servicer
is not the surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee and the
Enhancement Provider, to the extent so provided in the applicable
Supplement, in form satisfactory to the Trustee, the performance of every
covenant and obligation of the Servicer hereunder (to the extent that any
right, covenant or obligation of the Servicer, as applicable hereunder, is
inapplicable (because such successor entity is not a Connecticut capital
stock savings bank corporation) to the successor entity, such successor
entity shall be subject to such covenant or obligation, or benefit from
such right, 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 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
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the Servicer with respect to activities of the Trust or of the Trustee pursuant
to this Agreement, including, but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim; provided, however, that the Servicer shall not indemnify the Trustee for
-------- -------
any acts, omissions or alleged acts or omissions which constitute or are caused
by fraud, negligence, breach of fiduciary duty or willful misconduct by the
Trustee; provided further, that the Servicer shall not indemnify the Trust, the
-------- -------
Investor 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 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
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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 a
----------
Successor Servicer, the Trustee shall serve as Successor Servicer hereunder.
Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to
act, petition a court of competent jurisdiction to appoint any established
institution qualifying as an Eligible Servicer as the Successor Servicer
hereunder. The Trustee shall give prompt notice to the Rating Agency and the
Enhancement Provider, if so provided in the related Supplement upon the
appointment of a Successor Servicer.
SECTION 8.6 Access to Certain Documentation and Information Regarding the
-------------------------------------------------------------
Receivables. The Servicer shall provide to the Trustee access to the
- -----------
documentation regarding the Accounts and the Receivables in such cases where the
Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to the
Servicer's normal security and confidentiality procedures and (iv) at offices
designated by the Servicer. Nothing in this Section 8.6 shall derogate from the
-----------
obligation of the Seller, the Trustee or the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure
of the Servicer to provide access as provided in this Section 8.6 as a result of
-----------
such obligations shall not constitute a breach of this Section 8.6.
-----------
SECTION 8.7 Delegation of Duties. It is understood and agreed by the
--------------------
parties hereto that the Servicer may delegate certain of its duties hereunder to
any Affiliate of People's Bank. In the ordinary course of business, the
Servicer may at any time delegate any duties hereunder to any Person who agrees
to conduct such duties in accordance with the Account Guidelines. Any such
delegations shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 8.5 hereof. If any such delegation is to a party other than
-----------
an
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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 IX
PAY OUT EVENTS
SECTION 9.1 Pay Out Events. If any one of the following events shall
--------------
occur:
(a) the Seller shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to all or
substantially all of its property, or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Seller; or the Seller shall admit in writing
its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations; or the Seller shall become unable for
any reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement; or
(b) the Trust shall become subject to regulation by the Securities
and Exchange Commission as an "investment company" within the meaning of
the Investment Company Act;
then a Pay Out Event with respect to all Series of Certificates (each, a "Trust
-----
Pay Out Event") shall occur without any notice or other action on the part of
- -------------
the Trustee or the Investor Certificateholders immediately upon the occurrence
of such event and notice of such Trust Pay Out Event shall be sent by the
Servicer to the Rating Agencies.
SECTION 9.2 Additional Rights Upon the Occurrence of Certain Events.
-------------------------------------------------------
(a) If the Seller shall consent to the appointment of a conservator,
receiver or liquidator for 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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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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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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<PAGE>
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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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
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<PAGE>
of any Series relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Agreement;
(iii) the Trustee shall not be charged with knowledge of any failure
by the Servicer referred to in clauses (a) and (b) of Section 10.1 unless a
----------- --- ------------
Responsible Officer of the Trustee obtains actual knowledge of such failure
or the Trustee receives written notice of such failure from the Servicer,
any Enhancement Provider or any Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 10% of the Investor Interest
of any Series adversely affected thereby; and
(iv) in the event that the Trustee is acting as Successor Servicer,
its liability as Servicer shall be limited as specified in Section 8.3.
-----------
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the rights,
duties, 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.
- ----------------- ------ ----------
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<PAGE>
(g) In the event that the Paying Agent or the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on the
day required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, the Trustee shall be
obligated promptly upon a Responsible Officer's obtaining actual knowledge
thereof to perform such obligation, duty or agreement in the manner so required.
(h) If the Seller has agreed to transfer any of its credit card
receivables (other than the Receivables) to another Person, upon the written
request of the Seller, the Trustee will enter into such intercreditor agreements
(which shall be in form and substance satisfactory to the Trustee) with the
transferee of such receivables as are customary and necessary to separately
identify the rights, if any, of the Trustee, the Trust and such other Person in
the Seller's credit card receivables; provided that the Trustee, on behalf of
--------
the Trust, shall not enter into any intercreditor agreement which could
adversely affect the interests of the Certificateholders, any Enhancement
Provider or the Trustee and, upon the request of the Trustee, the Seller will
deliver an Opinion of Counsel on any matters 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
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<PAGE>
to the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee of the obligations, upon the
occurrence of any Servicer Default of which a Responsible Officer has
actual knowledge (which has not been cured), to exercise such of the rights
and powers vested in it by this Agreement or any Enhancement, and to use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs;
(d) the Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(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
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Certificates). Except as set forth in Section 11.15, the Trustee makes no
-------------
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificates of authentication on the Certificates)
or of any Receivable or related document. The Trustee shall not be accountable
for the use or application by the Seller of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Seller in respect of the Receivables or deposited in or 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,
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pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 11.6, the combined capital and
------------
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.6, the Trustee shall resign immediately in the
------------
manner and with the effect specified in Section 11.7.
------------
SECTION 11.7 Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign and be discharged from the Trust
hereby created by giving written notice thereof to the Servicer with a copy to
the Enhancement Provider. Upon receiving such notice of resignation, the
Servicer shall promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee, subject to the consent of the
Enhancement Provider of any Series (if the Supplement relating to such Series so
requires) which shall not be unreasonably withheld. In addition, the Servicer
shall notify the Rating Agency of the removal or discharge of the Trustee. If
no successor trustee shall have been so appointed and have accepted within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.6 hereof and shall fail to resign after
------------
written request therefor by the Seller, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Seller may remove the Trustee and promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(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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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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<PAGE>
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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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
-123-
<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.
-124-
<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]
-125-
<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:
-126-
<PAGE>
EXHIBIT A
---------
FORM OF EXCHANGEABLE SELLER CERTIFICATE
---------------------------------------
No. 1 One Unit
PEOPLE'S BANK CREDIT CARD MASTER TRUST
EXCHANGEABLE SELLER CERTIFICATE
THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE
AGREEMENT REFERRED TO HEREIN. A COPY OF THE AGREEMENT WILL BE FURNISHED TO THE
HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN REQUEST.
This Certificate represents Seller Interest in
----------------------------------------------
People's Bank Credit Card Master Trust
--------------------------------------
Evidencing an interest in a trust, the Corpus of which consists of a portfolio
of VISA/*/ and MasterCard/*/ credit card receivables generated or to be
generated by People's Bank.
(Not an interest in or an obligation of
People's Bank
or any Affiliate thereof.)
This certifies that PEOPLE'S 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 [ ], 1997 or any Supplement thereto (as the Amended and
Restated Pooling and Servicing Agreement may be amended, supplemented or
otherwise modified from time to time in accordance with its terms, including by
any Supplement thereto, the "Agreement"). The corpus of the Trust (a) as of
---------
March [ ], 1997 consists of (i) a portfolio of receivables (the "Receivables")
-----------
then existing or thereafter created and arising in connection with certain VISA
and MasterCard credit card accounts (the "Accounts") of People's Bank (the
--------
"Seller"), a Connecticut stock savings bank, 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 allocable to the Trust
pursuant to the Agreement, and (v) Interchange allocable to the Trust
- -----------------------
/*/ VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International Incorporated, respectively.
A-1
<PAGE>
pursuant to the Agreement and all proceeds thereof, and (b) consists of or will
from time to time consist of (vi) 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, and (vii) any Enhancement and all monies available under any
Enhancement, provided or to be provided for any Series for payment to the
Certificateholders of such Series (clauses (a) and (b) above, collectively, the
"Trust Assets").
------------
Although a summary of certain provisions of the Agreement is set forth below,
this Certificate does not purport to summarize the Agreement and reference is
made to that Agreement for information with respect to the interests, rights,
benefits, obligations, proceed and duties evidenced hereby. A copy of the
Agreement, may be requested from the Trustee by writing to the Trustee at Four
Albany Street, New York, NY 10006; Attention: Corporate Trust Office. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement 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 Charges 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
A-2
<PAGE>
interests of Investor Certificateholders of a specific Series in the Trust.
This Certificate shall not represent any interest in the Collection Account, any
Series Account, or any Enhancement. The Seller Interest on any date of
determination will generally be an amount equal to the aggregate amount of
Principal Receivables at the end of the day immediately prior to such date of
determination minus the Aggregate Investor Interest at the end of such day.
-----
This Certificate does not represent an obligation of, or any interest in, the
Seller or the Servicer, and neither the Certificates nor the Accounts or
Receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. This Certificate has a limited
right of payment to certain Collections respecting the Receivables, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement.
Subject to prior termination of the Trust, the Agreement, the obligations
created by the Agreement and the Trust shall terminate on the earlier to occur
of (i) the day after the Distribution Date with respect to any Series following
the date on which funds shall have been deposited in the Collection Account or
the applicable Series Account for the payment of Investor Certificateholders of
each Series then issued and outstanding sufficient to pay the Aggregate Investor
Interest plus interest accrued at the applicable Certificate Rate through the
end of the related Interest Accrual Period prior to the Distribution Date with
respect to each such Series in full (unless a Trust Extension shall have
occurred pursuant to Section 12.1 of the Agreement), (ii) if a Trust Extension
shall have occurred, the Extended Trust 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, the Trustee shall assign and convey to the Holder
of the Seller Certificate (without recourse, representation or warranty) all
right, title and interest of the Trust in the Receivables, whether then existing
or thereafter created, and all proceeds thereof and Interchange relating thereto
and Recoveries allocable to the Trust and the proceeds thereof. The Trustee
shall execute and deliver such instruments of transfer and assignment, in each
case without recourse, as shall be reasonably requested by the Holder of the
Seller Certificate to vest in such Holder all right, title and interest which
the Trustee had in the Receivables.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature,
A-3
<PAGE>
this Certificate shall not be entitled to any benefit under the Agreement, or be
valid for any purpose.
IN WITNESS WHEREOF, People's Bank, has caused this Certificate to be duly
executed by its duly authorized officer.
PEOPLE'S BANK
By: ___________________________
Name:
Title:
Dated ______________, _____
A-4
<PAGE>
Form of Trustee's Certificate of Authentication
-----------------------------------------------
This is the Seller Certificate referred to in the within mentioned Amended
and Restated Pooling and Servicing Agreement.
BANKERS TRUST COMPANY
By:___________________________
Authorized Officer
A-5
<PAGE>
EXHIBIT B
---------
FORM OF ASSIGNMENT OF RECEIVABLES IN
------------------------------------
ADDITIONAL ACCOUNTS
-------------------
ASSIGNMENT No. ____ OF RECEIVABLES IN ADDITIONAL ACCOUNTS, dated as of
_____________, __________ by and between PEOPLE'S BANK, a Connecticut stock
savings bank (the "Seller"), to Bankers Trust Company, a New York banking
corporation, not in its individual capacity but solely as trustee (the
"Trustee"), pursuant to the Pooling and Servicing Agreement referred to below.
W I T N E S S E T H:
-------------------
WHEREAS, the Seller and the Trustee are parties to the Amended and Restated
Pooling and Servicing Agreement, dated as of March [ ], 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>
EXHIBIT C
---------
FORM OF MONTHLY SERVICER'S CERTIFICATE
--------------------------------------
__________________________________
PEOPLE'S BANK
__________________________________
People's Bank Credit Card Master Trust, Series ______
__________________________________
For the __________ Determination Date
For the __________ Monthly Period
The undersigned, a duly authorized representative of The People's Bank, as
Servicer pursuant to the Amended and Restated Pooling and Servicing Agreement
dated as of March [ ], 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, does hereby certify as follows:
1. Capitalized terms used in this Certificate have their respective
meanings set forth in the Pooling and Servicing Agreement; provided, that
--------
the "preceding Monthly Period" shall mean the Monthly Period immediately
preceding the calendar month in which this Certificate is delivered. This
Certificate is delivered pursuant to subsection 3.4(b) of the Pooling and
Servicing Agreement. References herein to certain sections and subsections
are references to the respective sections and subsections of the Pooling
and Servicing Agreement, as amended by the applicable Series Supplement.
2. People's Bank is Servicer under the Pooling and Servicing
Agreement.
3. The undersigned is a Servicing Officer.
4. The date of this Certificate is _______________, 199__ which is a
Determination Date under the Pooling and
Servicing Agreement.
5. The aggregate amount of Collections processed during the preceding
Monthly Period (equal to 5(a) plus 5(b)) was equal to $_______________
C-1
<PAGE>
(a) The aggregate amount of Collections of Finance Charge
Receivables collected during the preceding Monthly Period (the "Collections
of Finance Charge
Receivables') was equal to $_______________
(b) The aggregate amount of Collections of Principal Receivables
collected during the preceding Monthly Period (the "Collections of
Principal Receivables") was equal to $_______________
6. The aggregate amount of Receivables as of the end of the last day
of the preceding Monthly Period was equal to $_______________
7. Attached hereto is a true and correct copy of the statements
required to be delivered by the Servicer on the date of this Certificate to
the Paying Agent pursuant to Article V.
8. To the knowledge of the undersigned, there are no Liens on any
Receivables in the Trust except as described below:
[If applicable, insert "None".]
9. The amount by which the Aggregate Principal Receivables exceeds
the Aggregate Principal Receivables required to be maintained pursuant to
the Pooling and Servicing Agreement, is equal to $_______________
C-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this certificate this _______ day of ___________________, ___________.
PEOPLE'S BANK,
Servicer
By:
---------------------------
Name:
Title:
C-3
<PAGE>
Schedule - to Monthly
Servicer's Certificate/*/
PEOPLE'S BANK
___________________________________
People's Bank Credit Card Master Trust, Series _________
___________________________________
For the _________ Determination Date
For the _________ Monthly Period
1. The aggregate amount of Collections processed during the preceding
Monthly Period (equal to 1(a) plus 1(b)) was equal to $_______________
(a) The aggregate amount of Collections of Finance Charge Receivables
collected during the preceding Monthly Period (the "Collections of Finance
Charge Receivables") allocated to Series ___ was equal to
$_______________
(b) The aggregate amount of Collections of Principal Receivables
collected during the preceding Monthly Period (the "Collections of
Principal Receivables") allocated to Series ___ was equal to
$_______________
2. The aggregate amount of funds on deposit in the [Collection Account
applicable to Series __] [Collection Subaccount with respect to Series __]
[Series Account with respect to Series __] with respect to Collections
processed during the preceding Monthly Period, and applicable to Series __]
as of the Closing Date relating to the preceding Monthly Period was equal
to $_______________
3. (a) The aggregate amount of funds on deposit in the [Principal Account]
with respect to Collections processed during the preceding Monthly Period
and allocated to Series ___, as of the end of the last day of the preceding
Monthly Period was equal to $_______________
- --------------------
/*/ A separate schedule is to be attached for each Series, with appropriate
changes to reflect the specifics of the related Series Supplement.
C-4
<PAGE>
(b) The aggregate amount of funds which will be on deposit in
the [Principal Account] on the Transfer Date following this Determination
Date, will be $_______________
4. The aggregate amount to funds on deposit in the Retention
Subaccount relating to Series ___ as of the end of the last day of the
preceding Monthly Period was equal to $_______________
5. The aggregate amount of [drawings] [withdrawals] [payments] required to
be made under the [Letter of Credit] [Cash Collateral Account] [other form
of Enhancement] pursuant to Section ___ or ___ on the Date in the current
calendar month is equal to $_______________
6. (a) The aggregate amount of Interchange to be deposited to the
Collection Account and allocated to Series ___ on the [next succeeding
Transfer Date] is equal to $_______________
(b) The amount of earnings (net of losses and investment expenses) on funds
on deposit in the Principal Funding Account to be transferred from the
Principal Funding Account to the [Finance Charge Account] on the (next
succeeding Transfer Date] is equal to $_______________
7. The sum of all amounts payable to the Investor Certificateholders
of Series on the Distribution Date in the current Monthly Period is equal
to:
Payable in respect of
principal ______________ $_______________
Payable in respect of
interest ______________ $_______________
Total $_______________
8. [No Series Pay Out Event or Trust Pay Out Event has occurred.] [The
following [Series Pay Out Event] [Trust Pay Out Event] has occurred:
__________________.]
C-5
<PAGE>
Form of Series 1997-1 Monthly Servicer's Report
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
Number of Months Series in Existence
Monthly Period Ended
Distribution Date
Determination Date
Number of Days in Period
- ------------------------------------------------------
1. Trust Activity Series 1997-1
Beginning of Month - Aggregate Principal Receivables
Principal Collections on the Receivables
Finance Charge Receivables
Receivables in Defaulted Accounts
End of Month - Aggregate Principal Receivables
Investor Interest Series 1993-1
Investor Interest Series 1994-1
Investor Interest Series 1994-2
Investor Interest Series 1995-1
Investor Interest Series 1997-1
Seller Principal Receivables
Total Investor Percentage with respect to...
Finance Charges
Charged-Off Accounts
Principal Receivables
Class A Percentage with respect to...
Finance Charges
Charged-Off Accounts
Principal Receivables
Class B Percentage with respect to...
Finance Charges
Charged-Off Accounts
Principal Receivables
Seller Percentage with respect to ...
Finance Charges
Charged-Off Accounts
Principal Receivables
- ---------------------------------------------------------------------
2. Allocation of Funds in Collection Account
Class A Available Finance Charge Collections
Class A Monthly Cap Interest Payable to Class A Certificateholders
(See "Calculation of Certificate Interest" #3)
Unpaid Class A Monthly Cap Interest
Class A Monthly Servicing Fee
(See"Calculation of Monthly Servicing Fee" #6)
Unpaid Class A Monthly Servicing Fee
Class A Investor Default Amount
Unreimbursed Class A Investor Charge-offs
Excess Spread from Class A Finance Charge Collections
Class A Required Amount
Class B Available Finance Charge Collections
Class B Monthly Cap Interest Payable to Class B Certificateholders
(See "Calculation of Certificate Interest" #3)
Unpaid Class B Monthly Cap Interest
Class B Monthly Servicing Fee
(See"Calculation of Monthly Servicing Fee" #6)
Unpaid Class B Monthly Servicing Fee
Class B Investor Default Amount
Unreimbursed Class B Investor Charge-offs
Excess Spread from Class B Finance Charge Collections
Class B Required Amount
Total Excess Spread
- ---------------------------------------------------------------------
2. Allocation of Funds in Collection Account (con't)
Excess Spread used to Satisfy Class A Required Amount
Excess Spread used to satisfy Unpaid Class A Monthly Cap Interest
Excess Spread used to satisfy Unpaid Class A Monthly Servicing Fee
Excess Spread used to satisfy Unreimbursed Class A Investor Charge-offs
Remaining Class A Required Amount
Excess Spread used to satisfy Class B Required Amount
Excess Spread used to satisfy Unpaid Class B Monthly Cap Interest
Excess Spread used to satisfy Unpaid Class B Monthly Servicing Fee
Excess Spread used to satisfy Unreimbursed Class B Investor Charge-offs
Remaining Class B Required Amount
Shared Finance Charges used to satisfy Remaining Class A Required Amount
Shared Finance Charges used to satisfy Unpaid Class A Monthly Cap Interest
Shared Finance Charges used to satisfy Unpaid Class A Monthly Servicing
Fee
Shared Finance Charges used to satisfy Unreimbursed Class A Investor
Charge-offs
Remaining Class A Required Amount
Cash Collateral Withdrawal used to satisfy Remaining Class A Required Amount
Cash Collateral Withdrawal used to satisfy Unpaid Class A Monthly Cap
Interest
Cash Collateral Withdrawal used to satisfy Unpaid Class A Monthly
Servicing Fee
Cash Collateral Withdrawal used to satisfy Unreimbursed Class A Investor
Charge-offs
Remaining Class A Required Amount
Class B Reallocated Amount used to satisfy Remaining Class A Required Amount
Class B Reallocated Amount used to satisfy Unpaid Class A Monthly Cap
Interest
Class B Reallocated Amount used to satisfy Unpaid Class A Monthly
Servicing Fee
Class B Reallocated Amount used to satisfy Unreimbursed Class A Investor
Charge-offs
Remaining Class A Required Amount
Class B Investor Interest used to satisfy Unreimbursed Class A Investor
Charge-offs
Shared Finance Charges used to satisfy Remaining Class B Required Amount
Shared Finance Charges used to satisfy Unpaid Class B Monthly Cap Interest
<PAGE>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
Number of Months Series in Existence
Monthly Period Ended
Distribution Date
Determination Date
Number of Days in Period
- ----------------------------------------------------------------------
Shared Finance Charges used to satisfy Unpaid Class B Monthly Servicing
Fee
Shared Finance Charges used to satisfy Unreimbursed Class B Investor
Charge-offs
Remaining Class B Required Amount
- ----------------------------------------------------------------------
2. Allocation of Funds in Collection Account (con't)
Cash Collateral Withdrawal used to satisfy Remaining Class B Required Amount
Cash Collateral Withdrawal used to satisfy Unpaid Class B Monthly Cap
Interest
Cash Collateral Withdrawal used to satisfy Unpaid Class B Monthly
Servicing Fee
Cash Collateral Withdrawal used to satisfy Unreimbursed Class B Investor
Charge-offs
Remaining Class B Required Amount
Excess Spread used to satisfy interest on overdue Class A
(See "Calculation of Certificate Interest" #3)
Excess Spread used to satisfy interest on overdue Class B
(See "Calculation of Certificate Interest" #3)
Excess Spread used to satisfy reimbursements of Class B Interest
Excess Spread used to satisfy deposits into Required Cash Collateral Account
Excess Spread used to satisfy shortfalls of the Class A Interest Payments
Excess Spread used to satisfy shortfalls of the Class B Interest Payments
Excess Spread used to satisfy payments per Loan Agreement
Excess Spread used to satisfy Class A Excess Interest
Excess Spread used to satisfy Class B Excess Interest
Remaining Excess Servicing (dollars)
Remaining Excess Servicing (percentage of Investor Interest)
Class A Investor Certificate Interest Shortfall (Deficiency Amounts)
Class A Charge-offs
Unreimbursed Class A Charge Offs
Unreimbursed Class A Charge Offs per $1,000 Original Investment
Class A Monthly Servicing Fee Shortfall
Class B Investor Certificate Interest Shortfall
- ----------------------------------------------------------------------
2. Allocation of Funds in Collection Account (con't)
Class B Charge-offs
Unreimbursed Class B Charge Offs
Unreimbursed Class B Charge Offs per $1,000 Original Investment
Class B Monthly Servicing Fee Shortfall
Available Principal Collections
Monthly Principal Payable To Class A Certificateholders
(See "Calculation of Monthly Principal" #4)
Monthly Principal Payable To Class B Certificateholders
(See "Calculation of Monthly Principal" #4)
Monthly Principal Reinvested In Receivables
(See "Calculation of Monthly Principal" #4)
(Net Deposit)/Draws on Shared Principal Collections
Required Shared Finance Charge Collections from other Series
Draw on Shared Finance Charge Collections from other Series
Withdrawal from Cash Collateral Account
Class B Investor Certificate Interest Shortfall (Deficiency Amounts)
Required Shared Finance Charge Collections for other Series
Deposit of Shared Finance Charge Collections for other Series
Total Distribution to Class A Investors
Total Distribution to Class A Investors per $1,000 Invested
Total Distribution to Class B Investors
Total Distribution to Class B Investors per $1,000 Invested
- ----------------------------------------------------------------------
3. Calculation of Certificate Interest
Class A Certificate Rate
Class A Interest Rate Cap Provider Deposit
Previous Month's Class A Deficiency Amount
Class A Interest at the Certificate Rate + 0.5% on Deficiency Amount
This Month Class A Certificate Interest
<PAGE>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
Number of Months Series in Existence
Monthly Period Ended
Distribution Date
Determination Date
Number of Days in Period
- --------------------------------------------------
Expected Class B Principal
This Month Class B Cap Shortfall
Class B Excess Interest
Total Class B Interest Distributable to Class B Certificateholders
Total Class B Interest Distributable per $1,000 of Class B Original
Investment
Total Certificate Interest Distributable to Certificateholders
Total Certificate Interest Distributable per $1,000 of Original Investment
- --------------------------------------------------
4. Calculation of Monthly Principal
Beginning Investor Interest
Beginning Class A Interest
Class A Available Principal Collections
Class A Monthly Unreimbursed Charge-Offs
Total Class A Monthly Principal
Class A Monthly Principal Reinvested in Receivables
Class A Controlled Amortization Amount
Maximum Monthly Principal to Class A Certificateholders
Class A Deficit Controlled Amortization Amount
Monthly Principal Payable to Class A Certificateholders
Class A Monthly Principal Payable per $1,000 of Original Investment
Beginning Class B Interest
Class B Available Principal Collections
Class B Monthly Unreimbursed Charge-Offs
Total Class B Monthly Principal
Class B Reallocated Principal
Prior Month's Cumulative Class B Reallocated Principal
Class B Reduction of Interest
Prior Month's Cumulative Class B Reduction of Interest
Class B Monthly Principal Reinvested in Receivables
Class B Controlled Amortization Amount
Maximum Monthly Principal to Class B Certificateholders
- --------------------------------------------------
4. Calculation of Monthly Principal (con't)
Required Shared Principal Collections for other Series
Deposit of Shared Principal Collections for other Series
Required Shared Principal Collections from other Series
Draw on Shared Principal Collections from other Series
Class B Deficit Controlled Amortization Amount
Monthly Principal Payable to Class B Certificateholders
Class B Monthly Principal Payable per $1,000 of Original Investment
Ending Investor Interest
Ending Class A Interest
Ending Class B Interest
5. Calculation of Pool Factor
Pool Factor
(Ending Certificate Balance divided by Initial Principal Amount to 7 decimal
places)
6. Calculation of Monthly Servicing Fee
Series Servicing Fee Percentage
Beginning Class A Investor Interest
Beginning Class B Investor Interest
Beginning Investor Interest
Class A Monthly Servicing Fee
Class B Monthly Servicing Fee
Total Monthly Servicing Fee
7. Cash Collateral Account Activity
Beginning of Month Balance
Required Cash Collateral Account Amount
Excess Spread used to satisfy payments per Loan Agreement
Cash Collateral Account Deposits
Reinvestment Income Received on Cash Collateral Account
Aggregate Cash Collateral Account Draws
Available Cash Collateral Amount (Dollars)
Available Cash Collateral Amount (Percentage)
- --------------------------------------------------
8. Past Due Statistics
(past due on a contractual basis)
1-30 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
31-60 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
61-90 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
91-120 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
<PAGE>
PEOPLE'S BANK CREDIT CARD MASTER TRUST SERIES 1997-1
MONTHLY SERVICER'S REPORT
Number of Months Series in Existence
Monthly Period Ended
Distribution Date
Determination Date
Number of Days in Period
- ------------------------------------------------------------------
121-150 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
151-180 days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
181 + days past due Dollars
Percent Dollars
Number of Accts
Percent Number of Accts
- ------------------------------------------------------------------
9. Base Rate Calculation
Base Rate
Portfolio Yield (net of losses)
Excess of Portfolio Yield over Base Rate
10. Number of Accounts in the Trust
Number of Additional Accounts
Number of Removed Accounts
Number of Automatic Additonal Accounts
Ending Number of Accounts
<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 [ ], 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 [ ], 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
--------------------------------------
[PULLMAN AND COMLEY TO PROVIDE]
-------------------------------
F-1
<PAGE>
EXHIBIT G
---------
FORM OF
ANNUAL SECURITY INTEREST OPINION PURSUANT TO
SECTIONS 13.2(D)(II) OF THE
POOLING AND SERVICING AGREEMENT
-------------------------------
PULLMAN & COMLEY, LLC
Attorneys At Law
850 MAIN STREET P.O. BOX 7006
BRIDGEPORT, CT 06601-7006
Reply to: Bridgeport
Telephone: (203) 330-2000
March [ ], 1997
VIA AIRBORNE EXPRESS
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 [ ], 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 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 1997-1 and Floating Rate Class B Asset Backed Certificates, Series 1996-
1; and our opinion dated October 1, 1996 delivered to you in connection with the
transfer and assignment of additional New Receivables to the Trust
(collectively, the "Prior Opinions"). Copies of the Prior Opinions are attached
hereto.
<PAGE>
PULLMAN & COMLEY, LLC
Page 2
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 (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 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.
<PAGE>
PULLMAN & COMLEY, LLC
Page 3
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
<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 [ ], 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
I-1
<PAGE>
right, title and interest of the Trust in and to the Receivables now existing
and hereafter created in the Removed Accounts designated hereby, 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 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
I-2
<PAGE>
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(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 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.
I-3
<PAGE>
(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.
(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
[ ], 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 1997-1 Certificateholders
-----------------------------------
SERIES 1997-1 SUPPLEMENT
Dated as of March [__], 1997
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March [__], 1997
-----------------------------------
$[ ]
PEOPLE'S BANK CREDIT CARD MASTER TRUST
$[_______________] Floating Rate Class A
Asset Backed Certificates, Series 1997-1
$[_______________] Floating Rate Class B
Asset Backed Certificates, Series 1997-1
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS........................................................1
SECTION 1. Designation........................................1
SECTION 2. Definitions........................................2
SECTION 2.1 Other Definitional Provisions.....................26
SECTION 3. Conveyance of Interest in Reserve Account.........26
SECTION 4. Minimum Seller Interest, Minimum Aggregate Principal
Receivables and Removal of Accounts...............26
SECTION 5. Reassignment and Transfer Terms...................27
SECTION 6. Delivery and Payment for the Series 1997-1
Certificates......................................27
SECTION 7. Depositary; Form of Delivery of Series 1997-1
Certificates......................................27
SECTION 8. Enhancement.......................................28
SECTION 9. Article IV of Agreement...........................28
ARTICLE IV RIGHTS OF SERIES 1997-1 INVESTOR
CERTIFICATEHOLDERS AND ALLOCATION AND
APPLICATION OF COLLECTIONS....................28
SECTION 4.2A Rights of Series 1997-1 Investor
Certificateholders.........................28
SECTION 4.2B The Series 1997-1 Collection Subaccount....29
SECTION 4.3 Establishment of Series 1997-1 Investor
Accounts...................................31
SECTION 4.4 Allocations................................33
SECTION 4.5 Defaulted Accounts and Charge-Offs.........36
SECTION 4.6 Monthly Payments...........................38
SECTION 4.7 Payment of Investor Certificate Interest...49
SECTION 4.8 Payment of Investor Certificate Principal..49
SECTION 4.9 Establishment of the Reserve Account.......54
SECTION 4.10 Transferor's or Servicer's Failure to Make a
Deposit or Payment. ......................57
SECTION 4.11 Interest Rate Caps. ......................60
SECTION 4.12 Reallocated Principal Collections..........63
SECTION 4.13 Determination of LIBOR.....................64
SECTION 4.14 Discount Option............................65
- i -
<PAGE>
Page
----
ARTICLE V DISTRIBUTIONS AND REPORTS TO
INVESTORCERTIFICATEHOLDERS....................66
SECTION 5.1 Distributions..............................66
SECTION 5.2 Monthly Certificateholders' Statement......67
SECTION 9.A Series 1997-1 Pay Out Events......................70
SECTION 10. Series 1997-1 Termination.........................73
SECTION 11. Ratification and Reaffirmation of Pooling and
Servicing Agreement...............................74
SECTION 12. Ratification and Reaffirmation of Representations
and Warranties....................................74
SECTION 13. [RESERVED]........................................74
SECTION 14. No Subordination..................................74
SECTION 15. Repurchase of the Series 1997-1 Certificates......74
SECTION 16. Counterparts......................................76
SECTION 17. Additional Covenants of Transferor................76
SECTION 18. Series 1997-1 Investor Exchange...................76
SECTION 19. Governing Law.....................................77
SECTION 20. Notification to Luxembourg Stock Exchange.........77
- ii -
<PAGE>
Page
----
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
EXHIBIT 7 Form of Notification to Trustee Regarding
Withdrawal From the Reserve Account
- iii -
<PAGE>
SERIES 1997-1 SUPPLEMENT, dated as of March [__], 1997 (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 [ ], 1997 between PEOPLE'S
BANK and the Trustee (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 Certificates authorized hereby shall be
-----------
designated generally as the "Series 1997-1 Certificates". The Series 1997-1
Certificates shall be issued in two Classes, which shall be designated generally
as the Floating Rate Class A Asset Backed Certificates, Series 1997-1 and the
Floating Rate Class B Asset Backed Certificates, Series 1997-1. 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 Agreement and this Series Supplement, except as expressly
provided herein, and shall be known as the Collateral Interest, Series 1997-1
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 Agreement, shall be entitled to the benefits of the 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, the provisions of Article VI and
Article XII of the Agreement relating to the registration, authentication,
delivery, presentation, cancellation and surrender of Registered Certificates
shall not be applicable to the Collateral Interest.
<PAGE>
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 1997-1
Investor Certificates and to no other Series of Certificates issued by the
Trust.
"Accumulation Shortfall" initially shall mean zero and thereafter means,
----------------------
with respect to any Monthly Period during the Controlled Accumulation Period,
the excess, if any, of the Controlled Deposit Amount for the previous Monthly
Period over the amount deposited into the Principal Funding Account pursuant to
subsection 4.8(a)(ii)(A) with respect to the Class A Certificates for the
previous Monthly Period.
"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.
"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) Collections of Principal Receivables
processed on any Date of Processing during such Monthly Period, which were
allocated to the Investor Interest and were deposited in the Principal Account
pursuant to subsection 4.4(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 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
- 2 -
<PAGE>
pursuant to (x) subsection 4.6(a)(iii) or 4.6(b)(iii) 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, respectively, the Class A Investor
Default Amount or the Class B Investor Default Amount), which shall, without
duplication, be included as Available Investor Principal Collections), 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 1997-1 Investor Certificates from each other Series [that has a
controlled or scheduled amortization or accumulation period beginning after the
Class B Expected Final Distribution Date].
"Base Rate" shall mean, with respect to any Monthly Period, the weighted
---------
average of (i) the lesser of the Class A Certificate Rate and the Class A Cap
Rate, (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) plus [2.00]% per annum.
"Calculation Period" shall have the meaning specified in the applicable
------------------
Interest Rate Cap.
"Certificate Rate" for purposes of Section 17 hereof shall mean, with
----------------
respect to any Monthly Period, the weighted average of (i) the lesser of the
Class A Certificate Rate and the Class A Cap Rate, (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).
"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.
- 3 -
<PAGE>
"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 Collections
of Finance Charge Receivables (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) with respect to any Monthly
Period during the Controlled Accumulation Period prior to the payment in full of
the Class A Investor Interest, 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 (d) or which will be required to be deposited in the Finance Charge
Account pursuant to such subsections on the related Transfer Date (before giving
effect to any permitted netting) and (d) the proceeds of the sale of any Class A
Interest Rate Cap deposited into the Collection Account during the related
Monthly Period pursuant to subsection 4.11(g).
"Class A Cap Rate" shall mean [____]% per annum.
----------------
"Class A Certificate Rate" shall mean, with respect to the period from and
------------------------
including the Closing Date through and including April 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 1997-1 executed by the Transferor and authenticated
by or on behalf of the Trustee, substantially in the form of Exhibit 1-A hereto.
"Class A Excess Interest" shall mean, on any date of determination, an
-----------------------
amount equal to the product of (a) the amount by which the Class A Certificate
Rate exceeds the Class A Cap
- 4 -
<PAGE>
Rate, (b) the Class A Excess Principal, if any, and (c) the actual number of
days in the related Interest Accrual Period divided by 360.
-------
"Class A Excess Principal" shall mean on any date of determination the
------------------------
amount by which the Class A Investor Interest exceeds the Expected Class A
Principal after giving effect to all payments, deposits and withdrawals on such
date.
"Class A 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 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.
"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, on any date of determination,
---------------------------------
mean the aggregate initial principal amount of the Class A Certificates on the
Closing Date, which is $[_______________], less the portion of such amount
represented by Class A Certificates tendered and canceled pursuant to any Series
1997-1 Investor Exchange occurring prior to such date of determination.
"Class A Interest Rate Cap" shall mean the master agreement dated as of
-------------------------
March [__], 1997 between the Trustee and the Interest Rate Cap Provider, as
supplemented by the schedule attached thereto and the confirmation dated on or
prior to March [__], 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.
"Class A 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 A
Floating Allocation, and
- 5 -
<PAGE>
(b) with respect to Principal Receivables during the Controlled Accumulation
Period or Rapid Amortization Period, the Class A Fixed Allocation.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
subsection 4.5(a).
"Class A Investor Default Amount" shall mean, with respect to any Transfer
-------------------------------
Date, an amount equal to the product of (a) the Investor Default Amount for the
related Monthly Period and (b) the Class A Floating Allocation applicable for
the related 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 1997-1 Investor Exchange, the amounts stated in clauses (b) and (c) shall
be computed with respect to the Class A Certificates not tendered or canceled
pursuant to such Series 1997-1 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, (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 the related Interest Accrual
Period divided by 360.
"Class A Monthly Interest" shall mean, with respect to any Distribution
------------------------
Date, an amount equal to the sum of (a) the product of (i) the Class A
Certificate Rate and, (ii) the lesser of the Class A Investor Interest as of the
preceding Distribution Date or, for the initial Interest Accrual Period, the
Closing Date (after giving effect to all payments, deposits and withdrawals on
such Distribution Date or Closing Date), and the Expected Class A Principal as
of the preceding Distribution Date and (iii) the actual number of days in the
related Interest Accrual Period divided by 360 and (b) the product of (i) the
Class A Excess Principal, (ii) the lesser of the Class A Certificate Rate and
- 6 -
<PAGE>
Class A Cap Rate and (iii) the actual number of days in the related 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 with respect to the first
-----------------------------
Transfer Date, $0.00 and with respect to any subsequent Transfer Date, one-
twelfth of the product of [2.00]% and the Class A Investor Interest on the last
day of the preceding Monthly Period.
"Class A Notional Amount" shall mean, on any date of determination, an
-----------------------
amount equal to the Executed Class A Principal on such date.
"Class A Required Amount" shall have the meaning specified in subsection
-----------------------
4.6(e).
"Class A Scheduled Payment Date" shall mean the [ ] Distribution
------------------------------
Date.
"Class B Available Funds" shall mean, with respect to any Monthly Period,
-----------------------
an amount equal to the sum of the Class B Floating Allocation of Collections of
Finance Charge Receivables (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), and (b) the proceeds of the sale of any Class B
Interest Rate Cap deposited into the Collection Account during the related
Monthly Period pursuant to subsection 4.11(g).
"Class B Cap Rate" shall mean [____]% per annum.
----------------
- 7 -
<PAGE>
"Class B Certificate Rate" shall mean, with respect to the period from and
------------------------
including the Closing Date through and including April 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 1997-1 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, on any date of determination, an
-----------------------
amount equal to the product of (a) the amount by which the Class B Certificate
Rate exceeds the Class B Cap Rate, (b) the Class B Excess Principal, if any, and
(c) the actual number of days in the related Interest Accrual Period divided by
-------
360.
"Class B Excess Principal" shall mean on any date of determination the
------------------------
amount by which the Class B Investor Interest exceeds the Expected Class B
Principal after giving effect to all payments, deposits and withdrawals on such
date.
"Class B 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
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
- 8 -
<PAGE>
$[_______________], less the portion of such amount represented by Class B
Certificates tendered and canceled pursuant to any Series 1997-1 Investor
Exchange occurring prior to such date of determination.
"Class B Interest Rate Cap" shall mean the master agreement dated as of
-------------------------
March [__], 1997 between the Trustee and the Interest Rate Cap Provider, as
supplemented by the schedule attached thereto and the confirmation dated on or
prior to March [__], 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.
"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 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, for any Transfer Date, an
-------------------------------
amount equal to the product of (a) the Investor Default Amount for the related
Monthly Period and (b) the Class B Floating Allocation applicable for the
related 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
-----
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, 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 1997-1 Investor Exchange, the amounts stated in clauses (b), (c), (d),
(e) and (f) shall be computed with respect to the Class B Certificates not
tendered or canceled pursuant to such Series 1997-1 Investor Exchange; provided
--------
further, however,
- ------- -------
- 9 -
<PAGE>
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, (b) the Class B Investor Interest
as determined as of the preceding Distribution Date or, for the initial Interest
Accrual Period, the Closing Date (after giving effect to all payments, deposits
and withdrawals on such Distribution Date or Closing Date) and (c) the actual
number of days in the related Interest Accrual Period divided by 360.
"Class B Monthly Interest" shall mean, with respect to any Distribution
------------------------
Date, an amount equal to the sum of (a) the product of (i) the Class B
Certificate Rate, (ii) the lesser of the Class B Investor Interest as of the
preceding Distribution Date or, for the initial Interest Accrual Period, the
Closing Date (after giving effect to all payments, deposits and withdrawals on
such Distribution Date or Closing Date) and the Expected Class B Principal as of
the preceding Distribution Date, and (iii) the actual number of days in the
related Interest Accrual Period divided by 360 and (b) the product of (i) the
Class B Excess Principal, (ii) the lesser of the Class B Certificate Rate and
the Class B Cap Rate and (iii) the actual number of days in the related 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 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 on such Transfer Date) and (ii) the Class B Investor
Interest for such Transfer Date.
"Class B Monthly Servicing Fee" shall mean, with respect to the first
-----------------------------
Transfer Date, $0.00, and 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, an
-----------------------
amount equal to the Expected Class B Principal.
"Class B Payment Commencement Date" shall mean either the Distribution Date
---------------------------------
on which the Class A Investor Interest is
- 10 -
<PAGE>
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 [ ] Distribution
------------------------------
Date.
"Closing Date" shall mean March [__], 1997.
------------
"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 Collections of Finance Charge
Receivables 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 3.2(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, for any Transfer Date an amount
-------------------------
equal to the product of (a) the Investor Default Amount for the related Monthly
Period and (b) the Collateral Floating Allocation applicable for the related
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
- 11 -
<PAGE>
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.
"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 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, 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, with respect to the
-----------------------------------------
first Transfer Date, $0.00, and 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
- 12 -
<PAGE>
Series 1997-1 Investor Certificateholders as of such date) exceeds the Required
Collateral Interest as of such date.
"Collateral Monthly Interest" shall mean, with respect to any Distribution
---------------------------
Date, an amount equal to the product of (i) the Collateral Rate, (ii) the
Collateral Interest as of the last day if the preceding monthly period 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 (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 (z) 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 Available
Investor Principal Collections remaining after allocations to the Series 1997-1
Certificateholders pursuant to Section 4.8 on such Transfer Date.
"Collateral Rate" shall mean [____]% per annum from March [__], 1997
---------------
through May 15, 1997, and with respect to each Interest Accrual Period
thereafter, a per annum rate [__]% in excess of LIBOR, as determined on the
related LIBOR Determination Date.
"Controlled Accumulation Amount" shall mean 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(c), (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(c) 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.
"Controlled Accumulation Date" shall mean [_______________].
----------------------------
"Controlled Accumulation Period" shall mean, unless a Pay Out Event shall
------------------------------
have occurred prior to such date, a period
- 13 -
<PAGE>
commencing on the Controlled Accumulation Date or such later day as is
determined in accordance with subsection 4.8(c) and continuing to, but not
including, a Pay Out Commencement Date or to, and including, (i) the date of
termination of the Trust pursuant to Section 12.1 of the Agreement or (ii) the
Series 1997-1 Termination Date.
"Controlled Accumulation Period Length" shall have the meaning specified in
-------------------------------------
subsection 4.8(c).
"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)
any existing Accumulation Shortfall.
"Controlled Distribution Amount" shall have the meaning specified in
------------------------------
subsection 4.4(d)(ii).
"Controlled Excess Amount" shall have the meaning specified in subsection
------------------------
4.4(d)(ii).
"Covered Amount" shall mean an amount determined as of each Transfer Date
--------------
with respect to any Interest Accrual Period as the product of (a)(i) a fraction,
the numerator of which is the actual number of days in such Interest Accrual
Period and the denominator of which is 360, times (ii) the Class A Certificate
Rate in effect with respect to such Interest Accrual Period, and (b) 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.
"Definitive Certificates" shall have the meaning specified in Section 6.11.
-----------------------
"Discount Option" shall have the meaning specified in Section 4.14.
---------------
"Discount Percentage" shall have the meaning specified in Section 4.14.
-------------------
"Distribution Account" shall have the meaning specified in subsection
--------------------
4.3(b).
"Distribution Date" shall mean April 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 1997-1
Termination Date.
- 14 -
<PAGE>
"Enhancement" shall mean the subordination of the Collateral Interest to
-----------
the extent provided herein and, with respect to the Class A Certificates, shall
also mean 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 1997-1
--------------------
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 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, the amount of the Class A Investor Interest that is equal to (a)
on each date to but excluding the [ ] Distribution 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, assuming a Controlled Accumulation
Period commencing [ ], and the number of Distribution Dates occurring from
and including the [ ] Distribution Date, and (c) on each date thereafter,
zero.
"Expected Class B Principal" shall mean, with respect to any date of
--------------------------
determination, the amount of Class B Investor Interest that is equal to (a) 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.
"Fixed Investor Percentage" shall mean, with respect to any Monthly Period,
-------------------------
the percentage equivalent of a fraction, the numerator of which is the Investor
Interest as of the close of business on the last day of the Revolving Period and
the denominator of which is the greater of (a) the aggregate amount of Principal
Receivables in the Trust determined as of the close
- 15 -
<PAGE>
of business on the last day of the prior Monthly Period 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; provided
that, if a Reset Date occurs in a Monthly Period, the denominator determined
pursuant to clause (a) hereof for the period from and including such Reset Date
to but excluding the last day of such Monthly Period shall be the aggregate
amount of Principal Receivables in the Trust as of the beginning of the day on
such Reset Date after adjusting for the aggregate amount of Principal
Receivables removed from the Trust on such Reset Date.
"Floating Investor Percentage" shall mean, with respect to any Monthly
----------------------------
Period, the percentage equivalent of a fraction, the numerator of which is the
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, the
Initial Investor Interest) and the denominator of which is the greater of (a)
the aggregate amount of Principal Receivables as of the close of business on the
last day of the preceding Monthly Period (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 with
respect to Finance Charge Receivables, Default Amounts or Principal Receivables,
as applicable, on such date of determination; provided that if a Reset Date
occurs in a Monthly Period, the denominator determined pursuant to clause (a)
hereof for the period from and including such Reset Date to but excluding the
last day of such Monthly Period shall be the aggregate amount of Principal
Receivables in the Trust as of the beginning of the day on such Reset Date after
adjusting for the aggregate amount of Principal Receivables removed from the
Trust on such Reset Date.
"Floating Rate" shall have the meaning specified in the applicable Interest
-------------
Rate Cap.
"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
- 16 -
<PAGE>
the Closing Date) through and including the day preceding the current
Distribution Date.
"Interest Rate Cap" shall mean either the Class A Interest Rate Cap or the
-----------------
Class B Interest Rate Cap.
"Interest Rate Cap Payment" shall mean, with respect to any Distribution
-------------------------
Date, any payment required to be made by an Interest Rate Cap Provider to the
Trust pursuant to an Interest Rate Cap with respect to such Distribution Date.
"Interest Rate Cap Provider" shall mean [_______________], in its capacity
--------------------------
as obligor under the Interest Rate Caps, or if any Replacement Interest Rate Cap
or Qualified Substitute Arrangement is obtained pursuant to Section 4.11, any
obligor with respect to such Replacement Interest Rate Cap or Qualified
Substitute Arrangement.
"Interest Rate Caps" shall mean, collectively, the Class A Interest Rate
------------------
Cap and the Class B Interest Rate Cap.
"Investor Accounts" shall mean the Finance Charge Account, the Distribution
-----------------
Account, the Principal Account and the Principal Funding Account.
"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 Distribution
-----------------------
Date, an amount equal to the product of (a) the sum of the Default Amounts for
all Defaulted Accounts during the immediately preceding Monthly Period and (b)
the Floating Investor Percentage (determined on a weighted average basis if a
Reset Date occurs during the related Monthly Period) 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.
- 17 -
<PAGE>
"LIBOR" shall mean, for any Interest Accrual Period, the London interbank
-----
offered quotations for one-month Dollar deposits determined for each Interest
Accrual Period in accordance with the provisions of Section 4.13.
"LIBOR Determination Date" shall mean (a) for the initial Interest Period,
------------------------
March [__], 1997 (for the period from and including the Closing Date through and
including April 14, 1997) and (b) for each subsequent Interest Accrual Period,
the second London Banking Day prior to the commencement of such Interest Accrual
Period.
"Loan Agreement" shall mean the agreement among the Transferor, the
--------------
Servicer, the Trustee and the Collateral Interest Holder, dated as of March
[__], 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.
"Minimum Seller Interest" shall have the meaning specified in Section 4
-----------------------
hereof.
"Monthly Investor Servicing Fee" shall mean, with respect to the first
------------------------------
Monthly Period, $0.00, and with respect to each subsequent Monthly Period, an
amount equal to one twelfth of the product of [2.00]% and the Investor Interest
as of the last day of the preceding Monthly Period.
"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 a Monthly Period shall mean the Principal Allocation, if any, for the
last day of such Monthly Period plus the sum of all Principal Allocations on
each prior day of such Monthly Period.
"Pay Out Commencement Date" shall mean, with respect to the Series 1997-1
-------------------------
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 1997-1 Pay
Out Event is deemed to occur or occurs pursuant to Section 9A hereof.
"Permitted Investments" shall mean with respect to the Series 1997-1
---------------------
Collection Subaccount, the Investor Accounts and the Reserve Account (a)
negotiable instruments or securities
- 18 -
<PAGE>
either represented by instruments in bearer or registered form or book-entry
form at a federal reserve bank or held by a clearing corporation which are
registered in the name of the Trustee upon books maintained for that purpose by
or on behalf of the issuer thereof and identified on books maintained for that
purpose by the Trustee and held for the benefit of the Trust or the
Certificateholders and which evidence (i) direct obligations of the United
States of America or any agency or instrumentality thereof the full and timely
payment of which is guaranteed by the full faith and credit of the United States
of America; (ii) demand deposits, time deposits or certificates of deposit of,
or bankers' acceptances issued by, any depositary institution or trust company
incorporated under the laws of the United States of America or any state thereof
and subject to supervision and examination by federal or state banking or
depositary institution authorities; provided, however, that at the time of the
-------- -------
Trust's investment or contractual commitment to invest therein, the certificates
of deposit or short-term deposits, if any, of such depositary institution or
trust company shall have a credit rating from Standard & Poor's of A-1+, and
either such certificates of deposit or short-term deposits shall have a credit
rating from Moody's of P-1 or the long-term unsecured debt obligations of such
depositary institution or trust company (other than such obligations whose
rating is based on collateral or on the credit of a Person other than such
institution or trust company) shall have a rating from Moody's of at least Aa3,
and the amount of such time deposits, demand deposits or certificates of deposit
are fully insured within the limits of insurance set by the FDIC and the
combined capital, surplus and undivided profits of such depositary institution
or trust company is not less than $3 million; (iii) certificates of deposit
having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating from Moody's and Standard & Poor's of P-1 and A-1+,
respectively; (iv) commercial paper having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating from Moody's
and Standard & Poor's of P-1 and A-1+, respectively; and (v) investments in
money market funds registered under the Investment Company Act rated in each
case in the highest investment category by Standard & Poor's and Moody's, or
otherwise approved in writing by the Rating Agency and acceptable to the
Enhancement Provider; and (b) demand deposits in the name of the Trust or the
Trustee, on behalf of the Trust, in any depositary institution or trust company
referred to in clause (a)(ii) above; provided, however, that with respect to any
-------- -------
of the Permitted Investments referred to herein, if requested by the Enhancement
Provider, the Servicer shall furnish to the Enhancement Provider an Opinion of
Counsel, in form and substance satisfactory to the Enhancement Provider and from
counsel reasonably acceptable to it, to the effect that, upon conveyance of
possession or registered ownership to the Trustee or its agent, nominee or
custodian, on behalf of the
- 19 -
<PAGE>
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 1997-1 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 1997-1 Investor Certificates is not Standard &
Poor's or Moody's, any investments specified in this definition of "Permitted
Investments" as requiring a specific credit rating from Standard & Poor's or
Moody's must also have a comparable credit rating from, or otherwise be
acceptable to, the Rating Agency rating the Series 1997-1 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 or Moody's must also receive written
approval from such other Rating Agency.
"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.
"Portfolio Yield" shall mean, with respect to the Series 1997-1 Investor
---------------
Certificates and with respect to 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 and
(iii) the amount of the Reserve Draw Amount (up to the Available Reserve Account
Amount), if any, with respect to such Monthly Period, plus 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 (before giving
effect to any permitted netting) relating to such Monthly Period, and the
denominator of which is the Investor Interest as of the last day of the
preceding Monthly Period.
- 20 -
<PAGE>
"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 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 principal amount, if any, on deposit in the Principal Funding
Account on such date of determination.
"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 Covered Amount determined as of such Transfer Date.
"Principal Shortfall" shall mean (i) on any Date of Processing for the
-------------------
Series 1997-1 Investor Certificates, the excess of (x) an amount equal to the
sum of the Controlled Deposit Amount and 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 and Standard & Poor's of at least Baa3 and BBB-,
respectively, and the deposits in whose accounts are insured to the limits
provided by law and as required by the FDIC.
- 21 -
<PAGE>
"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 1997-1
Termination Date.
"Rating Agency" shall mean, with respect to the Series 1997-1 Certificates,
-------------
each of Moody's and Standard & Poor's.
"Reallocated Class B Principal Collections" shall mean, with respect to any
-----------------------------------------
Transfer Date, Collections of Principal Receivables (including amounts specified
pursuant to subsections 4.6(b)(iii) and (iv), 4.6(d)(ii) and 4.6(f) to be
treated as Collections of Principal Receivables allocable to the Class B
Investor Interest) 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 Collections
of Principal Receivables 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, Collections of Principal Receivables (including amounts
specified pursuant to subsections 4.6(d)(ix) and (x) to be treated as
Collections of Principal Receivables) 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 Collections of Principal Receivables 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 any interest rate cap having
-----------------------------
substantially the same terms and conditions as the Class A Interest Rate Cap or
the Class B Interest Rate Cap, as the case may be, and otherwise satisfying the
conditions set forth in Section 4.11.
- 22 -
<PAGE>
"Required Collateral Interest" shall mean (a) initially, the Initial
----------------------------
Collateral Interest and (b) on any Transfer Date thereafter, an amount equal to
[___]% of (1) the sum of the Class A Adjusted Investor Interest and the Class B
Investor Interest on such Transfer Date, in each case after taking into account
all deposits in the Principal Funding Account on such date and payments to be
made on the related Distribution Date, plus (2) the Collateral Interest on the
----
prior Transfer Date, after any adjustments to be made on such Transfer 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-
1 Investor Certificates has occurred, the Required Collateral Interest for any
Transfer Date shall (subject to clauses (y) and (z) below) equal the Required
Collateral Interest for the Transfer Date immediately preceding such reduction
or Pay Out Event, (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 after taking into account the payments to be made
on the related Distribution Date and (z) the Required Collateral Interest may be
reduced at Transferor's option at any time to a lesser amount if the Transferor,
the Servicer, the Collateral Interest Holder and the Trustee have been provided
with notification in writing by the Rating Agency 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) [.50]%
of the outstanding principal balance of the Class A Certificates 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 Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at such time, in the reasonable belief of the Transferor, such designation will
not cause a Pay Out Event or an event that, after the giving of notice or the
lapse of time, would cause a Pay Out Event to occur with respect to the Series
1997-1 Investor Certificates.
"Reserve Account" shall have the meaning specified in subsection 4.9(a).
---------------
- 23 -
<PAGE>
"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; (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).
"Reset Date" shall mean a Removal Date that is not an Expired Accounts
----------
Removal Date.
"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 1997-1 Termination Date" shall mean the [_______________]
----------------------------------------
Distribution Date.
"Series 1997-1" shall mean the Series represented by the Series 1997-1
-------------
Certificates.
"Series 1997-1 Certificateholder" shall mean the holder of record of any
-------------------------------
Series 1997-1 Certificate.
"Series 1997-1 Certificates" shall have the meaning specified in Section 1
--------------------------
of this Series Supplement.
"Series 1997-1 Collection Subaccount" shall have the meaning specified in
-----------------------------------
Section 4.2B.
- 24 -
<PAGE>
"Series 1997-1 Investor Certificateholders" shall mean the Series 1997-1
-----------------------------------------
Certificateholders and the Collateral Interest Holder.
"Series 1997-1 Investor Certificates" shall mean the Class A Certificates,
-----------------------------------
the Class B Certificates and the Collateral Interest.
"Series 1997-1 Investor Exchange" shall mean an Investor Exchange pursuant
-------------------------------
to Section 6.9(b) of the Agreement and Section 18 hereof.
"Series 1997-1 Pay Out Event" shall have the meaning specified in Section
---------------------------
9A hereof.
"Series 1997-1 Termination Date" shall mean the earlier to occur of (i) the
------------------------------
day after the Distribution Date on which the Series 1997-1 Investor Certificates
are paid in full or (ii) the Scheduled Series 1997-1 Termination Date.
"Series Account" shall mean the Series 1997-1 Collection Subaccount, the
--------------
Principal 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).
"Series Servicing Fee Percentage" shall mean [2.0]%.
-------------------------------
"Series Supplement" shall have the meaning specified on the first page of
-----------------
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 1997-1 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 Sections 4.6(e) and 4.6(f) on such Transfer Date.
"Shared Principal Collections" shall mean, as the context requires, either
----------------------------
(a) the amounts allocated to the Series 1997-1 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
- 25 -
<PAGE>
cover Principal Shortfalls with respect to the Series 1997-1 Investor
Certificates.
"Telerate Page 3750" shall mean the display page currently so designated on
------------------
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Transferor" shall mean People's Bank, a Connecticut capital stock savings
----------
bank, the Seller under the Agreement.
SECTION 2.1 Other Definitional Provisions. Whenever a determination is to
-----------------------------
be made under the Agreement as to whether a given action, course of conduct or
set of facts or circumstances could or would have a material adverse effect on
the Trust or the Series 1997-1 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 Reserve Account. The Transferor
-----------------------------------------
and the Trustee intend that the Reserve Account and all property credited
thereto be the property of the Trust for the benefit of the Class A
Certificateholders. If and to the extent the Reserve Account and the property
credited thereto are characterized as property of the Transferor, the Transferor
hereby assigns, sets-over, conveys, pledges and grants a security interest and
lien (free and clear of all other Liens) to the Trustee for the benefit of the
Class A Certificateholders, in all of the Transferor's right, title and interest
(if any) in and to the Reserve Account and the amounts on deposit in the Reserve
Account and all property now or hereafter credited thereto, including but not
limited to Permitted Investments, together with all proceeds thereof, as
collateral security for the amounts payable from time to time to the Trustee,
for the benefit of the Class A Certificateholders.
SECTION 4. Minimum Seller Interest, Minimum Aggregate Principal
----------------------------------------------------
Receivables and Removal of Accounts. (a) The Minimum Seller Interest applicable
- -----------------------------------
to the Series 1997-1 Investor Certificates shall be 7%. The Minimum Aggregate
Principal Receivables shall be the sum of the numerators used to calculate the
Investor Percentage with respect to Principal Receivables for all Series then
outstanding. Upon final payment of the Series 1997-1 Investor Certificates, the
Minimum Aggregate Principal Receivables shall be computed in a manner consistent
with the Agreement or any future Supplement, as appropriate.
- 26 -
<PAGE>
(b) In addition to the requirements contained in subsections 2.7(a) and
(b) of the Agreement with respect to the removal of Accounts, pursuant to
subsection 2.7(b)(iii)(c) of the Agreement, the removal of any Receivables of
any Removed Accounts on any Removal Date shall not, in the reasonable belief of
the Transferor, result in the failure to make a deposit of a Controlled Deposit
Amount or a payment of Collateral Monthly Principal.
SECTION 5. Reassignment and Transfer Terms. The Series 1997-1 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 5% of the Initial
Investor Interest. The Series 1997-1 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 1997-1 Termination Date if the Investor Interest
is reduced to an amount less than or equal to 5% of the Initial Investor
Interest and the conditions specified in the proviso to Section 12.2(a) 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 1997-1 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 1997-1 Certificates. The
-------------------------------------------------------
Transferor shall execute and deliver the Series 1997-1 Certificates to the
Trustee for authentication in accordance with Section 6.1 of the Agreement. The
Trustee shall deliver the Series 1997-1 Certificates when authenticated in
accordance with Section 6.2 of the Agreement.
SECTION 7. Depositary; Form of Delivery of Series 1997-1 Certificates.
----------------------------------------------------------
(a) The Series 1997-1 Certificates shall be
- 27 -
<PAGE>
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 1997-1 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 1997-1 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 1997-1 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 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 1997-1 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 1997-1 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 1997-1 Investor Certificates:
- 28 -
<PAGE>
ARTICLE IV
RIGHTS OF SERIES 1997-1 INVESTOR CERTIFICATEHOLDERS
AND ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2A Rights of Series 1997-1 Investor Certificateholders. The
---------------------------------------------------
Series 1997-1 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 1997-1
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 1997-1 Investor Certificates,
(c) funds and securities on deposit in the Finance Charge Account, the Principal
Account, the Distribution Account and the Series 1997-1 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,
- 29 -
<PAGE>
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 1997-1
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 1997-1
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 1997-1 Collection Subaccount. Pursuant to Section
---------------------------------------
4.1 of the Agreement, the Servicer, on behalf of the Trustee, shall establish
and maintain a subaccount of the Collection Account to be maintained with a
Qualified Trust Institution, which shall initially be Bankers Trust Company, for
the benefit of the Series 1997-1 Investor Certificateholders, bearing a
designation clearly indicating that the funds therein are held in trust for the
benefit of the Series 1997-1 Investor Certificateholders (the "Series 1997-1
Collection Subaccount"). Funds allocable to the Series 1997-1 Investor
Certificates which are deposited into the Collection Account will be transferred
to the Series 1997-1 Collection Subaccount prior to further application.
References in this Series Supplement to deposits of such funds into the
Collection Account should be read to include such transfers. The Servicer, on
behalf of the Trustee, at all times shall maintain accurate records reflecting
each transaction in the Series 1997-1 Collection Subaccount and that funds held
therein shall at all times be held in trust for the benefit of the Series 1997-1
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 1997-1 Collection Subaccount for the purpose of carrying out its
duties hereunder. All such instructions from the Servicer to the Trustee shall
be in writing; provided, however, that the Servicer is entitled to give
-------- -------
instructions to the Trustee by facsimile. Funds on deposit in the Series 1997-1
Collection Subaccount (not required to be deposited in the Finance Charge
Account or the Principal Account pursuant to Section 4.4 hereof) shall
- 30 -
<PAGE>
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 1997-1 Collection Subaccount shall be deposited by the Trustee in a
separate deposit account with a Qualified Trust Institution in the name of the
Transferor, which shall not constitute a part of the Trust, or shall otherwise
be turned over to the Transferor 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 1997-1 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 is continuing, but shall be
retained in, or deposited into, the Finance Charge Account and shall be treated
as Collections of Finance Charge Receivables allocable to the Series 1997-1
Investor Certificateholders. The Qualified Trust Institution shall maintain,
either on its own or through its nominee or custodian for the benefit of the
Series 1997-1 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 1997-1 Collection Subaccount. For purposes of determining
the availability of funds or the balances in the Series 1997-1 Collection
Subaccount for any reason under this Agreement, all investment earnings on such
funds (net of losses and expenses) shall be deemed not to be available or on
deposit so long as a Servicer Default shall not be continuing pursuant to this
Section 4.2B. Permitted Investments shall not be disposed of prior to their
maturity other than as provided above with respect to short term U.S. treasury
securities.
- 31 -
<PAGE>
SECTION 4.3 Establishment of Series 1997-1 Investor Accounts. (a) The
------------------------------------------------ ---
Finance Charge Account, the Principal Account and the Principal Funding Account.
- -------------------------------------------------------------------------------
The Servicer, for the benefit of the Series 1997-1 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 1997-1 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 trust for the benefit
of the Series 1997-1 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
------------------------
1997-1 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 1997-1
Investor Certificateholders. The Paying Agent shall have the revocable authority
to make withdrawals from the
- 32 -
<PAGE>
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. Funds on deposit in 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 1997-1 Investor Certificateholders,
possession of any certificated negotiable instrument or security (other than
certificated securities held by a clearing corporation) evidencing the Permitted
Investments relating to the Principal Account, 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.
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
- 33 -
<PAGE>
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.
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, 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 excess of the 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. 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
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<PAGE>
or the Principal Funding Account, as the case may be) the following amounts as
set forth below:
(i) Deposit in the Finance Charge Account an amount equal to the sum of
(x) the product of (A) the applicable Investor Percentage on the Date of
Processing of such Collections and (B) the aggregate amount of Collections
processed in respect of Finance Charge Receivables on such Date of Processing
and (y) the proceeds of the sale of any Interest Rate Cap pursuant to subsection
4.11(g) on such Date of Processing.
(ii) Deposit in the Principal Account an amount equal to the product of
(A) the applicable Investor Percentage on the Date of Processing of such
Collections and (B) the aggregate amount of such Collections processed in
respect of Principal Receivables 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 1997-1 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, as the case may be) 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
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<PAGE>
applicable Investor Percentage on the Date of Processing of such Collections and
(B) the aggregate amount of Collections processed in respect of Finance Charge
Receivables on such Date of Processing and (y) the proceeds of the sale of any
Interest Rate Cap pursuant to subsection 4.11(g) on such Date of Processing.
(ii) Deposit in the Principal Account an amount, if any, equal to the
product of (A) the applicable Investor Percentage on the Date of Processing of
such Collections and (B) the aggregate amount of such Collections processed in
respect of Principal Receivables 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 or the Class B Investor
Interest, as applicable, and the Collateral Interest Surplus, then Shared
Principal Collections from other Series, if any, allocable to the Series 1997-1
Investors Certificates will be deposited to the Principal Account in accordance
with Section 4.2(e) of the Agreement to the extent of such shortfall.
(e) Allocations During the Rapid Amortization Period. During the Rapid
------------------------------------------------
Amortization Period, the Servicer shall, prior to the close of business on the
day any Collections are deposited in the Collection Account, direct the Trustee
to transfer from the Collection Account the following amounts as set forth
below:
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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 applicable Investor Percentage on the Date of
Processing of such Collections and (B) the aggregate amount of such Collections
processed in respect of Finance Charge Receivables on such Date of Processing
and (y) the proceeds of the sale of any Interest Rate Cap pursuant to subsection
4.11(g).
(ii) Deposit in the Principal Account an amount equal to the Principal
Allocation; provided, however, that after the date on which the Investor
-------- -------
Interest has been reduced to zero, the amount determined in accordance with this
subparagraph (ii) shall be treated as Shared Principal Collections allocable to
other Series and applied in accordance with Section 4.2(e) of the Agreement;
provided, further, that if on any Date of Processing the Monthly Total Principal
- -------- -------
Allocation for such Date of Processing in such Monthly Period is less than the
aggregate outstanding principal amount of the Series 1997-1 Investor
Certificates, then Shared Principal Collections from other Series, if any,
allocable to the Series 1997-1 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 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 lesser of the Class A Investor Default Amount and the Collateral
Interest (after giving effect to reductions for any Collateral Interest Charge-
Offs and any Reallocated Principal Collections on such Transfer Date) 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
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<PAGE>
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 lesser of the Class B Investor
Default Amount and 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)) 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 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
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<PAGE>
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), (x) [and (xii)] 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 Account 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 Reserve Account, pursuant to subsection
4.6(e). Any such withdrawal from the Reserve Account shall be made on the date
provided in this Section 4.6 with respect to such withdrawal.
(a) On each Transfer Date, an amount equal to the Class A Available Funds
will be distributed in the following priority:
(i) Class A Monthly Cap Rate Interest and the Covered Amount. On each
--------------------------------------------------------
Transfer Date, the
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<PAGE>
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 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 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
- -------
1997-1 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
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 in accordance with Section
4.8, as if such amount were Collections of Principal Receivables.
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<PAGE>
(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 in
accordance with Section 4.8, as if such amount were Collections of Principal
Receivables. On the date of any such reimbursement, the Class A Investor
Interest shall be increased by the amount of such reimbursement of Class A
Investor Charge-Offs.
(v) Excess Spread. The remaining Class A Available 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:
(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
- -------
1997-1 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
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<PAGE>
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 in accordance with Section
4.8 as if such amount were Collections of Principal Receivables allocable to the
Class B Investor Interest.
(iv) Reimbursement of Class B Investor Charge-Offs. On each Transfer
---------------------------------------------
Date, the Servicer or the Trustee, acting in accordance with instructions of the
Servicer, shall withdraw from the Finance Charge Account, to the extent funds
are available from Class B Available 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
in accordance with Section 4.8 as if such amounts were Collections of Principal
Receivables allocable to the Class B Investor Interest. On the date of any such
reimbursement, the Class B Investor Interest shall be increased by the amount of
such reimbursement of Class B Investor Charge-Offs.
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<PAGE>
(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.
(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, an amount equal to Excess Spread will be
distributed in the following priority:
(i) On each Transfer Date, the Servicer or the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw 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).
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<PAGE>
(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 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 in accordance with subsection 4.12(b) as if such amounts were
Collections of Principal Receivables allocable to the Class B Investor Interest.
(vi) On each Transfer Date, the Servicer or the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the Finance
Charge Account, 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
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<PAGE>
Collateral Monthly Interest for the related 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 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 in accordance with Section 4.8 as
if such amounts were Collections of Principal Receivables allocable to the
Collateral Interest.
(x) On each Transfer Date, the Servicer or the Trustee, acting in
accordance with instructions from the
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<PAGE>
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 in
accordance with Section 4.8 as if such amounts were Collections of Principal
Receivables allocable to the Collateral Interest.
(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 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
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<PAGE>
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 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 Covered Amount for such Distribution Date and Covered Amounts previously due
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<PAGE>
but not paid to the Class A Certificateholders on a prior Distribution Date,
(iv) the Class A Monthly Servicing Fee for the related Transfer 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 such Transfer Date and (vi)
the unreimbursed Class A Investor Charge-Offs, exceeds the Class A Available
Funds deposited in the Finance Charge Account for the related Monthly Period.
In the event that the Class A Required Amount for such Distribution Date is
greater than zero, the Servicer shall give written notice to the Trustee of such
positive Class A Required Amount on the related Determination Date and all or a
portion 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 1997-1
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
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Distribution Date, (iii) the Class B Monthly Servicing Fee for the related
Transfer 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
such Transfer Date, and (v) the unreimbursed Class B Investor Charge-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 1997-1 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)(vi) through (x)
exceed
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<PAGE>
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 amounts of Shared Finance Charge Collections with respect to the related
Monthly Period, if any, allocable to the Series 1997-1 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 (x).
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, (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 and (c) to the Collateral Interest
Holder from the Distribution Account the amount deposited into the Distribution
Account and allocated to the Collateral Interest pursuant to subsections
4.6(d)(vi) and (xii) and 4.6(g) on the related Transfer Date.
SECTION 4.8 Payment of Investor Certificate Principal. (a) On each
-----------------------------------------
Determination Date, Servicer shall instruct Trustee to withdraw, and 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
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Principal Collections for the related Monthly Period shall be distributed on
each Transfer Date, to the extent available, in the following priority:
(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 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 (i) and (ii), 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.
(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:
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(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 deposited in the Distribution Account for distribution to the Collateral
Interest Holder; 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 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) 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 Servicer, shall withdraw from the Principal Funding
Account and deposit in the Distribution Account the amount on deposit in the
Principal Funding Account. On each Distribution Date, the Trustee shall
distribute the funds in the Distribution Account in accordance with Section 5.1.
On the Determination Date preceding the final Transfer Date, the Servicer
shall determine the amounts to be deposited pursuant
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<PAGE>
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 in 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 Collections of Principal
Receivables 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 Sections 5 or 15 of the
Series Supplement relating to the Series 1997-1 Investor Certificates, the
Paying Agent shall pay in accordance with Section 5.1 to the Series 1997-1
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 (determined as described below) on any
Determination Date on or after the December 2000 Determination 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); 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 on and after the December 2000 Determination Date but 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
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<PAGE>
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 Collections of Principal
Receivables 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 and (4) no additional Series
(other than any Series being issued on such date of determination) will be
subsequently issued.
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, and the Servicer shall establish any and all subaccounts or
administrative subaccounts to the Reserve Account specified in the Loan
Agreement. 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
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<PAGE>
investments 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 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[; provided, however, that no such investment shall be
-------- -------
made before 2:00 p.m. (New York City time) on such Transfer Date;] and provided,
--------
further, that each Permitted Investment shall mature not later than the Business
- -------
Day preceding 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.
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<PAGE>
(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 Charge Account on such Transfer Date pursuant to subsection 4.9(b). If
the Reserve Draw Amount for any Transfer Date is greater than zero, the Servicer
shall give written notice to the Trustee, in substantially the form of Exhibit 7
to this Supplement of such positive Reserve Draw Amount.
(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 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) the
first Transfer Date relating to the Rapid Amortization Period, and (iii) 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
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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.
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 1997-1 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 1997-1 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 related Interest Accrual
Period exceeds the Class A Cap Rate or LIBOR plus [_____]% for the related
Interest Accrual Period exceeds the Class B
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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 either (I) 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 or (II) the long term
unsecured debt or long term certificate of deposit rating of the Interest Rate
Cap Provider is withdrawn or reduced below Aa3 by Moody's, then within 60 days
(in the case of a withdrawal or reduction by Standard & Poor's) or 30 days (in
the case of a withdrawal or reduction by Moody's) after such decline in the
creditworthiness of the Interest Rate Cap Provider as determined by the
applicable Rating Agency (notice of which the Interest Rate Cap Provider shall
provide to the Trustee and the Servicer promptly upon obtaining knowledge
thereof), the Interest Rate Cap Provider, at its own expense, will either (x)
obtain a Replacement Interest Rate Cap for each Interest Rate Cap under which it
is then currently an obligor or (y) enter into a Qualified Substitute
Arrangement. Upon receipt of notice of any such reduction or withdrawal, the
Trustee, at the direction of the Servicer, shall at its option either (i) with
the prior written confirmation of the applicable Rating Agency that such action
will not result in a reduction or withdrawal of the rating of the Class A
Certificates or the Class B Certificates, use its best efforts to (1) cause the
Interest Rate Cap Provider to pledge securities in the manner provided by
applicable law or (2) otherwise cause to be pledged securities, which in each
case shall be held by the Trustee, its custodian, or its agent free and clear of
the Lien of any third party, in a manner conferring on the Trustee a perfected
first Lien in
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<PAGE>
such securities securing the Interest Rate Cap Provider's performance of its
obligations under the applicable Interest Rate Cap or Caps, or (ii) provided
that, for each Interest Rate Cap under which such Interest Rate Cap Provider is
then currently an obligor, a Replacement Interest Rate Cap or Qualified
Substitute Arrangement meeting the requirements of Section 4.11(c) has been
obtained or will be obtained prior to or simultaneously with the termination of
such Interest Rate Cap pursuant to clause (B) below, (A) provide written notice
to the Interest Rate Cap Provider of its intention to terminate the Interest
Rate Cap within such 30-day period or 60-day period, as applicable, and (B)
terminate such Interest Rate Cap within such 30-day period or 60-day period, as
applicable, request the payment to it of all amounts due to the Trust under such
Interest Rate Cap through the termination date and deposit any such amounts so
received, on the day of receipt, to the Collection Account for application as
Finance Charge Receivables for the benefit of the applicable Class of
Certificateholders, or (iii) use reasonable efforts to establish any other
arrangement satisfactory to the Rating Agency including collateral, guarantees
or letters of credit, which arrangement will result in the applicable Rating
Agency not reducing or withdrawing the then rating of the Class A Certificates
or the Class B Certificates (a "Qualified Substitute Arrangement"); provided,
--------
however, that in the event at any time any alternative arrangement established
- -------
pursuant to clause (x) or clause (y) of the preceding sentence or pursuant to
clause (i) or clause (iii) of this sentence shall cease to be satisfactory to
the Rating Agency or shall terminate prior to the Class B Scheduled Payment
Date, then the provisions of this Section 4.11(b) shall again be applied and in
connection therewith the 30-day period or 60-day period, as applicable, referred
to above shall commence on the date the Servicer receives notice of such
cessation or termination, as the case may be.
(c) Unless an alternative arrangement pursuant to clause (x) or (y)(i) of
Section 4.11(b) is being established, the Trustee, at the direction of the
Servicer shall use its best efforts to obtain with respect to each Interest Rate
Cap referenced in Section 4.11(b) a Replacement Interest Rate Cap or Qualified
Substitute Arrangement meeting the requirements of this Section 4.11(c) during
the 30-day period referred to in Section 4.11(b). The Trustee shall not at any
time terminate any such Interest Rate Cap unless, prior to or simultaneously
with the termination thereof, the Trustee or the Servicer has
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<PAGE>
obtained or shall obtain (i) a Replacement Interest Rate Cap or Qualified
Substitute Arrangement with respect thereto, (ii) to the extent applicable, an
Opinion of Counsel as to the due authorization, execution, delivery, validity
and enforceability of such Replacement Interest Rate Cap or Qualified Substitute
Arrangement, as the case may be, and (iii) a letter from the Rating Agency
confirming that the termination of such Interest Rate Cap and its replacement
with such Replacement Interest Rate Cap or Qualified Substitute Arrangement will
not adversely affect its rating of the Class A Certificates or the Class B
Certificates.
(d) The Servicer shall notify the Trustee, the Rating Agency and the
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
the short-term unsecured debt or short-term certificate of deposit rating of the
Interest Rate Cap Provider has been withdrawn or reduced by Standard & Poors.
(e) Notwithstanding the foregoing, the Servicer may at any time obtain a
Replacement Interest Rate Cap, provided that the Servicer delivers to the
Trustee (i) an Opinion of Counsel as to the due authorization, execution and
delivery and validity and enforceability of such Replacement Interest Rate Cap
and (ii) a letter from the Rating Agency confirming that the termination of the
then current Interest Rate Cap and its replacement with such Replacement
Interest Rate Cap will not adversely affect its rating of the Class A
Certificates or the Class B Certificates.
(f) The Trustee hereby appoints the Interest Rate Cap Provider to perform
the duties of the calculation agent under the Interest Rate Cap and the Interest
Rate Cap Provider accepts such appointment. The Trustee shall, at the direction
of the Servicer, request a copy of the audited annual consolidated financial
statements of the 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
(during the Amortization Period) to, and upon notification from the Servicer
shall, sell all or a portion of the Interest Rate Caps subject to the following
conditions having been met:
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<PAGE>
(i) The Notional Amount of the unsold portion of each Interest Rate
Cap remaining as an asset of the Trust shall at least equal the Class A Investor
Interest, in the case of the Class A Interest Rate Cap, and the Class B Investor
Interest, in the case of the Class B Interest Rate Cap, outstanding as of the
date of such sale; and
(ii) Such sale will not result in a reduction or withdrawal of the then
current rating on the relevant class of Certificates by the Rating Agency.
The Servicer shall have the duty of obtaining a fair market value price for
the sale of the Trust's rights under an Interest Rate Cap, notifying the Trustee
of prospective purchasers and bids, selecting the purchaser of such Interest
Rate Cap, and instructing the selected purchaser (and/or the Trustee) to deposit
the purchase price therefor into the Collection Account. The Trustee, upon
receipt of the purchase price into the Collection Account, shall execute all
documentation, prepared by the Servicer, necessary to effect the transfer of the
Trust's rights under the Interest Rate Cap and to release the lien of the
Trustee on the Interest Rate Cap and proceeds thereof.
Funds deposited in the Collection Account in respect of the sale of all or
a portion of 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) through (c).
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
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<PAGE>
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
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
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<PAGE>
Accrual Period). The Trustee will request the principal London office of each
such bank to provide a quotation of its rate. If at least two such quotations
are provided, the rate for such Interest Accrual Period will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested,
the rate for such Interest Accrual Period will be the arithmetic mean of the
rates quoted by four major banks in New York City, selected by the Trustee, at
approximately 11:00 a.m., New York City time, on the first day of such Interest
Accrual Period for loans in United States dollars to leading European banks for
a period equal to one month (commencing on the first day of such Interest
Accrual Period).
SECTION 4.14 Discount Option. (a) The 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, 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
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<PAGE>
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 designated
pursuant to such notice, the Servicer shall deem the product of the Discount
Percentage and Collections of such Principal Receivables as Collections of
Finance Charge Receivables.
(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 1997-1]
SECTION 5.1 Distributions. (a) On each Distribution Date, the Paying
-------------
Agent shall distribute (in accordance with the certificate delivered by the
Servicer to the Trustee pursuant to subsection 3.4(b)) to each Class A
Certificateholder of record on the immediately preceding Record Date (other than
as provided in subsection 2.4(e) or Section 12.3 respecting a final
distribution) such Class A Certificateholder's pro rata share (based on the
--- ----
aggregate Undivided Interests represented by Class A Certificates held by such
Class A Certificateholder) of amounts on deposit in
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<PAGE>
the Distribution Account as are payable to the Class A Certificateholders
pursuant to Sections 4.7 and 4.8 hereof by check mailed to each Class A
Certificateholder except that, with respect to Class A Certificates registered
in the name of the nominee of a Clearing Agency, such distribution shall be made
in immediately available funds.
(b) On each Distribution Date, the Paying Agent shall distribute (in
accordance with the certificate delivered by the Servicer to the Trustee
pursuant to subsection 3.4(b)) to each Class B Certificateholder of record on
the immediately preceding Record Date (other 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 1997-1
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 1997-1 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):
[(xviii) the total amount distributed to the Class A Certificateholders
and the Class B Certificateholders and the Collateral Interest Holder,
respectively, on such Distribution Date and to the Collateral Interest Holder or
the preceding Transfer Date;
(xix) the amount of such distribution, if any, allocable to principal with
respect to the Class A
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<PAGE>
Certificates, the Class B Certificates and the Collateral Interest,
respectively;
(xx) the amount of such distribution allocable to interest on the Class A
Certificates, the Class B Certificates and the Collateral Interest,
respectively;
(xxi) the amount of Collections of Principal Receivables 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;
(xxii) 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 Investor Percentage, the Floating Investor Percentage,
the Class A Floating Allocation, the Class B Floating Allocation, 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 close of business on the last day of the preceding Monthly
Period;
(xxiii) the aggregate outstanding balance of Accounts which are up to 30,
31-60, 61-90 and 91 or more days delinquent in accordance with the Servicer's
then existing Account Guidelines as of the close of business on the last day of
the preceding Monthly Period;
(xxiv) the Class A Investor Default Amount, the Class B Investor Default
Amount and the Collateral Default Amount for the preceding Monthly Period;
(xxv) the aggregate amount of Class A Investor Charge-Offs, Class B
Investor Charge-Offs and Collateral Interest Charge-Offs for the preceding
Monthly Period;
(xxvi) 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;
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<PAGE>
(xxvii) 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;
(xxviii) the Principal Funding Account Balance as of the related Transfer
Date;
(xxix) the Accumulation Shortfall for the Class;
(xxx) the amount of the Principal Funding Investment Proceeds transferred to
the Finance Charge Account on the related Transfer Date;
(xxxi) the Principal Funding Investment Shortfall on the related Transfer
Date;
(xxxii) 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;
(xxxiii) the Pool Factor as of the end of the last day of the preceding
Monthly Period;
(xxxiv) 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 Collections of Finance Charge Receivables),
as appropriate, and allocated in respect of the Series 1997-1 Investor
Certificates;
(xxxv) the Class A Required Amount, the Class B Required Amount, the amount
required to be withdrawn from the Reserve Account, if any, to be applied with
respect to the Class A Covered 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 Interest and the Class B Investor Interest, if any,
to satisfy the Required Amounts, in each case with respect to the preceding
Monthly Period;
(xxxvi) the Reserve Account Draw and the Available Reserve Account Amount on
the related Transfer Date Period; and
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<PAGE>
(xxxvii) 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
1997-1 Certificateholder, a statement prepared by the Servicer containing the
information required to be contained in the regular monthly report to Series
1997-1 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 1997-1 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 1997-1 Investor Certificateholders to prepare
their tax returns. Such obligations of the Paying Agent shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent pursuant to any requirements of the Internal
Revenue Code.
SECTION 9.A Series 1997-1 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 1997-1 Certificates:
(a) failure on the part of the Transferor or the Holder of the
Exchangeable Seller Certificate (i) to make any payment or deposit required by
the terms of (A) the
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<PAGE>
Agreement relating to the Series 1997-1 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 1997-1 Investor Certificateholders (which
determination shall be made without regard to the subordination of the
Collateral Interest or 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 1997-1 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
Investor 1997-1 Certificateholders for such period;
(b) any representation or warranty made by the Transferor in the
Agreement, including this Series Supplement, or any information contained in a
computer file or microfiche list required to be delivered by the Transferor
pursuant to Section 2.1, 2.6 or 3.4(c) 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 1997-1 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
1997-1 Investor Certificateholders are materially and adversely affected (which
determination shall be made without regard to the subordination of the
Collateral Interest or 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 1997-1 Pay Out Event pursuant to this
- -------- -------
subsection 9A(b) shall not be deemed to have occurred hereunder if the
Transferor has accepted reassignment of the related Receivable, or all of such
Receivables, if
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<PAGE>
applicable, during such period in accordance with the provisions hereof;
(c) the average of the Portfolio Yield for any three consecutive Monthly
Periods is a rate which is less than the average of the Base Rate for such
period;
(d) the Transferor shall fail to convey Receivables arising under
Additional Accounts to the Trust, as required by subsection 2.6(e);
(e) any Servicer Default shall occur which would have a material adverse
effect on the Series 1997-1 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 1997-1 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 1997-1 Pay Out Event") has occurred as of the date of
such notice, and in the case of any event described in subparagraphs (c), (d),
(f), (g) or (h) a Series 1997-1 Pay Out Event shall occur without any notice or
other action on the part of the Trustee or the Series 1997-1 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
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<PAGE>
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 1997-1 Termination. All principal or interest with
-------------------------
respect to the Series 1997-1 Investor Certificates shall be due and payable no
later than the Scheduled Series 1997-1 Termination Date. In the event that the
Investor Interest is greater than zero on the Scheduled Series 1997-1
Termination Date, after giving effect to all transfers, withdrawals, deposits
and drawings to occur on such date and the payment of principal to be made on
the Certificates on such date, the Trustee will sell or cause to be sold, and
pay the proceeds to the Series 1997-1 Investor Certificateholders pro rata in
final payment of all principal of and accrued interest on the Series 1997-1
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 Collections of Finance
Charge Receivables and the denominator of which is the sum of all Investor
Percentages with respect to Collections of Finance Charge Receivables of all
Series outstanding and (2) the Investor Interest of such Series). The
Transferor or any of its Affiliates shall be permitted to bid for such
Receivables. In addition, the Transferor or any of its Affiliates shall have
the right to match any bid by a third person and be granted the right to
purchase the Receivables at such matched bid price. Any proceeds of such sale
in excess of
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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-
1 Termination Date, final payment of all amounts allocable to the Certificates
shall be made in the manner provided in Section 12.3 of the Agreement.
SECTION 11. Ratification and Reaffirmation of Pooling and Servicing
-------------------------------------------------------
Agreement. As supplemented by this Series Supplement, the Agreement is in all
- ---------
respects ratified and confirmed and the Agreement as so supplemented by this
Series Supplement shall be read, taken, and construed as one and the same
instrument.
SECTION 12. Ratification and Reaffirmation of Representations and
-----------------------------------------------------
Warranties. Except as otherwise provided in the Agreement, each of the
- ----------
Transferor, the Servicer and the Trustee hereby ratify and reaffirm its
representations and warranties contained in the Agreement as follows: (a) with
respect to the Transferor, the representations and warranties contained in (i)
Section 2.3 of the Agreement, (ii) Section 2.4(a) of the Agreement (with respect
to the Agreement as supplemented by this Series Supplement) and (iii) Section
2.4(b) of the Agreement, (b) with respect to the Servicer, the representations
and warranties contained in Section 3.3 of the Agreement and (c) with respect to
the Trustee, the representations and warranties contained in Section 11.15 of
the Agreement, as though such representations and warranties were made by such
party as of the Closing Date.
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 1997-1 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 1997-1 Investor Certificateholders which
would, in either case, result in the subordination of the rights of the Series
1997-1 Investor Certificateholders to the rights of the Holders of any other
Series.
SECTION 15. Repurchase of the Series 1997-1 Certificates. In the event of
--------------------------------------------
a breach of any of the representations and
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<PAGE>
warranties set forth in Section 12(a)(ii) hereof, either the Trustee or the
Holders of Series 1997-1 Certificates evidencing Undivided Interests aggregating
more than 50% of each of the Class A Investor Interest and the Class B Investor
Interest, by notice then given in writing to the Transferor (and to the Trustee
and the Servicer, if given by the Series 1997-1 Certificateholders), may direct
the Transferor to purchase the Series 1997-1 Certificates and the Collateral
Interest (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 1997-1
Investor Certificates in the Distribution Account, for distribution to the
Series 1997-1 Certificateholders and the Collateral Interest Holder 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 sum of the
Class A Investor Interest, the Class B Investor Interest and the Collateral
Interest at the end of the day on the last day of the Monthly Period preceding
the Repurchase Date, less the amount on deposit in the Principal Account which
will be transferred to the Distribution Account pursuant to the second paragraph
of subsection 4.8(a) on the related Transfer Date, (ii) an amount equal to all
interest accrued but unpaid on the Series 1997-1 Investor Certificates at the
Certificate Rate through and including the last day of the month preceding the
month in which such Transfer Date occurs, less the amount on deposit in the
Finance Charge Account [and, with respect to the Class A Certificates, the
Reserve Account,] which will be transferred to the Distribution Account to pay
interest pursuant to subsections 4.6(a) through (f) on the related Transfer Date
and (iii) any additional amounts owing to the Collateral Interest Holder
pursuant to the Loan Agreement. Payment of the portion of the reassignment
deposit amount and the transfer into the Distribution Account of the amounts
referred to in the second portion of clauses (i) and (ii) of the preceding
sentence, shall be considered a prepayment in full of the Series 1997-1
Certificates and the Collateral Interest. The Series 1997-1 Termination Date
shall be deemed to have occurred on the
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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 1997-1
Investor Certificateholders give notice directing the Transferor to purchase the
Series 1997-1 Certificates as provided above, the obligation of the Transferor
to purchase the Series 1997-1 Investor Certificates and to pay the reassignment
deposit amount pursuant to this Section 15 shall constitute the sole remedy
respecting a breach of the representations and warranties referenced in Section
12(a)(ii) hereof available to the Series 1997-1 Investor Certificateholders or
the Trustee on behalf of the Series 1997-1 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 applicable to such
Monthly Period, and (z) in the case of the Series 1997-1 Investor Certificates,
the weighted average (weighted based on the Transferor's reasonable belief as to
the Principal Receivables which will be outstanding on such last day) of (A) the
lesser of the Class A Certificate Rate and the Class A Cap Rate, (B) the lesser
of the Class B Certificate Rate and the Class B Cap Rate and (C) the Collateral
Rate.
SECTION 18. Series 1997-1 Investor Exchange. Pursuant to subsection
-------------------------------
6.9(b) of the Agreement, the Series 1997-1 Certificateholders may tender their
Series 1997-1 Certificates, and the Holders of the Exchangeable Seller
Certificate may tender
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<PAGE>
the Exchangeable Seller Certificate, in exchange for (i) one or more newly
issued Series of Series 1997-1 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 1997-1
Certificateholders. Such notice of exchange will specify, among other things:
(a) the amount of Series 1997-1 Certificates that may be tendered, (b) the
Certificate Rate with respect to the new Series, (c) the term of the Series, (d)
the method of computing the investor percentage, (e) the manner of Enhancement,
if any, with respect to the Series and (f) the time and the manner of the tender
and cancellation of the Series 1997-1 Certificates and the issuance of the new
Series of Certificates will be effectuated. Upon satisfaction of the conditions
contained in subsections 6.9(b) and 6.9(c) of the Agreement, and the receipt by
the Trustee of the Exchange Notice and the related Supplement, the Trustee shall
cancel the existing Exchangeable Seller Certificate and the applicable Series
1997-1 Certificates, and shall issue such Series of Series 1997-1 Investor
Certificates a new Exchangeable Seller Certificates, each dated the Exchange
Date.
SECTION 19. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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 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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<PAGE>
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
as of the day and year first above written.
PEOPLE'S BANK,
Transferor and Servicer
By:
-----------------------------------
Name:
Title:
BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Trustee
By:
-----------------------------------
Name:
Title:
- 76 -
<PAGE>
EXHIBIT 1-A
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FORM OF CLASS A INVESTOR CERTIFICATE
------------------------------------
$
No. CUSIP No.
PEOPLE'S BANK CREDIT CARD MASTER TRUST FLOATING RATE
CLASS A ASSET BACKED CERTIFICATE, SERIES 1997-1
Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA and MasterCard 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
<PAGE>
Accounts added to the Trust from time to time, all monies due or to become due
in payment of the Receivables (including all Finance Charge Receivables), and
the other assets and interests constituting the Trust pursuant to an Amended and
Restated Pooling and Servicing Agreement dated as of March [ ], 1997, and as
supplemented by the Series 1997-1 Supplement dated as of March [ ], 1997,
(collectively, the "Agreement"), by and between People's Bank, as Seller or
Transferor and Servicer, and Bankers Trust Company, as Trustee (the "Trustee"),
a summary of certain of the pertinent provisions of which is set forth herein
below.
The Seller has structured the Agreement and the Investor Certificates with
the intention that the Investor Certificates will qualify under applicable tax
law as indebtedness, and the Seller, the Holder of the Exchangeable Seller
Certificate, the Servicer and each Investor Certificateholder (or Certificate
Owner) by acceptance of its Certificate (or, in the case of a Certificate Owner,
by virtue of such Certificate Owner's acquisition of a beneficial interest
therein), agrees to treat the Investor Certificates consistently with, and to
take no action inconsistent with, the treatment of the Investor Certificates (or
beneficial interest therein) for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness. Each Certificateholder agrees that it will cause any
Certificateholder acquiring an interest in a Certificate through it to comply
with this Agreement as to treatment as indebtedness under applicable tax law.
To the extent not defined herein, capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof assents and by which the Certificateholder is bound. In the
case of conflict between the terms specified in this Class A Certificate and any
terms specified in the Agreement, the terms of the Agreement shall govern.
THE AGREEMENT AND THE CERTIFICATES CREATED THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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
1-A-2
<PAGE>
Finance Charges and other fees and charges as fully specified in the Agreement.
The assets of the Trust in which this Certificate represents an interest,
consist of (i)(a) the Receivables now existing and hereafter created and arising
in connection with the Accounts, and in connection with any Accounts that meet
the definition of Automatic Additional Accounts (other than Receivables in
Additional Accounts), (b) all monies and investments 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) Interchange and Recoveries allocated to the Trust 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
Series 1997-1 Collection Subaccount, (iii) the benefits of a Reserve Account and
(iv) the benefit of the Class A Interest Rate Cap between the Trustee and the
Interest Rate Cap Provider.
This Certificate is one of the People's Bank Credit Card Master Trust
$[______________] Floating Rate Class A Asset Backed Certificates, Series 1997-1
(the "Class A Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class A Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders. The aggregate interest represented by
the Class A Certificates at any time in the Principal Receivables in the Trust
shall not exceed an amount equal to the Class A Investor Interest at such time.
The Initial Class A Investor Interest is $[_____________] minus the retirement
of any Class A Certificates pursuant to an Investor Exchange. The Class A
Investor Interest on any date of determination will be an amount equal to (a)
the Class A Initial Investor Interest, minus (b) the aggregate amount of
-----
payments of Certificate Principal paid to the Class A Certificateholders prior
to such date of determination, minus (c) the excess, if any, of the aggregate
-----
amount of Class A Investor Charge-Offs over Class A Investor Charge-Offs
----
reimbursed prior to such date of determination. In addition to the Class A
Certificates, a class of certificates entitled "People's Bank Credit Card Master
Trust $[____________] Floating Rate Class B Asset Backed Certificates, Series
1997-1" (the "Class B Certificates") will be issued, an uncertificated interest
in the Trust to be known as the Collateral Interest, Series 1997-1, will be
created pursuant to the Loan Agreement, 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
1-A-3
<PAGE>
represent or will represent an undivided interest in the Trust. The Exchangeable
Seller Certificate will represent the interest in the Principal Receivables not
represented by the Investor Certificates or any other Series of certificates.
During the Revolving Period, which begins on the date of issuance of this
Class A Certificate, Certificate Interest at the Class A Certificate Rate will
be distributed on May 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. During either the Controlled Accumulation Period, which is
scheduled to begin with the [_______________] Monthly Period, unless the
Servicer elects to postpone the commencement of the Controlled Accumulation
Period and in certain other limited circumstances set forth in the Agreement,
Certificate Interest at the Class A Certificate Rate will continue to be
distributed on the fifteenth day of each calendar month, or if such fifteenth
day is not a Business Day, on the next succeeding Business Day, until the Class
A Scheduled Payment Date, which is scheduled to occur on [ ], on
which date any accrued and unpaid Certificate Interest and the Certificate
Principal will be distributed in full to the Class A Certificateholders. During
the Rapid Amortization Period, if any Certificate Interest and Certificate
Principal will be distributed to the Class A Certificateholders on the
Distribution Date of each calendar month commencing in the month following the
month in the Rapid Amortization Period commences.
The Servicer shall deposit all Collections in the Collection Account as
promptly as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following such Date of Processing.
Notwithstanding anything in the Agreement to the contrary, for so long as,
and only so long as, the Seller shall remain the Servicer hereunder and (a)(i)
the Servicer provides to the Trustee a letter of credit or other arrangement
covering risk of collection of the Servicer acceptable to the Rating Agency (as
evidenced by letters from the Rating Agency) and (ii) the Seller shall not have
received a notice from the Rating Agency that such letter of credit or other
arrangement would result in the lowering or withdrawal of such Rating Agency's
then-existing rating of any Series of Investor Certificates or (b) under certain
other circumstances permitted under the Agreement, the Servicer need not deposit
Collections into the Collection Account, the Principal Account or the Finance
Charge Account in
1-A-4
<PAGE>
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 received, but may make such payments on the Transfer
Date in the Monthly Period following the Monthly Period in which such
Collections are received in an amount equal to the net amount of such deposits,
payments and withdrawals which would have been made but for the provisions of
this paragraph.
On each Transfer Date, the Servicer or the Trustee acting in accordance
with instructions from the Servicer shall withdraw from the Finance Charge
Account and/or deposit to the Distribution Account to the extent funds are
available on the terms specified in the Agreement from Class A Available Funds,
from payments made pursuant to the Class A Interest Rate Cap and from Excess
Spread an amount equal to, with respect to Class A Certificates, the sum of: (i)
the product of (a) the Class A Certificate Rate, (b) the lesser of the Class A
Investor Interest determined as of the preceding Distribution Date (or, for the
initial Interest Accrual Period, the Closing Date), after giving effect to all
payments, deposits and withdrawals on such Distribution Date or Closing Date,
and the Expected Class A Principal as of the preceding Distribution Date or
Closing Date, and (c) the actual number of days in the related Interest Accrual
Period divided by 360, plus (ii) the product of (a) the Class A Excess
Principal, (b) the lesser of the Class A Certificate Rate and [____]% per annum,
and (c) the actual number of days in the related Interest Period divided by 360
(collectively, the "Class A Monthly Interest"), plus (iii) to the extent
permitted by applicable law, any interest accrued on the Class A Certificates
(including interest on any overdue Class A Monthly Interest) during any prior
accrual period which has not been distributed to the Class A Certificateholders,
plus, (iv) to the extent that there is available Excess Spread, an amount equal
to the product of (a) the amount by which the Class A Certificate Rate exceeds
[____]% per annum, (b) the Class A Excess Principal and (c) the actual number of
days in the related Interest Period divided by 360 (the "Class A Excess
Interest"). On such Transfer Date the Servicer or the Trustee shall deposit
such funds into the Distribution Account.
If, in any Monthly Period, collections of Finance Charge Receivables
allocable to the Class A Investor Interest for such Monthly Period available to
the Class A Certificates are insufficient to pay (i) the interest which accrued
on the Class A Certificates with respect to the related Distribution Date, in an
amount equal to the product of (a) the lesser of the Class A Certificate Rate
and the Class A Cap Rate, (b) the Class A
1-A-5
<PAGE>
Investor Interest as determined as of the preceding Distribution Date (or, for
the initial Interest Accrual Period, the Closing Date), after giving effect to
all payments, deposits and withdrawals on such Distribution Date or Closing Date
and (c) the actual number of days in the related Interest Accrual Period divided
by 360 (the "Class A Monthly Cap Rate Interest"), and any Class A Monthly Cap
Rate Interest accrued during any prior period which has not been distributed to
the Class A Certificateholders, (ii) the Class A Monthly Servicing Fee and any
accrued and unpaid Class A Monthly Servicing Fees from prior Monthly Periods,
(iii) the Class A Investor Default Amount for such Distribution Date, and (iv)
any unreimbursed Class A Investor Charge-Offs (the sum of the foregoing clauses
(i) through (iv) being referred to as the "Class A Required Amount"), then
first, Excess Spread, if any, from collections of Finance Charge Receivables
allocable to the Collateral Interest and the Class B Certificates will be
allocated to the Class A Certificates up to the unpaid amount of the Class A
Required Amount, second, Shared Finance Charge Collections, if any, allocable to
the Collateral Interest and Series 1997-1 will be allocated to the Class A
Certificates up to the amount of the Class A Required Amount remaining unpaid
and third, a withdrawal will be made from the Reserve Account on the
Distribution Date immediately following such Monthly Period, to the extent of
any Class A Required Amount remaining unpaid (but not more than the applicable
Available Reserve Account Amount). If such applicable Available Reserve Account
Amount is less than the unpaid amount of the Class A Required Amount for such
Distribution Date (after application of any available Excess Spread and Shared
Finance Charge Receivables), the applicable Collateral Floating Percentage and
Class B Floating Percentage or Collateral Fired Percentage and Class B Fired
Percentage, as the case may be, of the Investor Percentage of collections in
respect of Principal Receivables for the preceding Monthly Period will then be
used to fund the remaining Class A Required Amount (such collections,
"Reallocated Principal Collections"). The Collateral Interest and Class B
Investor Interest will be reduced by the amount of Reallocated Principal
Collections.
If, on such Distribution Date, the Excess Spread, Shared Finance Charge
Collections, Available Reserve Account Amount and Reallocated Principal
Collections are insufficient to fund the remaining Class A Required Amount for
such Monthly Period, the remaining Collateral Interest and Class B Investor
Interest will be reduced (but not in excess of the Class A Investor Default
Amount for such Distribution Date) by the amount of such remaining
insufficiency, until such time as the Collateral Interest and Class B Investor
Interest has been reduced to zero. Thereafter, the Class A Investor Interest
will be reduced by the
1-A-6
<PAGE>
amount of any remaining unpaid Class A Required Amount (a "Class A Investor
Charge-Off"), but not in excess of the Class A Investor Default Amount for such
Distribution Date.
The Trustee has entered into the Class A Interest Rate Cap and Class B
Interest Rate Cap with the Interest Rate Cap Provider for the exclusive benefit
of the Class A Certificateholders and the Class B Certificateholders,
respectively. On each Transfer Date that the Class A Certificate Rate or the
Class B Certificate Rate for the related Interest Period exceeds the Class A Cap
Rate or the Class B Cap Rate, respectively, the Interest Rate Cap Provider will
make a payment to the Trustee, on behalf of the Trust, based on the amount of
such excess and the notional amount of the applicable Interest Rate Cap. The
Class A Notional Amount will at all times equal the amount of the Expected Class
A Principal, and the Class B Notional Amount will at all times equal the amount
of the Expected Class B Principal. The Class A Interest Rate Cap and the Class
B Interest Rate Cap, or its Replacement Interest Rate Cap or Qualified
Substitute Arrangement, will terminate on the day immediately following the
Class A Expected Final Distribution Date and the Class B Expected Final
Distribution Date, respectively.
People's Bank, as Servicer, is entitled to receive as servicing
compensation a monthly servicing fee in an amount equal to one-twelfth of the
product of [2.00]% per annum and the Aggregate Principal Receivables in the
Trust on the last day of each Monthly Period, payable on each succeeding
Distribution Date. With respect to any Distribution Date, the share of the
servicing fee allocable to the Class A Certificates shall be equal to one-
twelfth of the product of [2.00]% per annum and the Class A Investor Interest as
of the last day of the preceding Monthly Period. The remainder of the servicing
fee, which will be allocable to the Collateral Interest Holder, the Class B
Certificateholders, the Holder of the Exchangeable Seller Certificate and the
other Series of certificates, if any, will be payable by the Collateral Interest
Holder, the Class B Certificateholders, the Holder of the Exchangeable Seller
Certificate or by the Holders of such Series of certificates, and none of the
Trust, the Trustee or the Class A Certificateholders will have any obligation to
pay such portion of the servicing fee.
On the Determination Date in the Monthly Period following the Monthly
Period in which either the Controlled Accumulation Period or the Rapid
Amortization Period commences, and on each Determination Date thereafter, the
Servicer shall notify the Trustee that it will withdraw, or shall instruct the
Trustee to
1-A-7
<PAGE>
withdraw, and on the next succeeding Transfer Date the Servicer or the Trustee
acting in accordance with such notice or instructions shall withdraw all amounts
on deposit in the Principal Account in respect of Collections processed during
the preceding Monthly Period and deposit such amounts in the Distribution
Account for distribution to the Class A Certificateholders to the extent
specified in the Agreement on the next succeeding Distribution Date.
If on any Distribution Date in the Controlled Accumulation Period through
and including the Class A Scheduled Payment Date, the Monthly Total Principal
Allocations for the prior Monthly Period are equal to or greater than an amount
equal to the sum of the Controlled Deposit Amount and the Collateral Monthly
Principal with respect to such Distribution Date, any excess of such Monthly
Total Principal Allocations over an amount equal to the sum of the Controlled
Deposit Amount and the Collateral Monthly Principal will be applied as Shared
Principal Collections and if not so used, paid from the Trust to the holder of
the Exchangeable Seller Certificate. If, while the Class A Investor Interest
exceeds zero, the Monthly Total Principal Allocations for any Monthly Period
during the Controlled Accumulation Period is less than an amount equal to the
sum of the Controlled Deposit Amount and the Collateral Monthly Principal, the
sum of such Monthly Total Principal Allocations and the amount of any Shared
Principal Collections available from other Series to the Certificates of this
Series will be paid from the Trust to the applicable Class A Certificateholders
in respect to the Class A Investor Interest to the extent specified in the
Agreement.
On each Distribution Date beginning in the month following the Monthly
Period in which the Rapid Amortization Period commences, the Monthly Total
Principal Allocations from the prior Monthly Period along with Shared Principal
Collections from other Series, if any, will be distributed to the Class A
Certificateholders until the earlier of the date on which the Class A Investor
Interest is paid in full and the Series 1997-1 Termination Date and, following
the final principal payment to the Class A Certificateholders, to the Class B
Certificateholders until the earlier of the date on which the Class B Investor
Interest is paid in full and the Series 1997-1 Termination Date and, following
the final principal payment to the Class B Certificateholders, to the Collateral
Interest Holder until the earlier of the date on which the Collateral Interest
is paid in full and the Series 1997-1 Termination Date.
On each Distribution Date occurring after a deposit is made pursuant to the
paragraphs above, the Paying Agent shall pay the
1-A-8
<PAGE>
Class A Certificateholders the amount deposited into the Distribution Account on
the related Transfer Date in respect of interest payable to the Class A
Certificateholders and, in addition, on the Class A Scheduled Payment Date or
the Rapid Amortization Period, the Paying Agent shall pay to the Class A
Certificateholders the amount deposited on the related Transfer Date into the
Distribution Account in respect of principal payable to the Class A
Certificateholders. Distributions with respect to this Class A Certificate will
be made by the Paying Agent by check mailed to the address of the holders of
record appearing in the Certificate Register (except for the final distribution
in respect of this Class A Certificate) without the presentation or surrender of
this Certificate or the making of any notation thereon, except that with respect
to Certificates registered in the name of the nominee of a Clearing Agency,
distributions will be made in the form of immediately available funds.
This Class A Certificate does not represent an obligation of, or an
interest in, the Seller or the Servicer, and neither the Class A Certificates
nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. This Class A
Certificate is limited in right of payment to certain collections respecting the
Receivables, as more specifically set forth hereinabove and in the Agreement.
As provided in the Agreement, withdrawals from the Series 1997-1 Investor
Accounts may be made upon the instructions of the Servicer from time to time for
purposes other than distributions to Class A Certificateholders.
The Seller may designate (subject to the terms and conditions of the
Agreement), Accounts for deletion and removal from the Accounts previously
assigned to and constituting a part of the Trust; provided, however, that the
-------- -------
Seller shall not make more than one such designation in any Monthly Period.
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of the Investor Certificateholders, of any
Series, to cure any ambiguity, to correct or supplement any provision therein
which may be inconsistent with any other provision therein, and to add any other
provisions with respect to matters or questions arising under the Agreement and
any Supplement which are not inconsistent with the provisions of the Agreement
and any Supplement. The Agreement may be amended from time to time by the
Seller, the Servicer and the Trustee, with the consent of any Trustee and
1-A-9
<PAGE>
without the consent of any Investor 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 the Agreement and (b) provide for the purchase
of Principal Receivables by the Trust at a price which is less than 100% of the
outstanding balance thereof, and to provide for the treatment of Collections of
Principal Receivables, in an amount up to the aggregate amount by which the
purchase price of Principal Receivables as sold thereafter is less than 100%, as
Collections of Finance Charge Receivables; provided, however, that any such
-------- -------
action shall not adversely affect in any material respect the interests of
Investor Certificateholders; provided further, however, that the Servicer and
---------------- -------
Trustee shall have received notice from the Rating Agency that any such
amendment will not result in the reduction or withdrawal of its then-existing
rating of the certificates of any Series. In addition, the Agreement and any
Supplement may be amended from time to time by the Seller, the Servicer and the
Trustee, without Investor Certificateholder consent, to add to or change any of
the provisions of the Agreement to provide that bearer certificates issued with
respect to any other Series may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal of or any interest on
such bearer certificates, to permit such bearer certificates to be issued in
exchange for registered certificates or bearer certificates of other authorized
denominations or to permit the issuance of uncertificated certificates, subject
to certain conditions. Moreover, any Supplement and any amendments regarding
the addition or removal of Receivables from the Trust will not be considered
amendments requiring certificateholder consent under the provisions of the
Agreement or any Supplement.
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee with the consent of the holders of certificates evidencing
undivided interests aggregating not less than 66-2/3% of the principal amount of
each Series adversely affected, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement or
any Supplement or of modifying in any manner the rights of certificateholders of
any Series. No such amendment, however, may (a) reduce in any manner the amount
of, or delay the timing of, distributions required to be made on such Series,
(b) change the definition of or the manner of calculating the interest of any
certificateholder of such Series or (c) reduce the aforesaid percentage of
undivided interests, the holders of which are required to consent to any such
amendment, in each case without the consent of all certificateholders of all
Series adversely affected. Promptly following the execution of any amendment to
the Agreement or any
1-A-10
<PAGE>
Supplement, the Trustee will furnish written notice of the substance of such
amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).
The transfer of this Class 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 1997-1 Supplement, the Seller 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 Seller
of the Discount Option will be subject to, among other things, the receipt by
the Trustee of written confirmation from each Rating Agency that the exercise of
such option will not result in a withdrawal or reduction of its rating of the
Certificates. Each Certificateholder by its acceptance of a beneficial interest
in a Certificate shall be deemed to have consented to the exercise by the Seller
of the Discount Option at such time as the Seller determines to exercise such
options.
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
1-A-11
<PAGE>
by notice to the contrary except in certain circumstances described in the
Agreement.
Subject to the prior termination of Series 1997-1, the Agreement provides
that the right of the Class A Certificateholders to receive payments from the
Trust will terminate on the Scheduled Series 1997-1 Termination Date. Upon the
termination of Trust pursuant to Section 12.1 of the Agreement (and subject to
the exceptions set forth in the Agreement), the Trustee will assign and convey
to the Holder of the Exchangeable Seller Certificate (without recourse,
representation or warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, and Recoveries
allocable to the Trust relating thereto and Interchange pursuant to subsections
2.5(k) and (l) of the Agreement. The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as shall
be reasonably requested by the Holder of the Exchangeable Seller Certificate to
vest in such Holder all right, title and interest which the Trustee had in the
Receivables.
1-A-12
<PAGE>
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.
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: March [ ], 1997
1-A-13
<PAGE>
Form of Trustee's Certificate of Authentication
-----------------------------------------------
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
BANKERS TRUST COMPANY, not in
its individual capacity,
but solely as Trustee
By:
------------------------------
(Authorized Officer)
1-A-14
<PAGE>
EXHIBIT 1-B
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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 1997-1
Evidencing an undivided interest in certain assets of a trust, the corpus of
which consists of a portfolio of selected VISA and MasterCard 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,
<PAGE>
all Receivables in Automatic Additional Accounts and Additional Accounts added
to the Trust from time to time, all monies due or to become due in payment of
the Receivables (including all Finance Charge Receivables), and the other assets
and interests constituting the Trust pursuant to an Amended and Restated Pooling
and Servicing Agreement dated as of March [__], 1997 and as supplemented by the
Series 1997-1 Supplement dated as of March [__], 1997 (collectively, the
"Agreement"), by and between People's Bank, as Seller or Transferor and
Servicer, and Bankers Trust Company, as Trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth herein below.
The Seller has structured the Agreement and the Investor Certificates with
the intention that the Investor Certificates will qualify under applicable tax
law as indebtedness, and the Seller, the Holder of the Exchangeable Seller
Certificate, the Servicer and each Investor Certificateholder (or Certificate
Owner) by acceptance of its Certificate (or, in the case of a Certificate Owner,
by virtue of such Certificate Owner's acquisition of a beneficial interest
therein), agrees to treat the Investor Certificates consistently with, and to
take no action inconsistent with, the treatment of the Investor Certificates (or
beneficial interest therein) for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or measured by income, as
indebtedness. Each Certificateholder agrees that it will cause any
Certificateholder acquiring an interest in a Certificate through it to comply
with this Agreement as to treatment as indebtedness under applicable tax law.
To the extent not defined herein, capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement, as amended from time to time, the Certificateholder by virtue of the
acceptance hereof assents and by which the Certificateholder is bound. In the
case of conflict between the terms specified in this Class B Certificate and any
terms specified in the Agreement, the terms of the Agreement shall govern.
THE AGREEMENT AND THE CERTIFICATES CREATED THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
The Receivables consist of Principal Receivables which arise from the
purchase of goods, services and cash advances and of
1-B-2
<PAGE>
Finance Charge Receivables which arise generally from Periodic Finance Charges
and other fees and charges as fully specified in the Agreement. The assets of
the Trust in which this Certificate represents an interest, consist of (i)(a)
the Receivables now existing and hereafter created and arising in connection
with the Accounts and in connection with any Accounts that meet the definition
of Automatic Additional Accounts (other than Receivables in Additional
Accounts), (b) all monies and investments 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) Interchange and Recoveries allocated to the Trust pursuant to
subsections 2.5(k) and (l) of the Agreement, (ii) such funds as from time to
time are deposited in the Collection Account, the Excess Funding Account, the
Investor Accounts and the Series 1997-1 Collection Subaccount 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 1997-1 (the
"Class B Certificates"), each of which represents an undivided interest in
certain assets of the Trust, including the right to receive Collections
allocable to the Class B Certificates and other amounts at the times and in the
amounts specified in the Agreement to be deposited in the Investor Accounts or
paid to the Investor Certificateholders. The aggregate interest represented by
the Class B Certificates at any time in the Principal Receivables in the Trust
shall not exceed an amount equal to the Class B Investor Interest at such time.
The Initial Class B Investor Interest is $[________] minus the retirement of any
Class B Certificates pursuant to an Investor Exchange. The Class B Investor
Interest on any date of determination will be an amount equal to (a) the Class B
Initial Investor Interest, minus (b) the aggregate amount of payments of
-----
Certificate Principal paid to the Class B Certificateholders prior to such date
of determination, minus (c) the excess, if any, of the aggregate amount of Class
-----
B Investor Charge-Offs and Reallocated Principal Collections over Class B
----
Investor Charge-Offs and Reallocated Principal Collections reimbursed prior to
such date of determination. In addition to the Class B Certificates, a class of
certificates entitled "People's Bank Credit Card Master Trust $[_________]
Floating Rate Class A Asset Backed Certificates, Series 1997-1" (the "Class A
Certificates") will be issued, an uncertified interest in the Trust to be known
as the Collateral Interest, Series 1997-1, will be created pursuant to the Loan
Agreement and an Exchangeable Seller Certificate will be issued to the Seller
pursuant to the
1-B-3
<PAGE>
Agreement, and other Series of certificates have been, and may from time to time
be, issued by the Trust, which represent or will represent an undivided interest
in the Trust. The Exchangeable Seller Certificate will represent the interest
in the Principal Receivables not represented by the Investor Certificates or any
other Series of certificates.
During the Revolving Period, which begins on the date of issuance of this
Class B Certificate, Class B Certificate Interest at the Class B Certificate
Rate will be distributed on May 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. During either the Controlled Accumulation Period, which is
scheduled to begin with the [______________] Monthly Period, unless the Servicer
elects to postpone the commencement of the Controlled Accumulation Period and in
certain other limited circumstances set forth in the Agreement, Certificate
Interest at the Class A Certificate Rate will continue to be distributed on the
fifteenth day of each calendar month, or if such fifteenth day is not a Business
Day, on the next succeeding Business Day, until the Class A Scheduled Payment
Date, which is scheduled to occur on [ ], on which date any accrued
and unpaid Certificate Interest and the Certificate Principal will be
distributed in full to the Class A Certificateholders. During the Rapid
Amortization Period, Certificate Interest and Certificate Principal will be
distributed to the Class B Certificateholders on the Distribution Date of each
calendar month commencing in the month following the month in which the Rapid
Amortization Period commences.
The Servicer shall deposit all Collections in the Collection Account as
promptly as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following such Date of Processing.
Notwithstanding anything in the Agreement to the contrary, for so long as,
and only so long as, the Seller shall remain the Servicer hereunder and (a)(i)
the Servicer provides to the Trustee a letter of credit or other arrangement
covering risk of collection of the Servicer acceptable to the Rating Agency (as
evidenced by letters from the Rating Agency) and (ii) the Seller shall not have
received a notice from the Rating Agency that such letter of credit or other
arrangement would result in the lowering or withdrawal of such Rating Agency's
then-existing rating of any Series of Investor Certificates or (b) under certain
circumstances permitted under the Agreement, the Servicer
1-B-4
<PAGE>
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 Transfer Date, the Servicer or the Trustee acting in accordance
with instructions from the Servicer shall withdraw from the Finance Charge
Account and/or deposit to the Distribution Account to the extent funds are
available on the terms specified in the Agreement from Class B Available funds,
from payments made pursuant to the Class B Interest Rate Cap and from Excess
Spread an amount equal to, with respect to Class B Certificates, the sum of: (i)
the product of (a) the Class B Certificate Rate, (b) the lesser of the Class B
Investor Interest determined as of the preceding Distribution Date (or, for the
initial Interest Accrual Period, the Closing Date), after giving effect to all
payments, deposits and withdrawals on such Distribution Date and the Expected
Class B Principal as of the preceding Distribution Date or Closing Date and (c)
the actual number of days in the related Interest Period divided by 360, plus
(ii) the product of (a) the Class B Excess Principal, (b) the lesser of the
Class B Certificate Rate and [___]% per annum, and (c) the actual number of days
in the related Interest Period divided by 360 (collectively, the "Class B
Monthly Interest"), plus (iii) to the extent permitted by applicable law, any
interest accrued on the Class B Certificates (including interest on any overdue
Class B Monthly Interest) during any prior accrual period which has not been
distributed to the Class B Certificateholders, plus, (iv) to the extent that
there is available Excess Spread, an amount equal to the product of (a) the
amount by which the Class B Certificate Rate exceeds [____]% per annum, (b) the
Class B Excess Principal and (c) the actual number of days in the related
Interest Period divided by 360 (the "Class B Excess Interest"). On such
Transfer Date the Servicer or the Trustee shall deposit such funds into the
Distribution Account.
If, in any Monthly Period, collections of Finance Charge Receivables
allocable to the Class B Investor Interest for such Monthly Period available to
the Class B Certificates are insufficient to pay (i) the interest which accrued
on the Class B Certificates with respect to the related Distribution Date, in an
1-B-5
<PAGE>
amount equal to the product of (a) the lesser of the Class B Certificate Rate
and the Class B Cap Rate, (b) the Class B Investor Interest as determined as of
the preceding Distribution Date (or, for the initial Interest Accrual Period,
the Closing Date), after giving effect to all payments, deposits and withdrawals
on such Distribution Date or Closing Date and (c) the actual number of days in
the related Interest Accrual Period divided by 360 (the "Class B Monthly Cap
Rate Interest"), and any Class B Monthly Cap Rate Interest accrued during any
prior period which has not been distributed to the Class B Certificateholders,
(ii) the Class B Monthly Servicing Fee and any accrued and unpaid Class B
Monthly Servicing Fees from prior Monthly Periods, (iii) the Class B Investor
Default Amount for such Distribution Date Monthly Period, and (iv) unreimbursed
Class B Investor Charge-Offs (the sum of the foregoing clauses (i) through (iv)
being referred to as the "Class B Required Amount"), then first, Excess Spread,
if any, from collections of Finance Charge Receivables allocable to the
Collateral Interest and the Class A Certificates will be allocated to the Class
B Certificates up to the unpaid amount of the Class B Required Amount, and
second, Shared Finance Charge Collections, if any, allocable to the Collateral
Interest and Series 1997-1 and not required to pay the Class A Required Amount
for such Distribution Date will be allocated to the Class B Certificates up to
the amount of the Class B Required Amount remaining unpaid.
If on any Distribution Date either or both of the Class A Required Amount
and the Class B Required Amount with respect to such Distribution Date after
application of Available Finance Charge Collections, Excess Spread and Shared
Finance Charge Collections, then Collections of Principal Receivables 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,
Collections of Principal Receivables 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 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 any
Collateral Interest Charge-Offs and any Reallocated Collateral Principal
Collections as of such Distribution Date) applied to fund the Class A Required
Amount.
1-B-6
<PAGE>
The Trustee has entered into the Class A Interest Rate Cap and Class B
Interest Rate Cap with the Interest Rate Cap Provider for the exclusive benefit
of the Class A Certificateholders and the Class B Certificateholders,
respectively. On each Transfer Date that the Class A Certificate Rate or the
Class B Certificate Rate for the related Interest Period exceeds the Class A Cap
Rate or the Class B Cap Rate, respectively, the Interest Rate Cap Provider will
make a payment to the Trustee, on behalf of the Trust, based on the amount of
such excess and the notional amount of the applicable Interest Rate Cap. The
Class A Notional Amount will at all times equal the amount of the Expected Class
A Principal, and the Class B Notional Amount will at all times equal the amount
of the Expected Class B Principal. The Class A Interest Rate Cap and the Class
B Interest Rate Cap, or its Replacement Interest Rate Cap or Qualified
Substitute Arrangement, will terminate on the day immediately following the
Class A Expected Final Distribution Date and the Class B Expected Final
Distribution Date, respectively.
People's Bank, as Servicer, is entitled to receive as servicing
compensation a monthly servicing fee in an amount equal to one-twelfth of the
product of [2.0]% per annum and the Aggregate Principal Receivables in the Trust
on the last day of each Monthly Period, payable on each succeeding Distribution
Date. With respect to any Distribution Date, the share of the servicing fee for
each Monthly Period allocable to the Class B Certificates shall be equal to one-
twelfth of the product of [2.0]% per annum and the Class B Investor Interest as
of the last day of the preceding Monthly Period. The remainder of the servicing
fee, which will be allocable to the Class A Certificateholders, the Collateral
Interest Holder, the Holder of the Exchangeable Seller Certificate and the other
Series of certificates, if any, will be payable by the Class A
Certificateholders, the Collateral Interest Holder, the Holder of the
Exchangeable Seller Certificate or by the Holders of such Series of
certificates, and none of the Trust, the Trustee or the Class B
Certificateholders will have any obligation to pay such portion of the servicing
fee.
On the Determination Date immediately preceding the Class B Payment
Commencement Date, and on each Determination Date thereafter, the Servicer shall
notify the Trustee that it will withdraw, or shall instruct the Trustee to
withdraw, and on the next succeeding Transfer Date the Servicer or the Trustee
acting in accordance with such notice or instructions shall withdraw all amounts
on deposit in the Principal Account, in respect of Collections processed during
the preceding Monthly Period and deposit such amounts less any amounts required
to be paid on the
1-B-7
<PAGE>
succeeding Distribution Date to the Class A Certificateholders in the
Distribution Account for distribution to the Class B Certificateholders to the
extent specified in the Agreement on the next succeeding Distribution Date.
If on the Class B Scheduled Payment Date the Monthly Total Principal
Allocations for the prior Monthly Period are equal to or greater than an amount
equal to the sum of the Class B Investor Interest as of the Class B Scheduled
Payment Date and the Collateral Monthly Principal, the amount of the Controlled
Distribution Amount will be paid from the Trust to the Class B
Certificateholders up to the outstanding Class B Investor Interest, as provided
in the Agreement and any excess of such Monthly Total Principal Allocations over
an amount equal to the sum of the Class B Investor Interest as of the Class B
Scheduled Payment Date and the Collateral Monthly Principal will be applied as
Shared Principal Collections and if not so used, paid from the Trust to the
holder of the Exchangeable Seller Certificate. If Monthly Total Principal
Allocation for any Monthly Period during the Controlled Accumulation Period is
less than an amount equal to the sum of the Class B Investor Interest as of the
Class B Scheduled Payment Date and the Collateral Monthly Principal, the sum of
such Monthly Total Principal Allocations and the amount of any Shared Principal
Collections available from other Series to the Certificates of this Series will
be paid from the Trust to the applicable Class B Certificateholders in respect
to the Class B Investor Interest to the extent specified in the Agreement.
On each Distribution Date beginning with the month following the Monthly
Period in which the Rapid Amortization Period commences, the Monthly Total
Principal Allocation from the prior Monthly Period along with Shared Principal
Collections from other Series, if any, will be distributed to the Class A
Certificateholders until the earlier of the date on which the Class A Investor
Interest is paid in full and the Series 1997-1 Termination Date and, following
the final principal payment to the Class A Certificateholders, to the Class B
Certificateholders until the Series 1997-1 Termination Date and, following the
final principal payment to the Class B Certificateholders, to the Collateral
Interest Holder until the earlier of the date on which the Collateral Interest
is paid in full and the Series 1997-1 Termination Date.
On each Distribution Date occurring after a deposit is made pursuant to the
paragraphs above, the Paying Agent shall pay the Class B Certificateholders the
amount deposited into the Distribution Account on the related Transfer Date in
respect of interest payable to the Class B Certificateholders and, in
1-B-8
<PAGE>
addition, upon and following the Class B Scheduled Payment, Date, the Paying
Agent shall pay to the Class B Certificateholders the amount deposited on the
related Transfer Date into the Distribution Account in respect of principal
payable to the Class B Certificateholders. Distributions with respect to this
Class B Certificate will be made by the Paying Agent by check mailed to the
address of the holder of record appearing in the Certificate Register (except
for the final distribution in respect of this Class B Certificate) without the
presentation or surrender of this Certificate or the making of any notation
thereon, except that with respect to Certificates registered in the name of the
nominee of a Clearing Agency, distributions will be made in the form of
immediately available funds.
This Class B Certificate does not represent an obligation of, or an
interest in, the Seller or the Servicer, and neither the Class B Certificates
nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. This Class B
Certificate is limited in right of payment to certain collections respecting the
Receivables, as more specifically set forth hereinabove and in the Agreement.
As provided in the Agreement, withdrawals from the Series 1997-1 Investor
Accounts may be made upon the instructions of the Servicer from time to time for
purposes other than distributions to Class B Certificateholders.
The Seller may designate (subject to the terms and conditions of the
Agreement) Accounts for deletion and removal from the Accounts previously
assigned to and constituting a part of the Trust; provided, however, that the
-------- -------
Seller shall not make more than one such designation in any Monthly Period.
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of the Investor Certificateholder of any
Series, to cure any ambiguity, to correct or supplement any provision therein
which may be inconsistent with any other provision therein, to add any other
provisions with respect to matters or questions arising under the Agreement and
any Supplement which are not inconsistent with the provisions of the Agreement
and any Supplement. The Agreement may be amended from time to time by the
Seller, the Servicer and the Trustee, with the consent of the Trustee and
without the consent of the Investor Certificateholders of any Series, 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 the Agreement and (b) provide
for the purchase of Principal
1-B-9
<PAGE>
Receivables by the Trust at a price which is less than 100% of the outstanding
balance thereof, and to provide for the treatment of Collections of Principal
Receivables, in an amount up to the aggregate amount by which the purchase price
of Principal Receivables as sold thereafter is less than 100%, as Collections of
Finance Charge Receivables; provided, however, that any such action shall not
-------- -------
adversely affect in any material respect the interests of the
certificateholders; 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. In addition, the Agreement and any Supplement may
be amended from time to time by the Seller, the Servicer and the Trustee,
without Investor Certificateholder consent, to add to or change any of the
provisions of the Agreement to provide that bearer certificates issued with
respect to any other Series may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal of or any interest on
such bearer certificates, to permit such bearer certificates to be issued in
exchange for registered certificates or bearer certificates of other authorized
denominations or to permit the issuance of uncertificated certificates, subject
to certain conditions. Moreover, any Supplement and any amendments regarding
the addition or removal of Receivables from the Trust will not be considered
amendments requiring certificateholder consent under the provisions of the
Agreement or any Supplement.
The Agreement and any Supplement may be amended by the Seller, the Servicer
and the Trustee with the consent of the holders of certificates evidencing
undivided interests aggregating not less than 66-2/3% of the principal amount of
each Series adversely affected, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement or
any Supplement or of modifying in any manner the rights of Certificateholders of
any Series. No such amendment, however, may (a) reduce in any manner the amount
of, or delay the timing of, distributions required to be made on such Series,
(b) change the definition of or the manner of calculating the interest of any
Certificateholder of such Series or (c) reduce the aforesaid percentage of
undivided interests, the holders of which are required to consent to any such
amendment, in each case without the consent of all Certificateholders of all
Series adversely affected. Promptly following the execution of any amendment to
the Agreement or any Supplement, the Trustee will furnish written notice of the
substance of such amendment to each Certificateholder of all Series (or with
respect to an amendment of a Supplement, to the applicable Series).
1-B-10
<PAGE>
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 1997-1 Supplement, the Seller 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 Seller
of the Discount Option will be subject to, among other things, the receipt by
the Trustee of written confirmation from each Rating Agency that the exercise of
such option will not result in a withdrawal or reduction of its rating of the
Certificates. Each Certificateholder by its acceptance of a beneficial interest
in a Certificate shall be deemed to have consented to the exercise by the Seller
of the Discount Option at such time as the Seller determines to exercise such
options.
As provided in the Agreement and subject to certain limitations therein set
forth, Class B Certificates are exchangeable for new Class B Certificates
evidencing like aggregate Undivided Interests, as requested by the Class B
Certificateholder surrendering such Class B Certificates. No service charge may
be imposed for any such exchange but the Servicer or Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar, and any agent of any of them, may treat the person in whose name this
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Agreement.
Subject to the prior termination of Series 1997-1, the Agreement provides
that the right of the Class B Certificateholders to receive payments from the
Trust will
1-B-11
<PAGE>
terminate on the Scheduled Series 1997-1 Termination Date. Upon the termination
of Trust pursuant to Section 12.1 of the Agreement, the Trustee will assign and
convey to the Holder of the Exchangeable Seller Certificate (without recourse,
representation or warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, and Recoveries
allocable to the Trust relating thereto and Interchange pursuant to subsections
2.5(k) and (l) of the Agreement. The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as shall
be reasonably requested by the Holder of the Exchangeable Seller Certificate to
vest in such Holder all right, title and interest which the Trustee had in the
Receivables.
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class B Certificate shall not
be entitled to any benefit under the Agreement, or be valid for any purpose.
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: March [ ], 1997
1-B-12
<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)
1-B-13
<PAGE>
EXHIBIT 2
---------
FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT
---------------------------------------------
PEOPLE'S BANK
PEOPLE'S BANK CREDIT CARD MASTER TRUST, SERIES 1997-1
MONTHLY CERTIFICATEHOLDERS' STATEMENT FOR MONTHLY PERIOD #
--
Monthly Period - Beginning Date _________
Monthly Period - Ending Date _________
Determination Date _________
Distribution Date _________
(Note: Monthly Period numbers found herein refer solely to
Series 1997-1 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 Collections of Principal Receivables during the
Monthly Period allocated to Certificateholders
--------------
23.3 Amount by which Controlled Accumulation
exceeds principal allocated to Investors
--------------
23.4 Collections of Finance Charge Receivables
during the Monthly Period allocated to
Certificateholders
--------------
23.5 Annualized Gross Portfolio Yield for:
(i) Period - 1 _________%
2-2
<PAGE>
(ii) Period - 2 _________%
(iii) Period - 3 _________%
(iv) 3 mo. avg. _________%
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
--------------
2-3
<PAGE>
25.5 Reallocated Principal Collections
(i) Aggregate dollar amount
--------------
(ii) Per $1,000 of Initial Investor Interest
--------------
25.6 Base Rate
--------------
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
2-4
<PAGE>
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
#_______
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.
2-5
<PAGE>
EXHIBIT 4
---------
Form of Monthly Payment Instructions to Trustee
ON __________, PLEASE PERFORM THE FOLLOWING TRANSACTIONS PURSUANT TO THE SERIES
1997-1 SUPPLEMENT AND THE AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
DATED MARCH [ ], 1997:
Per Section Please withdraw $_______ from Finance
4.6(a)(i) & Charge Account - and deposit into the
4.6(d)(vii) Distribution Account - to pay Class A
Monthly Interest to Class A Certificate
Holders.
Per Section Please withdraw $_______ from Finance
4.6(b)(i) & Charge Account - and deposit into the
4.6(d)(viii) Distribution Account - to pay Class B
Monthly Interest to Class B Certificate
Holders.
Per Section Please withdraw $__________ from Finance
4.6(d)(vi) Charge Account - and deposit into the
Distribution Account - to pay Collateral
Monthly Interest to the Collateral
Interest Holder.
Per Section Please withdraw $__________ from Finance
4.6(a)(ii), Charge Account - to pay Monthly Investor
4.6(b)(ii), Servicing Fee to People's Bank.
4.6(c)(i) &
4.6(d)(vii)
Per Section Please withdraw $_________ from Finance
4.6(a)(iii), Charge Account - to pay Investor Default
4.6(b)(iii) & Amount to People's Bank.
4.6(d)(ix)
Per Section Please withdraw $_________ from
4.6(d)(ix) Finance Charge Account - to pay Monthly
Loan Fee to _____________, as Administrative Agent
under the Loan Agreement, dated as of
March [ ], 1997 among Trustee, People's
Bank, _________________________ and
___________ ______________, Individually
and as Administrative Agent.
Per Section Please withdraw $____________ from Finance
4.6(d)(xvii) Charge Account - and pay to People's
Structured Finance Corp.
AUTHORIZED BY:
-------------------------------
<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 1997-1
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 1997-1
This is to inform you that we have been unable to make a [payment or
deposit] in the amount of __________ for the Monthly Period beginning on
________ and ending on _________. Such payments were to be made from [Account]
on _________ and such payment or deposit was to be made to [Person or Account].
----------------------------------
Name:
Title:
<PAGE>
EXHIBIT 7
---------
Form of Notification to Trustee of Amount Required to be
Withdrawn From the Reserve Account
PEOPLE'S BANK
PEOPLE'S BANK CREDIT CARD MASTER TRUST, SERIES 1997-1
This is to inform you that for the Transfer Date occurring on
________, the Reserve Draw Amount will be $___________.
----------------------------------
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,
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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.
7
<PAGE>
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.
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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
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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.
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"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
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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 March [ ], 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
LEHMAN BROTHERS FINANCIAL PRODUCTS INC.,
a corporation organized under the laws of
the State of Delaware
("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.
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14.
<PAGE>
"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 or Party B.
(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, 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 any portion of any such payment, (i) if Party A
shall be determining its Loss in respect of any Terminated Transaction,
such Loss shall never be a negative number, and (ii) if Party B shall be
determining its Loss in respect of any Terminated Transaction, such Loss
shall never be expressed as a positive number.
(ii) The Second Method will apply.
(f) "TERMINATION CURRENCY" means United States Dollars.
(g) ADDITIONAL TERMINATION EVENT; CREDIT DOWNGRADE.
(i) If with respect to Party B, the counterparty rating by Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies Inc.
("S&P"; S&P and Moody's, collectively, the "Rating Agencies") is withdrawn
by either Rating Agency or is reduced below Aa3 by Moody's or below AAA by
S&P (either such withdrawal or reduction, a "Downgrade"), Party B shall
promptly notify in writing Party A and the Rating Agencies, and shall
within 30 days of the date of such Downgrade, 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 1997-1
Certificates in effect immediately prior to such Downgrade, at the expense
of Party B, (x) obtain a
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<PAGE>
substitute cap provider ("X"), reasonably acceptable to Party A, having
Ratings of at least Aa3 by Moody's and of AAA by S&P, and acceptable to the
Rating Agencies, and replace the Transactions outstanding 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
outstanding hereunder. In the event that Party B fails to satisfy any of
its obligations referred to in this subparagraph (i) within the time
periods prescribed, such failure shall constitute an Additional Termination
Event with Party B as the Affected Party.
(ii) "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 1997-1
Certificates outstanding immediately prior to the Downgrade.
(h) Notwithstanding any provision contained herein, in the Agreement or in
any Confirmation (including any provision relating to Section 2(a)(iii) of the
Agreement regarding Events of Default and Potential Events of Default, Section 5
of the Agreement regarding Events of Default and Termination Events, but
excluding Section 5(b)(i) of the Agreement, or Section 6 of the Agreement
regarding Early Termination), the obligations of Party B contained herein, in
the Agreement or in any Confirmation shall be absolute, unconditional and
irrevocable and all payments required to be made by Party B hereunder, under the
Agreement and under any Confirmation shall be made without offset, counterclaim
or defense.
(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
the day that notice of the amount payable is effective."
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
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<PAGE>
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. In making this representation, it may rely on (i) the
-----------------------------------------------------
accuracy of any representation made by the other party pursuant to Section
--------------------------------------------------------------------------
3(f) of this Agreement, (ii) the satisfaction of the agreement contained in
---------------------------------------------------------------------------
Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and
-------------------------------------------------------------------
effectiveness of any document provided by the other party contained in
----------------------------------------------------------------------
Section 4(d) of this Agreement, provided that it shall not be a breach of
-------------------------------------------------------------------------
this representation where reliance is placed on clause (ii) and the other
-------------------------------------------------------------------------
party does not deliver a form or document under Section 4(a)(iii) by reason
---------------------------------------------------------------------------
of material prejudice to its legal or commercial position.
---------------------------------------------------------
(b) PAYEE TAX REPRESENTATIONS. For the purposes of Section 3(f) of this
Agreement, Party A makes no representations.
PART 3
AGREEMENT TO DELIVER DOCUMENTS
------------------------------
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
(a) Tax forms, documents or certificates to be delivered are:
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:
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<PAGE>
COVERED BY
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH SECTION 3(d)
DELIVER DOCUMENT CERTIFICATE TO BE 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 An opinion of counsel Upon execution Yes.
for Party A. of this
Agreement
Party A The relevant excerpts Upon execution Yes.
from the Trust of this
Agreement of Party A Agreement.
pursuant to which
Party A is authorized
to enter into this
Agreement.
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 of this
to Party A, the Agreement.
rating agencies
rating the
Certificates issued
by the Trust,
covering such other
matters as reasonably
requested by, and
satisfactory to the
addressees.
-5-
<PAGE>
COVERED BY
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH SECTION 3(d)
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED REPRESENTATION
- ----------------- -------------- --------------- --------------
Party B A copy of the annual Upon execution Yes.
report of Party B of this
containing audited Agreement and,
consolidated thereafter,
financial statements upon request of
for such fiscal year Party A or the
certified by Servicer.
independent public
accountants and
prepared in
accordance with
generally accepted
accounting practices
consistently applied.
-6-
<PAGE>
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 (People's
Bank Series 1997-1)
Facsimile No.: (212) 250-6439
Telephone No.: (212) 250-6137
(For all purposes)
With copies to the Servicer:
Address: People's Bank
Bridgeport Center
850 Main Street
Bridgeport, Connecticut 06604-4913
Attention: General Counsel and
Interest Rate Risk Manager
Address for notices or communications to Party B:
Address: Lehman Brothers Financial Products Inc.
3 World Financial Center, 12th Floor
New York, New York 10285-1200 USA
Attention: Documentation Group
Facsimile No.: (212) 526-1877
Telephone No.: (212) 528-7097
(For all purposes.)
(b) PROCESS AGENT. Not applicable.
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<PAGE>
(c) MULTIBRANCH PARTY. For the purpose of Section 10:
Party A is not a Multibranch Party.
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.
(f) CREDIT SUPPORT PROVIDER. None.
(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.
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
-8-
<PAGE>
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 any portion of any such payment, 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) 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 (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.
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<PAGE>
(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) 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 1997-1 Certificates.
(h) 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.
(i) 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 described in paragraph
(j) below.
(j) TRANSACTIONS. This Agreement and all Transactions relate to the
Trust's Series 1997-1 Certificates, and unless otherwise agreed to in writing by
the parties hereto, the only Transactions governed hereby shall be the two
Transactions evidenced by the Confirmations dated March [ ], 1997, and attached
as Exhibit A hereto, as such Confirmations are modified from time to time.
(k) 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 [ ], 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 1997-1
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<PAGE>
Supplement, dated as of March [ ], 1997 (the "Supplement") (as so supplemented,
the "Pooling and Servicing Agreement").
(l) WAIVER OF JURY TRIAL. Each party hereto hereby irrevocably waives any
and all right to trial by jury in any Proceedings.
(m) REPRESENTATIONS AND WARRANTIES. Section 3(a) is amended by adding the
following paragraph (vi):
"(vii) ELIGIBLE SWAP PARTICIPANT. It is an "eligible swap
participant" as that term is defined by the United States Commodity
Futures Trading Commission in 17 C.F.R. (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.
(n) NO RELIANCE. Each party acknowledges and agrees that (i) it is acting
solely in the capacity of an arm's length contractual counterparty, with respect
to this Agreement and any Transaction hereunder, and (ii) it is not acting as a
financial advisor or fiduciary of the other party (or in any similar capacity)
with respect to the Agreement and any Transaction hereunder regardless of
whether it provides the other party with market information or its views. Each
party represents to the other party (which representation shall be deemed to be
repeated on each date on which any Transaction is entered into) that it
understands the risks of the Transactions it enters and any legal, regulatory,
tax, accounting and economic consequences arising therefrom and that its
decision to enter into each Transaction has been based solely on its independent
evaluation and the independent evaluation of its representatives in light of its
financial capabilities and objectives.
(o) 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.
(p) NOTICE BY FACSIMILE. In addition to the methods outlined in Section
12(a), notices and communications (other than for the purposes of Section
13(c)), may also be sent by telecopier at the numbers specified in Part 4 of
this Schedule. Promptly after giving any such notice or communication, the
sender shall also confirm the notice or communication by telephone at the number
and to the attention of the party specified in Part 4 of this Schedule.
Provided that such
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<PAGE>
telephonic confirmation is made promptly, a notice or communication sent via
telecopier will be effective upon receipt.
(q) COUNTRY OF DOMICILE. The country of domicile of Party A is the United
States of America. The country of domicile of Party B is the United States of
America.
(r) CONFIRMATION. Each Confirmation supplements, forms part of, and will
be read and construed as one with, this Agreement.
(s) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby amended by
adding in the third line thereof after the word "respect" and before the period
the words "or, in the case of audited or unaudited financial statements or
balance sheets, a fair presentation of the financial condition of the relevant
person".
(t) "FORM W-9" means United States Internal Revenue Service Form W-9 or
any successor form.
[Rest of page intentionally left blank.]
-12-
<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 LEHMAN FINANCIAL PRODUCTS INC.
individual capacity but solely as
Trustee for People's Bank Credit
Card Master Trust
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
DATE:___________________________ DATE:___________________________
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<PAGE>
[Class A]
CONFIRMATION
------------
Date: March __, 1997
To: Bankers Trust Company,
not in its individual
capacity, but solely as
Trustee for People's Bank
Credit Card Master Trust
Attention:
From: [__________________]
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 March __, 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 March __, 1997, between
People's Bank and _____________, which supplements the Master Agreement dated as
of March __, 1997, between People's Bank and ______ shall be deemed cancelled 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
---- ------
_______________ $___________
________________ $____________
________________ $____________
_______________ $____________
_______________ $___________
______________ $____________
______________ $____________
______________ $____________
_______________ $____________
________________ $____________
________________ $____________
________________ $____________
________________ $____________
Trade Date: March __, 1997 1/
1/ This Confirmation relates to an Interest Rate Cap Assignment and Assumption
Agreement, dated as of March __, 1997, among People's Bank, the Trustee and
____ (the "Assignment Agreement"), pursuant to which People's Bank
transferred all of its rights, title, obligations and interest in and under
two confirmations, dated March __, 1997, between People's Bank and ____.
Such confirmations had a "Trade Date" of _________ and an "Effective Date"
of _____________.
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<PAGE>
Effective Date: April __, 1997 2/
Effective Date
of Assignment: ______________
Termination Date: The Distribution Date in _____________
Fixed Rate Amounts:
Fixed Rate Payer: Bankers Trust Company, not in its individual
capacity, but solely as Trustee for People's Bank
Credit Card Master Trust (the "Trustee")
Fixed Rate Payer
Payment Date: Not applicable.
Fixed Amount: Zero. 3/
Floating Amounts:
Floating Rate Payer: SBC
Cap Rate: _._% per annum
Floating Rate Payer
Payment Dates: The third Business Day preceding each Distribution
Date. Early Payment applies. No adjustment of
Floating Rate Payer Payment Dates, except for any
adjustment of any Distribution Date, as provided
in the definition of "Distribution Dates".
Period End Dates: Each Distribution Date. No adjustment of Period
End Dates, except for any adjustment of any
Distribution Date, as provided in the definition
of "Distribution Dates".
- ------
2/ See footnote 1.
3/ Pursuant to the Assignment Agreement, under the [Class A] confirmation,
dated March __, 1997, executed by People's Bank and _____, relating to this
Confirmation, the Fixed Amount was U.S.$___________.
-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: ____
(c) Account Details:
Payments to Bankers Trust
Company, as Trustee
Account for payments: Bankers Trust Company
ABA No.: _____________
Account No.: ___________
Reference: ______________
Attention: _____________
Payments to SBC
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
-4-
<PAGE>
deposits commencing on the London Banking Day immediately
succeeding the Reset Date, such rate shall nonetheless be the
Floating Rate for such Calculation Period.
Credit Support Documents:
SBC Credit
Support Documents: See Master Agreement.
Counterparty Credit
Support Documents: None.
Certain Defined Terms:
"Distribution Dates" shall mean April __, 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.
-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.
[_________________________]
By:______________________
[Name]
[Title]
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: March __, 1997
To: Bankers Trust Company, not in its individual capacity, but solely as
Trustee for People's Bank Credit Card Master Trust
Attention:
From: [___________________]
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 March __, 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 March __, 1997, between
People's Bank and _______________, which supplements the Master Agreement dated
as of March __, 1997, between People's Bank and ________ shall be deemed
cancelled 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: U.S.$____________
Trade Date: March __, 1997 /1
Effective Date: March __, 1997 /2
Effective Date
of Assignment: ______________
Termination Date: The Distribution Date in
______________.
Fixed Rate Amounts:
Fixed Rate Payer: The Bankers Trust Company, not in
its individual capacity, but
solely as Trustee for People's
Bank Credit Card Master Trust
(the "Trustee")
Fixed Rate Payer
Payment Date: Not applicable.
Fixed Amount Zero. /3
Floating Amounts:
Floating Rate Payer: SBC
- ------
1/ This Confirmation relates to an Interest Rate Cap Assignment and Assumption
Agreement, dated as of March __, 1997, among People's Bank, the Trustee and
_____ (the "Assignment Agreement"), pursuant to which People's Bank
transferred all of its rights, title, obligations and interest in and under
two confirmations, dated _________, between People's Bank and _________.
Such confirmations had a Trade Date of _____________ and an Effective Date
of _____________.
2/ See footnote 1.
3/ Pursuant to the Assignment Agreement, under the [Class B] confirmation,
dated March __, 1997, executed by People's Bank and ______, relating to this
Confirmation, the Fixed Amount was U.S.$________.
-2-
<PAGE>
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".
Floating Rate for Initial
Calculation Period: _.______% per annum
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One Month.
Spread: None
Floating Rate Day Count
Fraction: Actual/360
Reset Dates: First day of each Calculation Period.
Compounding: Not applicable.
Business Days: New York, and Bridgeport, Connecticut
Calculation Agent: SBC
(c) Account Details:
-3-
<PAGE>
Payments to Bankers Trust
Company, as Trustee:
Account for payments: Bankers Trust Company
ABA No.: __________
Account No.: _________
Reference: _____________
Attention: _________________
Payments to SBC:
Account for payments: Swiss Bank Corporation,
New York Branch
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:
SBC Credit
Support Documents: See the Master Agreement.
Counterparty Credit
Support Documents: None.
Certain Defined Terms:
"Distribution Dates" shall mean April 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.
-4-
<PAGE>
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
[__________________]
By: ________________________
[Name]
[Title]
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>
Exhibit 5.1
[Mayer, Brown & Platt Letterhead]
March __, 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 1997-1
--------------------------------------------------------------
Floating Rate Class B Asset Backed Certificates, Series 1997-1
--------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to People's Bank, a Connecticut stock
savings bank ("People's"). At your request, we have examined the Registration
Statement on Form S-1 (the "Registration Statement") filed by People's, as
originator of the People's Bank Credit Card Master Trust (the "Trust"), on
November 17, 1995 with the Securities and Exchange Commission, relating to the
registration under the Securities Act of 1933, as amended (the "Act"), of the
Floating Rate Class A Asset Backed Certificates, Series 1997-1 (the "Class A
Certificates") and the Floating Rate Class B Asset Backed Certificates, Series
1997-1 (the "Class B Certificates"; together with the Class A Certificates, the
"Certificates") to be issued by the Trust, including a copy of the form of
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 executed and delivered by People's in accordance with the Pooling and
Servicing Agreement, authenticated by the Trustee in accordance with the Pooling
and Servicing Agreement, and issued and sold as contemplated by the
<PAGE>
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
[Prospectus Federal Tax Opinion]
March __, 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 1997-1; Floating Rate Class B Asset Backed
Certificates, Series 1997-1
-------------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel to People's Bank, a Connecticut stock
savings bank (the "Company"), in connection with (i) the proposed issuance and
sale by the Company of the Floating Rate Class A Asset Backed Certificates,
Series 1997-1 (the "Class A Certificates") and the Floating Rate Class B Asset
Backed Certificates, Series 1997-1 (the "Class B Certificates" and together with
the Class A Certificates, the "Certificates") issued by People's Bank Credit
Card Master Trust pursuant to the amended and restated Pooling and Servicing
Agreement, dated as of March __, 1997, between the Company, as Seller and
Servicer, and Bankers Trust Company, a New York banking corporation, as Trustee,
and the Series 1997-1 Supplement thereto (collectively, the "Pooling and
Servicing Agreement"), and (ii) the preparation and filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-1 (as amended by Amendment No. 1, Amendment No.
2 and Amendment No.3 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
<PAGE>
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
March [ ], 1997
People's Bank [
850 Main Street
Bridgeport, Connecticut 06604
]
Goldman, Sachs & Co., as Representa-
tives of the Class A Underwriters Standard & Poor's Corporation
and as Class B Underwriters 25 Broadway
85 Broad Street New York, New York 10004
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 1997-1
FLOATING RATE CLASS B ASSET BACKED CERTIFICATES, SERIES 1997-1
--------------------------------------------------------------
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 1997-1 and Floating Rate Class B Asset Backed Certificates, Series 1997-1
(collectively, the "Certificates") pursuant to an Amended and Restated Pooling
and Servicing Agreement dated as of March [ ], 1997, 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 1997-1 Supplement by and
between the same parties and dated as of March [ ], 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.
<PAGE>
Page 2
In connection with your request, we have been furnished with copies of:
(a) the Registration Statement on Form S-1 (as amended by Amendment Nos. 1, 2
and 3 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
P&C/dc
