<PAGE>
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED MARCH 16, 1998
[LOGO OF CAPITAL ONE APPEARS HERE]
MASTER TRUST
$500,000,000 CLASS A 6.310% ASSET BACKED CERTIFICATES, SERIES 1998-1
$50,236,407 CLASS B 6.356% ASSET BACKED CERTIFICATES, SERIES 1998-1
CAPITAL ONE BANK, SELLER AND SERVICER
The Class A 6.310% Asset Backed Certificates, Series 1998-1 (the "Class A
Certificates") and the Class B 6.356% Asset Backed Certificates, Series 1998-1
(the "Class B Certificates" and, together with the Class A Certificates, the
"Investor Certificates") offered hereby represent undivided interests in
certain assets of the Capital One Master Trust (the "Trust") created pursuant
to a Pooling and Servicing Agreement between Capital One Bank, a Virginia
banking corporation (the "Bank"), as seller and servicer, and The Bank of New
York, as trustee. The property of the Trust includes receivables (the
"Receivables") generated from time to time in a portfolio of consumer
revolving credit card accounts and other consumer revolving accounts (the
"Accounts"), collections thereon and certain other property as more fully
described herein. Concurrently with the issuance of the Investor Certificates,
the Trust will issue $40,780,142 aggregate initial principal amount of
Floating Rate Class C Asset Backed Interests, Series 1998-1 (the "Class C
Interests" and, together with the Investor Certificates, the "Series 1998-1
Interests"). The Bank owns the remaining undivided interest in the Trust not
represented by the Investor Certificates, the other investor certificates
issued by the Trust and any uncertificated interests in the Trust issued as
Series Enhancement and will service the Receivables. The Trust previously has
issued eighteen other series of investor certificates which evidence undivided
interests in the Trust. The Bank may offer from time to time other series of
certificates that evidence undivided interests in certain assets of the Trust,
which may have terms significantly different from the Investor Certificates
and the Class C Interests. The issuance of additional series of certificates
may impact the timing or amount of payments received by the holders of the
Class A Certificates and the Class B Certificates (the "Investor
Certificateholders").
(Continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE INVESTOR CERTIFICATES, AND
THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, THAT IT
WILL CONTINUE UNTIL THE INVESTOR CERTIFICATES ARE PAID IN FULL. POTENTIAL
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN
"RISK FACTORS" HEREIN ON PAGE S-16 AND IN THE PROSPECTUS ON PAGE 18.
THE INVESTOR CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY AFFILIATE OF THE
BANK. NEITHER THE INVESTOR CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS THE SELLER(1)(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate............. 100% 0.26823% 99.73177%
- --------------------------------------------------------------------------------
Per Class B Certificate............. 100% 0.26823% 99.73177%
- --------------------------------------------------------------------------------
Total............................... $550,236,407 $1,475,899 $548,760.508
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from April 1, 1998.
(2) Before deduction of expenses payable by the Seller, estimated to be
$700,000.
---------------
The Investor Certificates are offered by the Underwriter when, as and if
issued by the Trust and accepted by the Underwriter and subject to the
Underwriter's right to reject orders in whole or in part. It is expected that
the Investor Certificates will be delivered in book-entry form on or about
April 1, 1998, through the facilities of The Depository Trust Company, Cedel
Bank, societe anonyme and the Euroclear System.
BARCLAYS CAPITAL
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MARCH 20, 1998
<PAGE>
(Continued from previous page)
Following the completion of the offering made hereby, additional Investor
Certificates may be issued from time to time if certain conditions have been
met. See "Series Provisions--Issuance of Additional Investor Certificates" in
this Prospectus Supplement.
Interest will accrue on the Class A Certificates from April 1, 1998 (the
"Series Issuance Date") at the rate of 6.310 percent per annum (the "Class A
Certificate Rate"). Interest on the Class B Certificates will accrue from the
Series Issuance Date at the rate of 6.356 percent per annum (the "Class B
Certificate Rate"). Interest on the Investor Certificates will be distributed
monthly on the 15th day of each month (or if any such day is not a business
day, the next succeeding business day) beginning on May 15, 1998 (each, a
"Distribution Date"). See "Series Provisions--Interest Payments." For purposes
of this Prospectus Supplement and the Prospectus, a "business day" shall mean,
unless otherwise indicated, any day other than (a) a Saturday or Sunday or (b)
any other day on which national banking associations or state banking
institutions in New York, New York or Richmond, Virginia are authorized or
obligated by law, executive order or governmental decree to be closed.
Principal with respect to the Class A Certificates is scheduled to be paid
on the April 2008 Distribution Date, but may be paid earlier or later under
certain circumstances described herein. Principal with respect to the Class B
Certificates is scheduled to be paid on the June 2008 Distribution Date, but
may be paid earlier or later under certain circumstances described herein. See
"Maturity Considerations" and "Series Provisions--Pay Out Events" herein and
"Description of the Certificates--Pay Out Events" in the Prospectus. 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
"Series Provisions--Principal Payments."
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY THE CLASS B
CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND PAYMENTS
WITH RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED HEREIN. In
addition, the fractional undivided interest in the Trust represented by the
Class C Interests will be subordinated to the extent necessary to fund
payments with respect to the Investor Certificates to the extent described
herein. The Series 1998-1 Interests will also have the benefit of the Cash
Collateral Account which will be funded with an initial deposit of $9,456,265.
See "Summary of Series Provisions--The Investor Certificates; the Class C
Interests," "--Subordination; Additional Amounts Available to Investor
Certificateholders" and "--The Cash Collateral Account." Only the Investor
Certificates are offered hereby. Additional credit enhancement will be
provided in the event that additional Investor Certificates are issued. See
"Series Provisions--Issuance of Additional Investor Certificates" in this
Prospectus Supplement.
Application will be made to list the Investor Certificates on the Luxembourg
Stock Exchange; however, no assurance can be given that such listing will be
obtained. Investor Certificateholders should consult with Banque
Internationale a Luxembourg, the Luxembourg listing agent for the Investor
Certificates, 69, route d'Esch, L-1470 Luxembourg, phone number 011-352-4590-
3550, for the status of such listing.
The Termination Date for the Investor Certificates is the June 2011
Distribution Date.
Series 1998-1 is not an Extendable Series or a Prefunded Series.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING
TRANSACTIONS, SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Investor Certificates offered hereby constitute a separate Series of
investor certificates being offered by the Bank from time to time pursuant to
its Prospectus dated March 16, 1998. This Prospectus Supplement does not
contain complete information about the offering of the Investor Certificates.
Additional information is contained in the Prospectus and investors are urged
to read both this Prospectus Supplement and the Prospectus in full. Sales of
the Investor Certificates may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus.
S-2
<PAGE>
The following Summary of Series Terms (the "Summary of Terms") and the
Summary of Series Provisions are qualified in their entirety by reference to
the detailed information appearing elsewhere in this Prospectus Supplement and
the accompanying Prospectus. Reference is made to the Glossary in each of this
Prospectus Supplement and the Prospectus for the location herein and therein of
the definitions of certain capitalized terms used herein. Certain capitalized
terms used but not defined herein have the meanings assigned to them in the
Prospectus.
SUMMARY OF SERIES TERMS
TRUST....................... Capital One Master Trust (the "Trust").
TITLE OF SECURITIES......... $500,000,000 Class A 6.310% Asset Backed
Certificates, Series 1998-1 (the "Class A
Certificates") and $50,236,407 Class B 6.356%
Asset Backed Certificates, Series 1998-1 (the
"Class B Certificates" and, together with the
Class A Certificates, the "Investor
Certificates"). In addition, the Trust will
issue $40,780,142 Floating Rate Class C Asset
Backed Interests, Series 1998-1 (the "Class C
Interests" and, together with the Investor
Certificates, the "Series 1998-1 Interests").
Only the Investor Certificates are offered
hereby.
INITIAL INVESTOR AMOUNT..... $591,016,549 (the "Initial Investor Amount").
CLASS A INITIAL INVESTOR $500,000,000 (the "Class A Initial Investor
AMOUNT..................... Amount").
CLASS B INITIAL INVESTOR $50,236,407 (the "Class B Initial Investor
AMOUNT..................... Amount").
CLASS C INITIAL INVESTOR $40,780,142 (the "Class C Initial Investor
AMOUNT..................... Amount").
INITIAL CASH COLLATERAL $9,456,265 (the "Initial Cash Collateral
AMOUNT..................... Amount").
SERIES DESIGNATIONS......... Series 1998-1 is not an Extendable Series or a
Prefunded Series.
CLASS A CERTIFICATE RATE.... 6.310% per annum.
CLASS B CERTIFICATE RATE.... 6.356% per annum.
INTEREST PAYMENT DATES...... The 15th day of each calendar month (or, if any
such day is not a business day, the next
succeeding business day), beginning on May 15,
1998.
CLASS A CONTROLLED
ACCUMULATION AMOUNT........ For each Distribution Date with respect to the
Class A Accumulation Period, $25,000,000; except
that, if the commencement of the Class A
Accumulation Period is delayed as described
herein under "Series Provisions--Principal
Payments," which the Bank believes is likely,
the Class A
S-3
<PAGE>
Controlled Accumulation Amount may be different
for each Distribution Date with respect to the
Class A Accumulation Period and will be
determined as described under "Series
Provisions--Application of Collections--Payments
of Principal."
SERIES 1998-1 TERMINATION
DATE ...................... The June 2011 Distribution Date. See "Series
Provisions--Series Termination."
CLASS A EXPECTED FINAL
PAYMENT DATE............... The April 2008 Distribution Date.
CLASS B EXPECTED FINAL
PAYMENT DATE............... The June 2008 Distribution Date.
SERIES CUT-OFF DATE......... April 1, 1998.
SERIES ISSUANCE DATE........ April 1, 1998.
GOVERNING LAW............... New York.
S-4
<PAGE>
SUMMARY OF SERIES PROVISIONS
THE INVESTOR
CERTIFICATES;THE CLASS C
INTERESTS.................. Each of the Series 1998-1 Interests represents a
specified undivided interest in certain assets
of the Trust. The portion of the Trust Assets
allocated to the holders of the Series 1998-1
Interests as described below and under
"Description of the Certificates" in the
Prospectus will be further allocated between the
holders of the Class A Certificates (the "Class
A Certificateholders' Interest"), the holders of
the Class B Certificates (the "Class B
Certificateholders' Interest") and the holders
of the Class C Interests (the "Class C
Investors' Interest") as described herein. The
Class A Certificateholders' Interest and the
Class B Certificateholders' Interest are
sometimes collectively referred to herein as the
"Investor Certificateholders' Interest." The
specified undivided interest in the Trust Assets
represented by the Class C Interests in the
initial amount of $40,780,142 (an amount that
represents 6.90% of the Initial Investor Amount)
together with amounts on deposit in the Cash
Collateral Account constitute the Credit
Enhancement for the Investor Certificates. For
purposes of this Prospectus Supplement, the
Class C Investors' Interest shall be deemed to
be the "Enhancement Invested Amount" for all
purposes under the Prospectus. The Class C
Interests will be issued pursuant to the Pooling
Agreement and the Series 1998-1 Supplement as
supplemented by the supplement relating to the
Class C Interests (the "Class C Supplemental
Agreement").
The aggregate amount of Principal Receivables
allocated to the Investor Certificateholders'
Interest and the Class C Investors' Interest (as
more fully defined herein, the "Invested
Amount") will be $591,016,549 on the Series
Issuance Date (the "Initial Invested Amount").
The aggregate amount of Principal Receivables
allocable to the Class A Certificateholders'
Interest (as more fully defined herein, the
"Class A Invested Amount") will be $500,000,000
on the Series Issuance Date (the "Class A
Initial Invested Amount"). The aggregate amount
of Principal Receivables allocable to the Class
B Certificateholders' Interest (as more fully
defined herein, the "Class B Invested Amount")
will be $50,236,407 on the Series Issuance Date
(the "Class B Initial Invested Amount"). The
aggregate amount of Principal Receivables
allocable to the Class C Interests (as more
fully defined herein, the "Class C Invested
Amount") will be $40,780,142 on the Series
Issuance Date (the "Class C Initial Invested
Amount"). Because Series 1998-1 is not a
Prefunded Series, the Class A Initial Invested
Amount will equal the Class A Initial Investor
Amount, the Class B Initial Invested Amount will
equal the Class B Initial Investor Amount and
the Class C Initial Invested Amount will equal
the Class C Initial Investor Amount.
S-5
<PAGE>
The Class B Invested Amount will decline in
certain circumstances as a result of (a) the
allocation to the Class B Certificateholders'
Interest of Defaulted Amounts otherwise
allocable to the Class A Certificateholders'
Interest and (b) the reallocation of collections
of Principal Receivables otherwise allocable to
the Class B Certificateholders' Interest to fund
certain payments in respect of the Class A
Certificates. Any such reductions in the Class B
Invested Amount may be reimbursed out of Excess
Spread, if any, Excess Finance Charges allocable
to Series 1998-1, the reallocation of certain
amounts allocable to the Class C Interests and
certain amounts, if any, on deposit in the Cash
Collateral Account as described herein. The
Class C Invested Amount may be reduced and may
be reimbursed in certain circumstances, as
described herein. During the Class A
Accumulation Period, for the sole purpose of
allocating collections of Finance Charge
Receivables and the Defaulted Amount with
respect to each Monthly Period, the Class A
Certificateholders' Interest will be further
reduced by the amount on deposit in the
Principal Funding Account (as so reduced, the
"Class A Adjusted Invested Amount" and together
with the Class B Invested Amount and the Class C
Invested Amount, the "Adjusted Invested
Amount"). The principal amount of the Seller's
Interest will fluctuate as the amount of
Principal Receivables in the Trust, the invested
amount of each Series and the amounts on deposit
in the Excess Funding Account, any principal
funding account and any prefunding account
change from time to time.
The Investor Certificateholders' Interest and the
Class C Investors' Interest will include the
right to receive (but only to the extent needed
to make required payments under the Pooling
Agreement and the Series 1998-1 Supplement and
subject to any reallocation of such amounts as
described herein) varying percentages of the
collections of Finance Charge Receivables and
Principal Receivables and will be allocated a
varying percentage of the Defaulted Amount with
respect to each Monthly Period. Finance Charge
Receivables collections and the Defaulted Amount
will be allocated to the Series 1998-1 Interests
based on the Floating Allocation Percentage.
Such amounts will be further allocated to the
Class A Certificates, the Class B Certificates
and the Class C Interests based on the Class A
Floating Percentage, the Class B Floating
Percentage and the Class C Floating Percentage,
respectively. Collections of Principal
Receivables will be allocated to the Series
1998-1 Interests based on the Principal
Allocation Percentage. Such percentage will vary
as described herein under "Series Provisions--
Allocation Percentages" depending on whether the
Investor Certificates are in their Revolving
Period, Principal Payment Period, Accumulation
Period or Early Amortization Period. See also
"Description of the Certificates--Allocation
Percentages" in the Prospectus. Such amounts
will be further allocated to the Class A
Certificates, the Class B Certificates and the
Class C Interests as described herein. See
"Series Provisions--Allocation Percentages."
S-6
<PAGE>
ISSUANCE OF ADDITIONAL
INVESTOR CERTIFICATES...... After the completion of the offering made hereby,
the Bank may cause the Trustee to issue
additional Investor Certificates of Series 1998-
1 ("Additional Investor Certificates") from time
to time during the Revolving Period, provided
that certain conditions included in the Series
1998-1 Supplement are met. In connection with
each Additional Issuance, the outstanding
principal amounts of the Class A Certificates
and the Class B Certificates and the aggregate
amount of Credit Enhancement will be increased
pro rata. When issued, the Additional Investor
Certificates of a class will be identical in all
respects to the other outstanding Investor
Certificates of that class. See "Series
Provisions--Issuance of Additional Investor
Certificates" in this Prospectus Supplement.
OTHER SERIES................ As of the date hereof, the Trust has issued
eighteen other Series of Certificates, thirteen
of which are still outstanding. For information
concerning the characteristics of such other
outstanding Series of Certificates, see "Annex
I: Previous Issuances of Certificates."
Additional Series are expected to be issued from
time to time by the Trust. See "Description of
the Certificates--New Issuances" in the
Prospectus and "Maturity Considerations" herein.
RECEIVABLES................. The Bank has conveyed to the Trust Receivables
arising in Accounts constituting a portion of
the Bank Portfolio, based on criteria provided
in the Pooling Agreement as applied on July 30,
1993 (the "Trust Cut-Off Date"), and in certain
Additional Accounts conveyed to the Trust in
accordance with the Pooling Agreement since the
Trust Cut-Off Date, all as more fully described
herein under "The Bank Portfolio." The aggregate
amount of Receivables in the Accounts (including
Receivables in Accounts conveyed to the Trust
after January 30, 1998 and before the Series
Issuance Date) as of January 30, 1998 was
$10,951,046,183.46, consisting of
$10,629,372,511.61 of Principal Receivables and
$321,673,671.85 of Finance Charge Receivables.
REGISTRATION, CLEARANCE AND
SETTLEMENT................. The Investor Certificates will be represented by
certificates registered in the name of Cede, as
the nominee of DTC. No purchaser of an Investor
Certificate will be entitled to receive a
definitive certificate except under certain
limited circumstances. Investor
Certificateholders may elect to hold their
Investor Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe). See
"The Pooling Agreement Generally--Definitive
Certificates" in the Prospectus.
SERVICING COMPENSATION...... The Servicing Fee Rate for the Series 1998-1
Interests will be 2.00% per annum. On each
Distribution Date, Servicer Interchange with
respect to the related Monthly Period that is on
deposit in the Collection Account will be
withdrawn from the Collection Account and paid
to the Servicer in respect of the Monthly
S-7
<PAGE>
Servicing Fee. In addition, the Class A
Servicing Fee, the Class B Servicing Fee and the
Class C Servicing Fee will be paid on each
Distribution Date as described under "Series
Provisions--Application of Collections--Payment
of Interest, Fees and Other Items" and "--
Servicing Compensation and Payment of Expenses"
herein. See also "Description of the
Certificates--Servicing Compensation and Payment
of Expenses" in the Prospectus.
FUNDING PERIOD.............. If the Summary of Terms herein designates Series
1998-1 a Prefunded Series, then during the
period (the "Funding Period") from and including
the Series Issuance Date to but excluding the
earlier of (i) the conclusion of the Revolving
Period, (ii) the date on which the Invested
Amount first equals the Investor Amount and
(iii) the Final Funding Date specified in the
Summary of Terms, the Prefunded Amount will be
maintained in an Eligible Deposit Account to be
established with the Trustee (the "Prefunding
Account"). If Series 1998-1 is designated a
Prefunded Series, the "Prefunded Amount" will
equal the Initial Prefunded Amount specified in
the Summary of Terms, less the amounts of any
increases in the Invested Amount pursuant to the
Series 1998-1 Supplement in connection with an
increase in the amount of Principal Receivables
in the Trust. Funds on deposit in the Prefunding
Account will be invested by the Trustee in
Eligible Investments.
During the Funding Period, if applicable, funds
on deposit in the Prefunding Account will be
withdrawn on the Funding Dates specified in the
Summary of Terms and paid to the Seller, and the
Invested Amount will be increased by a
corresponding amount, to the extent that the
principal amount of the Seller's Interest on
such day exceeds the Required Funding Percentage
specified in the Summary of Terms of the
aggregate amount of Principal Receivables in the
Trust on such day; provided, however, that the
Invested Amount will in no event exceed the
Initial Investor Amount or increase by an amount
in excess of the Prefunded Amount immediately
prior to giving effect to such increase.
Investor Certificateholders and the holders of
the Class C Interests (the "Class C Interest
Holders" and, together with the Investor
Certificateholders, the "Series 1998-1 Holders")
will have no further right to or interest in
such funds upon their withdrawal from the
Prefunding Account in connection with such
increases in the Invested Amount. Should the
Prefunded Amount be greater than zero at the end
of the Funding Period, the amounts remaining on
deposit in the Prefunding Account will be
payable pro rata to the Class A
Certificateholders, the Class B
Certificateholders and the Class C Interest
Holders on the next succeeding Distribution
Date and result in a reduction of the Investor
Amount. See "Series Provisions--Prefunding
Account" herein and "Description of the
Certificates--Funding Period" in the Prospectus.
S-8
<PAGE>
REVOLVING PERIOD; CLASS A
ACCUMULATION PERIOD; CLASS
B AMORTIZATION PERIOD;
CLASS C AMORTIZATION
PERIOD..................... Unless a Pay Out Event or, if Series 1998-1 is an
Extendable Series, a Principal Payment Event has
occurred, the revolving period with respect to
Series 1998-1 (the "Revolving Period") is
scheduled to end at the close of business on the
last day of the July 2006 Monthly Period.
Subject to the conditions set forth under
"Series Provisions--Principal Payments" herein,
the day on which the Revolving Period ends and
the Class A Accumulation Period begins may be
delayed to no later than the close of business
on the last day of February 2008 Monthly Period.
Unless a Pay Out Event or, if Series 1998-1 is
an Extendable Series, a Principal Payment Event
has occurred, (i) the Class A accumulation
period (the "Class A Accumulation Period") will
commence at the close of business on the last
day of the Revolving Period and end on the
earliest of (a) the commencement of the Early
Amortization Period, (b) the commencement of the
Principal Payment Period, if applicable, (c) the
payment in full of the Class A Invested Amount
or (d) the Series 1998-1 Termination Date (the
"Termination Date"), (ii) the Class B
amortization period (the "Class B Amortization
Period") will commence on the Distribution Date
on which the Class A Invested Amount is paid in
full (the "Class B Principal Commencement Date")
and end on the earliest of (a) the commencement
of the Early Amortization Period, (b) the
payment in full of the Class B Invested Amount
or (c) the Termination Date and (iii) the Class
C amortization period (the "Class C Amortization
Period") will commence on the Distribution Date
on which the Class B Invested Amount is paid in
full (the "Class C Principal Commencement Date")
and end on the earliest of (a) the commencement
of the Early Amortization Period, (b) the
payment in full of the Class C Invested Amount
or (c) the Termination Date. No principal will
be payable to Class A Certificateholders (other
than, if applicable, principal payments made
from amounts on deposit in the Prefunding
Account on the first Distribution Date following
the end of the Funding Period) until the Class A
Expected Final Payment Date, or, upon the
occurrence of a Pay Out Event or a Principal
Payment Event as described herein, the first
Special Payment Date with respect to the Early
Amortization Period or Principal Payment Period,
as applicable. No principal will be payable to
the Class B Certificateholders (other than, if
applicable, principal payments made from amounts
on deposit in the Prefunding Account on the
first Distribution Date following the end of the
Funding Period) until the Class A Invested
Amount is paid in full. No principal will be
payable to the Class C Interest Holders (other
than, if applicable, principal payments made
from amounts on deposit in the Prefunding
Account on the first Distribution Date following
the end of the Funding Period) until the Class B
Invested Amount
S-9
<PAGE>
is paid in full. For the period beginning on the
Series Cut-Off Date and ending with the
commencement of the Class A Accumulation Period,
the Principal Payment Period or the Early
Amortization Period, collections of Principal
Receivables otherwise allocable to the Investor
Certificateholders' Interest and the Class C
Investors' Interest (other than collections of
Principal Receivables allocated to the Class B
Certificateholders' Interest and the Class C
Investors' Interest ("Reallocated Principal
Collections") that are used to pay any
deficiency in the Class A Required Amount or the
Class B Required Amount) will, subject to
certain limitations, be treated as Shared
Principal Collections and applied to cover
principal payments due to or for the benefit of
Certificateholders of other Series, if so
specified in the Supplements for such other
Series, or paid to the Bank. See "Series
Provisions--Pay Out Events" and "--Extension of
Initial Principal Payment Date" herein and
"Description of the Certificates--Pay Out
Events" in the Prospectus for a discussion of
the events which might lead to the termination
of the Revolving Period prior to the
commencement of the Class A Accumulation Period.
In addition, see "Series Provisions--Principal
Payments" herein and "Description of the
Certificates--Shared Principal Collections" in
the Prospectus.
SUBORDINATION; ADDITIONAL
AMOUNTS AVAILABLE TO
INVESTOR
CERTIFICATEHOLDERS......... The fractional undivided interest in the Trust
Assets allocable to the Class B Certificates and
the Class C Interests will be subordinated to
the extent necessary to fund payments with
respect to the Class A Certificates as described
herein. In addition, the Class C Interests will
be subordinated to the extent necessary to fund
certain payments with respect to the Class B
Certificates.
If collections of Finance Charge Receivables
allocable to the Class A Certificates for any
Monthly Period and certain other available
amounts described herein are less than the sum
of (i) current and overdue Class A Monthly
Interest, (ii) Class A Additional Interest,
(iii) current and overdue Class A Servicing Fee
and (iv) the Class A Investor Default Amount,
with respect to the related Distribution Date,
Excess Spread and Excess Finance Charges
allocable to Series 1998-1 will be applied to
fund the deficiency (the "Class A Required
Amount"). "Excess Spread" for any Distribution
Date will equal the sum of (a) the excess of
collections of Finance Charge Receivables
allocated to the Class A Certificates and other
available funds described herein over the sum of
the amounts referred to in clauses (i), (ii),
(iii) and (iv) above, (b) the excess of
collections of Finance Charge Receivables
allocated to the Class B Certificates and
certain other available funds described herein
over the sum of (i) current and overdue Class B
Monthly Interest, (ii) Class B Additional
Interest and (iii) current and overdue Class B
Servicing Fee and (c) the excess of collections
of Finance Charge Receivables allocated to
S-10
<PAGE>
the Class C Interests and certain other
available funds described herein over the
current and overdue Class C Servicing Fee. If
Excess Spread and Excess Finance Charges
allocable to Series 1998-1 with respect to such
Distribution Date are less than the Class A
Required Amount, amounts, if any, on deposit in
the Cash Collateral Account will then be used to
fund the remaining Class A Required Amount. If
Excess Spread and Excess Finance Charges
allocable to Series 1998-1 with respect to such
Distribution Date and amounts, if any, on
deposit in the Cash Collateral Account are less
than the Class A Required Amount, Reallocated
Principal Collections allocable first to the
Class C Invested Amount and then the Class B
Invested Amount with respect to the related
Monthly Period will then be used to fund the
remaining Class A Required Amount. If
Reallocated Principal Collections with respect
to such Monthly Period are insufficient to fund
the remaining Class A Required Amount for the
related Distribution Date, then a portion of the
Class C Invested Amount will be reduced by the
amount of such deficiency (but not by more than
the Class A Investor Default Amount for such
Monthly Period). If such reduction would cause
the Class C Invested Amount to be reduced below
zero, the Class B Invested Amount will be
reduced by the amount by which the Class C
Invested Amount would have been reduced below
zero (but not by more than the excess of the
Class A Investor Default Amount for such Monthly
Period over the amount of such reduction in the
Class C Invested Amount) to avoid a charge-off
with respect to the Class A Certificates. If the
Class B Invested Amount is reduced to zero, the
Class A Invested Amount will be reduced if the
Class A Required Amount for any Distribution
Date exceeds the sum of Excess Spread and Excess
Finance Charges allocated to Series 1998-1,
amounts on deposit in the Cash Collateral
Account and Reallocated Principal Collections
for the related Monthly Period, but not by more
than the excess of the Class A Investor Default
Amount for such Monthly Period over the
aggregate reductions in the Class C Invested
Amount and the Class B Invested Amount with
respect to such Monthly Period, and the Class A
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. See "Series Provisions--
Reallocation of Cash Flows" and "--Defaulted
Receivables; Investor Charge-Offs."
Excess Spread and Excess Finance Charges
allocable to Series 1998-1 and not required to
pay the Class A Required Amount or reimburse
Class A Investor Charge-Offs will be applied to
fund the Class B Required Amount. The "Class B
Required Amount" means the amount for any
Distribution Date equal to the sum of (a) the
amount, if any, by which the sum of (i) current
and overdue Class B Monthly Interest, (ii) Class
B Additional Interest and (iii) current and
overdue Class B Servicing Fee exceeds
collections of Finance Charge Receivables
allocable to the
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<PAGE>
Class B Certificates for the related Monthly
Period and certain other available amounts
described herein and (b) the Class B Investor
Default Amount for the related Monthly Period.
If Excess Spread and Excess Finance Charges
allocable to Series 1998-1 with respect to such
Distribution Date and not required to pay the
Class A Required Amount are less than the Class
B Required Amount, amounts on deposit in the
Cash Collateral Account not required to pay the
Class A Required Amount will be withdrawn and
applied to fund the Class B Required Amount. If
such amounts available with respect to such
Distribution Date are insufficient to pay the
Class B Required Amount, Reallocated Principal
Collections allocable to the Class C Invested
Amount for the related Monthly Period and not
required to pay the Class A Required Amount will
then be used to fund the remaining Class B
Required Amount. If Reallocated Principal
Collections allocable to the Class C Invested
Amount with respect to such Monthly Period are
insufficient to fund the remaining Class B
Required Amount for the related Distribution
Date, then the Class C Invested Amount will be
reduced by the amount of such deficiency (but
not by more than the Class B Investor Default
Amount for such Monthly Period). If such
reduction would cause the Class C Invested
Amount to be reduced below zero, the Class B
Invested Amount will be reduced by the amount by
which the Class B Required Amount for any
Distribution Date exceeds the sum of Excess
Spread and Excess Finance Charges allocated to
Series 1998-1 not required to pay the Class A
Required Amount and amounts on deposit in the
Cash Collateral Account not required to pay the
Class A Required Amount and Reallocated
Principal Collections not required to pay the
Class A Required Amount for the related Monthly
Period, but not by more than the excess of the
Class B Investor Default Amount for such Monthly
Period over the reduction in the Class C
Invested Amount with respect to such Monthly
Period. In the event of a reduction of the Class
A Invested Amount, the Class B Invested Amount
or the Class C Invested Amount, the amount of
principal and interest available to fund
payments with respect to the Class A
Certificates and the Class B Certificates will
be decreased. See "Series Provisions--
Reallocation of Cash Flows."
THE CASH COLLATERAL
ACCOUNT.................... A cash collateral account (the "Cash Collateral
Account") will be held in the name of the
Trustee for the benefit of the Series 1998-1
Holders. The Cash Collateral Account will be
fully funded on the Closing Date in the amount
of $9,456,265 (the "Initial Cash Collateral
Amount"). See "Series Provisions--Cash
Collateral Account." To the extent set forth
herein, withdrawals will be made from the Cash
Collateral Account to pay the Class A Required
Amount first and then to pay the Class B
Required Amount and then to pay the excess, if
any, of (a) the sum of (i) the excess, if any,
of current and overdue Class C Servicing Fee
over Class C
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<PAGE>
Available Funds, (ii) current and overdue Class
C Monthly Interest, (iii) Class C Additional
Interest, and (iv) the Class C Investor Default
Amount for such Distribution Date over (b) the
amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-1 and available
to fund such amounts. See "Series Provisions--
Reallocation of Cash Flows" and "--Application
of Collections."
On each Distribution Date, Excess Spread and
Excess Finance Charges allocable to Series 1998-
1 (to the extent described under "Series
Provisions--Application of Collections--Excess
Spread; Excess Finance Charges" herein) will be
deposited in the Cash Collateral Account, to the
extent that the amount on deposit in the Cash
Collateral Account is less than the Required
Cash Collateral Amount. The "Required Cash
Collateral Amount" with respect to any
Distribution Date means, subject to certain
limitations more fully described herein, the
greater of (I) the product of (a) the sum of the
Class A Adjusted Invested Amount, the Class B
Invested Amount and the Class C Invested Amount,
each as of such Distribution Date after taking
into account distributions made on such
Distribution Date and (b) 1.6% and (II)
$1,112,502. If on any Distribution Date the
Available Cash Collateral Amount exceeds the
Required Cash Collateral Amount, such excess in
the Cash Collateral Account will be applied in
accordance with the Series 1998-1 Supplement and
the Class C Supplemental Agreement and will not
be available to the Investor Certificateholders.
See "Series Provisions--Cash Collateral
Account."
EXCESS FINANCE CHARGES...... The Series 1998-1 Certificates will be the
nineteenth Series issued by the Trust and the
fourteenth Series, outstanding as of the Series
Issuance Date, included in a group of Series
("Group One") expected to be issued by the Trust
from time to time. The Series 1993-1
Certificates, the Series 1993-4 Certificates,
the Series 1994-3 Certificates, the Series 1994-
A Certificates, the Series 1995-1 Certificates,
the Series 1995-2 Certificates, the Series 1995-
3 Certificates, the Series 1995-4 Certificates,
the Series 1996-1 Certificates, the Series 1996-
2 Certificates, the Series 1996-3 Certificates,
the Series 1997-1 Certificates and the Series
1997-2 Certificates are currently included in
Group One. See "Annex I: Previous Issuances of
Certificates." Subject to certain limitations
described under "Description of the
Certificates--Sharing of Excess Finance Charges"
in the Prospectus, Excess Finance Charges, if
any, with respect to a Series included in Group
One will be applied to cover any shortfalls with
respect to amounts payable from collections of
Finance Charge Receivables allocable to any
other Series in Group One, pro rata based upon
the amount of the shortfall, if any, with
respect to each Series in Group One.
SHARED PRINCIPAL
COLLECTIONS................ Collections of Principal Receivables and certain
other amounts otherwise allocable to other
Series, to the extent such collections are not
needed to make payments to or deposits for the
benefit of
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<PAGE>
the certificateholders of such other Series,
will be applied to cover principal payments due
to or for the benefit of the holders of the
Investor Certificates and the Class C Interests.
See "Description of the Certificates--Shared
Principal Collections" in the Prospectus.
OPTIONAL REPURCHASE......... The Investor Certificateholders' Interest and the
Class C Investors' Interest will be subject to
optional repurchase by the Bank on any
Distribution Date after the sum of the Class A
Invested Amount, the Class B Invested Amount and
the Class C Invested Amount is reduced to an
amount that is less than or equal to 5% of the
sum of the Initial Invested Amount plus, if
applicable, the amount of any increases in the
Invested Amount during the Funding Period. The
purchase price will be equal to the sum of the
Class A Invested Amount and the Class B Invested
Amount (less the Principal Funding Account
Balance, if any), the Class C Invested Amount
and accrued and unpaid interest on the Class A
Certificates, the Class B Certificates and the
Class C Interests (and accrued and unpaid
interest with respect to interest amounts that
were due but not paid on a prior Payment Date)
through (a) if the day on which such purchase
occurs is a Distribution Date, the day preceding
such Distribution Date or (b) if the day on
which such repurchase occurs is not a
Distribution Date, the day preceding the
Distribution Date following such day. See
"Description of the Certificates--Optional
Termination; Final Payment of Principal" in the
Prospectus.
REQUIRED PRINCIPAL BALANCE;
ADDITION OF ACCOUNTS....... The Series 1998-1 Supplement provides that the
Bank will be required to make an Addition of
Accounts to the Trust if the amount of Principal
Receivables in the Trust is not maintained at a
minimum level equal to the sum of the initial
invested amounts (plus the amount of any
increases in the invested amounts attributable
to prefunding) of each Series then outstanding
(provided that certain Series may be excluded
from such calculation if the issuance of such
Series will not result in a Ratings Effect)
minus amounts on deposit in the Excess Funding
Account. See "Series Provisions--Required
Principal Balance; Addition of Accounts" herein
and "Description of the Certificates--Addition
of Trust Assets" in the Prospectus.
DEFEASANCE.................. In certain circumstances and subject to certain
conditions, the Bank may terminate its
substantive obligations in respect of Series
1998-1 or the Pooling Agreement as a whole. See
"The Pooling Agreement Generally--Defeasance" in
the Prospectus.
ERISA CONSIDERATIONS........ The Class A Certificates and the Class B
Certificates may not be acquired by (a) any
employee benefit plan that is subject to the
Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), any plan or other
arrangement (including an
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<PAGE>
individual retirement account or Keogh plan)
that is subject to Section 4975 of the Code, or
(c) any entity whose underlying assets include
"plan assets" under the Final Regulation (as
defined under "ERISA Considerations" in the
Prospectus) by reason of any such plan's
investment in the entity. By its acceptance of
an Investor Certificate, each Investor
Certificateholder will be deemed to have
represented and warranted that it is not subject
to the foregoing limitation. See "ERISA
Considerations" in the Prospectus.
CLASS A CERTIFICATE
RATING..................... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
rating category by at least one nationally
recognized rating agency. The rating of the
Class A Certificates is based primarily on the
value of the Receivables, the subordination of
the Class B Certificates and the Class C
Interests and the circumstances, as described
herein, in which the Available Cash Collateral
Amount may be available for the benefit of the
Class A Certificateholders. See "Risk Factors--
Series Considerations--Limited Nature of Rating"
in the Prospectus.
CLASS B CERTIFICATE RATING
........................... It is a condition to the issuance of the Class B
Certificates that they be rated in one of the
three highest rating categories by at least one
nationally recognized rating agency. The rating
of the Class B Certificates is based primarily
on the value of the Receivables, the
subordination of the Class C Interests and the
circumstances, as described herein, in which the
Available Cash Collateral Amount may be
available for the benefit of the Class B
Certificateholders. See "Risk Factors--Series
Considerations--Limited Nature of Rating" in the
Prospectus.
LISTING..................... Application will be made to list the Investor
Certificates on the Luxembourg Stock Exchange;
however, no assurance can be given that such
listing will be obtained. Investor
Certificateholders should consult with Banque
Internationale a Luxembourg, S.A., the
Luxembourg listing agent for the Investor
Certificates, 69, route d'Esch, L-1470
Luxembourg, phone number 011-352-4590-3550 for
the status of such listing.
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<PAGE>
RISK FACTORS
LIMITED AMOUNTS OF CREDIT ENHANCEMENT. Although Credit Enhancement with
respect to the Investor Certificates will be provided by the subordination of
the Class C Interests and the funds held in the Cash Collateral Account, such
amounts are limited. If the Class C Invested Amount and the amount on deposit
in the Cash Collateral Account are reduced to zero, the Class B
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust and the Class B Invested Amount may
be reduced. If the Class B Invested Amount is reduced to zero, Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust. See "Series Provisions--Cash
Collateral Account."
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS. The
Class B Certificates are subordinated in right of payment of principal to the
Class A Certificates. Payments of principal in respect of the Class B
Certificates (other than, if applicable, principal payments made from amounts
on deposit in the Prefunding Account on the first Distribution Date following
the end of the Funding Period) will not commence until after the final
principal payment with respect to the Class A Certificates has been made as
described herein. Moreover, the Class B Invested Amount is subject to
reduction if the Class A Required Amount for any Monthly Period is greater
than zero and is not funded from Excess Spread and Excess Finance Charges
allocated to Series 1998-1, Reallocated Principal Collections with respect to
the Class C Interests, amounts on deposit in the Cash Collateral Account, and
reductions in the Class C Invested Amount. To the extent the Class B Invested
Amount is reduced, the percentage of collections of Finance Charge Receivables
allocable to the Class B Certificateholders' Interest in future Monthly
Periods will be reduced. Moreover, to the extent the amount of such reduction
in the Class B Invested Amount is not reimbursed, the amount of principal and
interest distributable to the Class B Certificateholders will be reduced. See
"Series Provisions--Allocation Percentages" and "--Reallocation of Cash Flows"
herein. If the Class B Invested Amount is reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Supplement thereto for Series 1998-1 (the
"Series 1998-1 Supplement") provide that Class A Certificateholders will not
receive payments of principal (other than, if applicable, principal payments
made from amounts on deposit in the Prefunding Account on the first
Distribution Date following the end of the Funding Period) until the Class A
Expected Final Payment Date, or earlier in the event of a Pay Out Event or, if
Series 1998-1 is an Extendable Series, a Principal Payment Event. Class A
Certificateholders will receive payments of principal (i) on each Distribution
Date following the Monthly Period in which a Pay Out Event occurs and (ii) on
each Distribution Date beginning with the commencement of the Principal
Payment Period (each such Distribution Date, a "Special Payment Date") until
the Class A Invested Amount has been paid in full or the Termination Date has
occurred. The Class B Certificateholders will not begin to receive payments of
principal (other than, if applicable, principal payments made from amounts on
deposit in the Prefunding Account on the first Distribution Date following the
end of the Funding Period) until the final principal payment on the Class A
Certificates has been made. The Class C Interest Holders will not begin to
receive payments of principal (other than, if applicable, principal payments
made from amounts on deposit in the Prefunding Account on the first
Distribution Date following the end of the Funding Period) until the final
principal payment on the Class B Certificates has been made.
On each Distribution Date during the Class A Accumulation Period, amounts
equal to the least of (a) Available Investor Principal Collections (see
"Series Provisions--Principal Payments") for the related Monthly Period on
deposit in the Collection Account, (b) the applicable Controlled Deposit
Amount, which is equal to the sum of the applicable Controlled Accumulation
Amount for such Monthly Period and any applicable Deficit Controlled
Accumulation Amount and (c) the Class A Adjusted Invested Amount will be
deposited in the Principal Funding Account held by the Trustee (the "Principal
Funding Account") until the Principal Funding Account Balance is equal to the
Class A Invested Amount or, if earlier, the Class A Expected Final Payment
Date. See "Series Provisions--Principal Payments" for a discussion of
circumstances under which the commencement of the Class A Accumulation Period
may be delayed. After the Class A Invested Amount has
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<PAGE>
been paid in full, on each Distribution Date during the Class B Amortization
Period, an amount equal to the lesser of (a) Available Investor Principal
Collections for the related Monthly Period on deposit in the Collection
Account (minus the portion of such Available Investor Principal Collections
applied to Class A Monthly Principal on such Distribution Date) and (b) the
Class B Invested Amount will be paid to the Class B Certificateholders.
The Bank may, at or after the time at which the Class A Accumulation Period
commences for Series 1998-1, cause the Trust to issue another Series (or some
portion thereof, to the extent that the full principal amount of such other
Series is not otherwise outstanding at such time) as a Paired Series with
respect to Series 1998-1 to be used to finance the increase in the Seller's
Interest caused by the accumulation of principal in the Principal Funding
Account with respect to Series 1998-1. Although no assurances can be given as
to whether such other Series will be issued and, if issued, the terms thereof,
the outstanding principal amount of such other Series may vary from time to
time (whether or not a Pay Out Event occurs with respect to Series 1998-1),
and the interest rate with respect to certificates of such other Series may be
established on its date of issuance and may be reset periodically. Further,
since the terms of the Investor Certificates will vary from the terms of such
other Series, the Pay Out Events with respect to such other Series will vary
from the Pay Out Events with respect to Series 1998-1 and may include Pay Out
Events which are unrelated to the status of the Bank or the Receivables, such
as Pay Out Events related to the continued availability and rating of certain
providers of Series Enhancement to such other Series. If a Pay Out Event does
occur with respect to any such Paired Series prior to the payment in full of
the Investor Certificates, the final payment of principal to the Investor
Certificateholders may be delayed.
Should a Pay Out Event or, if Series 1998-1 is an Extendable Series, a
Principal Payment Event occur with respect to Series 1998-1 and the Early
Amortization Period or the Principal Payment Period commence, any amount on
deposit (a) in the Principal Funding Account will be paid to the Class A
Certificateholders on the first Special Payment Date and the Series 1998-1
Holders will be entitled to receive Available Investor Principal Collections
on each Distribution Date with respect to such Early Amortization Period or
the Principal Payment Period or following the Expected Final Payment Date, as
the case may be, as described herein until the Invested Amount is paid in full
or until the Termination Date occurs, (b) in the Excess Funding Account will
be released and treated as Shared Principal Collections to the extent needed
to cover principal payments due to or for the benefit of any Series entitled
to the benefits of Shared Principal Collections and (c) in the Prefunding
Account, if applicable, will be distributed to the Series 1998-1 Holders on a
pro rata basis based on the Class A Initial Invested Amount, the Class B
Initial Invested Amount and the Class C Initial Invested Amount, respectively.
See "Description of the Certificates --Pay Out Events" in the Prospectus and
"Series Provisions--Pay Out Events" herein.
The ability of Investor Certificateholders to receive payments of principal
on the applicable Expected Final Payment Date depends on the payment rates on
the Receivables, the amount of outstanding Receivables, the delinquencies,
charge-offs and new borrowings on the Accounts, the potential issuance by the
Trust of additional Series and the availability of Shared Principal
Collections. Monthly payment rates on the Receivables may vary because, among
other things, accountholders may fail to make a required minimum payment, may
only make payments as low as the minimum required amount or may make payments
as high as the entire outstanding balance. Monthly payment rates may also vary
due to seasonal purchasing and payment habits of accountholders and to changes
in any terms of rebate programs in which accountholders participate. See the
"Accountholder Monthly Payment Rates for the Bank Portfolio" table under "The
Bank Portfolio" herein. The Bank cannot predict, and no assurance can be
given, as to the accountholder monthly payment rates that will actually occur
in any future period, as to the actual rate of payment of principal of the
Investor Certificates or whether the terms of any previously or subsequently
issued Series might have an impact on the amount or timing of any such payment
of principal. A significant amount of receivables initially originated by the
Bank was attributable to customers who, attracted by the low introductory
rates, transferred balances from competing card issuers. Accounts in the
Bank's low introductory rate portfolio that reprice are subject to a
significant risk of attrition, because cardholders that were initially
attracted by the Bank's low introductory rates may determine to switch
accounts or transfer account balances to lower price products offered by
competing card issuers. See "Risk Factors--Series Considerations--Generation
of Additional Receivables; Dependency on Cardholder Repayments" and
"Description of the Certificates--Shared Principal Collections" in the
Prospectus.
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<PAGE>
In addition, the amount of outstanding Receivables and the delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month
due to seasonal variations, the product mix of the Trust Portfolio, the
availability of other sources of credit, legal factors, general economic
conditions and spending and borrowing habits of individual accountholders.
There can be no assurance that collections of Principal Receivables with
respect to the Trust Portfolio, and thus the rate at which Investor
Certificateholders could expect to receive payments of principal on their
Investor Certificates during the Early Amortization Period or Principal
Payment Period or the rate at which the Principal Funding Account could be
funded during the Class A Accumulation Period, will be similar to the
historical experience set forth in the "Accountholder Monthly Payment Rates
for the Bank Portfolio" table under "The Bank Portfolio" herein. As described
under "Series Provisions--Principal Payments," the Bank may shorten the Class
A 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
Invested Amount on the Class A Expected Final Payment Date.
The Trust, as a master trust, has previously issued eighteen Series,
thirteen of which are still outstanding, and may issue additional Series from
time to time, and there can be no assurance that the terms of any such Series
might not have an impact on the timing or amount of payments received by
Investor Certificateholders. Further, if a Pay Out Event occurs, the average
life and maturity of the Class A Certificates and Class B Certificates,
respectively, could be significantly reduced.
Due to the reasons set forth above, and the fact that payment experience
with respect to the more recently originated accounts in the Bank Portfolio
(from which the Accounts included in the Trust Portfolio have been selected)
is limited (see "The Bank Portfolio" herein), there can be no assurance that
deposits in the Principal Funding Account will be made in accordance with the
Controlled Accumulation Amount or that the actual number of months elapsed
from the date of issuance of the Class A and Class B Certificates to their
respective final Distribution Dates will equal the expected number of months.
See "Risk Factors--Series Considerations--Generation of Additional
Receivables; Dependency on Cardholder Repayments" in the Prospectus.
THE BANK PORTFOLIO
GENERAL
The Accounts included in the Trust as of the Trust Cut-Off Date and
subsequent Additional Cut-Off Dates (the "Trust Portfolio") were selected from
the Bank Portfolio based on the eligibility criteria specified in the Pooling
Agreement. The Trust Portfolio is comprised of the majority of Eligible
Accounts in the Bank Portfolio as of the Series Cut-Off Date. The Trust
Portfolio also includes certain charged-off accounts with zero balances (the
"Zero Balance Accounts"), the recoveries on which will be treated as
collections of Finance Charge Receivables. The Bank plans to continue to add
Zero Balance Accounts to the Trust from time to time. See "The Accounts," "The
Pooling Agreement Generally--Conveyance of Receivables" and "--Representations
and Warranties" in the Prospectus.
The Bank Portfolio is primarily comprised of accounts originated by the Bank
from 1992 to 1998, regardless of whether such accounts meet the eligibility
requirements specified in the Pooling Agreement. Although such accounts were
not originated using identical underwriting criteria, the receivables arising
under such accounts are assessed finance charges having one of two general
pricing characteristics. The annual percentage rate on such receivables is
either a relatively low introductory rate converting to a higher rate at the
end of an introductory period or a non-introductory rate generally ranging
between approximately 10% and 26%. Introductory period rates generally range
from approximately 5% to 10% for introductory periods of 6 to 18 months after
which the rate converts to an annual percentage rate generally between
approximately 14% and 17%. The annual percentage rate is either a fixed rate
or a variable rate that adjusts periodically according to an index. Non-
introductory rate products generally include secured cards, affinity and joint
account cards, college student cards and other cards targeted to certain other
market segments. Historically, these non-introductory rate cards tend to have
lower credit lines, balances that build over time, less attrition, higher
margins (including fees)
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<PAGE>
and, in some cases, higher delinquencies and credit losses than the Bank's
traditional low introductory rate products. The number of these non-
introductory rate accounts in the Bank Portfolio has been increasing, and as
the number of these accounts increases and as such accounts season, the
characteristics of these accounts as described in the preceding sentence will
have a more significant effect on the Bank Portfolio. Receivables added to the
Trust have and will include such non-introductory rate credit card
receivables, which at the Series Issuance Date constitute, and at any given
time thereafter may constitute, a material portion of the Trust Portfolio. See
"Risk Factors--Certain Legal Aspects--Transfer of Receivables," "The Bank's
Credit Card and Consumer Lending Business--Underwriting Procedures" and
"Certain Legal Aspects of the Receivables--Transfer of Receivables" in the
Prospectus.
In the fourth quarter of 1997, the Bank adopted a more conservative
accounting methodology with respect to charge-offs and made an adjustment to
its recognition of finance charges and fee income. The Bank modified its
methodology for charging off credit card loans (net of any collateral) to 180
days past-due, from the prior practice of charging off loans during the
billing cycle after 180 days past-due. This resulted in adjustments to
delinquencies and losses, as well as a reduction in revenue as a result of a
reversal of previously accrued finance charges and fee income. In addition,
the Bank also began recognizing the estimated uncollectible portion of finance
charges and fee income receivables which resulted in a decrease in loans and a
corresponding decrease in revenue. The 1997 impact of these adjustments is
shown as a footnote in the tables that follow.
DELINQUENCY AND LOSS EXPERIENCE
Because new accounts usually initially exhibit lower delinquency rates and
credit losses, the growth of the Bank Portfolio from approximately $1.985
billion at year end 1992, to approximately $13.155 billion at month end
December 1997, has had the effect of significantly lowering the charge-off and
delinquency rates for the entire portfolio from what they otherwise would have
been. However, as the proportion of new accounts to seasoned accounts becomes
smaller, this effect should be lessened. As seasoning occurs or if new account
origination slows, it is expected that the charge-off rates and delinquencies
will increase over time. The Bank's delinquency and net loss rates at any time
reflect, among other factors, the quality of the credit card loans, the
average seasoning of the Bank's accounts, the success of the Bank's collection
efforts, the product mix of the portfolio and general economic conditions.
The following tables set forth the delinquency and loss experience for the
Bank Portfolio for each of the periods shown. The Bank Portfolio includes
groups of accounts each created in connection with a particular solicitation,
which may, when taken individually, have delinquency and loss characteristics
different from those of the overall Bank Portfolio. As of January 30, 1998,
the Trust Portfolio (including Receivables added to the Trust after January
30, 1998 and before the Series Issuance Date) represented approximately 63%
and 84% of the Bank Portfolio by account and receivables outstanding,
respectively. Because the Trust Portfolio is only a portion of the Bank
Portfolio, actual delinquency and loss experience with respect to the
Receivables is different from that set forth below for the Bank Portfolio.
There can be no assurance that the delinquency and loss experience for the
Receivables will be similar to the historical experience set forth below for
the Bank Portfolio.
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<PAGE>
DELINQUENCIES AS A PERCENTAGE OF THE BANK PORTFOLIO(1)(3)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT YEAR END
-----------------------------------------------------------------
1997 (4) 1996 1995
--------------------- --------------------- ---------------------
NUMBER OF DAYS DELINQUENT DELINQUENT DELINQUENT
DELINQUENT(2) AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
-------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
30-59 days.............. $309,440 2.35% $261,165 2.16% $165,306 1.58%
60-89 days.............. 202,735 1.54 151,218 1.25 92,665 0.89
90+ days................ 323,803 2.46 335,986 2.78 181,243 1.73
-------- ---- -------- ---- -------- ----
TOTAL.................. $835,978 6.35% $748,369 6.19% $439,214 4.20%
======== ==== ======== ==== ======== ====
</TABLE>
- --------
(1) The percentages are the result of dividing the delinquent amount by end of
period receivables outstanding for the applicable period. The delinquent
amount is the dollar amount of month end delinquencies in each category
for the period. The end of period receivables outstanding at year end
1997, 1996 and 1995 were $13,155,103, $12,092,872 and $10,445,480,
respectively.
(2) The Bank uses billing cycles to determine delinquency. This table assumes
that each billing cycle is 30 days long, but actual billing cycles range
from 26 to 34 days each.
(3) Figures and percentages in this table are reported on a processing month
basis.
(4) The total delinquencies greater than or equal to 30 days as a percentage
of the Bank Portfolio would have been 7.13% without the adjustments
discussed above under "--General."
LOSS EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
1997(1) 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding......... $12,103,362 $11,028,180 $9,089,278
Gross Losses............................ $ 895,434 $ 509,689 $ 238,438
Gross Losses as a Percentage of Average
Receivables Outstanding................ 7.40% 4.62% 2.62%
Recoveries.............................. $ 74,902 $ 37,166 $ 33,610
Net Losses.............................. $ 820,532 $ 472,523 $ 204,828
Net Losses as a Percentage of Average
Receivables Outstanding................ 6.78% 4.28% 2.25%
</TABLE>
- --------
(1) Net Losses as a Percentage of Average Receivables Outstanding would have
been 6.40% without the change in charge-off methodology discussed above
under "--General."
S-20
<PAGE>
REVENUE EXPERIENCE
The following table sets forth the revenues from finance charges and fees
billed and Interchange received with respect to the Bank Portfolio for the
periods shown.
REVENUE EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
1997(2) 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Average Receivables Outstanding........... $12,103,362 $11,028,180 $9,089,278
Finance Charges and Fees(1)............... $ 2,434,650 $ 1,904,885 $1,363,765
Yield from Finance Charges and Fees....... 20.12% 17.27% 15.00%
Interchange............................... $ 109,394 $ 97,892 $ 79,128
Yield from Interchange.................... 0.90% 0.89% 0.87%
</TABLE>
- --------
(1) Finance Charges and Fees does not include interest on subsequent
collections on accounts previously charged off. Finance Charges and Fees
includes monthly periodic rate finance charges, the portion of the annual
membership fees amortized on a monthly basis, cash advance fees, late
charges, overlimit charges and other miscellaneous fees.
(2) Yield from Finance Charges and Fees would have been 20.66% without the
adjustments discussed above under "--General."
Because the Trust Portfolio is only a portion of the Bank Portfolio, actual
revenue experience with respect to the Receivables is different from that set
forth above for the Bank Portfolio. There can be no assurance that the yield
experience with respect to the Receivables in the future will be similar to
the historical experience set forth above for the Bank Portfolio. In addition,
revenue from the Receivables will depend on the types of fees and charges
assessed on the Accounts, and could be adversely affected by future changes
made by the Bank or the Servicer in such fees and charges or by other factors.
See "Risk Factors--Certain Legal Aspects" and""--The Ability of the Bank to
Change Terms of the Accounts" in the Prospectus.
The revenue for the accounts in the Bank Portfolio shown in the above table
is comprised of three primary components: monthly periodic rate finance
charges, the amortized portion of annual membership fees and other service
charges, such as cash advance fees, late charges, overlimit fees and other
miscellaneous fees. If payment rates decline, the balances subject to monthly
periodic rate finance charges tend to grow, assuming no change in the level of
purchasing activity. Accordingly, under these circumstances, the yield related
to monthly periodic rate finance charges normally increases. Conversely, if
payment rates increase, the balances subject to monthly periodic rate finance
charges tend to fall, assuming no change in the level of purchasing activity.
Accordingly, under these circumstances, the yield related to monthly periodic
rate finance charges normally decreases. Furthermore, as the Bank Portfolio
experiences growth in receivables through account origination and account
management balance transfer programs which are assessed low introductory
periodic rate finance charges and to the extent the Bank chooses to waive all
or part of the rate increase for selected accounts in an effort to profitably
retain balances, the yield related to monthly periodic rate finance charges
would be adversely affected. The yield related to service charges varies with
the type and volume of activity in and the amount of each account, as well as
with the number of delinquent accounts. As account balances increase, annual
membership fees, which remain constant, represent a smaller percentage of the
aggregate account balances.
PAYMENT RATES
The following table sets forth the highest and lowest accountholder monthly
payment rates for the Bank Portfolio during any single month in the periods
shown and the average accountholder monthly payment rates
S-21
<PAGE>
for all months during the periods shown, in each case calculated as a
percentage of average monthly account balances during the periods shown.
Payment rates shown in the table are based on amounts which would be payments
of Principal Receivables and Finance Charge Receivables with respect to the
Accounts.
ACCOUNTHOLDER MONTHLY PAYMENT RATES FOR THE BANK PORTFOLIO(1)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Lowest Month(2)............................................ 9.66% 8.54% 8.68%
Highest Month(2)........................................... 10.74% 10.97% 11.76%
Average Payment Rate for the Period........................ 10.20% 9.83% 10.17%
</TABLE>
- --------
(1) The monthly payment rates include amounts which are payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
(2) The monthly payment rates are calculated as the total amount of payments
received during the month divided by the average monthly receivables
outstanding for each month.
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of January 30, 1998 (including
Receivables in Accounts conveyed to the Trust after January 30, 1998 and
before the Series Issuance Date, which Receivables and Accounts are included
in all figures set fourth below in this paragraph, the next paragraph and the
following tables) included $10,629,372,511.61 of Principal Receivables and
$321,673,671.85 of Finance Charge Receivables. The Accounts had an average
balance of $1,541.15 and an average credit limit of $3,423.37. The percentage
of the aggregate total Receivables balance to the aggregate total credit limit
was 45.0%. The average age of the Accounts was approximately 32 months. As of
January 30, 1998, all of the Accounts in the Trust Portfolio were VISA or
MasterCard credit card accounts, of which 70% were standard accounts and 30%
were premium accounts, and the aggregate Receivables balances of standard
accounts and premium accounts, as a percentage of the total aggregate
Receivables, were 47% and 53%, respectively. Since the Trust Cut-Off Date, and
prior to the Series Issuance Date, the Bank has added approximately $15.892
billion principal amount of Receivables in Additional Accounts to the Trust.
The Receivables arising under such accounts added to the Trust since the Trust
Cut-Off Date are generally assessed finance charges having one of two general
pricing characteristics. The annual percentage rate on such Receivables is
either a relatively low introductory rate converting to a higher rate at the
end of an introductory period or a non-introductory rate generally ranging
between approximately 10% and 26%. Introductory period rates generally range
from approximately 5% to 10% for introductory periods of 6 to 18 months after
which the rate converts to an annual percentage rate generally between
approximately 14% and 17%. The annual percentage rate is either a fixed rate
or a variable rate that adjusts periodically according to an index. Non-
introductory rate products generally include secured cards, affinity and joint
account cards, college student cards and other cards targeted to certain other
market segments. Historically, these non-introductory rate cards tend to have
lower credit lines, balances that build over time, less attrition, higher
margins (including fees) and, in some cases higher delinquencies and credit
losses than the Bank's traditional low introductory rate products. Receivables
added to the Trust have and will include such non-introductory rate credit
card receivables, which at the Series Issuance Date constitute, and at any
given time thereafter may constitute, a material portion of the Trust
Portfolio.
As of January 30, 1998, approximately 41% of the Trust Portfolio accounts
were assessed a variable rate periodic finance charge and approximately 59%
were assessed a fixed rate periodic finance charge.
The following tables summarize the Trust Portfolio by various criteria as of
January 30, 1998. References to "Receivables Outstanding" in the following
tables include both Finance Charge Receivables and Principal Receivables.
Because the future composition and product mix of the Trust Portfolio may
change over time, these tables are not necessarily indicative of the
composition of the Trust Portfolio at any subsequent time.
S-22
<PAGE>
COMPOSITION BY ACCOUNT BALANCE TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------------------- --------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Credit Balance(1)........ 134,840 1.90% $ (13,264,226.93) (0.12)%
No Balance(2)............ 1,222,559 17.21 0.00 0.00
More than $0 and less
than or equal to
$1,500.00............... 3,698,709 52.05 1,941,107,666.09 17.73
$1,500.01-$5,000.00...... 1,395,721 19.64 4,285,561,944.43 39.13
$5,000.01-$10,000.00..... 584,617 8.23 3,853,206,032.97 35.18
Over $10,000.00.......... 69,321 0.97 884,434,766.90 8.08
--------- ------ ------------------ ------
TOTAL.................. 7,105,767 100.00% $10,951,046,183.46 100.00%
========= ====== ================== ======
</TABLE>
- --------
(1) Credit balances are a result of cardholder payments and credit adjustments
applied in excess of the unpaid balance on an Account. Accounts which
currently have a credit balance are included because Receivables may be
generated with respect thereto in the future.
(2) Accounts which currently have no balance are included because Receivables
may be generated with respect thereto in the future. Zero Balance Accounts
are not included in these figures.
COMPOSITION BY CREDIT LIMIT(1)
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
------------------ --------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Less than or equal to
$1,500.00................. 3,399,365 47.84% $ 1,583,174,600.88 14.46%
$1,500.01-$5,000.00........ 1,513,864 21.31 2,537,115,577.75 23.17
$5,000.01-$10,000.00....... 1,984,056 27.92 5,305,854,411.77 48.45
Over $10,000.00............ 208,482 2.93 1,524,901,593.06 13.92
--------- ------ ------------------ ------
TOTAL.................... 7,105,767 100.00% $10,951,046,183.46 100.00%
========= ====== ================== ======
</TABLE>
- --------
(1) References to "Credit Limit" herein include both the line of credit
established for purchases, cash advances and balance transfers as well as
receivables originated under temporary extensions of credit through
account management programs. Credit limits relating to these temporary
extensions decrease as cardholder payments are applied to these
receivables.
S-23
<PAGE>
COMPOSITION BY PAYMENT STATUS(1)
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
PAYMENT STATUS(2) ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
----------------- --------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Current to 29 days(3)...... 6,537,837 92.01% $10,064,222,573.25 91.90%
Past due 30-59 days........ 232,250 3.27 358,323,509.42 3.27
Past due 60-89 days........ 123,676 1.74 189,376,993.81 1.73
Past due 90+ days.......... 212,004 2.98 339,123,106.98 3.10
--------- ------ ------------------ ------
TOTAL.................... 7,105,767 100.00% $10,951,046,183.46 100.00%
========= ====== ================== ======
</TABLE>
- --------
(1) Payment Status is determined as of the prior statement cycle date.
(2) The Bank uses billing cycles to determine delinquency. The table assumes
that each billing cycle is 30 days long, but actual billing cycles range
from 26 to 34 days each.
(3) Accounts designated as current include accounts on which the minimum
payment has not been received prior to the second billing date following
the issuance of the related bill.
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
----------- --------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Not More than 6 Months..... 515,551 7.25% $ 1,924,045,662.40 17.57%
Over 6 Months to 12
Months.................... 668,574 9.41 1,144,675,687.76 10.45
Over 12 Months to 24
Months.................... 2,583,443 36.36 1,978,187,073.05 18.06
Over 24 Months to 36
Months.................... 1,112,937 15.66 1,703,631,365.94 15.56
Over 36 Months to 48
Months.................... 1,011,208 14.23 1,810,008,402.91 16.53
Over 48 Months to 60
Months.................... 650,085 9.15 1,313,305,282.92 11.99
Over 60 Months............. 563,969 7.94 1,077,192,708.48 9.84
--------- ------ ------------------ ------
TOTAL.................... 7,105,767 100.00% $10,951,046,183.46 100.00%
========= ====== ================== ======
</TABLE>
S-24
<PAGE>
COMPOSITION OF ACCOUNTS BY ACCOUNTHOLDER BILLING ADDRESS
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
STATE OR TERRITORY ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
------------------ --------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
California.................. 1,006,473 14.16% $ 1,559,784,441.82 14.24%
Texas....................... 561,218 7.90 855,731,463.07 7.81
New York.................... 536,427 7.55 784,846,556.26 7.17
Florida..................... 483,527 6.80 752,803,992.82 6.87
Pennsylvania................ 280,364 3.95 418,532,857.98 3.82
Illinois.................... 292,881 4.12 416,062,885.64 3.80
Virginia.................... 223,744 3.15 402,068,962.56 3.67
Ohio........................ 253,722 3.57 375,754,054.44 3.43
New Jersey.................. 241,840 3.40 359,796,306.29 3.29
Michigan.................... 207,024 2.91 320,272,905.35 2.93
Georgia..................... 196,582 2.77 305,500,857.11 2.79
Massachusetts............... 190,371 2.68 289,753,701.40 2.65
North Carolina.............. 167,413 2.36 270,862,719.96 2.47
Maryland.................... 155,774 2.19 262,869,089.93 2.40
Washington.................. 141,548 1.99 262,771,719.51 2.40
Missouri.................... 139,721 1.97 220,868,815.40 2.02
Indiana..................... 135,997 1.91 202,784,200.95 1.85
Tennessee................... 127,169 1.79 191,448,452.93 1.75
Minnesota................... 109,249 1.54 188,758,244.33 1.72
Arizona..................... 125,557 1.77 187,454,697.05 1.71
Colorado.................... 123,662 1.74 180,960,235.60 1.65
Connecticut................. 97,671 1.37 155,240,618.96 1.42
Alabama..................... 101,892 1.43 148,445,105.85 1.36
Louisiana................... 100,476 1.41 143,081,059.44 1.31
Oregon...................... 84,442 1.19 135,739,497.86 1.24
Oklahoma.................... 89,641 1.26 134,545,054.89 1.23
South Carolina.............. 88,455 1.25 132,186,462.97 1.21
Kentucky.................... 78,863 1.11 110,531,457.08 1.01
Kansas...................... 63,119 0.89 105,274,132.29 0.96
Arkansas.................... 62,987 0.89 94,447,670.95 0.86
Nevada...................... 61,374 0.86 89,144,217.74 0.81
Mississippi................. 59,296 0.83 81,816,863.56 0.75
West Virginia............... 47,132 0.66 70,190,387,14 0.64
New Hampshire............... 44,899 0.63 69,321,358.09 0.63
New Mexico.................. 39,419 0.56 62,409,917.24 0.57
Utah........................ 37,972 0.53 54,731,784.01 0.50
Nebraska.................... 36,483 0.51 54,298,863.32 0.50
Maine....................... 25,606 0.36 49,921,727.30 0.46
Iowa........................ 37,492 0.53 49,149,172.47 0.45
Idaho....................... 29,116 0.41 47,576,544.65 0.43
Hawaii...................... 28,217 0.40 45,398,061.60 0.41
Rhode Island................ 29,474 0.42 44,455,985.86 0.41
Montana..................... 23,221 0.33 38,640,615.02 0.35
Alaska...................... 18,850 0.27 33,563,949.37 0.31
Vermont..................... 19,886 0.28 31,506,128.56 0.29
Delaware.................... 19,753 0.28 31,190,572.75 0.29
District of Columbia........ 17,934 0.25 26,607,259.36 0.24
South Dakota................ 14,477 0.20 25,586,701.18 0.23
North Dakota................ 13,983 0.20 24,569,477.35 0.22
Wyoming..................... 13,926 0.20 21,269,016.95 0.19
Wisconsin................... 6,720 0.09 11,089,757.35 0.10
Other....................... 12,728 0.18 19,429,601.90 0.18
--------- ------ ------------------ ------
TOTAL..................... 7,105,767 100.00% $10,951,046,183.46 100.00%
========= ====== ================== ======
</TABLE>
S-25
<PAGE>
As of January 30, 1998, the Bank, like many other national credit card
issuers, had a significant concentration of credit card receivables
outstanding in California. Adverse economic conditions affecting
accountholders residing in California could affect timely payment by such
accountholders of amounts due on the Accounts and, accordingly, the actual
rates of delinquencies and losses with respect to the Trust Portfolio. See
also "Risk Factors--Certain Legal Aspects--Consumer Protection Laws" in the
Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Investor Certificates will be paid to
the Bank. The Bank will use such proceeds for general corporate purposes.
THE BANK
At December 31, 1997, the Bank had assets of approximately $6.3 billion and
stockholder's equity of approximately $681 million. For a more detailed
description of the Bank, see "The Bank" in the Prospectus.
SERIES PROVISIONS
The Investor Certificates and the Class C Interests will be issued pursuant
to the Pooling Agreement and the Series 1998-1 Supplement. The following
summary describes certain terms applicable to the Investor Certificates.
Reference should be made to the Prospectus for additional information
concerning the Investor Certificates and the Pooling Agreement.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Series Issuance Date on the outstanding principal balances of
the Class A Certificates and the Class B Certificates, respectively, at the
Class A Certificate Rate and the Class B Certificate Rate, respectively.
Interest will be distributed monthly on the 15th day of each month (or if any
such day is not a business day, the next succeeding business day), commencing
on the May 1998 Distribution Date to Investor Certificateholders in whose
names the Investor Certificates were registered at the close of business on
the last day of the calendar month preceding the date of such payment the
("Record Date"). Interest for any Payment Date will accrue from and including
the preceding Payment Date (or in the case of the first Payment Date, from and
including the Series Issuance Date) to but excluding such Payment Date.
If the Class A Certificate Rate or the Class B Certificate Rate specified in
the Summary of Terms herein is a floating rate, interest will be calculated
based on the actual number of days in the period from and including the
preceding Distribution Date (or, in the case of the initial Distribution Date,
the Series Issuance Date) to but excluding such Distribution Date and a 360-
day year. If the Class A Certificate Rate or the Class B Certificate Rate
specified in the Summary of Terms herein is a fixed rate, interest will be
calculated based on a 360-day year of twelve 30-day months.
Interest payments on the Class A Certificates for each Payment Date will be
calculated on the outstanding principal balance of the Class A Certificates as
of the close of business on the preceding Record Date (or in the case of the
initial Payment Date, on the initial Class A principal balance) based upon the
Class A Certificate Rate. On each Distribution Date, Class A Monthly Interest
and Class A Outstanding Monthly Interest for the related Monthly Period will
be (i) paid to the Class A Certificateholders, if Interest Payment Dates occur
monthly, or (ii) deposited in an Eligible Deposit Account in the name of the
Trustee and for the benefit of the Investor Certificateholders (the "Class A
Interest Funding Account"), if Interest Payment Dates occur less frequently
than monthly. Payments to the Class A Certificateholders or deposits in the
Class A Interest Funding Account on any Distribution Date will be funded from
Class A Available Funds for the related Monthly Period. To the extent Class A
Available Funds allocated to the Class A Certificateholders' Interest for such
Monthly Period are insufficient to pay such interest or make such deposits, as
applicable, Excess Spread and Excess
S-26
<PAGE>
Finance Charges allocated to Series 1998-1, amounts on deposit in the Cash
Collateral Account and Reallocated Principal Collections allocable first to
the Class C Invested Amount and then the Class B Invested Amount will be used
to make such payments or deposits. "Class A Available Funds" means, with
respect to any Monthly Period, an amount equal to the sum of (i) the Class A
Floating Percentage of collections of Finance Charge Receivables allocated to
the Series 1998-1 Interests with respect to such Monthly Period (including any
investment earnings and certain other amounts that are to be treated as
collections of Finance Charge Receivables in accordance with the Pooling
Agreement or the Series 1998-1 Supplement, but excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that is
allocable to Servicer Interchange); (ii) if such Monthly Period relates to a
Distribution Date with respect to the Class A Accumulation Period, the
Principal Funding Investment Proceeds, if any, with respect to the related
Distribution Date; (iii) if applicable, the Class A Certificateholders' pro
rata portion of interest and other investment income (net of losses and
investment expenses) earned on amounts on deposit in the Prefunding Account;
and (iv) 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
1998-1 Supplement with respect to such Distribution Date.
Interest payments on the Class B Certificates for each Payment Date will be
calculated on the outstanding principal balance of the Class B Certificates as
of the preceding Record Date (or in the case of the initial Payment Date, on
the initial Class B principal balance) based upon the Class B Certificate
Rate. On each Distribution Date, Class B Monthly Interest and Class B
Outstanding Monthly Interest for the related Monthly Period will be (i) paid
to the Class B Certificateholders, if Interest Payment Dates occur monthly, or
(ii) deposited in an Eligible Deposit Account in the name of the Trustee and
for the benefit of the Class B Investor Certificateholders (the "Class B
Interest Funding Account"), if Interest Payment Dates occur less frequently
than monthly. Payments to the Class B Certificateholders or deposits in the
Class B Interest Funding Account, as applicable, on any Distribution Date will
be funded from Class B Available Funds for such Monthly Period. To the extent
Class B Available Funds allocated to the Class B Certificateholders' Interest
for such Monthly Period are insufficient to pay such interest or make such
deposits, as applicable, Excess Spread and Excess Finance Charges allocated to
Series 1998-1, amounts on deposit in the Cash Collateral Account not required
to pay the Class A Required Amount or reimburse Class A Investor Charge-Offs
and Reallocated Principal Collections allocable to the Class C Invested Amount
and not required to pay the Class A Required Amount or reimburse Class A
Investor Charge-Offs, will be used to make such payments or deposits. "Class B
Available Funds" means, with respect to any Monthly Period, an amount equal to
the sum of (i) the Class B Floating Percentage of collections of Finance
Charge Receivables allocated to the Series 1998-1 Interests with respect to
such Monthly Period (including any investment earnings and certain other
amounts that are to be treated as collections of Finance Charge Receivables in
accordance with the Pooling Agreement or the Series 1998-1 Supplement, but
excluding the portion of collections of Finance Charge Receivables
attributable to Interchange that is allocable to Servicer Interchange); (ii)
if such Monthly Period relates to a Distribution Date that occurs on or after
the Class B Principal Commencement Date, the Principal Funding Investment
Proceeds, if any, with respect to the related Distribution Date; (iii) if
applicable, the Class B Certificateholders' pro rata portion of interest and
other investment income (net of losses and investment expenses) earned on
amounts on deposit in the Prefunding Account; and (iv) amounts, if any, to be
withdrawn from the Reserve Account which are required to be included in Class
B Available Funds pursuant to the Series 1998-1 Supplement with respect to
such Distribution Date.
Interest payments on the Class C Interests for each Payment Date will be
calculated on the outstanding principal balance of the Class C Interests as of
the preceding Record Date (or in the case of the initial Payment Date, on the
initial Class C principal balance) based upon the Class C Interest Rate.
"Class C Interest Rate" means a rate per annum not to exceed LIBOR for one-
month United States dollar deposits, determined as of the LIBOR Determination
Date as described herein, plus 1.00%. If the Class C Interest Rate specified
herein is a floating rate, interest will be calculated based on the actual
number of days in the period from and including the preceding Distribution
Date to but excluding such Distribution Date and a 360-day year. If the Class
C Interest Rate specified herein is a fixed rate, interest will be calculated
based on a 360-day year of twelve 30-day months. On each Distribution Date,
Class C Monthly Interest for the related Monthly Period and any Class C
Monthly Interest previously due but not distributed to the Class C Interest
Holders will be (i) paid to the Class C Interest
S-27
<PAGE>
Holders, if Interest Payment Dates occur monthly, or (ii) deposited in an
Eligible Deposit Account in the name of the Trustee and for the benefit of the
Class C Interest Holders (the "Class C Interest Funding Account"), if Interest
Payment Dates occur less frequently than monthly. Payments to the Class C
Interest Holders or deposits in the Class C Interest Funding Account, as
applicable, on any Distribution Date will be funded from Excess Spread and
Excess Finance Charges allocated to Series 1998-1 and amounts on deposit in
the Cash Collateral Account not required to pay the Class A Required Amount or
the Class B Required Amount or reimburse Class A Investor Charge-Offs for such
Monthly Period. To the extent such Excess Spread and Excess Finance Charges
allocated to Series 1998-1 and amounts on deposit in the Cash Collateral
Account for such Monthly Period are insufficient to pay such interest or make
such deposits, as applicable, amounts, if any, on deposit in the spread
account maintained for the benefit of the Class C Interest Holders (the "Class
C Spread Account") will be used to make such payments or deposits.
If the Class A Interest Funding Account, the Class B Interest Funding
Account and the Class C Interest Funding Account are created (because the
Interest Payment Dates occur less frequently than monthly), then funds on
deposit in the Class A Interest Funding Account, the Class B Interest Funding
Account and the Class C Interest Funding Account generally will be invested in
certain Eligible Investments. For purposes of investments of funds in the
Class B Interest Funding Account and the Class C Interest Funding Account, the
term "highest rating" as used in the definition of "Eligible Investments"
shall include A-1 as well as A-1+, in the case of a short-term rating by
Standard & Poor's. Any earnings (net of losses and investment expenses) on
funds in the Class A Interest Funding Account, the Class B Interest Funding
Account and the Class C Interest Funding Account will be paid to the Bank. If
an Early Amortization Period commences, then thereafter Class A Monthly
Interest will be distributed to the Class A Certificateholders monthly on each
Special Payment Date, Class B Monthly Interest will be distributed to the
Class B Certificateholders monthly on each Special Payment Date and Class C
Monthly Interest will be distributed to the Class C Interest Holders monthly
on each Special Payment Date and any amounts on deposit in the Class A
Interest Funding Account, the Class B Interest Funding Account and the Class C
Interest Funding Account will be distributed to the Class A
Certificateholders, the Class B Certificateholders and the Class C Interest
Holders, respectively, on the first Special Payment Date.
The Servicer will make all determinations and calculations relating to the
Class A Certificate Rate, the Class B Certificate Rate and the Class C
Interest Rate.
If the Class A Certificate Rate is a Federal Funds-based rate then the Class
A Certificates will bear interest at a rate per annum equal to the sum of
Applicable Federal Funds Rates for each day during the applicable Interest
Period divided by the number of days in such Interest Period, plus the Class A
Certificate Rate Spread.
If the Class A Certificate Rate is a Federal Funds-based rate, the Class A
Certificate Rate will be rounded to the nearest one hundred-thousandth of a
percentage point, with five one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or
.0987655)), and all dollar amounts resulting from any calculation using such
rate will be rounded to the nearest cent (with one-half cent being rounded
upward). For purposes of calculating the Applicable Federal Funds Rate, a
business day is any day other than a Saturday or Sunday in the City of New
York that is not a day on which banking institutions are authorized or
required by law, regulation or executive order to close.
If applicable, the Federal Funds Weekly Rate will reset on Monday of each
week, or if such day is not a business day, the next succeeding business day
(each, a "Federal Funds Reset Date"). If applicable, the Federal Funds Weekly
Rate applied to each day (the "Applicable Federal Funds Rate") will be (a) if
such day is a Federal Funds Reset Date, the Federal Funds Weekly Rate for such
day or (b) if such day is not a Federal Funds Reset Date, the Federal Funds
Weekly Rate on the immediately preceding Federal Funds Reset Date; provided,
however, that for each day from and including a Determination Date to but
excluding the Distribution Date relating to such Determination Date, the
Applicable Federal Funds Rate shall be the rate applied on the day immediately
preceding the Determination Date.
The "Federal Funds Weekly Rate" means, with respect to any Federal Funds
Reset Date (1) the average of the rate on Federal Funds for the 7 calendar
days ending on the Wednesday of the immediately preceding week with the rates
for non-business days assumed as the rate as of the immediately preceding
business day (each a
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"Federal Funds Determination Period"), as published in H.15(519) under the
heading "Federal funds (effective)" or, (2) if not published by 3:00 p.m., New
York City time on the business day next succeeding such Federal Funds Reset
Date, the average of the rates for each day in the Federal Funds Determination
Period as published on Bloomberg FEDL01 Index GPO GO Page Forward
("Bloomberg") under the heading "FED EFFECTIVE" and under the column "CLOSE,"
with any day for which no rate is specified assumed to be the rate on the
immediately preceding day for which a rate was published on Bloomberg. If such
rate is not published in H.15(519) and no rates are published on Bloomberg for
the related Federal Funds Determination Period, the Federal Funds Weekly Rate
will be the average of the rates for each day in the Federal Funds
Determination Period as published, with respect to each day, on the next
succeeding business day in The Wall Street Journal for near closing bid, with
any day for which no rate is specified assumed to be the rate on the
immediately preceding day for which a rate was published in The Wall Street
Journal. Notwithstanding the above, if for any day a rate other than the
average weekly rate published in H.15(519) is used, and such rate subsequently
is published in H.15(519) prior to the next Federal Funds Reset Date, then the
rate as published in H.15(519) shall be considered the Federal Funds Weekly
Rate as it applies to each day following the day of publication of such rate
in H.15(519) but prior to the next Federal Funds Reset Date.
"H.15(519)" means the weekly statistical release designated as such,
published by the Board of Governors of the Federal Reserve System (or such
other release which may replace H.15(519)).
If either the Class A Certificate Rate, the Class B Certificate Rate or the
Class C Interest Rate is a LIBOR-based rate, then the Servicer will determine
LIBOR (i) for the initial Interest Period on the second business day prior to
the Series Issuance Date and (ii) for each Interest Period following the
initial Interest Period, on the second business day prior to the commencement
of such Interest Period (each a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a business day is any day on which dealings in deposits in
U.S. Dollars are transacted in the London interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
U.S. Dollars for a period equal to the relevant Interest Period (commencing on
the first day of such Interest Period) which appears on Telerate Page 3750 as
of 11:00 a.m., London Time, on such date. If such rate does not appear on
Telerate Page 3750, the rate for that day will be determined on the basis of
the rates at which deposits in U.S. Dollars are offered by the Reference Banks
at approximately 11:00 a.m., London Time, on that day to prime banks in the
London interbank market for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period). The Servicer 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 the day will be the arithmetic mean of the quotations. If fewer than
two quotations are provided as requested, the rate for that day will be the
arithmetic mean of the rates quoted by major banks in New York City, selected
by the Servicer, at approximately 11:00 a.m., New York City time, on that day
for loans in U.S. Dollars to leading international banks for a period equal to
the relevant Interest Period (commencing on the first day of such Interest
Period).
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
"Interest Period" means, with respect to any Payment Date, a period from and
including the preceding Payment Date to but excluding such Payment Date;
provided, however, that the initial Interest Period will constitute a period
from and including the Series Issuance Date to but excluding the May 1998
Distribution Date.
PREFUNDING ACCOUNT
If the Summary of Terms herein designates Series 1998-1 a Prefunded Series,
then the Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Prefunding Account as an Eligible
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Deposit Account held for the benefit of the Series 1998-1 Holders. If
applicable, funds on deposit in the Prefunding Account will be withdrawn on
the Funding Dates and paid to the Seller, and the Invested Amount will be
increased by a corresponding amount, to the extent that the principal amount
of the Seller's Interest on such day exceeds the Required Funding Percentage
specified in the Summary of Terms of the sum of the aggregate amount of
Principal Receivables in the Trust and amounts on deposit in the Excess
Funding Account on such day; provided, however, that the Invested Amount will
in no event exceed the Initial Investor Amount or increase by an amount in
excess of the Prefunded Amount immediately prior to giving effect to such
increase. Should the Prefunded Amount be greater than zero at the end of the
Funding Period, any principal amounts remaining on deposit in the Prefunding
Account will be withdrawn for pro rata distribution to the Class A
Certificateholders, the Class B Certificateholders and the Class C Interest
Holders on the next succeeding Distribution Date.
All amounts on deposit in the Prefunding Account, if applicable, will be
invested by the Trustee in Eligible Investments. On each Distribution Date
with respect to the Funding Period, the amount of interest and other
investment income (net of losses and investment expenses) earned on amounts on
deposit in the Prefunding Account during the preceding Monthly Period will be
withdrawn from the Prefunding Account and deposited into the Collection
Account for distribution to the Series 1998-1 Holders. Such investment income
will be deemed to be collections of Finance Charge Receivables allocable to
the Investor Certificateholders' Interest and the Class C Investors' Interest
for such Monthly Period.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Series Cut-Off Date and
ends on the day before the commencement of the Class A Accumulation Period or,
if earlier, the Early Amortization Period or the Principal Payment Period), no
principal payments will be made to Investor Certificateholders (other than, if
applicable, principal payments made from amounts on deposit in the Prefunding
Account on the first Distribution Date following the end of the Funding
Period). During the Class A Accumulation Period (on or prior to the Class A
Expected Final Payment Date), principal will be deposited in the Principal
Funding Account as described below and on the Class A Expected Final Payment
Date will be distributed to Class A Certificateholders up to the Class A
Invested Amount. On each Distribution Date during the Class B Amortization
Period, principal payments will be distributed to the Class B
Certificateholders up to the Class B Invested Amount. During the Early
Amortization Period, which will begin upon the occurrence of a Pay Out Event,
or during the Principal Payment Period, and until the Termination Date occurs,
principal will be paid first to the Class A Certificateholders until the Class
A Invested Amount has been paid in full, and then to the Class B
Certificateholders until the Class B Invested Amount has been paid in full,
and then to the Class C Interest Holders. No principal payments will be made
in respect of the Class C Invested Amount until the final principal payment
has been made to the Class A Certificateholders and the Class B
Certificateholders.
On each Distribution Date during the Revolving Period, collections of
Principal Receivables allocable to the Investor Certificateholders' Interest
and the Class C Investors' Interest will, subject to certain limitations,
including the allocation of any Reallocated Principal Collections with respect
to the related Monthly Period to pay the Class A Required Amount and the Class
B Required Amount, be paid to the Bank to purchase additional Receivables in
order to maintain the Invested Amount, and, if necessary, be treated as Shared
Principal Collections.
On each Distribution Date of the Class A Accumulation Period, the Trustee
will deposit in the Principal Funding Account an amount equal to the least of
(a) Available Investor Principal Collections on deposit in the Collection
Account with respect to such Distribution Date, (b) the applicable Controlled
Deposit Amount for such Distribution Date and (c) the Class A Adjusted
Invested Amount, until the Principal Funding Account Balance equals the Class
A Invested Amount. Amounts on deposit in the Principal Funding Account will be
paid to the Class A Certificateholders on the Class A Expected Final Payment
Date. After the Class A Invested Amount has been paid in full, on each
Distribution Date during the Class B Amortization Period, amounts equal to the
lesser of (a) Available Investor Principal Collections on deposit in the
Collection Account with respect to
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such Distribution Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Distribution Date)
and (b) the Class B Invested Amount will be paid to the Class B
Certificateholders.
If a Pay Out Event or, if Series 1998-1 is an Extendable Series, a Principal
Payment Event occurs with respect to Series 1998-1, the Early Amortization
Period or the Principal Payment Period will commence and (i) any amount on
deposit in the Principal Funding Account will be paid to the Class A
Certificateholders on the first Special Payment Date and (ii) any amount on
deposit in the Prefunding Account will be distributed to the Investor
Certificateholders and the Class C Interest Holders on a pro rata basis based
on the Class A Initial Invested Amount, the Class B Initial Invested Amount
and the Class C Initial Invested Amount, respectively. If, on an Expected
Final Payment Date, monies on deposit in the Principal Funding Account are
insufficient to pay the scheduled principal amount, a Pay Out Event will occur
and the Early Amortization Period will commence. After payment in full of the
Class A Invested Amount, the Class B Certificateholders will be entitled to
receive an amount equal to the Class B Invested Amount.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
product of the Principal Allocation Percentage of all collections of Principal
Receivables received during such Monthly Period, minus (ii) the amount of
Reallocated Principal Collections with respect to such Monthly Period used to
fund the Class A Required Amount or the Class B Required Amount, plus (b) the
amount of Miscellaneous Payments, if any, for such Monthly Period allocated to
Series 1998-1, plus (c) any Shared Principal Collections with respect to other
Series that are allocated to Series 1998-1, plus (d) the amount, if any, of
Class A Available Funds to be distributed to cover the Class A Investor
Default Amount with respect to the related Distribution Date, plus (e) any
other amounts which pursuant to the Series 1998-1 Supplement are to be treated
as Available Investor Principal Collections with respect to the related
Distribution Date, plus (f) the proceeds of any withdrawal from the Class C
Spread Account in respect of the Class C Investor Default Amount (which
proceeds will only be used to make principal payments on the Class C
Interests).
The Class A Accumulation Period is scheduled to commence at the close of
business on the last day of the July 2006 Monthly Period. However, the
Servicer may elect to postpone the commencement of the Class A 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 Class A Accumulation Period Length (determined as
described below) is less than twenty months. On each Determination Date until
the Class A Accumulation Period begins, the Servicer will determine the "Class
A Accumulation Period Length," which is the number of months expected to be
required to fully fund the Principal Funding Account no later than the Class A
Expected Final Payment Date, based on (i) the expected monthly collections of
Principal Receivables expected to be distributable to the Certificateholders
of all Series (excluding certain other Series), assuming a principal payment
rate no greater than the lowest monthly principal payment rate on the
Receivables for the preceding twelve months and (ii) 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 period
during the Class A Accumulation Period. If the Class A Accumulation Period
Length is less than twenty months, the Servicer may, at its option, postpone
the commencement of the Class A Accumulation Period such that the number of
months included in the Class A Accumulation Period will be equal to or exceed
the Class A Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Class A
Accumulation Period based on the invested amounts of certain other Series
which are expected to be in their revolving periods during the Class A
Accumulation Period or on increases in the principal payment rate occurring
after the Series Issuance Date. Notwithstanding the above, the Series 1998-1
Supplement may require that the number of months in the Class A Accumulation
Period exceed the Class A Accumulation Period Length and that certain minimum
deposits be made to the Principal Funding Account during the Class A
Accumulation Period. The length of the Class A Accumulation Period will not be
less than one month. If the commencement of the Class A Accumulation Period is
delayed in accordance with the foregoing, and if a Pay Out Event occurs after
the date originally scheduled as the commencement of the Class A Accumulation
Period, then it is probable
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that the Class A Certificateholders would receive some of their principal
later than if the Class A Accumulation Period had not been delayed.
On each Distribution Date during the Early Amortization Period or the
Principal Payment Period until the Class A Invested Amount has been paid in
full or the Termination Date occurs, the Class A Certificateholders will be
entitled to receive Available Investor Principal Collections in an amount up
to the Class A Invested Amount. After payment in full of the Class A Invested
Amount, the Class B Certificateholders will be entitled to receive on each
Distribution Date Available Investor Principal Collections until the earlier
of the date the Class B Invested Amount is paid in full and the Series 1998-1
Termination Date.
SUBORDINATION
The Class B Certificateholders' Interest and the Class C Investors' Interest
will be subordinated to the extent necessary to fund certain payments with
respect to the Class A Certificates. In addition, the Class C Investors'
Interest will be subordinated to the extent necessary to fund certain payments
with respect to the Class B Certificates. Certain principal payments otherwise
allocable to the Class B Certificateholders may be reallocated to the Class A
Certificateholders and the Class B Invested Amount may be decreased.
Similarly, certain principal payments allocable to the Class C Investors'
Interest may be reallocated to the Class A Certificateholders and the Class B
Certificateholders and the Class C Invested Amount may be reduced. To the
extent the Class B Invested Amount is reduced, the percentage of collections
of Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal and interest distributable to the Class B Certificateholders will
be reduced. See "--Allocation Percentages," "--Reallocation of Cash Flows" and
"--Application of Collections--Excess Spread; Excess Finance Charges" herein.
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Investor Certificateholders' Interest and the Class C Investors' Interest, the
certificateholders' interest for all other Series of certificates issued and
outstanding and the Seller's Interest all collections of Finance Charge
Receivables and Principal Receivables and the Defaulted Amount with respect to
such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 1998-1 based on the
Floating Allocation Percentage. The "Floating Allocation Percentage" means,
with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
the sum of the Adjusted Invested Amount as of the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the Initial
Invested Amount as of the Series Issuance Date) and the denominator of which
is the sum of the total amount of the Principal Receivables in the Trust as of
such day (or with respect to the first Monthly Period, the total amount of
Principal Receivables in the Trust on the Series Cut-Off Date) and the
principal amount on deposit in the Excess Funding Account as of such day;
provided, however, that if (i) Series 1998-1 is a Prefunded Series and (ii)
the Invested Amount has increased during the previous Monthly Period as a
result of an increase in the amount of Principal Receivables in the Trust,
then the numerator above shall instead be equal to an average Adjusted
Invested Amount for such Monthly Period. Such amounts so allocated will be
further allocated between the Class A Certificateholders, the Class B
Certificateholders and the Class C Interest Holders in accordance with the
Class A Floating Percentage, the Class B Floating Percentage and the Class C
Floating Percentage, respectively. The "Class A Floating Percentage" means,
with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the Class A Adjusted Invested Amount 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 Series Issuance Date) and the denominator of which
is equal to the Adjusted Invested Amount as of the close of business on such
day (or with respect to the first Monthly Period, the Initial Invested
Amount). The "Class B Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is equal
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to the Class B Invested Amount 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 Series Issuance Date) and the denominator of which is equal to the
Adjusted Invested Amount at the close of business on such day (or with respect
to the first Monthly Period, the Initial Invested Amount). The "Class C
Floating Percentage" means, 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 C Invested Amount 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 Series Issuance Date) and the denominator of which
is equal to the Adjusted Invested Amount as of the close of business on such
day (or with respect to the first Monthly Period, the Initial Invested
Amount).
Collections of Principal Receivables will be allocated to Series 1998-1
based on the Principal Allocation Percentage. The "Principal Allocation
Percentage" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is (a) during the Revolving Period, the Invested Amount as
of the last day of the immediately preceding Monthly Period (or, in the case
of the first Monthly Period, the Series Issuance Date) and (b) during the
Class A Accumulation Period, the Class B Amortization Period, the Class C
Amortization Period, the Principal Payment Period or the Early Amortization
Period, the Invested Amount as of the last day of the Revolving Period and the
denominator of which is the greater of (i) the sum of the total amount of
Principal Receivables in the Trust as of the last day of the immediately
preceding Monthly Period and the principal amount on deposit in the Excess
Funding Account as of such last day (or, in the case of the first Monthly
Period, the Series Cut-Off Date) and (ii) the sum of the numerators used to
calculate the principal allocation percentages for all Series outstanding as
of the date as to which such determination is being made; provided, however,
that if (i) Series 1998-1 is designated a Prefunded Series in the Summary of
Terms herein, and (ii) the Invested Amount has increased during the previous
Monthly Period as a result of payments made to the Seller from amounts on
deposit in the Prefunding Account, then the numerator referred to in (a) above
shall instead be equal to an average Adjusted Invested Amount for such Monthly
Period; and provided further, however, that because the Investor Certificates
are subject to being paired with a future Series, if a Pay Out Event occurs
with respect to such a paired Series during the Class A Accumulation Period,
the Class B Amortization Period, the Class C Amortization Period, the
Principal Payment Period or the Early Amortization Period with respect to
Series 1998-1, the Bank may, by written notice delivered to the Trustee and
the Servicer, designate a different numerator for the foregoing fraction,
provided that such numerator is not less than the Adjusted Invested Amount as
of the last day of the revolving period for such paired Series and the Bank
shall have received written notice from each Rating Agency that such
designation will not have a Ratings Effect and the Bank 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 the time, in the reasonable belief
of the Bank, such designation will not cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time, would constitute a Pay Out
Event, to occur with respect to Series 1998-1. Such amounts so allocated to
the Investor Certificateholders will be further allocated between the Class A
Certificateholders and the Class B Certificateholders based on the Class A
Principal Percentage and the Class B Principal Percentage, respectively. The
"Class A Principal Percentage" means, with respect to any Monthly Period (a)
during the Revolving Period, the percentage equivalent (which shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Invested Amount as of the last day of the immediately preceding Monthly Period
(or, in the case of the first Monthly Period, the Class A Initial Invested
Amount), and the denominator of which is equal to the Invested Amount as of
such day (or, in the case of the first Monthly Period, the Initial Invested
Amount) and (b) during the Class A Accumulation Period, the Class B
Amortization Period, the Class C Amortization Period, the Principal Payment
Period or the Early Amortization Period, the percentage equivalent (which
shall never exceed 100%) of a fraction, the numerator of which is the Class A
Invested Amount as of the last day of the Revolving Period, and the
denominator of which is the Invested Amount as of such last day. The "Class B
Principal Percentage" means, with respect to any Monthly Period, (i) during
the Revolving Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Class B Invested
Amount as of the last day of the immediately preceding Monthly Period (or, in
the case of the first Monthly Period, the Class B Initial Invested Amount) and
the denominator of which is the Invested Amount as of such day (or, in the
case of the first Monthly Period, the Initial Invested Amount) and (ii) during
the Class A
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Accumulation Period, the Class B Amortization Period, the Class C Amortization
Period, the Principal Payment Period or the Early Amortization Period, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Class B Invested Amount as of the last
day of the Revolving Period, and the denominator of which is the Invested
Amount as of such last day.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, minus (ii) the amount of principal payments
made to the Class A Certificateholders on or prior to such date (other than,
if applicable, principal payments made from amounts on deposit in the
Prefunding Account on the first Distribution Date following the end of the
Funding Period), minus (iii) the excess, if any, of the aggregate amount of
Class A Investor Charge-Offs for all prior Distribution Dates over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates prior to such date, plus (iv) if applicable, the amount of
any increases in the Class A Invested Amount during the Funding Period as a
result of payments made to the Seller from amounts on deposit in the
Prefunding Account.
"Class B Invested Amount" for any date means an amount equal to (i) the
Class B Initial Invested Amount, minus (ii) the amount of principal payments
made to Class B Certificateholders on or prior to such date (other than, if
applicable, principal payments made from amounts on deposit in the Prefunding
Account on the first Distribution Date following the end of the Funding
Period), minus (iii) the excess, if any, of the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates over the aggregate
amount of any reimbursement of Class B Investor Charge-Offs for all
Distribution Dates preceding such date, minus (iv) the aggregate amount of
Reallocated Principal Collections for all prior Distribution Dates which have
been used to fund the Required Amount with respect to such Distribution Dates
(excluding any Reallocated Principal Collections that have resulted in a
reduction of the Class C Invested Amount), minus (v) an amount equal to the
amount by which the Class B Invested Amount has been reduced to fund the Class
A Investor Default Amount on all prior Distribution Dates as described under
"Class A Investor Charge-Offs," plus (vi) the aggregate amount of Excess
Spread and Excess Finance Charges allocated to Series 1998-1 and applied on
all prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (iii), (iv) and (v), plus (vii) if
applicable, the amount of any increases in the Class B Invested Amount during
the Funding Period as a result of payments made to the Seller from amounts on
deposit in the Prefunding Account.
"Class A Adjusted Invested Amount," for any date of determination, means an
amount equal to the then current Class A Invested Amount, minus the funds on
deposit in the Principal Funding Account on such date.
"Class C Invested Amount" means an amount equal to (i) the Class C Initial
Invested Amount, minus (ii) the aggregate amount of principal payments made to
the Class C Interest Holders prior to such date (other than principal payments
made from the proceeds of any withdrawal from the Class C Spread Account for
the purpose of reimbursing previous reductions in the Class C Invested
Amount), minus (iii) the aggregate amount of Reallocated Principal Collections
allocable to the Class C Invested Amount for all prior Distribution Dates
which have been used to fund the Class A Required Amount or the Class B
Required Amount, minus (iv) an amount equal to the aggregate amount by which
the Class C Invested Amount has been reduced to fund the Class A Investor
Default Amount and the Class B Investor Default Amount on all prior
Distribution Dates as described under "--Defaulted Receivables; Investor
Charge-Offs," minus (v) an amount equal to the product of the Class C Floating
Percentage and the Investor Default Amount (the "Class C Investor Default
Amount") with respect to any Distribution Date that is not funded out of
Excess Spread and Excess Finance Charges allocated to Series 1998-1 and
available for such purpose on such Distribution Date, plus (vi) the aggregate
amount of Excess Spread and Excess Finance Charges allocated and available to
reimburse amounts deducted pursuant to the foregoing clauses (iii), (iv) and
(v), plus (vii) if applicable, the amount of any increases in the Class C
Invested Amount during the Funding Period as a result of payments made to the
Seller from amounts on deposit in the Prefunding Account; provided, however,
that the Class C Invested Amount may not be reduced below zero.
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"Invested Amount," for any date, means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Class C Invested
Amount.
"Class A Investor Amount" for any date means an amount equal to the sum of
the Class A Invested Amount plus the product of (i) a fraction, the numerator
of which is the Class A Initial Investor Amount and the denominator of which
is the Initial Investor Amount and (ii) the amount, if any, on deposit in the
Prefunding Account, if applicable.
"Class B Investor Amount" for any date means an amount equal to the sum of
the Class B Invested Amount plus the product of (i) a fraction, the numerator
of which is the Class B Initial Investor Amount and the denominator of which
is the Initial Investor Amount and (ii) the amount, if any, on deposit in the
Prefunding Account, if applicable.
"Class C Investor Amount" for any date means an amount equal to the sum of
the Class C Invested Amount plus the product of (i) a fraction, the numerator
of which is the Class C Initial Invested Amount and the numerator of which is
the Initial Invested Amount and (ii) the amount, if any, on deposit in the
Prefunding Account, if applicable.
"Investor Amount" for any date means an amount equal to the sum of the
Invested Amount plus any amounts on deposit in the Prefunding Account, if
applicable.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the trustee, on
behalf of the Trust, the Principal Funding Account as an Eligible Deposit
Account held for the benefit of the Class A Investor Certificateholders.
During the Class A Accumulation Period, the Servicer will transfer collections
in respect of Principal Receivables, Shared Principal Collections allocated to
Series 1998-1, Miscellaneous Payments allocated to Series 1998-1 and other
amounts described herein to be treated in the same manner as collections of
Principal Receivables from the Collection Account to the Principal Funding
Account as described under "--Application of Collections."
Unless a Pay Out Event or, if Series 1998-1 is an Extendable Series, a
Principal Payment Event has occurred with respect to the Investor
Certificates, all amounts on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from the Principal Funding Account
to be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. On each Distribution Date with respect to the Class A
Accumulation Period (on or prior to the Class A Expected Final Payment Date)
the interest and other investment income (net of investment expenses and
losses) earned on such investments (the "Principal Funding Investment
Proceeds") will be withdrawn from the Principal Funding Account and will be
treated as a portion of Class A Available Funds. If such investments with
respect to any such Distribution Date yield less than the Class A Certificate
Rate, the Principal Funding Investment Proceeds with respect to such
Distribution Date will be less than the Covered Amount for such following
Distribution Date. It is intended that any such shortfall will be funded from
Class A Available Funds (including a withdrawal from the Reserve Account, if
necessary, as described under "--Reserve Account"). The Available Reserve
Account Amount at any time will be limited and there can be no assurance that
sufficient funds will be available to fund any such shortfall. The "Covered
Amount" shall mean an amount equal to (i) if the Class A Certificate Rate is a
fixed rate, one-twelfth of the product of the Class A Certificate Rate and the
Principal Funding Account Balance, if any, as of the preceding Distribution
Date, and (ii) if the Class A Certificate Rate is a floating rate, the product
of (A) a fraction, the numerator of which is the actual number of days in the
period from and including the preceding Distribution Date to but excluding
such Distribution Date and the denominator of which is 360, (B) the Class A
Certificate Rate and (C) the Principal Funding Account Balance, if any, as of
the preceding Distribution Date.
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RESERVE ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the Class
A Certificateholders (the "Reserve Account"). The Reserve Account is
established to assure the subsequent distribution of interest on the Class A
Certificates as provided in this Prospectus Supplement during the Class A
Accumulation Period. On each Distribution 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 and Excess Finance Charges allocated to Series 1998-1 (to the extent
described below under "--Application of Collections--Payment of Interest, Fees
and Other Items") 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 Distribution Date with respect to
the Monthly Period which commences no later than three months prior to the
Distribution Date with respect to the Monthly Period during which the Class A
Accumulation Period begins or such earlier date as the Servicer may designate.
The "Required Reserve Account Amount" for any Distribution Date on or after
the Reserve Account Funding Date will be equal to the product of $5,000,000
and the Reserve Account Factor as of such Distribution Date. On each
Distribution Date, after giving effect to any deposit to be made to, and any
withdrawal to be made from, the Reserve Account on such Distribution 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 pay such amount to the Seller. The "Reserve Account
Factor" for any Distribution Date will be equal to the percentage (not to
exceed 100%) equivalent of a fraction, the numerator of which is the number of
Monthly Periods scheduled to be included in the Class A Accumulation Period
(as such may have been postponed at the option of the Servicer) as of such
Distribution Date and the denominator of which is twenty.
Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
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 therein is less than the
Required Reserve Account Amount) or deposited in the Collection Account and
treated as collections of Finance Charge Receivables.
On or before each Distribution Date with respect to the Class A Accumulation
Period (on or prior to the Class A Expected Final Payment Date) and on the
first Special Payment Date, a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the Collection
Account and included in Class A Available Funds, in an amount equal to the
lesser of (a) the Available Reserve Account Amount with respect to such
Distribution Date or Special Payment Date and (b) the excess, if any, of the
Covered Amount with respect to such Distribution Date or Special Payment Date
over the Principal Funding Investment Proceeds with respect to such
Distribution Date or Special Payment Date; provided that the amount of such
withdrawal shall be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Distribution Date or
Special Payment Date. On each Distribution Date, the amount available to be
withdrawn from the Reserve Account (the "Available Reserve Account Amount")
will be equal to the lesser of the amount on deposit in the Reserve Account
(before giving effect to any deposit to be made to the Reserve Account on such
Distribution Date) and the Required Reserve Account Amount for such
Distribution Date.
The Reserve Account will be terminated following the earlier to occur of (a)
the termination of the Trust pursuant to the Pooling Agreement, (b) the date
on which the Class A Certificates are paid in full and (c) if the Class A
Accumulation Period has not commenced, the occurrence of a Pay Out Event or a
Principal Payment Event with respect to Series 1998-1 or, if the Class A
Accumulation Period has commenced, the first Special 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 paid to the Seller. Any amounts withdrawn from the
Reserve Account and paid to the Seller as described above will not be
available for distribution to the Investor Certificateholders or the Class C
Interest Holders.
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REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class A Required Amount"), which will
be equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Outstanding Monthly
Interest, (iii) any Class A Additional Interest, (iv) the Class A Servicing
Fee for such Distribution Date and any unpaid Class A Servicing Fee and (v)
the Class A Investor Default Amount, if any, for such Distribution Date
exceeds the sum of (A) the amount of Principal Funding Investment Proceeds, if
any, with respect to such Distribution Date, (B) the Class A Floating
Percentage of collections of Finance Charge Receivables allocated to Series
1998-1 (including any investment earnings treated as collections of Finance
Charge Receivables in accordance with the Pooling Agreement or the Series
1998-1 Supplement but excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (C) if applicable, the Class A Certificateholders' pro rata
portion of interest and other investment income (net of losses and investment
expenses) earned on amounts on deposit in the Prefunding Account, and (D) the
amount of funds, if any, to be withdrawn from the Reserve Account and
allocated to the Class A Certificates pursuant to the Series 1998-1
Supplement. If the Class A Required Amount is greater than zero, Excess Spread
and Excess Finance Charges allocated to Series 1998-1 and available for such
purpose will be used to fund the Class A Required Amount with respect to such
Distribution Date. If such Excess Spread and Excess Finance Charges available
with respect to such Distribution Date are less than the Class A Required
Amount, amounts, if any, on deposit in the Cash Collateral Account will then
be used to fund the remaining Class A Required Amount. If such Excess Spread
and Excess Finance Charges and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to fund the Class A Required Amount,
collections of Principal Receivables allocable first to the Class C Invested
Amount and then to the Class B Certificates for the related Monthly Period
("Reallocated Principal Collections") will then be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread and Excess Finance
Charges allocated to Series 1998-1 and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to fund the Class A Required Amount for
such related Monthly Period, then the Class C Invested Amount will be reduced
by the amount of such excess (but not by more than the Class A Investor
Default Amount for such Distribution Date). In the event that such reduction
would cause the Class C Invested Amount to be a negative number, the Class C
Invested Amount will be reduced to zero, and the Class B Invested Amount will
be reduced by the amount by which the Class C Invested Amount would have been
reduced below zero (but not by more than the excess of the Class A Investor
Default Amount, if any, for such Distribution Date over the amount of such
reduction, if any, of the Class C Invested Amount with respect to such
Distribution Date). In the event that such reduction would cause the Class B
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but
not by more than the excess, if any, of the Class A Investor Default Amount
for such Distribution Date over the amount of the reductions, if any, of the
Class C Invested Amount and the Class B Invested Amount with respect to such
Distribution Date as described above. Any such reduction in the Class A
Invested Amount will have the effect of slowing or reducing the return of
principal and interest to the Class A Certificateholders. In such case, the
Class A Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. See "--Defaulted
Receivables; Investor Charge-Offs."
Reductions of the Class A or Class B Invested Amount shall thereafter be
reimbursed and the Class A or Class B Invested Amount increased on each
Distribution Date by the amount, if any, of Excess Spread and Excess Finance
Charges. See "--Application of Collections--Excess Spread; Excess Finance
Charges." When such reductions of the Class A and Class B Invested Amount have
been fully reimbursed, reductions of the Class C Invested Amount will be
reimbursed and the Class C Invested Amount increased in a similar manner.
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class B Required Amount"), which will
be equal to the sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Outstanding
Monthly Interest, (iii) any Class B Additional Interest and (iv) the Class B
Servicing Fee for such Distribution Date and any unpaid
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Class B Servicing Fee exceeds the collections of Finance Charge Receivables
allocable to the Class B Certificates for the related Monthly Period and
certain other available amounts described herein and (b) the Class B Investor
Default Amount for the related Monthly Period. If the Class B Required Amount
is greater than zero, Excess Spread and Excess Finance Charges allocated to
Series 1998-1 and not required to pay the Class A Required Amount or reimburse
Class A Investor Charge-Offs will be used to fund the Class B Required Amount
with respect to such Distribution Date. If such Excess Spread and Excess
Finance Charges available with respect to such Distribution Date are less than
the Class B Required Amount, amounts, if any, on deposit in the Cash
Collateral Account not required to fund the Class A Required Amount will then
be used to fund the remaining Class B Required Amount. If such Excess Spread
and Excess Finance Charges and amounts, if any, on deposit in the Cash
Collateral Account are insufficient to pay the Class B Required Amount,
Reallocated Principal Collections allocable to the Class C Investors' Interest
and not required to pay the Class A Required Amount for the related Monthly
Period will then be used to fund the remaining Class B Required Amount. If
such Reallocated Principal Collections allocable to the Class C Investors'
Interest with respect to the related Monthly Period are insufficient to fund
the remaining Class B Required Amount, then the Class C Invested Amount will
be reduced by the amount of such insufficiency (but not by more than the Class
B Investor Default Amount for such Distribution Date). In the event that such
a reduction would cause the Class C Invested Amount to be a negative number,
the Class C Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Class C Invested Amount
would have been reduced below zero (but not by more than the excess of the
Class B Investor Default Amount for such Distribution Date over the amount of
such reduction of the Class C Invested Amount), and the Class B
Certificateholders will bear directly the credit and other risks associated
with their undivided interests in the Trust. See "--Defaulted Receivables;
Investor Charge-Offs."
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class
A Available Funds, Class B Available Funds and Class C Available Funds (see
"--Interest Payments" above) on deposit in the Collection Account in the
following priority:
(A) On each Distribution Date, an amount equal to the Class A Available
Funds with respect to such Distribution Date will be distributed in the
following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution Date,
plus the amount of any Class A Outstanding Monthly Interest, plus the
amount of any Class A Additional Interest for such Distribution Date
will be (x) distributed to the Class A Certificateholders, if Interest
Payment Dates occur monthly, or (y) deposited in the Class A Interest
Funding Account, if Interest Payment Dates occur less frequently than
monthly;
(ii) an amount equal to the Class A Servicing Fee for such Distribution
Date, plus the amount of any Class A Servicing Fee previously due but
not distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer (unless such amount has been netted
against deposits to the Collection Account);
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" below.
(B) On each Distribution Date, an amount equal to the Class B Available
Funds with respect to such Distribution Date will be distributed in the
following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution Date,
plus the amount of any Class B Outstanding Monthly Interest, plus the
amount of any Class B Additional Interest for such Distribution Date
will be (x) distributed to the Class B Certificateholders, if Interest
Payment Dates
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<PAGE>
occur monthly, or (y) deposited in the Class B Interest Funding Account,
if Interest Payment Dates occur less frequently than monthly;
(ii) an amount equal to the Class B Servicing Fee for such Distribution
Date, plus the amount of any Class B Servicing Fee previously due but
not distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer (unless such amount has been netted
against deposits to the Collection Account); and
(iii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" below.
(C) On each Distribution Date, an amount equal to the Class C Available
Funds with respect to such Distribution Date will be distributed in the
following priority:
(i) an amount equal to the Class C Servicing Fee for such Distribution Date,
plus the amount of any Class C Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer (unless such amount has been netted against
deposits to the Collection Account); and
(ii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to (i) if the Class A Certificate Rate specified in the Summary
of Terms is a floating rate, the product of (A) a fraction, the numerator of
which is the actual number of days in the period from and including the
preceding Distribution Date and the denominator of which is 360, (B) the Class
A Certificate Rate and (C) the outstanding principal balance of the Class A
Certificates as of the preceding Record Date, or (ii) if the Class A
Certificate Rate specified in the Summary of Terms is a fixed rate, one-
twelfth of the product of the Class A Certificate Rate and the outstanding
principal balance of the Class A Certificates as of the preceding Record Date;
provided, however, with respect to the first Distribution Date, Class A
Monthly Interest shall be equal to the interest accrued on the outstanding
principal balance of the Class A Certificates at the Class A Certificate Rate
for the period from the Series Issuance Date to but excluding the first
Distribution Date; and provided further that, with respect to the first
Distribution Date following the Monthly Period in which an Additional Issuance
Date occurs, Class A Monthly Interest shall be increased by the amount equal
to the product of (a) a fraction, the numerator of which is the actual number
of days in the period from and including such Additional Issuance Date to but
excluding such Distribution Date (which actual number of days in the period
shall be computed using a 30-day month if the Class A Certificate Rate is a
fixed rate) and the denominator of which is 360, (b) the Class A Certificate
Rate and (c) the increase in the outstanding principal balance of the Class A
Certificates as a result of such Additional Issuance.
"Class A Outstanding Monthly Interest" means, with respect to any
Distribution Date, the amount of Class A Monthly Interest previously due but
not (i) paid to the Class A Certificateholders or (ii) deposited in the Class
A Interest Funding Account, as applicable.
"Class A Additional Interest" means any additional interest with respect to
interest amounts that were due but not (i) distributed to the Class A
Certificateholders on a prior Payment Date or (ii) deposited in the Class A
Interest Funding Account on a prior Distribution Date, as applicable, at a
rate equal to the Class A Certificate Rate plus 2% per annum.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to (i) if the Class B Certificate Rate specified in the Summary
of Terms is a floating rate, the product of (A) a fraction, the numerator of
which is the actual number of days in the period from and including the
preceding Distribution Date and the denominator of which is 360, (B) the Class
B Certificate Rate and (C) the outstanding principal balance of the Class B
Certificates as of the preceding Record Date, or (ii) if the Class B
Certificate Rate specified in the Summary of Terms is a fixed rate, one-
twelfth of the product of the Class B Certificate Rate and
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the outstanding principal balance of the Class B Certificates as of the
preceding Record Date; provided, however, with respect to the first
Distribution Date, Class B Monthly Interest shall be equal to the interest
accrued on the outstanding principal balance of the Class B Certificates at
the Class B Certificate Rate for the period from the Series Issuance Date to
but excluding the first Distribution Date; and provided further that, with
respect to the first Distribution Date following the Monthly Period in which
an Additional Issuance Date occurs, Class B Monthly Interest shall be
increased by the amount equal to the product of (a) a fraction, the numerator
of which is the actual number of days in the period from and including such
Additional Issuance Date to but excluding such Distribution Date (which actual
number of days in the period shall be computed using a 30-day month if the
Class B Certificate Rate is a fixed rate) and the denominator of which is 360,
(b) the Class B Certificate Rate and (c) the increase in the outstanding
principal balance of the Class B Certificates as a result of such Additional
Issuance.
"Class B Outstanding Monthly Interest" means, with respect to any
Distribution Date, the amount of Class B Monthly Interest previously due but
not (i) paid to the Class B Certificateholders or (ii) deposited in the Class
B Interest Funding Account, as applicable.
"Class B Additional Interest" means any additional interest with respect to
interest amounts that were due but not (i) distributed to the Class B
Certificateholders on a prior Payment Date or (ii) deposited in the Class B
Interest Funding Account on a prior Distribution Date, as applicable, at a
rate equal to the Class B Certificate Rate plus 2% per annum.
"Class C Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class C Floating Percentage of the
collections of Finance Charge Receivables (including any investment earnings
and certain other amounts that are to be treated as collections of Finance
Charge Receivables in accordance with the Pooling Agreement or the Series
1998-1 Supplement, but other than Finance Charge Receivables allocated to
Servicer Interchange with respect to such Monthly Period) allocated to Series
1998-1 and (b) if applicable, the Class C Interest Holders' pro rata portion
of interest and other investment income (net of losses and expenses) earned on
amounts on deposit in the Prefunding Account.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above, clause
(B)(iii) above and clause (C)(ii) above.
Excess Spread; Excess Finance Charges. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply Excess
Spread and Excess Finance Charges allocated to Series 1998-1 with respect to
the related Monthly Period to make the following distributions in the
following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect to
such Distribution Date will be used to fund any deficiency pursuant to
clauses (A)(i), (ii) and (iii) above under "--Payment of Interest, Fees
and Other Items;" provided that, in the event the Class A Required
Amount for such Distribution Date exceeds the amount of Excess Spread
and Excess Finance Charges allocated to Series 1998-1, such Excess
Spread and Excess Finance Charges shall be applied first to pay amounts
due with respect to such Distribution Date pursuant to clause (A)(i)
above under "--Payment of Interest, Fees and Other Items," second to
pay the Class A Servicing Fee pursuant to clause (A)(ii) above under
"--Payment of Interest, Fees and Other Items" and third to pay the
Class A Investor Default Amount for such Distribution Date pursuant to
clause (A)(iii) above under "--Payment of Interest, Fees and Other
Items";
(b) an amount equal to the aggregate amount of Class A Investor Charge-Offs
which have not been previously reimbursed (after giving effect to the
allocation on such Distribution Date of certain other amounts applied
for that purpose) will be treated as a portion of Available Investor
Principal Collections for such Distribution Date as described under "--
Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with respect to
such Distribution Date will be (I) used to fund any deficiency pursuant
to clauses (B)(i) and (ii) above under "--Payment of Interest, Fees and
Other Items" and (II) applied, up to the Class B Investor Default
Amount, as a
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portion of Available Investor Principal Collections for such Distribution
Date; provided that, in the event the Class B Required Amount for such
Distribution Date exceeds the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-1, such Excess Spread and Excess Finance
Charges shall be applied first to pay amounts due with respect to such
Distribution Date pursuant to clause (B)(i) above under "--Payment of
Interest, Fees and Other Items," second to pay the Class B Servicing Fee
pursuant to clause (B)(ii) above under "--Payment of Interest, Fees and
Other Items" and the remainder applied as a portion of Available Investor
Principal Collections for such Distribution Date pursuant to clause
(c)(II);
(d) an amount equal to the aggregate amount by which the Class B Invested
Amount has been reduced pursuant to clauses (iii), (iv) and (v) of the
definition of "Class B Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated
as a portion of Available Investor Principal Collections for such
Distribution Date;
(e) an amount equal to the sum of (I) Class C Monthly Interest for such
Distribution Date, plus the amount of any Class C Monthly Interest
previously due but not distributed to the Class C Interest Holders on a
prior Distribution Date and (II) the amount of any Class C Additional
Interest for such Distribution Date and any Class C Additional Interest
previously due but not distributed to the Class C Interest Holders on a
prior Distribution Date will be distributed to the Class C Interest
Holders;
(f) an amount equal to the Class C Servicing Fee due but not paid to the
Servicer on such Distribution Date or a prior Distribution Date shall
be paid to the Servicer;
(g) an amount equal to the Class C Investor Default Amount shall be treated
as a portion of Available Investor Principal Collections with respect
to such Distribution Date;
(h) an amount equal to the aggregate amount by which the Class C Invested
Amount has been reduced pursuant to clauses (iii), (iv) and (v) of the
definition of "Class C Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed, including from
the Spread Account) shall be treated as a portion of Available Investor
Principal Collections for such Distribution Date;
(i) an amount up to the excess, if any, of the Required Cash Collateral
Amount over the remaining Available Cash Collateral Amount (without
giving effect to any deposit to the Cash Collateral Account made on
such date) shall be deposited into the Cash Collateral Account;
(j) on each Distribution 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" above, an amount up to the excess,
if any, of the Required Reserve Account Amount over the Available
Reserve Account Amount shall be deposited into the Reserve Account;
(k) amounts required to be deposited in the Class C Spread Account pursuant
to the Class C Supplemental Agreement will be deposited into the Class
C Spread Account;
(l) if applicable, an amount equal to the aggregate of any amounts then due
to the depositor of funds into the Cash Collateral Account (or any
successor or assignee thereto) pursuant to an agreement, as amended
from time to time, among the Seller, the Servicer, such depositor and
the Trustee (to the extent such amounts are payable pursuant to the
terms of such agreement out of Excess Spread or Excess Finance Charges
allocated to Series 1998-1) will be distributed to the depositor or its
designee for application in accordance with such agreement; and
(m) the balance, if any, will constitute a portion of Excess Finance
Charges for such Distribution Date and will be available for allocation
to other Series in Group One or to the Bank as described in
"Description of the Certificates--Sharing of Excess Finance Charges" in
the Prospectus.
"Class C Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) (A) a fraction, the numerator of which is
the actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator
of which is 360, times
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(B) the Class C Interest Rate and (ii) the outstanding principal balance of
the Class C Interests as of the preceding Record Date; provided, however, with
respect to the first Distribution Date, Class C Monthly Interest shall be
equal to the interest accrued on the initial Class C Investor Amount at the
Class C Interest Rate for the period from the Series Issuance Date to but
excluding the first Distribution Date.
"Class C Interest Rate" means a rate specified in the Class C Supplemental
Agreement not to exceed one-month LIBOR plus 1% per annum.
"Class C Additional Interest," with respect to any Distribution Date, means
additional interest with respect to Class C Monthly Interest due but not paid
to the Class C Interest Holders on a prior Distribution Date at a rate equal
to the Class C Interest Rate.
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Investor
Principal Collections (see "--Principal Payments" above) on deposit in the
Collection Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be treated as Shared
Principal Collections and applied as described under "Description of
the Certificates--Shared Principal Collections" in the Prospectus; and
(ii) on each Distribution Date with respect to the Class A Accumulation
Period, the Class B Amortization Period, the Class C Amortization
Period, the Principal Payment Period or the Early Amortization Period,
all such Available Investor Principal Collections will be distributed
or deposited in the following priority:
(w) an amount equal to Class A Monthly Principal, up to the Class A
Adjusted Invested Amount on such Distribution Date, will be
deposited in the Principal Funding Account or, if such Distribution
Date is a Special Payment Date on which the Principal Funding
Account Balance is zero, shall be distributed to the Class A
Certificateholders;
(x) for each Distribution Date beginning on the Class B Principal
Commencement Date, an amount equal to Class B Monthly Principal for
such Distribution Date, up to the Class B Invested Amount on such
Distribution Date, will be distributed to the Class B
Certificateholders;
(y) for each Distribution Date beginning on the Class C Principal
Commencement Date, an amount equal to Class C Monthly Principal, up
to the Class C Invested Amount on such Distribution Date, will be
distributed to the Class C Interest Holders; and
(z) the balance, if any, will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates--Shared Principal Collections" in the Prospectus.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Class A Accumulation Period, the Principal Payment Period or the Early
Amortization Period will equal the least of (i) the Available Investor
Principal Collections on deposit in the Collection Account with respect to
such Distribution Date, (ii) for each Distribution Date with respect to the
Class A Accumulation Period, and on or prior to the Class A Expected Final
Payment Date, the Controlled Deposit Amount for such Distribution Date and
(iii) the Class A Adjusted Invested Amount on such Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date relating
to the Class B Amortization Period, the Principal Payment Period or the Early
Amortization Period, after the Class A Certificates have been paid in full,
will equal the lesser of (i) the Available Investor Principal Collections on
deposit in the Collection Account with respect to such Distribution Date
(minus the portion of such Available Principal Collections applied to Class A
Monthly Principal on such Distribution Date) and (ii) the Class B Invested
Amount on such Distribution Date.
"Class C Monthly Principal" with respect to any Distribution Date relating
to the Class C Amortization Period, the Principal Payment Period or the Early
Amortization Period, after the Class B Certificates have been
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paid in full, will equal the lesser of (i) the Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date and (ii) the Class C Invested Amount on
such Distribution Date.
"Controlled Accumulation Amount" means $25,000,000 provided, however, that,
if the commencement of the Class A Accumulation Period is delayed as described
above under "--Principal Payments," the Controlled Accumulation Amount may be
different for each Distribution Date with respect to the Class A Accumulation
Period and will be determined by the Servicer in accordance with the Pooling
Agreement based on the principal payment rates for the Accounts and on the
invested amounts of other Series (other than certain excluded Series) which
are scheduled to be in their revolving periods and then scheduled to create
Shared Principal Collections during the Class A Accumulation Period.
"Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date with respect to the Class A Accumulation Period, the excess, if any, of
the Controlled Accumulation Amount for such Distribution Date over the amount
distributed from the Collection Account as Class A Monthly Principal for such
Distribution Date and (b) on each subsequent Distribution Date with respect to
the Class A Accumulation Period, the excess, if any, of the Controlled Deposit
Amount for such subsequent Distribution Date plus any Deficit Controlled
Accumulation Amount for the prior Distribution Date over the amount
distributed from the Collection Account as Class A Monthly Principal for such
subsequent Distribution Date.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Class A Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution
Date.
CASH COLLATERAL ACCOUNT
The Trust will have the benefit of the Cash Collateral Account which will be
held in the name of the Trustee for the benefit of the Series 1998-1 Holders
and will be invested in certain obligations meeting the requirements for
"Eligible Investments."
The Cash Collateral Account will be fully funded on the Series Issuance Date
in the Initial Cash Collateral Amount with a deposit to be made by the Seller.
The Cash Collateral Account will be terminated following the earlier to occur
of (a) the date on which the Class A Certificates, Class B Certificates and
the Class C Interests are paid in full, (b) the Series 1998-1 Termination Date
and (c) the final Termination Date of the Trust.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available Cash Collateral Amount") will be equal
to the lesser of the amount on deposit in the Cash Collateral Account on such
date (before giving effect to any deposit to or withdrawal from the Cash
Collateral Account to be made on such Distribution Date) and the Required Cash
Collateral Amount.
On each Distribution Date, a withdrawal will be made from the Cash
Collateral Account in an amount up to the Available Cash Collateral Amount, to
fund the following amounts in the following order of priority:
(a) the excess, if any, of the Class A Required Amount with respect to
the related Distribution Date over the amount of Excess Spread and Excess
Finance Charges allocated to Series 1998-1 available to fund such Class A
Required Amount will be used first to fund any deficiency in current Class
A Monthly Interest, overdue Class A Monthly Interest and any current or
overdue Class A Additional Interest, second to fund any deficiency in the
Class A Servicing Fee, and third to fund the Class A Investor Default
Amount not funded from Class A Available Funds and Excess Spread and Excess
Finance Charges allocated to Series 1998-1 , if any, for such Distribution
Date;
(b) the excess, if any, of the Class B Required Amount with respect to
the related Distribution Date over the amount of Excess Spread and Excess
Finance Charges allocated to Series 1998-1 available to fund such Class B
Required Amount will be used first to fund any deficiency in current Class
B Monthly Interest, overdue Class B Monthly Interest and any current or
overdue Class B Additional Interest, second to fund any deficiency in the
Class B Servicing Fee and third to fund the Class B Investor Default Amount
not funded from Excess Spread and Excess Finance Charges allocated to
Series 1998-1 for such Distribution Date;
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(c) the excess, if any, of the current Class C Monthly Interest, overdue
Class C Monthly Interest and any current or overdue Class C Additional
Interest over the amount of Excess Spread and Excess Finance Charges
allocated to Series 1998-1 and available to fund such amount;
(d) the excess, if any of the accrued and unpaid Class C Servicing Fee
with respect to the related Distribution Date over the amount of Class C
Available Funds and Excess Spread and Excess Finance Charges allocated to
Series 1998-1 and available to fund such amount; and
(e) the excess, if any, of the Class C Investor Default Amount for the
related Distribution Date over the amount of Excess Spread and Excess
Finance Charges allocated to Series 1998-1 and available to fund such
amount.
"Required Cash Collateral Amount" means, with respect to any Distribution
Date, the greater of (I) the product of (a) the sum of the Class A Adjusted
Invested Amount, the Class B Invested Amount and the Class C Invested Amount,
each as of such Distribution Date after taking into account distributions made
on such Distribution Date and (b) 1.6%, and (II) $1,112,502; provided,
however, that (i) if there are any withdrawals from the Cash Collateral
Account (other than withdrawals from the Cash Collateral Account because the
amount on deposit in the Cash Collateral Account exceeds the Required Cash
Collateral Amount), or a Pay Out Event occurs with respect to Series 1998-1,
then the Required Cash Collateral Amount shall equal the Required Cash
Collateral Amount on the Distribution Date immediately preceding such
withdrawal or Pay Out Event, (ii) in no event shall the Required Cash
Collateral Amount exceed the sum of the Class A Adjusted Invested Amount, the
Class B Invested Amount and the Class C Invested Amount on any such date and
(iii) the Required Cash Collateral Amount may be reduced without the consent
of the Series 1998-1 Holders, if the Seller shall have received written notice
from each Rating Agency that such reduction will not result in the reduction
or withdrawal of the then current rating of the Investor Certificates or the
Class C Interests and the Seller 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 Seller,
such reduction will not cause a Pay Out Event or an event that, after the
giving of notice or the lapse of time, would constitute a Pay Out Event, to
occur with respect to Series 1998-1.
With respect to any Distribution Date, if the Available Cash Collateral
Amount is less than the Required Cash Collateral Amount, certain Excess Spread
and Excess Finance Charges will be deposited into the Cash Collateral Account
to the extent of such shortfall.
If on any Distribution Date, the Available Cash Collateral Amount exceeds
the Required Cash Collateral Amount, such excess in the Cash Collateral
Account will be applied in accordance with the Series 1998-1 Supplement and
the Class C Supplemental Agreement and will not be available to the Investor
Certificateholders.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor Default
Amount for the preceding Monthly Period. The term "Investor Default Amount"
means, for any Monthly Period, the product of (i) the Floating Allocation
Percentage with respect to such Monthly Period and (ii) the Defaulted Amount
for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class A Certificateholders (the "Class A Investor Default
Amount") on each Distribution Date in an amount equal to the product of the
Class A Floating Percentage applicable during the related Monthly Period and
the Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class B Certificateholders (the "Class
B Investor Default Amount") in an amount equal to the product of the Class B
Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. An amount equal to the Class
A Investor Default Amount for each Monthly Period will be paid from Class A
Available Funds, Excess Spread and Excess Finance Charges allocated to Series
1998-1 or from amounts on deposit in the Cash Collateral Account and
Reallocated Principal Collections and applied as described above in "--
Application of Collections--Payment of Interest, Fees and Other Items" and "--
Reallocation of Cash Flows." An amount equal to the Class B Investor Default
Amount for each Monthly Period will be paid from Excess Spread and Excess
Finance Charges allocated to Series 1998-1 or from amounts available under the
Cash Collateral Account and Reallocated Principal Collections allocable to the
Class C Invested Amount and applied as described above in "--Application of
Collections--Payment of Interest, Fees and other Items" and "--Reallocation of
Cash Flows."
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On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 1998-1, amounts on deposit in the Cash Collateral Account
and Reallocated Principal Collections, the Class C Invested Amount will be
reduced by the amount of such excess, but not by more than the Class A
Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Class C Invested Amount to be a negative number, the
Class C Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Class C Invested Amount
would have been reduced below zero, but not by more than the excess, if any,
of the Class A Investor Default Amount for such Distribution Date over the
amount of such reduction, if any, of the Class C Invested Amount with respect
to such Distribution Date. In the event that such reduction would cause the
Class B Invested Amount to be a negative number, the Class B Invested Amount
will be reduced to zero, and the Class A Invested Amount will be reduced by
the amount by which the Class B Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class A Investor Default
Amount for such Distribution Date over the amount of the reductions, if any,
of the Class C Invested Amount and the Class B Invested Amount with respect to
such Distribution Date as described above (a "Class A Investor Charge-Off"),
which will have the effect of slowing or reducing the return of principal to
the Class A Certificateholders. If the Class A Invested Amount has been
reduced by the amount of any Class A Investor Charge-Offs, it will thereafter
be increased on any Distribution Date (but not by an amount in excess of the
aggregate Class A Investor Charge-Offs) by the amount of Excess Spread and
Excess Finance Charges allocated to Series 1998-1 and available for such
purpose as described under "--Application of Collections--Excess Spread;
Excess Finance Charges."
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charges
allocable to Series 1998-1 and not required to pay the Class A Required
Amount, amounts on deposit in the Cash Collateral Account not required to pay
the Class A Required Amount and Reallocated Principal Collections allocable to
the Class C Investors' Interest and not required to pay the Class A Required
Amount, then the Class C Invested Amount will be reduced by the amount of such
excess. In the event that such reduction would cause the Class C Invested
Amount to be a negative number, the Class C Invested Amount will be reduced to
zero, and the Class B Invested Amount will be reduced by the amount by which
the Class C Invested Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class B Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Class C
Invested Amount with respect to such Distribution Date (a "Class B Investor
Charge-Off"). If the Class B Invested Amount has been reduced by the amount of
any Class B Investor Charge-Offs, it will thereafter be increased on any
Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread and Excess Finance
Charges allocated to Series 1998-1 and available for such purpose as described
under "--Application of Collections--Excess Spread; Excess Finance Charges."
EXTENSION OF INITIAL PRINCIPAL PAYMENT DATE
Unless an Early Amortization Event has occurred, principal (other than, if
applicable, principal payments made from amounts on deposit in the Prefunding
Account on the first Distribution Date following the end of the Funding
Period) with respect to the Class A Certificates is expected to be paid on the
Class A Expected Final Payment Date and the final principal payment with
respect to the Class B Certificates is expected to be paid on the Class B
Expected Final Payment Date, provided, that if Series 1998-1 is designated an
Extendable Series in the Summary of Terms, the Investor Certificateholders
will receive payments of principal earlier than such dates if the Servicer
elects not to extend the Initial Principal Payment Date. The Initial Principal
Payment Date will initially be the date specified as such in the Summary of
Terms, but will successively be extended to the next Distribution Date after
the then-current Initial Principal Payment Date unless the Servicer, at least
30 days prior to the then-current Initial Principal Payment Date, elects not
to cause such extension. In the event that the Servicer elects not to extend
the Initial Principal Payment Date, the Revolving Period or the Class A
Accumulation Period, as applicable, will end, and the Principal Payment Period
will commence. During the Principal Payment Period, interest will be paid
monthly on each Distribution Date, and amounts then on deposit in the
Principal Funding Account and Available Investor Principal Collections with
respect to each Distribution Date commencing on the Initial Principal Payment
Date will be paid first to the Class A Certificateholders until
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the earlier of the date on which the Class A Invested Amount is paid in full
or the Series Termination Date, and, after payment in full to the Class A
Certificateholders, then to the Class B Certificateholders until the earlier
of the date on which the Class B Invested Amount is paid in full or the Series
Termination Date.
The payment in full of the Invested Amount on the Initial Principal Payment
Date is dependent on Available Investor Principal Collections with respect to
such date and any amounts then on deposit in the Principal Funding Account.
With respect to certain principal payments to be made prior to the Class A
Expected Final Payment Date, other Series will have priority over the Investor
Certificates in the allocation of Shared Principal Collections, as described
"Description of the Certificates--Shared Principal Collections" in the
Prospectus.
The Servicer will cause the Trustee to provide written notice to each
Certificateholder, the Seller, each Rating Agency and the Class C Interest
Holders of any election by the Servicer not to extend the Initial Principal
Payment Date. The Servicer will cause the Trustee to provide such notice not
more than 60 nor less than 30 days prior to the then-current Initial Principal
Payment Date.
ISSUANCE OF ADDITIONAL INVESTOR CERTIFICATES
The Series 1998-1 Supplement provides that, from time to time during the
Revolving Period, the Bank may, subject to certain conditions described below,
cause the Trustee to issue Additional Investor Certificates (each such
issuance, an "Additional Issuance"). When issued, the Additional Investor
Certificates of each class will be identical in all respects to the other
outstanding Certificates of that class and will be equally and ratably
entitled to the benefits of the Pooling Agreement and the Series 1998-1
Supplement without preference, priority or distinction.
In connection with each Additional Issuance, the outstanding principal
amounts of the Class A Certificates and the Class B Certificates and the
aggregate amount of Credit Enhancement will all be increased pro rata. The
additional Credit Enhancement provided in connection with an Additional
Issuance may take the form of an increase in the Class C Investors' Interest
or another form of Credit Enhancement, provided that the form and amount of
additional Credit Enhancement will not cause a Ratings Effect.
Following an Additional Issuance, the Controlled Accumulation Amount will be
increased proportionately to reflect the principal amount of Additional
Investor Certificates.
Additional Investor Certificates may be issued only upon the satisfaction of
certain conditions provided in the Series 1998-1 Supplement, including the
following: (a) on or before the fifth business day immediately preceding the
date on which the Additional Investor Certificates are to be issued, the Bank
shall have given the Trustee and the Servicer written notice of such issuance
and the date upon which it is to occur; (b) after giving effect to the
Additional Issuance, the total amount of Principal Receivables shall be at
least equal to the Required Principal Balance; (c) the Bank shall have
delivered to the Trustee any additional Credit Enhancement agreement related
to the Additional Issuance, executed by each of the parties to such agreement;
(d) the Bank shall have received written notice from each Rating Agency that
such Additional Issuance will not have a Ratings Effect; (e) the Bank 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 the time, in the
reasonable belief of the Bank, such Additional Issuance will not cause a Pay
Out Event or an event that, after the giving of notice or the lapse of time,
would constitute a Pay Out Event, to occur with respect to Series 1998-1; (f)
as of the date of the Additional Issuance and taking the Additional Issuance
into account, the amount of Credit Enhancement with respect to Series 1998-1,
together with any additional Credit Enhancement, shall not be less than the
amount required so that the Additional Issuance will not result in a Ratings
Effect; (g) as of the date of the Additional Issuance, all amounts due and
owing to the holders of Investor Certificates shall have been paid, and there
shall not be any unreimbursed Class A Investor Charge-Offs or Class B Investor
Charge-Offs; (h) the excess of the principal amount of the Additional Investor
Certificates over their issue price shall not exceed the maximum amount
permitted under the Code without the creation of original issue discount; (i)
the Bank's remaining interest in Principal Receivables shall not be less than
2% of the total amount of Principal Receivables, in each case as of the date
upon which the Additional Issuance is to occur after giving effect to such
issuance; and (j) the Bank shall have delivered to the Trustee a Tax Opinion
with respect to the Additional Issuance.
There are no restrictions on the timing or amount of any Additional
Issuance, provided that the conditions described above are met. As of the date
of any Additional Issuance, the Class A Invested Amount and the Class B
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Invested Amount will be increased to reflect the initial principal balance of
the Additional Investor Certificates of the respective classes.
PAIRED SERIES
The Series 1998-1 Interests may be paired with one or more other Series
(each a "Paired Series"). Each Paired Series either will be prefunded with an
initial deposit to a prefunding account in an amount up to the initial
principal balance of such Paired Series and primarily from the proceeds of the
sale of such Paired Series or will have a variable principal amount. Any such
prefunding account will be held for the benefit of such Paired Series and not
for the benefit of Investor Certificateholders. As funds are accumulated in
the Principal Funding Account, either (i) in the case of a prefunded Paired
Series, an equal amount of funds on deposit in any prefunding account for such
prefunded Paired Series will be released (which funds will be distributed to
the Bank) or (ii) in the case of a Paired Series having a variable principal
amount, an interest in such variable Paired Series in an equal or lesser
amount may be sold by the Trust (and the proceeds thereof will be distributed
to the Bank) and, in either case, the invested amount in the Trust of such
Paired Series will increase by up to a corresponding amount. Upon payment in
full of Series 1998-1, assuming that there have been no unreimbursed charge-
offs with respect to any related Paired Series, the aggregate invested amount
of such related Paired Series will have been increased by an amount up to an
aggregate amount equal to the Invested Amount paid to the Investor
Certificateholders and the Class C Interest Holders. The issuance of a Paired
Series will be subject to the conditions described under "Description of the
Certificates--New Issuances" in the Prospectus. There can be no assurance,
however, that the terms of any Paired Series might not have an impact on the
timing or amount of payments received by an Investor Certificateholder. See
"Risk Factors--Master Trust Considerations--Issuance of Additional Series;
Effect on Payments to Certificateholders" in the Prospectus.
REQUIRED PRINCIPAL BALANCE; ADDITION OF ACCOUNTS
The obligation of the Trustee to authenticate certificates of a new Series
and to execute and deliver the related Series Supplement shall be subject to
the conditions described under "Description of the Certificates--New
Issuances" in the Prospectus and to the additional condition that, as of the
Series Issuance Date and after giving effect to such issuance, the aggregate
amount of Principal Receivables in the Trust equals or exceeds the Required
Principal Balance. The "Required Principal Balance" means, as of any date of
determination, the sum of the "Initial Invested Amount" (as defined in the
relevant Supplement) of each Series outstanding on such date plus the
aggregate amounts of any increases in the Invested Amounts of each Prefunded
Series outstanding (in each case, other than any Series or portion thereof (an
"Excluded Series") which is designated in the relevant Supplement as then
being an Excluded Series) minus the principal amount on deposit in the Excess
Funding Account on such date; provided, however, that if at any time the only
Series outstanding are Excluded Series and a Pay Out Event has occurred with
respect to one or more such Series, the Required Principal Balance shall mean
the sum of the "Invested Amount" (as defined in the relevant Supplement) of
each such Excluded Series as of the earliest date on which any such Pay Out
Event is deemed to have occurred minus the principal amount on deposit in the
Excess Funding Account.
If, as of the close of business on the last business day of any Monthly
Period, the aggregate amount of Principal Receivables in the Trust is less
than the Required Principal Balance on such date, the Bank shall on or before
the tenth business day following such day, unless the amount of Principal
Receivables in the Trust equals or exceeds the Required Principal Balance as
of the close of business on any day after the last business day of such
Monthly Period and prior to such tenth business day, make an Addition to the
Trust such that, after giving effect to such Addition, the amount of Principal
Receivables in the Trust is at least equal to the Required Principal Balance.
PAY OUT EVENTS
The Pay Out Events with respect to Series 1998-1 will include each of the
events specified in the Prospectus under "Description of the Certificates--Pay
Out Events" and the following:
(a) failure on the part of the Bank (i) to make any payment or deposit
required under the Pooling Agreement or the Series 1998-1 Supplement
within five business days after the day such payment or deposit is
required to be made; or (ii) to observe or perform any other covenants
or agreements of the
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Bank set forth in the Pooling Agreement or the Series 1998-1 Supplement,
which failure has a material adverse effect on the Series 1998-1 Holders
and which continues unremedied for a period of 60 days after written
notice;
(b) any representation or warranty made by the Bank in the Pooling
Agreement or the Series 1998-1 Supplement or any information required
to be given by the Bank 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 Series
1998-1 Holders are materially and adversely affected; provided,
however, that a Pay Out Event shall not be deemed to occur thereunder
if the Bank has repurchased the related Receivables or all such
Receivables, if applicable, during such period in accordance with the
provisions of the Pooling Agreement;
(c) a failure by the Bank to make an Addition to the Trust within five
business days after the day on which it is required to make such
Addition pursuant to the Pooling Agreement or the Series 1998-1
Supplement;
(d) the occurrence of any Servicer Default;
(e) the average Portfolio Yield for any three consecutive Monthly Periods
is less than the average of the Base Rates with respect to Series 1998-
1 for such three Monthly Periods;
(f) the failure to pay in full the Class A Invested Amount on the Class A
Expected Final Payment Date, or the Class B Invested Amount on the
Class B Expected Final Payment Date; and
(g) the Bank is unable for any reason to transfer Receivables to the Trust
in accordance with the Pooling Agreement or the Series 1998-1
Supplement.
Then, in the case of any event described in subparagraph (a), (b) or (d),
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Investor Certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 1998-1 by notice
then given in writing to the Bank and the Servicer (and to the Trustee if
given by the Investor Certificateholders) may declare that a Pay Out Event has
occurred with respect to Series 1998-1 as of the date of such notice, and, in
the case of any event described in subparagraph (c), (e), (f) or (g), a Pay
Out Event shall occur with respect to Series 1998-1, without any notice or
other action on the part of the Trustee immediately upon the occurrence of
such event.
If, contrary to the opinion of Tax Counsel described under "Certain Federal
Income Tax Considerations--General" in the Prospectus, it is determined that
the Class A Certificates or the Class B Certificates do not constitute
indebtedness for Federal income tax purposes, such determination will not
constitute a Pay Out Event with respect to the Investor Certificates.
For purposes of the foregoing discussion pertaining to Pay Out Events,
references to the Investor Certificates will include the Class C Investors'
Interest.
For purposes of the Pay Out Event described in clause (e) above, the terms
"Base Rate" and "Portfolio Yield" will be defined as follows with respect to
Series 1998-1:
"Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the
sum of Class A Monthly Interest, Class B Monthly Interest, Class C Monthly
Interest and the Monthly Servicing Fee with respect to Series 1998-1 for the
related Distribution Date and the denominator of which is the Investor Amount
as of the last day of the preceding Monthly Period; provided, however, that if
the Bank receives written notice from each Rating Agency that the following
will not have a Ratings Effect, for purposes of determining the Base Rate, the
Monthly Servicing Fee will be replaced with an amount equal to one-twelfth of
the product of (a) the Net Servicing Fee Rate and (b) the Servicing Base
Amount.
"Portfolio Yield" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to (a)
the Floating Allocation Percentage of collections of Finance Charge
Receivables (including any investment earnings and certain other amounts that
are to be treated as collections of Finance Charge Receivables in accordance
with the Pooling Agreement) for such Monthly Period calculated on a billed
basis or, in the case of any such collections consisting of annual membership
fees, on an amortized rather than billed basis, plus (b) the amount of
Principal Funding Investment Proceeds for the related
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Distribution Date, plus (c) if applicable, the amount of interest and other
investment income (net of losses and investment expenses) earned on amounts on
deposit in the Prefunding Account, plus (d) any Excess Finance Charges that
are allocated to Series 1998-1, plus (e) the amount of funds withdrawn from
the Reserve Account and which are required to be included as Class A Available
Funds or Class B Available Funds, in each case for the Distribution Date with
respect to such Monthly Period, minus (f) the Investor Default Amount for the
Distribution Date with respect to such Monthly Period, and the denominator of
which is the Investor Amount as of the last day of the preceding Monthly
Period.
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to the Bank, as described in the Prospectus
under "Description of the Certificates--Pay Out Events," allocated to the
Class A Invested Amount and the proceeds of any collections on the Receivables
in the Collection Account are not sufficient to pay in full the remaining
amount due on the Class A Certificates, the Class A Certificateholders will
suffer a corresponding loss and no such proceeds will be available to the
Class B Certificateholders. See "Certain Legal Aspects of the Receivables--
Certain Matters Relating to Receivership" in the Prospectus for a discussion
of the impact of recent Federal legislation on the Trustee's ability to
liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to Series 1998-1 with respect to
any Distribution Date (the "Monthly Servicing Fee") shall be equal to one-
twelfth of the product of (a) 2.00% (the "Servicing Fee Rate") and (b) the
Adjusted Invested Amount as of the last day of the Monthly Period preceding
such Distribution Date (the amount calculated pursuant to this clause (b) is
referred to as the "Servicing Base Amount"); provided, however, that the
Monthly Servicing Fee with respect to the first Distribution Date (the
"Initial Servicing Fee") will be equal to the Servicing Fee accrued on the
Initial Invested Amount at the Net Servicing Fee Rate for the period from the
Series Issuance Date to but excluding the first Distribution Date. On each
Distribution Date, but only if the Bank or The Bank of New York is the
Servicer, Servicer Interchange with respect to the related Monthly Period that
is on deposit in the Collection Account shall be withdrawn from the Collection
Account and paid to the Servicer in payment of a portion of the Monthly
Servicing Fee with respect to such Monthly Period. The "Servicer Interchange"
for any Monthly Period for which the Bank or The Bank of New York is the
Servicer will be equal to the product of (a) the Floating Allocation
Percentage for such Monthly Period and (b) the portion of Finance Charge
Receivables allocated to the Investor Certificates and the Class C Invested
Amount with respect to such Monthly Period that is attributed to Interchange;
provided, however, that Servicer Interchange for a Monthly Period shall not
exceed one-twelfth of the product of (i) the Servicing Base Amount as of the
last day of such Monthly Period and (ii) 0.75%. In the case of any
insufficiency of Servicer Interchange on deposit in the Collection Account, a
portion of the Monthly Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency and in no event shall the
Trust, the Trustee, the Investor Certificateholders or the Class C Interest
Holders be liable for the share of the Servicing Fee to be paid out of
Servicer Interchange.
The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders (after giving effect to the distribution of any Servicer
Interchange to the Servicer) with respect to any Distribution Date (the "Class
A Servicing Fee") shall be equal to one-twelfth of the product of (a) the
Class A Floating Percentage, (b) the Net Servicing Fee Rate and (c) the
Servicing Base Amount; provided, however, with respect to the first
Distribution Date, the Class A Servicing Fee shall be equal to the product of
the Class A Floating Percentage as of the first Distribution Date and the
Initial Servicing Fee. The "Net Servicing Fee Rate" means (a) so long as the
Bank is the Servicer, 0.75% per annum, (b) if The Bank of New York is the
Servicer, 1.25% per annum and (c) if the Bank or The Bank of New York is not
the Servicer, 2.00%. The share of the Monthly Servicing Fee allocable to the
Class B Certificateholders (after giving effect to any distribution of
Servicer Interchange to the Servicer) with respect to any Distribution Date
(the "Class B Servicing Fee") shall be equal to one-twelfth of the product of
(a) the Class B Floating Percentage, (b) the Net Servicing Fee Rate and (c)
the Servicing Base Amount; provided, however, with respect to the first
Distribution Date, the Class B Servicing Fee shall be equal to the product of
the Class B Floating Percentage as of the first Distribution Date and the
Initial Servicing Fee. The share of the Monthly Servicing Fee allocable to the
Class C Interest Holders (after giving effect to the distribution of any
Servicer Interchange to the Servicer) with respect to such Distribution Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(a) the Class C Floating Percentage, (b) the Net Servicing Fee Rate and
S-49
<PAGE>
(c) the Servicing Base Amount; provided, however, with respect to the first
Distribution Date, the Class C Servicing Fee shall be equal to the product of
the Class C Floating Percentage as of the first Distribution Date and the
Initial Servicing Fee. The remainder of the Servicing Fee shall be paid by the
Bank or the certificateholders of other Series (as provided in the related
Supplements) or, to the extent of any insufficiency of Servicer Interchange as
described above, not be paid and in no event shall the Trust, the Trustee, the
Investor Certificateholders or the Class C Interest Holders be liable for the
share of the Servicing Fee to be paid by the Bank or the Certificateholders of
any other Series or to be paid out of Servicer Interchange. The Class A
Servicing Fee, the Class B Servicing Fee and the Class C Servicing Fee shall
be payable to the Servicer solely to the extent amounts are available for
distribution in respect thereof as described under "--Application of
Collections--Payment of Interest, Fees and Other Items" above.
SERIES TERMINATION
If on the Distribution Date which is two months prior to the Termination
Date, the Invested Amount (after giving effect to all changes therein on such
date) exceeds zero, the Servicer will, within the 40-day period beginning on
such date, solicit bids for the sale of interests in the Principal Receivables
or certain Principal Receivables, together in each case with the related
Finance Charge Receivables, in an amount equal to the Invested Amount at the
close of business on the last day of the Monthly Period preceding the
Termination Date (after giving effect to all distributions required to be made
on the Termination Date). The Bank will be entitled to participate in, and to
receive notice of each bid submitted in connection with, such bidding process.
Upon the expiration of such 40-day period, the Trustee will determine (a)
which bid is the highest cash purchase offer (the "Highest Bid") and (b) the
amount (the "Available Final Distribution Amount") which otherwise would be
available in the Collection Account on the Termination Date for distribution
to the Investor Certificateholders and the Class C Interest Holders. The
Servicer will sell such Receivables on the Termination Date to the bidder who
provided the Highest Bid and will deposit the proceeds of such sale in the
Collection Account for allocation (together with the Available Final
Distribution Amount) to the Investor Certificateholders' Interest and the
Class C Investors' Interest.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Subject to the matters discussed under "Certain Federal Income Tax
Consequences" in the Prospectus, Tax Counsel will deliver its opinion that,
under existing law, the Class A Certificates and the Class B Certificates
offered hereby will properly be characterized as debt for Federal income tax
purposes.
REPORTS
No later than the fourth business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent and each Rating Agency
a statement (the "Monthly Report") prepared by the Servicer setting forth
certain information with respect to the Trust, the Investor Certificates and
the Class C Interests, including: (a) the aggregate amount of Principal
Receivables and Finance Charge Receivables in the Trust as of the end of such
Monthly Period; (b) the Class A Invested Amount, the Class B Invested Amount
and the Class C Invested Amount at the close of business on the last day of
the preceding Monthly Period; (c) the Floating Allocation Percentage and,
during the Class A Accumulation Period, the Class B Amortization Period, the
Class C Amortization Period, the Principal Payment Period or Early
Amortization Period with respect to such Series, the Principal Allocation
Percentage with respect to the Investor Certificates and the Class C
Interests; (d) the amount of collections of Principal Receivables and Finance
Charge Receivables processed during the related Monthly Period and the portion
thereof allocated to the Investor Certificateholders' Interest and the Class C
Investors' Interest; (e) the aggregate outstanding balance of Accounts which
were 30, 60 and 90 days or more delinquent as of the end of such Monthly
Period; (f) the Defaulted Amount with respect to such Monthly Period and the
portion thereof allocated to the Investor Certificateholders' Interest and the
Class C Investors' Interest; (g) the amount, if any, of Class A Investor
Charge-Offs, Class B Investor Charge-Offs and the amounts by which the Class C
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of Class C Invested Amount; (h) the Monthly Servicing Fee; (i)
the Portfolio Yield for such Monthly Period; (j) amounts on deposit in the
Cash Collateral Account for such Distribution Date; and (k) Reallocated
Principal Collections.
LEGAL MATTERS
Certain legal matters relating to the Investor Certificates will be passed
upon for the Underwriters by Cravath, Swaine & Moore, New York, New York.
S-50
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
for the Class A Certificates and the underwriting agreement for the Class B
Certificates (collectively, the "Underwriting Agreement") between the Bank and
Barclays de Zoete Wedd Limited ("Barclays Capital" or the "Underwriter"), the
Bank has agreed to sell to the Underwriter, and the Underwriter has agreed to
purchase, the Class A Certificates and the Class B Certificates.
The Underwriting Agreement provides that the obligation of the Underwriter
to pay for and accept delivery of the Investor Certificates is subject to the
approval of certain legal matters by its counsel and to certain other
conditions. All of the Investor Certificates offered hereby will be issued if
any are issued. Under the terms and conditions of the Underwriting Agreement,
the Underwriter is committed to take and pay for all the Investor Certificates
offered hereby, if any are taken.
The Underwriter intends initially to sell the Class A Certificates to a
single institutional investor at the price set forth on the cover page hereof
less a discount of 0.03%. The Underwriter proposes initially to offer the
Class B Certificates to the public at the price set forth on the cover page
hereof. After the initial public offering, the public offering price and other
selling terms may be changed by the Underwriter.
Barclays Capital, a United Kingdom broker-dealer regulated by the Securities
and Futures Authority Limited, has agreed that, as part of the distribution of
Investor Certificates offered hereby and subject to certain exceptions, it
will not offer or sell any Investor Certificates within the United States, its
territories or possessions or to persons who are citizens thereof or residents
therein. Affiliates of Barclays Capital (such as BZW Securities Inc.) are not,
however, prohibited from acting as agents for investors in the United States
in connection with the distribution of Investor Certificates.
The Underwriter has represented and agreed that:
(a) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Public Offers of Securities
Regulations 1995 (the "Regulations") with respect to anything done by it
in relation to the Investor Certificates in, from or otherwise involving
the United Kingdom;
(b) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the Investor 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 are persons to whom such
document may otherwise lawfully be issued or passed on;
(c) if it is an authorized person under Chapter III of part I of the Financial
Services Act 1986, it has only promoted and will only promote (as that
term is defined in Regulation 1.02(2) of the Financial Services (Promotion
of Unregulated Schemes) Regulations 1991) to any person in the United
Kingdom the scheme described in this Prospectus Supplement and the
Prospectus if that person is of a kind described either in section 76(2)
of the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
The Underwriter may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Investor Certificates in accordance with Regulation M under the Exchange
Act. Over-allotment transactions involve syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the Investor Certificates so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the
S-51
<PAGE>
Investor Certificates in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Underwriter to reclaim a selling concession from a syndicate member when the
Investor Certificates originally sold by such syndicate member are purchased
in a syndicate covering transaction. Such over-allotment transactions,
stabilization transactions, syndicate covering transactions and penalty bids
may cause the price of the Investor Certificates to be higher than they would
otherwise be in the absence of such transactions. Neither the Bank nor the
Underwriter represents that the Underwriter will engage in any such
transactions or that such transactions, once commenced, will not be
discontinued without notice at any time.
The Bank will indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriter may be required to make in respect thereof.
The closing of the sale of each class of Investor Certificates is
conditional upon the closing of the sale of the other class.
In the ordinary course of their respective businesses, the Underwriter and
its affiliates have engaged and may engage in investment banking and/or
commercial banking transactions with the Bank and its affiliates.
S-52
<PAGE>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Accounts............................................................. S-1
Additional Investor Certificates..................................... S-7
Additional Issuance.................................................. S-46
Adjusted Invested Amount............................................. S-6
Applicable Federal Funds Rate........................................ S-28
Available Cash Collateral Amount..................................... S-43
Available Final Distribution Amount.................................. S-50
Available Investor Principal Collections............................. S-31
Available Reserve Account Amount..................................... S-36
Bank................................................................. S-1
Barclays Capital..................................................... S-51
Base Rate............................................................ S-48
Bloomberg............................................................ S-29
Cash Collateral Account.............................................. S-12
Class A Accumulation Period.......................................... S-9
Class A Accumulation Period Length................................... S-31
Class A Additional Interest.......................................... S-39
Class A Adjusted Invested Amount..................................... S-6, S-34
Class A Available Funds.............................................. S-27
Class A Certificate Rate............................................. S-2
Class A Certificateholders' Interest................................. S-5
Class A Certificates................................................. S-1, S-3
Class A Floating Percentage.......................................... S-32
Class A Initial Invested Amount...................................... S-5
Class A Initial Investor Amount...................................... S-3
Class A Interest Funding Account..................................... S-26
Class A Invested Amount.............................................. S-5, S-34
Class A Investor Amount.............................................. S-35
Class A Investor Charge-Off.......................................... S-45
Class A Investor Default Amount...................................... S-44
Class A Monthly Interest............................................. S-39
Class A Monthly Principal............................................ S-42
Class A Outstanding Monthly Interest................................. S-39
Class A Principal Percentage......................................... S-33
Class A Required Amount.............................................. S-10, S-37
Class A Servicing Fee................................................ S-49
Class B Additional Interest.......................................... S-40
Class B Amortization Period.......................................... S-9
Class B Available Funds.............................................. S-27
Class B Certificate Rate............................................. S-2
Class B Certificateholders' Interest................................. S-5
Class B Certificates................................................. S-1, S-3
Class B Floating Percentage.......................................... S-32
Class B Initial Invested Amount...................................... S-5
Class B Initial Investor Amount...................................... S-3
Class B Interest Funding Account..................................... S-27
Class B Invested Amount.............................................. S-5, S-34
Class B Investor Amount.............................................. S-35
Class B Investor Charge-Off.......................................... S-45
Class B Investor Default Amount...................................... S-44
</TABLE>
S-53
<PAGE>
<TABLE>
<S> <C>
Class B Monthly Interest........................................ S-39
Class B Monthly Principal....................................... S-42
Class B Outstanding Monthly Interest............................ S-40
Class B Principal Commencement Date............................. S-9
Class B Principal Percentage.................................... S-33
Class B Required Amount......................................... S-11, S-37
Class B Servicing Fee........................................... S-49
Class C Additional Interest..................................... S-42
Class C Amortization Period..................................... S-9
Class C Available Funds......................................... S-40
Class C Floating Percentage..................................... S-33
Class C Initial Invested Amount................................. S-5
Class C Initial Investor Amount................................. S-3
Class C Interest Funding Account................................ S-28
Class C Interest Holders........................................ S-8
Class C Interest Rate........................................... S-27, S-42
Class C Interests............................................... S-1, S-3
Class C Invested Amount......................................... S-5, S-34
Class C Investor Amount......................................... S-35
Class C Investor Default Amount................................. S-34
Class C Investors' Interest..................................... S-5
Class C Monthly Interest........................................ S-41
Class C Monthly Principal....................................... S-42
Class C Principal Commencement Date............................. S-9
Class C Servicing Fee........................................... S-49
Class C Spread Account.......................................... S-28
Class C Supplemental Agreement.................................. S-5
Controlled Accumulation Amount.................................. S-43
Controlled Deposit Amount....................................... S-43
Covered Amount.................................................. S-35
Deficit Controlled Accumulation Amount.......................... S-44
Distribution Date............................................... S-2
Enhancement Invested Amount..................................... S-5
ERISA........................................................... S-14
Excess Spread................................................... S-10, S-40
Excluded Series................................................. S-47
Federal Funds Determination Period.............................. S-29
Federal Funds Reset Date........................................ S-28
Federal Funds Weekly Rate....................................... S-28
Floating Allocation Percentage.................................. S-32
Funding Period.................................................. S-8
Group One....................................................... S-13
H.15(519)....................................................... S-29
Highest Bid..................................................... S-50
Initial Cash Collateral Amount.................................. S-3, S-12
Initial Invested Amount......................................... S-5, S-47
Initial Investor Amount......................................... S-3
Initial Servicing Fee........................................... S-49
Interest Period................................................. S-29
Invested Amount................................................. S-5, S-35, S-47
Investor Amount................................................. S-35
Investor Certificateholders..................................... S-1
</TABLE>
S-54
<PAGE>
<TABLE>
<S> <C>
Investor Certificateholders' Interest................................ S-5
Investor Certificates................................................ S-1, S-3
Investor Default Amount.............................................. S-44
LIBOR................................................................ S-29
LIBOR Determination Date............................................. S-29
Monthly Report....................................................... S-50
Monthly Servicing Fee................................................ S-49
Net Servicing Fee Rate............................................... S-49
Paired Series........................................................ S-47
Portfolio Yield...................................................... S-48
Prefunded Amount..................................................... S-8
Prefunding Account................................................... S-8
Principal Allocation Percentage...................................... S-33
Principal Funding Account............................................ S-16
Principal Funding Account Balance.................................... S-35
Principal Funding Investment Proceeds................................ S-35
Reallocated Principal Collections.................................... S-10, S-37
Receivables.......................................................... S-1
Record Date.......................................................... S-26
Reference Banks...................................................... S-29
Regulations.......................................................... S-51
Required Cash Collateral Amount...................................... S-13, S-44
Required Principal Balance........................................... S-47
Required Reserve Account Amount...................................... S-36
Reserve Account...................................................... S-36
Reserve Account Factor............................................... S-36
Reserve Account Funding Date......................................... S-36
Revolving Period..................................................... S-9
Series Issuance Date................................................. S-2
Series 1998-1 Holders................................................ S-8
Series 1998-1 Interests.............................................. S-1, S-3
Series 1998-1 Supplement............................................. S-16
Servicer Interchange................................................. S-49
Servicing Base Amount................................................ S-49
Servicing Fee Rate................................................... S-49
Special Payment Date................................................. S-16
Summary of Terms..................................................... S-3
Telerate Page 3750................................................... S-29
Termination Date..................................................... S-9
Trust................................................................ S-1, S-3
Trust Cut-Off Date................................................... S-7
Trust Portfolio...................................................... S-18
Underwriter.......................................................... S-51
Underwriting Agreement............................................... S-51
Zero Balance Accounts................................................ S-18
</TABLE>
S-55
<PAGE>
ANNEX I
PREVIOUS ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the Class A and
Class B Asset Backed Certificates of the only outstanding Series that have
been issued by the Trust prior to the date hereof. For more specific
information with respect to any Series, prospective investors should contact
the Servicer (in care of Capital One Bank, attention: Treasury Department) at
(703) 205-1000. The Servicer will provide, without charge, to any prospective
purchaser of the Investor Certificates, a copy of the Prospectus Supplement
for any previous publicly-issued Series.
<TABLE>
<S> <C>
1. SERIES 1993-1 CERTIFICATES
Initial Series 1993-1 Invested Amount......... $500,000,000
Initial Class A Invested Amount............... $450,000,000
Initial Class B Invested Amount............... $50,000,000
Class A Certificate Rate...................... 5.20%
Class B Certificate Rate...................... 5.40%
Class A Expected Final Payment Date........... October 1998 Distribution Date
Class B Expected Final Payment Date........... December 1998 Distribution Date
Class A Controlled Accumulation Amount........ $22,500,000 (1)
Class B Controlled Accumulation Amount........ $25,000,000
Group......................................... One
Servicing Fee Rate............................ 2.00%
Series Termination Date....................... February 15, 2002
2. SERIES 1993-4 CERTIFICATES
Initial Series 1993-4 Invested Amount......... $700,000,000
Initial Class A Invested Amount............... $609,000,000
Initial Class B Invested Amount............... $91,000,000
Class A Certificate Rate...................... One-month LIBOR + 0.25% per annum
Class B Certificate Rate...................... 5.80%
Class A Expected Final Payment Date........... January 1999 Distribution Date
Class B Expected Final Payment Date........... March 1999 Distribution Date
Class A Controlled Accumulation Amount........ $30,450,000 (1)
Class B Controlled Accumulation Amount........ $45,500,000
Group......................................... One
Servicing Fee Rate............................ 2.00%
Series Termination Date....................... May 2002 Distribution Date
3. SERIES 1994-3 CERTIFICATES
Initial Series 1994-3 Invested Amount......... $452,530,818
Initial Class A Invested Amount............... $357,500,000
Initial Class B Invested Amount............... $40,727,000
Class A Certificate Rate...................... One-month LIBOR + 0.20% per annum
Class B Certificate Rate...................... 7.35%
Class A Expected Final Payment Date........... June 1999 Distribution Date
Class B Expected Final Payment Date........... August 1999 Distribution Date
Class A Controlled Accumulation Amount........ $17,875,000 (1)
Class B Controlled Accumulation Amount........ $20,363,500
Group......................................... One
Servicing Fee Rate............................ 2.00%
Series Termination Date....................... September 2002 Distribution Date
</TABLE>
The Series 1994-3 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had
an invested amount of $54,303,818.
- --------
(1) Subject to change if the commencement of the Accumulation Period is
delayed.
A-1
<PAGE>
<TABLE>
<S> <C>
4. SERIES 1994-4 CERTIFICATES
Initial Series 1994-A Invested Amount......... $550,000,000
Maximum Invested Amount....................... $1,500,000,000
Certificate Rate.............................. Floating Rate
Group......................................... One
Servicing Fee Rate............................ 2.00%
Termination Date.............................. April 2003 Distribution Date
5. SERIES 1995-1 CERTIFICATES
Initial Series 1995-1 Invested Amount......... $900,000,000
Initial Class A Invested Amount............... $720,000,000
Initial Class B Invested Amount............... $81,000,000
Class A Certificate Rate...................... One-month LIBOR + 0.19% per annum
Class B Certificate Rate...................... Floating Rate
Class A Expected Final Payment Date........... June 2000
Class B Expected Final Payment Date........... August 2000
Class A Controlled Accumulation Amount........ $36,000,000 (1)
Group......................................... One
Servicing Fee Rate............................ 2.00%
Series Termination Date....................... October 2003
The Series 1995-1 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $99,000,000.
6. SERIES 1995-2 CERTIFICATES
Initial Series 1995-2 Invested Amount......... $375,000,000
Initial Class A Invested Amount............... $300,000,000
Initial Class B Invested Amount............... $48,750,000
Class A Certificate Rate...................... One-month LIBOR + 0.11% per annum
Class B Certificate Rate...................... Floating Rate
Class A Expected Final Payment Date........... August 1998
Class B Expected Final Payment Date........... October 1998
Class A Controlled Accumulation Amount........ $15,000,000 (1)
Group......................................... One
Servicing Fee Rate............................ 2.00%
Series Termination Date....................... December 2001
</TABLE>
The Series 1995-2 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $26,250,000.
- --------
(1) Subject to change if the commencement of the Accumulation Period is
delayed.
A-2
<PAGE>
<TABLE>
<S> <C>
7. SERIES 1995-3 CERTIFICATES
Initial Series 1995-3 Invested Amount...... $1,050,000,000
Initial Class A Invested Amount............ $840,000,000
Initial Class B Invested Amount............ $136,500,000
Class A Certificate Rate................... One-month LIBOR + 0.15% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ August 2000
Class B Expected Final Payment Date........ October 2000
Class A Controlled Accumulation Amount..... $42,000,000 (1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... December 2003
The Series 1995-3 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $73,500,000.
8. SERIES 1995-4 CERTIFICATES
Initial Series 1995-4 Invested Amount...... $750,000,000
Initial Class A Invested Amount............ $600,000,000
Initial Class B Invested Amount............ $97,500,000
Class A Certificate Rate................... Federal Funds + 0.28% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ May 1998
Class B Expected Final Payment Date........ July 1998
Class A Controlled Accumulation Amount..... $30,000,000(1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... December 2000
The Series 1995-4 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $52,500,000.
9. SERIES 1996-1 CERTIFICATES
Initial Series 1996-1 Invested Amount...... $845,000,000
Initial Class A Invested Amount............ $676,000,000
Initial Class B Invested Amount............ $109,850,000
Class A Certificate Rate................... Three-month LIBOR + 0.12% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ August 2001
Class B Expected Final Payment Date........ October 2001
Class A Controlled Accumulation Amount..... $33,800,000 (1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... October 2004
</TABLE>
The Series 1996-1 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $59,150,000.
- --------
(1) Subject to change if the commencement of the Accumulation Period is
delayed.
A-3
<PAGE>
<TABLE>
<S> <C>
10. SERIES 1996-2 CERTIFICATES
Initial Series 1996-2 Invested Amount...... $750,000,000
Initial Class A Invested Amount............ $600,000,000
Initial Class B Invested Amount............ $82,500,000
Class A Certificate Rate................... One-month LIBOR + 0.10% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ December 2001
Class B Expected Final Payment Date........ February 2002
Class A Controlled Accumulation Amount..... $30,000,000 (1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... February 2005
The Series 1996-2 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $67,500,000.
11. SERIES 1996-3 CERTIFICATES
Initial Series 1996-3 Invested Amount...... $500,000,000
Initial Class A Invested Amount............ $400,000,000
Initial Class B Invested Amount............ $55,000,000
Class A Certificate Rate................... One-month LIBOR + 0.12% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ January 2004
Class B Expected Final Payment Date........ March 2004
Class A Controlled Accumulation Amount..... $20,000,000(1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... March 2007
The Series 1996-3 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $45,000,000.
12. SERIES 1997-1 CERTIFICATES
Initial Series 1997-1 Invested Amount...... $608,275,000
Initial Class A Invested Amount............ $486,620,000
Initial Class B Invested Amount............ $66,910,250
Class A Certificate Rate................... Three-month LIBOR - 0.03% per annum
Class B Certificate Rate................... Floating Rate
Class A Expected Final Payment Date........ June 2002
Class B Expected Final Payment Date........ August 2002
Class A Controlled Accumulation Amount..... $24,331,000 (1)
Group...................................... One
Servicing Fee Rate......................... 2.00%
Series Termination Date.................... June 2007
</TABLE>
The Series 1997-1 Certificates are supported by a collateral indebtedness
interest in the receivables which on the respective Series Issuance Date had an
initial invested amount of $54,744,750.
- --------
(1) Subject to change if the commencement of the Accumulation Period is
delayed.
A-4
<PAGE>
<TABLE>
<S> <C>
13. SERIES 1997-2 CERTIFICATES
Initial Series 1997-2 Invested Amount..... $502,212,500
Initial Class A Invested Amount........... $401,770,000
Initial Class B Invested Amount........... $55,243,375
Initial Class C Invested Amount........... $45,199,125
Class A Certificate Rate.................. Three-month LIBOR + 0.049% per annum
Class B Certificate Rate.................. Floating Rate
Class A Expected Final Payment Date....... August 2002
Class B Expected Final Payment Date....... October 2002
Class A Controlled Accumulation Amount.... $20,088,500 (1)
Group..................................... One
Servicing Fee Rate........................ 2.00%
Series Termination Date................... October 2005
</TABLE>
- --------
(1) Subject to change if the commencement of the Accumulation Period is
delayed.
A-5
<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 SUPPLE-
MENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE BANK OR
THE UNDERWRITER. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PRO-
SPECTUS CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUN-
DER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE BANK SINCE THE DATE HEREOF OR THEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Series Terms.................................................... S-3
Summary of Series Provisions............................................... S-5
Risk Factors............................................................... S-16
Maturity Considerations.................................................... S-16
The Bank Portfolio......................................................... S-18
The Receivables............................................................ S-22
Use of Proceeds............................................................ S-26
The Bank................................................................... S-26
Series Provisions.......................................................... S-26
Underwriting............................................................... S-51
Glossary for Prospectus Supplement......................................... S-53
Annex I--Previous Issuances of Certificates................................ A-1
PROSPECTUS
Available Information...................................................... 2
Reports to Certificateholders.............................................. 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 18
The Bank's Credit Card and Consumer Lending Business....................... 25
The Accounts............................................................... 29
The Bank................................................................... 30
Assumption of the Bank's Obligations....................................... 31
Use of Proceeds............................................................ 32
The Trust.................................................................. 32
Description of the Certificates............................................ 32
The Pooling Agreement Generally............................................ 51
Certain Legal Aspects of the Receivables................................... 63
Certain Federal Income Tax Consequences.................................... 67
ERISA Considerations....................................................... 72
Plan of Distribution....................................................... 74
Legal Matters.............................................................. 74
Glossary for Prospectus.................................................... 75
Annex I.................................................................... A-1
</TABLE>
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[LOGO OF MASTER TRUST APPEARS HERE]
$500,000,000
CLASS A 6.310%
ASSET BACKED CERTIFICATES
SERIES 1998-1
$50,236,407
CLASS B 6.356%
ASSET BACKED CERTIFICATES
SERIES 1998-1
CAPITAL ONE BANK
SELLER AND SERVICER
----------------
PROSPECTUS SUPPLEMENT
DATED MARCH 20, 1998
----------------
BARCLAYS CAPITAL
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