<PAGE>
As filed with the Securities and Exchange Commission on January , 1999
Registration No. 333-66335 and
333-66335-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CAPITAL ONE MASTER TRUST
(Issuer of Securities)
CAPITAL ONE BANK
(Depositor to the Trust described herein)
(Exact Name of Registrant as Specified in Its Charter)
Virginia 6141 54-1719855
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification Number)
of Organization) Classification Code
Number)
Capital One Bank
11011 West Broad Street
Richmond, VA 23060
(804) 967-1000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
John G. Finneran, Jr.
Capital One Bank
Senior Vice President and General Counsel
11011 West Broad Street
Richmond, VA 23060
(804) 967-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
Susanne Kogut, Esq. Paul Weiffenbach, Esq.
Assistant General Counsel Orrick, Herrington & Sutcliffe LLP
Capital One Bank Washington Harbour
2980 Fairview Park Drive 3050 K Street, N.W.
Falls Church, VA 22042 Washington, D.C. 20007
(703) 205-1079 (202)339-8400
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount aggregate aggregate Amount of
Title of securities to be to be price offering registration
registered registered per unit* price* fee**
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<S> <C> <C> <C> <C>
Asset Backed
Certificates........... $2,500,000,000 100% $2,500,000,000 $695,000
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</TABLE>
*Estimated solely for the purpose of calculating the registration fee.
**$278 of the Registration Statement already has been paid.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
In accordance with Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the Prospectus included herein is a
combined Prospectus which also relates to $889,311,593 of unissued Asset
Backed Certificates registered under Registration Statement No. 33-99276 of
the Registrant. A Filing Fee of $306,659 was paid for such unissued Securities
with Registration Statement No. 33-99276.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+This information in this prospectus supplement and the accompanying +
+prospectus is not complete and may be amended. We may not sell these +
+securities until we deliver a final prospectus supplement and accompanying +
+prospectus. This prospectus supplement and the accompanying prospectus are +
+not an offer to sell nor are they seeking an offer to buy these securities in +
+any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
Prospectus Supplement to Prospectus Dated January 28, 1999
[LOGO OF CAPITAL ONE APPEARS HERE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
$ Class A Floating Rate Asset Backed Certificates, Series 199 -
$ Class B Floating Rate Asset Backed Certificates, Series 199 -
<TABLE>
<CAPTION>
<S> <C> <C> <C>
You should consider carefully the risk
factors beginning on page S-7 in Class A Class B
this prospectus supplement and on certificates certificates
page 6 in the prospectus. ------------ ------------
Principal amount $ $
A certificate is not a deposit and Certificate rate One-Month LIBOR One-Month LIBOR
neither the certificates nor the plus [ ]% per year plus [ ]% per year
underlying accounts or receivables Interest paid Monthly, beginning Monthly, beginning
are insured or guaranteed by the , 199 , 199
Federal Deposit Insurance Expected final payment
Corporation or any other date , 200 , 200
government agency. Legal final maturity , 200 , 200
Price to public per
The certificates will represent certificate % %
interests in the trust only, not Underwriting discount
interests in or obligations of per certificate % %
Capital One Bank or any of its Proceeds to seller per
affiliates. certificate % %
<CAPTION>
<S> <C>
This prospectus supplement may The total price to public is $ , the total amount of the
be used to offer and sell the underwriting discount is $ and the total amount of proceeds
certificates only if accompanied plus accrued interest and before deduction of expenses is
by the prospectus. $ .
Credit Enhancement--
. The Class B certificates are subordinated to the Class A
certificates. Subordination of the Class B certificates
provides credit enhancement for the Class A certificates.
. The trust also is issuing Class C interests in the amount of
$ that are subordinated to both the Class A certificates
and the Class B certificates. Subordination of the Class C
interests provides credit enhancement for both the Class A
certificates and the Class B certificates.
. The Seller will establish a cash collateral account in the
amount of $ .
</TABLE>
This prospectus supplement and the accompanying prospectus relate only to the
offering of the Class A certificates and the Class B certificates.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these certificates or determined that
this prospectus supplement or the prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Underwriters of the Series 199 - certificates
A Co.
B Co.
C Co.
, 199
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Capital One Master Trust provides information to you about the Series 199 -
certificates in two separate documents: (a) the accompanying prospectus, which
provides general information about the Capital One Master Trust and the
securities issued by it, some of which may not apply to your Series 199 -
certificates and (b) this prospectus supplement, which describes the specific
terms of your Series 199 - certificates. This prospectus supplement may be
used to sell Class A certificates and Class B certificates only if accompanied
by the prospectus.
If the terms of your Series 199 - certificates vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
additional related discussions. The following table of contents and the table
of contents in the accompanying prospectus provide the pages on which these
captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the prospectus are defined under the caption "Index
of Terms for Prospectus Supplement" beginning on page S-48 in this document and
under the caption "Index of Terms for Prospectus" beginning on page 71 in the
accompanying prospectus. The capitalized terms are provided for your
convenience, to avoid unnecessary duplication of terms.
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
SUMMARY OF TERMS.......................................................... S-1
The Trust................................................................ S-1
The Bank................................................................. S-1
Offered Securities....................................................... S-1
Certificates............................................................ S-1
Distribution Dates...................................................... S-1
Interest................................................................ S-1
Principal............................................................... S-2
Class C Interests........................................................ S-2
Credit Enhancement....................................................... S-2
Cash Collateral Account................................................. S-2
Subordination........................................................... S-2
Other Interests In The Trust............................................. S-2
Other Series of Certificates............................................ S-2
The Seller's Interest................................................... S-3
The Receivables.......................................................... S-3
Collections by the Servicer.............................................. S-3
Allocations.............................................................. S-3
To Your Series.......................................................... S-3
Among Classes........................................................... S-3
Application of Collections............................................... S-3
Finance Charge Collections.............................................. S-4
Excess Spread........................................................... S-4
Principal Collections................................................... S-4
Pay Out Events........................................................... S-5
Optional Repurchase...................................................... S-5
Registration............................................................. S-5
Tax Status............................................................... S-5
ERISA Considerations..................................................... S-5
Certificate Ratings...................................................... S-6
[Exchange Listing........................................................ S-6]
RISK FACTORS.............................................................. S-7
Credit Enhancement May Not Be Sufficient to Prevent Loss................. S-7
Class B Certificates Are Subordinate to the Class A Certificates; Trust
Assets May Be Diverted from Class B to Pay Class A...................... S-7
INTRODUCTION.............................................................. S-8
MATURITY CONSIDERATIONS................................................... S-8
THE BANK PORTFOLIO........................................................ S-10
General.................................................................. S-10
Delinquency and Loss Experience.......................................... S-11
Revenue Experience....................................................... S-13
Payment Rates............................................................ S-14
THE RECEIVABLES........................................................... S-14
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
USE OF PROCEEDS........................................................... S-18
THE BANK.................................................................. S-18
SERIES PROVISIONS......................................................... S-18
Interest Payments........................................................ S-18
[Prefunded Series........................................................ S-20]
Principal Payments....................................................... S-21
Subordination............................................................ S-23
Allocation Percentages................................................... S-23
Principal Funding Account................................................ S-27
Reserve Account.......................................................... S-27
Reallocation of Cash Flows............................................... S-28
Application of Collections............................................... S-30
Payment of Interest, Fees and Other Items............................... S-30
Excess Spread; Excess Finance Charges................................... S-31
Payments of Principal................................................... S-33
Cash Collateral Account.................................................. S-34
Defaulted Receivables; Investor Charge-Offs.............................. S-36
Shared Principal Collections[; Excess Shared Principal Collections]...... S-37
[Extension of Initial Principal Payment Date............................. S-37]
Issuance of Additional Investor Certificates............................. S-38
Paired Series............................................................ S-39
Required Principal Balance; Addition of Accounts......................... S-39
Pay Out Events........................................................... S-40
Servicing Compensation and Payment of Expenses........................... S-41
Series Termination....................................................... S-42
Federal Income Tax Consequences.......................................... S-43
Reports.................................................................. S-43
Legal Matters............................................................ S-43
ERISA CONSIDERATIONS...................................................... S-43
General.................................................................. S-43
The Authorization........................................................ S-44
UNDERWRITING.............................................................. S-45
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT.................................. S-48
ANNEX I: PREVIOUS ISSUANCES OF CERTIFICATES............................... A-1
</TABLE>
i
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information and does not contain all of the
information that you need in making your investment decision. It also provides
general, simplified descriptions of matters that, in some cases, are highly
technical and complex. More detail is provided in other sections of this
document and in the prospectus.
Do not rely upon this summary for a full understanding of the matters you need
to consider for any potential investment in the Series 199 - certificates.
To understand all of the terms of the offering of the Series 199 -
certificates, you should carefully read this entire document and the
accompanying prospectus.
THE TRUST
The certificates will be issued by Capital One Master Trust, which is a master
trust formed in 1993.
The trustee is The Bank of New York.
THE BANK
Capital One Bank sells the receivables to the trust and services them. The bank
is a Virginia state-chartered credit card bank. Its principal office currently
is located at 11011 West Broad Street, Richmond, Virginia 23060 and its
telephone number is (804) 967-1000.
OFFERED SECURITIES
Certificates
Capital One Master Trust is offering:
. $ of Class A certificates; and
. $ of Class B certificates.
In this document, references to Series 199 - certificates include both Class A
and Class B.
Only the Class A certificates and the Class B certificates are offered by this
prospectus supplement and the accompanying prospectus. The Class C interests
are not offered by this prospectus supplement and the accompanying prospectus.
Beneficial interests in the Series 199 - certificates may be purchased in
minimum denominations of $1,000 and integral multiples of $1,000.
The Series 199 - certificates are expected to be issued on , .
[The Series 199 - certificates will be a prefunded series and an extendable
series. See "Series Provisions--Prefunded Series" and "--Extension of Initial
Principal Payment Date" in this prospectus supplement.]
Distribution Dates
Distribution dates for the Series 199 - certificates will be 15, 199
and, after that, will be the 15th day of each month if the 15th is a business
day and, if not, the following business day.
Interest
Interest on the Series 199 - certificates will be paid on each distribution
date.
The Class A certificates will bear interest at [one-month LIBOR] as determined
each month plus % per year.
The Class B certificates will bear interest at [one-month LIBOR] as determined
each month plus % per year.
Interest for the Class A certificates and Class B certificates will be
calculated as follows:
<TABLE>
<S> <C> <C>
Principal amount Number of days in Rate for
at end of prior X interest period X interest period
month -----------------
360
</TABLE>
You may obtain the interest rates for the current interest period and the
immediately preceding interest period by telephoning the trustee at (212) 815-
5738.
S-1
<PAGE>
See "Series Provisions--Interest Payments" in this prospectus supplement for a
description of how and when LIBOR will be determined.
Principal
Principal of the Class A certificates is expected to be paid in full on the
distribution date. We are scheduled to begin accumulating
collections of principal receivables starting on , 200 for payment to the
Class A certificateholders on the expected final payment date, but we may begin
accumulating at a later date.
Principal of the Class B certificates is expected to be paid in full on the
distribution date. No principal will be paid on the Class B
certificates, however, until the Class A certificates are paid in full or the
full amount has been accumulated to pay principal on the Class A certificates.
The amortization period for the Class B certificates is scheduled to begin on
the distribution date.
The Series 199 - certificates are expected to be paid on the dates noted
above; however, principal may be paid earlier or later. Certificateholders will
not be entitled to any premium for early or late payment of principal. If
certain adverse events known as pay out events occur [or if a principal payment
event occurs], principal may be paid earlier than expected. If collections of
the credit card receivables are less than expected or are collected more slowly
than expected, then principal payments may be delayed. If the Series 199 -
certificates are not paid on their expected final payment dates, collections of
principal receivables will continue to be used to pay principal on the Series
199 - certificates until the certificates are paid or until , 200 ,
whichever occurs first. , 200 is the legal final maturity date for Series
199 - .
See "Maturity Considerations," "Series Provisions--Allocation Percentages," "--
Principal Payments," ["--Prefunded Series" and "-- Extension of Initial
Principal Payment Date"] in this prospectus supplement.
CLASS C INTERESTS
At the same time as the Class A certificates and the Class B certificates are
issued, the trust will issue $ of Class C floating rate asset backed
interests as part of Series 199 - . The Class C interests will be subordinated
to both the Class A certificates and the Class B certificates.
The Class C interests are not offered by this document.
CREDIT ENHANCEMENT
Cash Collateral Account
The servicer will establish a cash collateral account to provide credit
enhancement for the Series 199 - certificates and the Class C interests. $
will be deposited into the account when the Series 199 -certificates are
issued. The cash collateral account will be used to make payments on the Series
199 - certificates and the Class C interests if collections of receivables
allocated to Series 199 - are insufficient to make required payments.
Subordination
Credit enhancement for the Class A certificates is also provided by the
subordination of the Class B certificates and the Class C interests.
Credit enhancement for the Class B certificates is also provided by the
subordination of the Class C interests.
Credit enhancement for your series is for your series' benefit only, and you
are not entitled to the benefits of credit enhancement available to other
series.
See "Series Provisions--Reallocation of Cash Flows," "--Application of
Collections" and "--Defaulted Receivables; Investor Charge-Offs" in this
prospectus supplement.
OTHER INTERESTS IN THE TRUST
Other Series of Certificates
The trust has issued numerous other series of certificates and expects to issue
additional series. A summary of the outstanding series is in "Annex I:
S-2
<PAGE>
Previous Issuances of Certificates" included at the end of this prospectus
supplement. Annex I is hereby incorporated into this prospectus supplement by
reference. The issuance of future series will occur without prior review or
consent by you or any other certificateholder.
The Seller's Interest
The interest in the trust not represented by your series or by any other series
is the seller's interest. The seller's interest is owned by the bank. The bank
may, however, sell a portion of its interest in the seller's interest. The
seller's interest does not provide credit enhancement for your series or any
other series.
THE RECEIVABLES
The primary assets of the trust are receivables in MasterCard(R) and VISA(R)/1/
revolving credit card accounts. The receivables consist of principal
receivables and finance charge receivables.
The following information is as of , 199 :
. Receivables in the trust: $
. Accounts designated to the trust:
See "The Receivables" in this prospectus supplement.
COLLECTIONS BY THE SERVICER
The bank, as servicer, will collect payments on the receivables and will
deposit those collections in an account. It will keep track of those
collections that are finance charge receivables and those that are principal
receivables.
ALLOCATIONS
To Your Series
Each month the bank, as servicer, will allocate collections received among
. your series;
. other series outstanding; and
. the seller's interest in the trust.
- --------
/1/MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Inc. and VISA U.S.A., Inc. respectively.
The amount allocated to your series will be determined based mainly upon the
size of the invested amount of your series compared to the total amount of
principal receivables in the trust. At the time of issuance of the Series 199 -
certificates, the invested amount for Series 199 - will be $ .
Among Classes
Amounts allocated to your series will be further allocated among the Class A
certificates, the Class B certificates and the Class C interests on the basis
of the invested amount of each class. Initially the invested amount of each
class will be equal to the original principal amount of such class.
See "Series Provisions--Allocation Percentages" in this prospectus supplement.
You are entitled to receive payments of interest and principal only from
collections and other trust assets allocated to your series. The invested
amount, which is the primary basis for allocations to your series, is the sum
of (a) the Class A invested amount, (b) the Class B invested amount and (c) the
Class C invested amount.
If the invested amount of your series declines, amounts allocated and available
for payment to your series and to you will be reduced. In addition, for
purposes of allocating finance charge collections and amounts that are written
off as uncollectible, the allocations to the Class A certificates will be based
upon the Class A adjusted invested amount, which will be the Class A invested
amount less amounts accumulated in the principal funding account for payment to
the Class A certificateholders on the Class A expected final payment date. For
a description of the events which may lead to these reductions, see "Series
Provisions--Allocation Percentages" and "--Reallocation of Cash Flows" in this
prospectus supplement.
APPLICATION OF COLLECTIONS
The following steps describe how the trust allocates and applies collections of
finance charge receivables to your series.
S-3
<PAGE>
Finance Charge Collections
. Collections of finance charge receivables allocated to the Class A
certificates will be used to pay interest on the Class A certificates, to pay
Class A's portion of the servicing fee and to cover Class A's portion of
receivables that are written off as uncollectible. Any remaining amount will
become excess spread and be applied as described below.
. Collections of finance charge receivables allocated to the Class B
certificates will be used to pay interest on the Class B certificates and to
pay Class B's portion of the servicing fee. Any remaining amount will become
excess spread and be applied as described below.
. Collections of finance charge receivables allocated to the Class C interests
will be used to pay the Class C portion of the servicing fee and any
remaining amount will become excess spread and be applied as described below.
Excess Spread
Each month the trust will distribute the excess spread and your series' share
of excess finance charges from other series in the following order of priority:
. first to make up deficiencies with respect to Class A;
. then to make up deficiencies with respect to Class B;
. then to pay interest on the Class C interests and to make up deficiencies
with respect to Class C;
. then to make a deposit to the cash collateral account if the amount in the
cash collateral account is less than the required cash collateral amount;
. then, in limited circumstances, to fund a reserve account to cover Class A
interest payment shortfalls during the Class A accumulation period;
. then, if needed, to make a deposit into the spread account created for the
benefit of the Class C interests; and
. finally to other series or to the holders of the seller's interest in the
trust.
See "Series Provisions--Application of Collections" in this prospectus
supplement.
Principal Collections
The trust will apply your series' share of principal collections each month as
follows:
. First, principal collections allocated to the Class C interests and the Class
B certificates may be reallocated, if necessary, to make required payments on
the Class A certificates and the Class B certificates not made from finance
charge collections, excess spread or funds in the cash collateral account or
the reserve account.
. During the revolving period, no principal will be paid to you or accumulated
in a trust account. Instead, your series' share of principal collections will
then be treated as shared principal collections and may be available to make
principal payments for other series.
. The Class A accumulation period is scheduled to begin on , 200 , but may
begin at a later date. During the Class A accumulation period, principal
collections will then be deposited in a trust account, up to a controlled
deposit amount, for payment to the Class A certificateholders on the Class A
expected final payment date.
. Upon payment in full of the Class A certificates, the Class B amortization
period will begin. During the Class B amortization period, principal
collections will then be paid to the Class B certificateholders on each
distribution date.
. Upon payment in full of the Class A and Class B certificates, the Class C
amortization period will begin. During the Class C amortization period,
principal collections will then be paid to the Class C interest holders on
each distribution date.
. If a pay out event (described below) that applies to Series 199 - or to all
series occurs, the early amortization period will begin. [If a principal
payment event occurs, the principal payment period will begin.] During the
early amortization period [or the principal payment period], principal
collections will then be paid first to the Class A certificateholders, then
to the Class B certificateholders and then to the Class C interest holders.
. Any remaining principal collections will be first made available to other
series and then paid to the holders of the seller's interest or deposited in
the excess funding account.
S-4
<PAGE>
PAY OUT EVENTS
The documents under which the Series 199 - interests will be issued include a
list of adverse events known as pay out events. If a pay out event that applies
to Series 199 - or to all series occurs, the trust will use collections of
principal receivables allocated to Series 199 - each month to pay principal.
Pay out events may occur if the seller fails to make required payments or
deposits, violates other covenants and agreements or makes representations and
warranties that are materially incorrect.
The following also are pay out events:
. The seller does not transfer additional assets to the trust when required;
. The yield on the trust portfolio less the amount of receivables that are
written off as uncollectible allocated to Series 199 - averaged over three
months is less than the weighted average interest rate for Series 199 - ,
calculated by taking into account the interest rate for Class A, Class B and
Class C, plus the servicing fee rate for Series 199 - ;
. Certain defaults of the servicer;
. The Class A certificates or the Class B certificates are not paid in full on
their expected final payment dates;
. The occurrence of certain events of insolvency or receivership relating to
the seller (including any additional seller);
. The seller is unable to transfer receivables to the trust as required under
the pooling and servicing agreement; or
. The trust becomes an "investment company" under the Investment Company Act of
1940.
For a more detailed discussion of the pay out events, see "Series Provisions--
Pay Out Events" in this prospectus supplement. In addition, see "Description of
the Certificates--Pay Out Events" in the accompanying prospectus.
OPTIONAL REPURCHASE
The bank has the option to repurchase your Series 199 - certificates when the
invested amount for your series has been reduced to 5% or less of the initial
invested amount. See "Risk Factors--Optional Repurchase May Result in an Early
Return of Principal and a Reinvestment Risk" in the accompanying prospectus.
REGISTRATION
The Series 199 - certificates will be in book-entry form and will be
registered in the name of Cede & Co., as the nominee of The Depository Trust
Company. Except in certain limited circumstances, you will not receive a
definitive certificate representing your interest. See "The Pooling Agreement
Generally--Definitive Certificates" in the accompanying prospectus.
You may elect to hold your Series 199 - certificates through The Depository
Trust Company, in the United States, or Cedel Bank, societe anonyme or the
Euroclear System in Europe. See "The Pooling Agreement Generally--Book-Entry
Registration" and "--Definitive Certificates" in the accompanying prospectus.
TAX STATUS
Orrick, Herrington & Sutcliffe LLP, as special tax counsel to the bank, is of
the opinion that under existing law your Series 199 - certificates will be
characterized as debt for federal income tax purposes. By your acceptance of a
Series 199 - certificate, you will agree to treat your Series 199 -
certificates as debt for federal, state and local income and franchise tax
purposes. See "Federal Income Tax Consequences" in the accompanying prospectus
for additional information concerning the application of federal income tax
laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus, the Class A
certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
For the reasons discussed under "ERISA Considerations" in this prospectus
supplement and the accompanying prospectus, the Class B certificates are not
eligible for purchase by persons
S-5
<PAGE>
investing assets of employee benefit plans or individual retirement accounts
other than an insurance company investing assets of its general account.
CERTIFICATE RATINGS
The Class A certificates are required to be rated in the highest rating
category by at least one nationally recognized rating organization and the
Class B certificates are required to be rated in one of the three highest
rating categories by at least one nationally recognized rating organization.
See "Prospectus Summary--Certificate Ratings" and "Risk Factors--Credit Ratings
Assigned to Your Certificates Are Limited in Nature" in the accompanying
prospectus.
[EXCHANGE LISTING
We will apply to list the series 199 - certificates on the Luxembourg Stock
Exchange. We cannot guarantee that the application for the listing will be
accepted. No application will be made to list the Class C interests on the
Luxembourg Stock Exchange.]
S-6
<PAGE>
RISK FACTORS
In the accompanying prospectus you will find a section called "Risk Factors."
The information in that section applies to all series, including yours. The
information in this section applies more specifically to your series.
Please carefully read the "Risk Factors" section in the prospectus and the
risk factors discussed below before deciding whether to purchase any of the
Series 199 - certificates.
Credit Enhancement May Not
Be Sufficient to Prevent
Loss Credit enhancement for the Series 199 -
certificates is provided by a cash collateral
account and through the subordination of the
Class B certificates and the Class C interests.
However, such credit enhancement is limited.
The only sources of payment for your
certificates are the assets of the trust
allocated to your series. If problems develop
with the receivables, such as an increase in
losses on the receivables, or there are
problems in the collection and transfer of the
receivables to the trust, it is possible that
you may not receive the full amount of interest
and principal that you would otherwise receive.
See "Series Provisions--Allocation
Percentages," "--Cash Collateral Account" and
"--Defaulted Receivables; Investor Charge-Offs"
in this prospectus supplement.
Class B Certificates Are
Subordinate to the Class A
Certificates; Trust Assets
May Be Diverted from Class B
to Pay Class A
If you purchase a Class B certificate, your
right to receive principal payments is
subordinated to the payment in full of the
Class A certificates. No principal will be paid
to you until the full amount of principal has
been paid or accumulated for payment on the
Class A certificates. In addition, if Class A's
share of collections of finance charge
receivables allocated to Series 199 - , excess
spread, funds in the cash collateral account
and Class C's share of principal collections
are not sufficient to make all required
payments for the Class A certificates,
collections of principal receivables allocated
to Class B may be diverted to Class A. Also, if
Class A's share of losses on the receivables
exceeds collections and credit enhancement
available to cover those losses and the Class C
invested amount is reduced to zero, the Class B
invested amount may be reduced to avoid
reducing the Class A invested amount. If this
occurs, the Class B invested amount and future
allocations to Class B would be reduced.
Accordingly, you may receive payments of
interest or principal later than you expect or
you may not receive the full amount of
principal and interest due to you.
See "Series Provisions--Reallocation of Cash
Flows" and "--Defaulted Receivables; Investor
Charge-Offs" in this prospectus supplement.
S-7
<PAGE>
INTRODUCTION
The following provisions of this Prospectus Supplement contain more detailed
information concerning the asset backed certificates offered by this Prospectus
Supplement and the accompanying Prospectus. The certificates will be issued by
Capital One Master Trust (the "Trust") pursuant to a pooling and servicing
agreement, dated as of September 30, 1993 (as amended, the "Pooling
Agreement"), originally between a predecessor in interest to Capital One Bank
(the "Bank"), as Seller and Servicer, and The Bank of New York, as trustee (the
"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.
The Trust will issue $ of its Class A Floating Rate Asset Backed
Certificates, Series 199 - (the "Class A Certificates"), $ of its Class B
Floating Rate Asset Backed Certificates, Series 199 - (the "Class B
Certificates" and, together with the Class A Certificates, the "Investor
Certificates") and $ of Class C Floating Rate Asset Backed Interests,
Series 199 - (the "Class C Interests" and, together with the Investor
Certificates, the "Series 199 - Interests").
The Investor Certificates will be issued pursuant to the Pooling Agreement,
together with the Series 199 -Supplement (the "Series 199 - Supplement"). The
Class C Interests will be issued pursuant to the Pooling Agreement, the Series
199 - Supplement and the agreement relating to the Class C Interests (the
"Class C Supplemental Agreement").
The Series 199 - Interests will be the Series issued by the Trust and
the Series outstanding, as of the Series Issuance Date, included in a group
of Series ("Group One") issued by the Trust from time to time. See "Annex I:
Previous Issuances of Certificates." Annex I is incorporated into this
Prospectus Supplement by reference.
The Investor Certificates offered by this Prospectus Supplement and the
accompanying Prospectus are investment grade asset-backed securities within the
meaning of the Act and the rules promulgated thereunder.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Series 199 - Supplement provide that the
holders of the Class A Certificates (the "Class A Certificateholders") will not
receive payments of principal until the Distribution Date (the "Class A
Expected Final Payment Date"), or earlier if a Pay Out Event [or a Principal
Payment Event] occurs. 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 earlier to occur of the date on which the
Class A Invested Amount has been paid in full or 200 (the "Series
199 - Termination Date" or the "Termination Date"). The holders of the Class B
Certificates (the "Class B Certificateholders" and, together with the Class A
Certificateholders, the "Investor Certificateholders") will not begin to
receive payments of principal until the final principal payment on the Class A
Certificates has been made. The holders of the Class C Interests (the "Class C
Interest Holders" and, together with the Investor Certificateholders, the
"Series 199 - 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 (the "Class
A Accumulation Period"), amounts equal to the least of (a) Available Investor
Principal Collections (see "Series Provisions--Principal Payments" in this
Prospectus Supplement) 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
S-8
<PAGE>
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" in this Prospectus
Supplement for a discussion of circumstances under which the start of the
Class A Accumulation Period may be delayed. Upon payment in full of the Class A
Invested Amount, on each Distribution Date during the Class B amortization
period (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
begins, cause another Series issued or to be issued by the Trust (or some
portion thereof, to the extent that the full principal amount of such other
Series is not otherwise outstanding at such time) to be a Paired Series with
Series 199 - to be used to finance the increase in the Seller's Interest
caused by the accumulation of principal in the Principal Funding Account for
Series 199 - . 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 199 - ), 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 for such other Series may vary from the Pay Out Events for
Series 199 - and may include Pay Out Events that 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 for any such Paired Series prior to
the payment in full of the Series 199 - Interests, the Principal Allocation
Percentage could be reduced and the final payment of principal to the Series
199 - Holders could be delayed.
Should a Pay Out Event occur with respect to Series 199 - and the Early
Amortization Period begins, [or if a Principal Payment Event occurs and the
Principal Payment Period begins,] 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 199 - Holders will be entitled to receive
Available Investor Principal Collections on each Distribution Date for such
Early Amortization Period [or Principal Payment Period] until the Invested
Amount is paid in full or until the Termination Date occurs and (b) in the
Excess Funding Account will be released and treated as Shared Principal
Collections and Excess 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 or Excess Shared Principal
Collections. See "Description of the Certificates--Pay Out Events" in the
accompanying Prospectus and "Series Provisions--Pay Out Events" [and "--
Extension of Initial Principal Payment Date"] in this Prospectus Supplement.
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" in this Prospectus Supplement. 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,
S-9
<PAGE>
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--Ability to Continue the Trust Will Be Dependent Upon the Ability to
Generate New Receivables" and "Description of the Certificates--Shared
Principal Collections; Excess Shared Principal Collections" in the accompanying
Prospectus.
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." 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 Series, 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 could be
significantly reduced.
Due to the reasons set forth above, and the fact that the payment experience
for 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" in this Prospectus Supplement), 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--Ability to Continue the Trust Will Be Dependent Upon the
Ability to Generate New Receivables" in the accompanying Prospectus.
THE BANK PORTFOLIO
General
The Accounts included in the Trust as of July 30, 1993 (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 , 199 (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 accompanying Prospectus.
The Bank Portfolio is primarily comprised of accounts originated by the Bank
from 1992 to 199 , 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 the following pricing
characteristics. The annual percentage
S-10
<PAGE>
rate on such receivables is either a relatively low introductory rate
converting to a higher rate at the end of an introductory period, a low fixed-
rate of generally % to % or a non-introductory rate generally ranging between
approximately % and %. Low introductory rates generally range from
approximately % to % for introductory periods of to months after which the
rate converts to an annual percentage rate generally between approximately %
and %. The annual percentage rate is either a fixed rate or a variable rate
that adjusts periodically according to an index. Non-introductory rate products
(excluding the low fixed-rate products) are more customized products and
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. The number of low-fixed rate
products and non-introductory rate products 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 low fixed-rate and non-
introductory rate credit card receivables, which at the date of the initial
issuance of the Investor Certificates (the "Series Issuance Date") constitute,
and at any given time thereafter may constitute, a material portion of the
Trust Portfolio. See "Risk Factors--The Laws Relating to Insolvency and the
Perfection of Security Interests Involve Discretion and Uncertainty and May
Result in Other Interests Having Priority Over Your Certificates," "The Bank's
Credit Card and Consumer Lending Business--Underwriting Procedures" and
"Certain Legal Aspects of the Receivables--Transfer of Receivables" in the
accompanying Prospectus.
In the fourth quarter of 1997, the Bank adopted a more conservative
accounting methodology for 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 $1.985
billion at year end 1992, to approximately [$ ] billion as of the end of
199 , 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 , 199 , the
Trust Portfolio (including Receivables added to the Trust on , 199 )
represented approximately % and % 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 for 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.
S-11
<PAGE>
Delinquencies as a Percentage of the Bank Portfolio(1)(3)
(Dollars in Thousands)
<TABLE>
<CAPTION>
At Year End
-----------------------------------------------------------------
At , 199 199 (4) 199 199
--------------------- --------------------- --------------------- ---------------------
Number of Days Delinquent Delinquent Delinquent Delinquent
Delinquent(2) Amount Percentage Amount Percentage Amount Percentage Amount Percentage
- -------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 - 59 days............
60 - 89 days............
90+ days................
Total..................
</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 199 ,
199 and 199 were [$ ], [$ ] and [$ ], respectively. The
end of period receivables outstanding as of , 199 were [$ ].
(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 % without the adjustments discussed
above under "--General."
Loss Experience for the Bank Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended
-----------------
, 199 199 (1) 199 199
----------- ------- ---- ----
<S> <C> <C> <C> <C>
Average Receivables Outstanding.................
Gross Losses....................................
Gross Losses as a Percentage of Average
Receivables Outstanding........................
Recoveries......................................
Net Losses......................................
Net Losses as a Percentage of Average
Receivables Outstanding........................
</TABLE>
- --------
(1) Net Losses as a Percentage of Average Receivables Outstanding would have
been % without the change in charge-off methodology discussed above under
"--General."
S-12
<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
-----------------
, 199 199 (2) 199 199
----------- ------- ---- ----
<S> <C> <C> <C> <C>
Average Receivables Outstanding...................
Finance Charges and Fees(1).......................
Yield from Finance Charges and Fees...............
Interchange.......................................
Yield from Interchange............................
</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 % without the
adjustments discussed above under "--General."
Because the Trust Portfolio is only a portion of the Bank Portfolio, actual
revenue experience for the Receivables is different from that set forth above
for the Bank Portfolio. There can be no assurance that the yield experience for
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--Seller's
Ability to Change Terms of the Receivables Could Alter Payment Patterns" and
"--Consumer Protection Laws May Restrict the Bank's Ability to Collect
Receivables and Maintain Yield on Portfolio and Lead to an Early Amortization
or Inability to Pay Certificates in Full" in the accompanying 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.
S-13
<PAGE>
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 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 on the Accounts.
Accountholder Monthly Payment Rates
for the Bank Portfolio(1)
<TABLE>
<CAPTION>
Year Ended
--------------
, 199 199 199 199
---------- ---- ---- ----
<S> <C> <C> <C> <C>
Lowest Month(2).......................................
Highest Month(2)......................................
Average Payment Rate for the Period...................
</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 , 199 (including
Receivables in Accounts conveyed to the Trust on , 199 , which
Receivables and Accounts are included in all figures set forth below in this
paragraph, the next paragraph and the following tables) included $ of
Principal Receivables and $ of Finance Charge Receivables. The Accounts had
an average balance of $ and an average credit limit of $ . The
percentage of the aggregate total Receivables balance to the aggregate total
credit limit was %. The average age of the Accounts was approximately
months. As of , , all of the Accounts in the Trust Portfolio were
VISA or MasterCard credit card accounts, of which % were standard accounts and
% were premium accounts, and the aggregate Receivables balances of standard
accounts and premium accounts, as a percentage of the total aggregate
Receivables, were % and %, respectively. Since the formation of the Trust,
and prior to the Series Issuance Date, the Bank has added approximately [$ ]
billion principal amount of Receivables in Additional Accounts to the Trust.
The Receivables arising under such accounts added to the Trust since its
formation are generally assessed finance charges having the following 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, a low fixed-rate of generally % to % or a non-
introductory rate generally ranging between approximately % and %. Low
introductory rates generally range from approximately % to % for introductory
periods of to months, after which the rate converts to an annual percentage
rate generally between approximately % and %. The annual percentage rate is
either a fixed rate or a variable rate that adjusts periodically according to
an index. Non-introductory rate products (excluding the low fixed-rate
products) are more customized products and 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 low
fixed-rate and 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.
S-14
<PAGE>
As of , , approximately % of the Trust Portfolio accounts were
assessed a variable rate periodic finance charge and approximately % were
assessed a fixed rate periodic finance charge.
The following tables summarize the Trust Portfolio by various criteria as of
, . 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.
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)................
No Balance(2)....................
More than $0 and less than or
equal to $1,500.00..............
$1,500.01 - $ 5,000.00...........
$5,000.01 - $10,000.00...........
Over $10,000.00..................
--- --- --- ---
Total..........................
=== === === ===
</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...
$1,500.01 - $5,000.00.............
$5,000.01 - $10,000.00............
Over $10,000.00...................
--- --- --- ---
Total...........................
=== === === ===
</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-15
<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)..............
Past due 30 - 59 days..............
Past due 60 - 89 days..............
Past due 90+ days..................
--- --- --- ---
Total............................
=== === === ===
</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............
Over 6 Months to 12 Months........
Over 12 Months to 24 Months.......
Over 24 Months to 36 Months.......
Over 36 Months to 48 Months.......
Over 48 Months to 60 Months.......
Over 60 Months....................
--- --- --- ---
Total...........................
=== === === ===
</TABLE>
S-16
<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.........................
Texas..............................
New York...........................
Florida............................
Illinois...........................
Pennsylvania.......................
Virginia...........................
Ohio...............................
New Jersey.........................
Michigan...........................
Georgia............................
Massachusetts......................
North Carolina.....................
Washington.........................
Maryland...........................
Missouri...........................
Indiana............................
Minnesota..........................
Tennessee..........................
Colorado...........................
Arizona............................
Connecticut........................
Alabama............................
Louisiana..........................
South Carolina.....................
Oregon.............................
Oklahoma...........................
Kentucky...........................
Kansas.............................
Arkansas...........................
Nevada.............................
Mississippi........................
West Virginia......................
New Hampshire......................
New Mexico.........................
Nebraska...........................
Utah...............................
Maine..............................
Idaho..............................
Hawaii.............................
Rhode Island.......................
Iowa...............................
Montana............................
Alaska.............................
Vermont............................
Delaware...........................
South Dakota.......................
North Dakota.......................
District of Columbia...............
Wyoming............................
Wisconsin..........................
Other..............................
--- --- --- ---
Total.............................
=== === === ===
</TABLE>
S-17
<PAGE>
As of , , 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 "Risk Factors--Consumer Protection
Laws May Restrict the Bank's Ability to Collect Receivables and Maintain Yield
on Portfolio and Lead to an Early Amortization or Inability to Pay Certificates
in Full" in the accompanying 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 , , the Bank had assets of approximately $[ ] billion and
stockholder's equity of approximately $[ ] million. For a more detailed
description of the Bank, see "The Bank" in the accompanying Prospectus.
SERIES PROVISIONS
The Investor Certificates and the Class C Interests will be issued pursuant
to the Pooling Agreement and the Series 199 - 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. 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), beginning on , 199 (each, a
"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"). 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.
Interest for any Distribution Date will accrue from and including the preceding
Distribution Date (or in the case of the first Distribution Date, from and
including the Series Issuance Date) to but excluding such Distribution Date.
"Class A Certificate Rate" means a rate per annum equal to [LIBOR for one-
month United States dollar deposits, determined as of the LIBOR Determination
Date as described below], plus %.
"Class B Certificate Rate" means a rate per annum equal to [LIBOR for one-
month United States dollar deposits, determined as of the LIBOR Determination
Date as described below], plus %.
Because each of the Class A Certificate Rate and the Class B Certificate
Rate 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.
S-18
<PAGE>
Interest payments on the Class A Certificates for each Distribution 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 Distribution Date, on the initial Class A principal balance) based upon
the Class A Certificate Rate. On each Distribution Date, Class A Monthly
Interest, Class A Outstanding Monthly Interest and Class A Additional Interest,
if any, for such Distribution Date will be paid to the Class A
Certificateholders. Payments to the Class A Certificateholders will be funded
from Class A Available Funds for the related Monthly Period. To the extent
Class A Available Funds allocated to the holders of the Class A Certificates
(the "Class A Certificateholders' Interest") for such Monthly Period are
insufficient to pay such interest, Excess Spread and Excess Finance Charges
allocated to Series 199 - , 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, for 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 199 - Interests for 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 199 - 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 for the Class A Accumulation Period, the Principal Funding
Investment Proceeds, if any, for the related Distribution Date; [(iii) the
Class A Certificateholders' pro rata share 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 199 - Supplement for such Distribution Date.
Interest payments on the Class B Certificates for each Distribution 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 Distribution
Date, on the initial Class B principal balance) based upon the Class B
Certificate Rate. On each Distribution Date, Class B Monthly Interest, Class B
Outstanding Monthly Interest and Class B Additional Interest, if any, for such
Distribution Date will be paid to the Class B Certificateholders. Payments to
the Class B Certificateholders on any Distribution Date will be funded from
Class B Available Funds for the related Monthly Period. To the extent Class B
Available Funds allocated to the holders of the Class B Certificates (the
"Class B Certificateholders' Interest" and, together with the Class A
Certificateholders' Interest, the "Investor Certificateholders' Interest") for
such Monthly Period are insufficient to pay such interest, Excess Spread and
Excess Finance Charges allocated to Series 199 - , 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, for 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 199 - Interests for 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 199 - Supplement, but excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that is
allocable to Servicer Interchange) [; and (ii) the Class B Certificateholders'
pro rata share of interest and other investment income (net of losses and
investment expenses) earned on amounts on deposit in the Prefunding Account].
Interest payments on the Class C Interests for each Distribution 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 Distribution Date, on
the initial Class C principal balance) based upon the Class C Interest Rate.
"Class C Interest Rate" means a rate per annum specified in the Class C
Supplemental Agreement not to exceed [LIBOR for one-month United States dollar
deposits, determined as of the LIBOR Determination Date as described
S-19
<PAGE>
herein, plus %]. The Class C Interest Rate specified herein is a floating
rate, so 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. 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 paid to the Class C Interest Holders. Payments to the Class C Interest
Holders on any Distribution Date will be funded from Excess Spread and Excess
Finance Charges allocated to Series 199 - 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 or reductions in
the Class B Invested Amount for such Monthly Period. To the extent such Excess
Spread and Excess Finance Charges allocated to Series 199 - and amounts on
deposit in the Cash Collateral Account for such Monthly Period are insufficient
to pay such interest, 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.
For each of the Class A Certificate Rate, the Class B Certificate Rate and
the Class C Interest Rate, 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 first day 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
(beginning 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 (beginning 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, for any Distribution Date, a period from and
including the preceding Distribution Date to but excluding such Distribution
Date; provided, however, that the initial Interest Period will constitute a
period from and including the Series Issuance Date to but excluding the
Distribution Date.
[Prefunded Series
Series 199 - will be a prefunded Series.
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Series 199 - Holders, the prefunding account (the "Prefunding
Account"), which will be an Eligible Deposit Account. During the period from
the Series Issuance Date to the earliest to occur of (i) the start of the Early
Amortization Period, (ii) the date on which the Invested Amount first equals
$ and (iii) , (the "Funding Period"), the Prefunded Amount will be
maintained in the Prefunding Account. The
S-20
<PAGE>
"Prefunded Amount" means the principal amount on deposit in the Prefunding
Account, which initially will equal $ (or % of the Initial Investor
Amount).
Funds on deposit in the Prefunding Account will be withdrawn on (each,
a "Funding Date") to the extent of any increases in the Invested Amount during
the Funding Period as a result of an increase in the Seller's Participation
Amount in excess of % (the "Required Funding Percentage") of the sum of (A)
the aggregate amount of Principal Receivables and (B) the principal amount on
deposit in the Excess Funding Account on such date; provided that the Invested
Amount will in no event exceed the Initial Investor Amount or increase by an
amount in excess of the Prefunded Amount before 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,
Class B Certificateholders and the Class C Interest Holders on the next
succeeding Distribution Date, and result in a reduction of the Investor Amount.
Any such payment would be made earlier than the expected final payment dates
for the Series 199 - Interests and will not include any prepayment premium.
There is no assurance that such partial prepayment could be reinvested at a
rate equivalent to the interest rates on the Investor Certificates.
All amounts on deposit in the Prefunding Account will be invested by the
Trustee in Eligible Investments. On each Distribution Date for 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
will be withdrawn from the Prefunding Account and deposited in the Collection
Account and treated as collections of Finance Charge Receivables allocable to
the Investor Certificateholders' Interest and the Class C Investors' Interest
for the prior Monthly Period.]
Principal Payments
During the revolving period for Series 199 - (the "Revolving Period") (which
begins on the Series Cut-Off Date and ends on the day before the first day of
the Class A Accumulation Period or, if earlier, the first day of 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,
which will begin on the occurrence of a Principal Payment Event,] 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 to the Class C Interest Holders 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 holders of the Class C Interests (the "Class C Investors' Interest")
will, subject to certain limitations, including the allocation of any
Reallocated Principal Collections for 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 or deposited in the
Excess Funding Account.
On each Distribution Date for 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 for such Distribution Date, (b) the applicable Controlled Deposit
Amount for such
S-21
<PAGE>
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 or, if earlier,
the first Special Payment Date. Upon payment in full of the Class A Invested
Amount, 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 for 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. The "Class B Expected Final Payment
Date" will be the Distribution Date.
If a Pay Out Event occurs with respect to Series 199 - , the Early
Amortization Period will begin [or if a Principal Payment Event occurs, the
Principal Payment Period will begin,] and [in each case] any amount on deposit
in the Principal Funding Account will be paid to the Class A Certificateholders
on the first Special Payment Date. If, on the Class A Expected Final Payment
Date, monies on deposit in the Principal Funding Account are insufficient to
pay the Class A Invested Amount in full, a Pay Out Event will occur and the
Early Amortization Period will begin. Upon 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, for 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 for 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 199 - , plus (c)
any Shared Principal Collections from other Series that are allocated to Series
199 - , plus (d) the amount of any Excess Shared Principal Collections from
other Series that are allocated to Series 199 - , plus (e) the amount, if any,
of Class A Available Funds to be distributed to cover the Class A Investor
Default Amount for the related Distribution Date, plus (f) any other amounts
which pursuant to the Series 199 - Supplement are to be treated as Available
Investor Principal Collections for the related Distribution Date, plus (g) 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 begin at the close of
business on the last day of the Monthly Period. However, the
Servicer may elect to postpone the start 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 start 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 199 -
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
S-22
<PAGE>
start 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 start of the Class A Accumulation Period, then it is probable 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. Upon 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 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" in this
Prospectus Supplement.
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 for such Monthly
Period.
Collections of Finance Charge Receivables and the Defaulted Amount for any
Monthly Period will be allocated to Series 199 - based on the Floating
Allocation Percentage. The "Floating Allocation Percentage" means, for any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Adjusted Invested Amount as
of the last day of the preceding Monthly Period (or for the first Monthly
Period, the Initial Invested Amount) and the denominator of which is the sum of
the total amount of the Principal Receivables in the Trust as of such day (or
for 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 the Invested
Amount has increased during the previous Monthly Period as a result of an
increase in the Seller's Participation Amount during the Funding Period, then
the numerator above shall instead be equal to the average Adjusted Invested
Amount for such Monthly Period].
Such amounts so allocated to Series 199 - will be further allocated among
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. The "Class A
Floating Percentage" means, for 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 for the first
Monthly Period, as of the Series
S-23
<PAGE>
Issuance Date) and the denominator of which is equal to the Adjusted Invested
Amount as of the close of business on such day (or for the first Monthly
Period, the Initial Invested Amount).
The "Class B Floating Percentage" means, for any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class B Invested Amount as of the close
of business on the last day of the preceding Monthly Period (or for 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
for the first Monthly Period, the Initial Invested Amount).
The "Class C Floating Percentage" means, for 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 for 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 for the first Monthly Period, the Initial Invested Amount).
Collections of Principal Receivables will be allocated to Series 199 - based
on the Principal Allocation Percentage. The "Principal Allocation Percentage"
means, for 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 "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 the Invested Amount has increased during the previous Monthly Period as a
result of payments made to the Seller from the Prefunding Account, then the
numerator referred to in (a) above shall instead be equal to the average
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 for Series 199 - , 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 199 - .
Such amounts so allocated to Series 199 - will be further allocated among
the Class A Certificateholders, the Class B Certificateholders and the Class C
Interest Holders based on the Class A Principal Percentage, the Class B
Principal Percentage and the Class C Principal Percentage. The "Class A
Principal Percentage" means, for 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
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<PAGE>
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, for 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 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.
The "Class C Principal Percentage" means, for 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 C Invested
Amount as of the last day of the immediately preceding Monthly Period (or, in
the case of the first Monthly Period, the Class C 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 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 C 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 Initial Invested Amount" means $ .
"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 [(other than principal payments made from
amounts on deposit in the Prefunding Account on the first Distribution Date
following the end of the Funding Period)] on or prior to such date, 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) 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]; provided, however, that the Class A
Invested Amount may not be reduced below zero.
"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 B Initial Invested Amount" means $ .
"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 [(other than principal payments made from amounts on
deposit in the Prefunding Account on the first Distribution Date following the
end of the Funding Period)] on or prior to such date, 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 for 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 below under "--Defaulted Receivables; Investor Charge-Offs," plus
(vi) the aggregate amount of Excess Spread and Excess Finance Charges allocated
to Series 199 - and applied on
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<PAGE>
all prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (iii), (iv) and (v) [, plus (vii) 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]; provided, however, that the Class B Invested Amount may not be
reduced below zero.
"Class C Initial Invested Amount" means $ .
"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 amounts on deposit in the Prefunding Account on the first
Distribution Date following the end of the Funding Period and] 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 below 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") for any Distribution Date that is not funded out of Excess Spread and
Excess Finance Charges allocated to Series 199 - 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)
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.
"Initial Invested Amount" means $ .
"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.
"Adjusted Invested Amount," for any date, means an amount equal to the sum of
the Class A Adjusted 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 Class A Floating Percentage of the amounts
on deposit in the Prefunding Account.]
["Class A Initial Investor Amount" means $ .]
["Class B Investor Amount," for any date, means an amount equal to the sum of
the Class B Invested Amount plus the Class B Floating Percentage of the amounts
on deposit in the Prefunding Account.]
["Class B Initial Investor Amount" means $ .]
["Class C Investor Amount," for any date, means an amount equal to the sum of
the Class C Invested Amount plus the Class C Floating Percentage of the amounts
on deposit in the Prefunding Account.]
["Class C Initial Investor Amount" means $ .]
["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.]
["Initial Investor Amount" means $ .]
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<PAGE>
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 Certificateholders. During the
Class A Accumulation Period, the Servicer will transfer collections of
Principal Receivables, Shared Principal Collections allocated to Series 199 - ,
Miscellaneous Payments allocated to Series 199 - 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 below
under "--Application of Collections."
Unless a Pay Out Event [or a Principal Payment Event] has occurred with
respect to the Series 199 - Interests, 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 for 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 for any
such Distribution Date yield less than the Class A Certificate Rate, the
Principal Funding Investment Proceeds for such Distribution Date will be less
than the Covered Amount for such 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 below 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" means an 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 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.
Reserve Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, a reserve account as 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 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 199 - (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 for the Monthly Period that begins no later than
one month prior to the Distribution Date for 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
$ 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 will 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 it may have been postponed at the option of the Servicer) as of such
Distribution Date and the denominator of which is twenty.
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<PAGE>
If the Reserve Account has not terminated as described below, all amounts
remaining 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 for 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 for such Distribution Date or Special
Payment Date and (b) the excess, if any, of the Covered Amount for such
Distribution Date or Special Payment Date over the Principal Funding Investment
Proceeds for such Distribution Date or Special Payment Date; provided that the
amount of such withdrawal will 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 begun, the occurrence of a Pay Out Event [or a
Principal Payment Event] with respect to Series 199 - or, if the Class A
Accumulation Period has begun, 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.
Reallocation of Cash Flows
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
the sum of (i) Class A Monthly Interest for the related 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 Class A Available Funds for such
Distribution Date.
If the Class A Required Amount is greater than zero, Excess Spread and Excess
Finance Charges allocated to Series 199 - and available for such purpose will
be used to fund the Class A Required Amount for such Distribution Date. If such
Excess Spread and Excess Finance Charges available for 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 Interests 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 for
the related Monthly Period, together with Excess Spread and Excess Finance
Charges allocated to Series 199 - 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
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<PAGE>
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 for 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 for such Distribution Date as described above. Any such reduction in the
Class A Invested Amount may 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" below.
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 allocated to Series 199 - available to reimburse such reductions. See
"--Application of Collections--Excess Spread; Excess Finance Charges" below.
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.
On each Determination Date, the Servicer will determine an 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 the related 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 Class B Servicing Fee exceeds the Class B Available Funds
for such Distribution Date 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 199 - 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 for such Distribution Date. If such Excess Spread
and Excess Finance Charges available for 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 Interests and not required to pay the
Class A Required Amount will then be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections allocable to the
Class C Interests for 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"
below.
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<PAGE>
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 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
for 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 and
any Class A Additional Interest previously due but not distributed to the
Class A Certificateholders on a prior Distribution Date will be distributed
to the Class A Certificateholders;
(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
for 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 and
any Class B Additional Interest previously due but not paid to the Class B
Certificateholders on a prior Distribution Date will be distributed to the
Class B Certificateholders;
(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
for 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, for any Distribution Date, an 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 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 outstanding principal balance of the Class
A Certificates as of the preceding Record Date; provided, however, for 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, for 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
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<PAGE>
such Distribution Date 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, for any Distribution Date, the
amount of Class A Monthly Interest previously due but not paid to the Class A
Certificateholders.
"Class A Additional Interest" means any additional interest on interest
amounts that were due but not distributed to the Class A Certificateholders on
a prior Distribution Date, at a rate equal to the Class A Certificate Rate plus
2% per annum.
"Class B Monthly Interest" means, for any Distribution Date, an 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 the preceding Distribution Date to but
excluding such 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; provided, however, for 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, for 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 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, for any Distribution Date, the
amount of Class B Monthly Interest previously due but not paid to the Class B
Certificateholders.
"Class B Additional Interest" means any additional interest on interest
amounts that were due but not distributed to the Class B Certificateholders on
a prior Distribution Date, at a rate equal to the Class B Certificate Rate plus
2% per annum.
"Class C Available Funds" means, for any Monthly Period, an amount equal to
[(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 199 - Supplement, but excluding
Finance Charge Receivables allocated to Servicer Interchange with respect to
such Monthly Period) allocated to Series 199 - [and (b) the Class C Interest
Holders' pro rata portion of interest and other investment income (net of
losses and investment expenses) earned on amounts on deposit in the Prefunding
Account].
"Excess Spread" means, for 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 199 - for 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, for 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 199 - , such Excess Spread and Excess Finance
Charges shall be applied first to pay amounts due for 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";
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<PAGE>
(b) an amount equal to the aggregate amount of Class A Investor Charge-
Offs that 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, for 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
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 199 - , such Excess Spread and Excess Finance
Charges shall be applied first to pay amounts due on 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"
(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 Outstanding Monthly
Interest 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 for 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"
(but not in excess of the aggregate amount of such reductions that 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," 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 199 - ) will be distributed to the depositor or its designee for
application in accordance with such agreement; and
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(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 accompanying
Prospectus.
"Class C Monthly Interest" means, for 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 (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,
that for the first Distribution Date, Class C Monthly Interest shall be equal
to the interest accrued on the Class C Initial [Investor][Invested] Amount at
the Class C Interest Rate for the period from the Series Issuance Date to but
excluding the first Distribution Date.
"Class C Outstanding Monthly Interest" means, for any Distribution Date, the
amount of Class C Monthly Interest previously due but not paid to the Class C
Interest Holders.
"Class C Additional Interest," for any Distribution Date, means additional
interest on 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 for 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; Excess Shared Principal
Collections" in the accompanying Prospectus; and
(ii) on each Distribution Date for 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, will
be distributed to the Class A Certificateholders;
(x) for each Distribution Date beginning on the Distribution Date on
which the Class A Invested Amount is paid in full (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 Distribution Date on
which the Class B Invested Amount is paid in full (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; Excess Shared Principal Collections" in the
accompanying Prospectus.
"Class A Monthly Principal" for 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 for such Distribution Date, (ii) for each
Distribution Date for 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.
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"Class B Monthly Principal" for 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 for 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" for 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 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 $ ; provided, however, that if the
start 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 for the Class A Accumulation Period and will be
determined by the Servicer in accordance with the Series 199 - Supplement
based on the principal payment rates for the Accounts and on the invested
amounts of other Series (other than certain excluded Series) that are scheduled
to be in their revolving periods and able to create Shared Principal
Collections during the Class A Accumulation Period.
"Controlled Deposit Amount" means, for any Distribution Date relating 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.
"Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date for 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 for 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.
Cash Collateral Account
The Trust will have the benefit of a cash collateral account that will be
held in the name of the Trustee for the benefit of the Series 199 - Holders
(the "Cash Collateral Account"), which will be invested in Eligible
Investments.
The Cash Collateral Account will be fully funded on the Series Issuance Date
with a deposit of $ (the "Initial Cash Collateral Amount") 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 199 -
Termination Date and (c) the termination 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.
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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 for such
Distribution Date over the amount of Excess Spread and Excess Finance
Charges allocated to Series 199 - 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 199 - for such Distribution Date;
(b) the excess, if any, of the Class B Required Amount for such
Distribution Date over the amount of Excess Spread and Excess Finance
Charges allocated to Series 199 - 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
199 - for such Distribution Date;
(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 199 - and available to fund such amount;
(d) the excess, if any of the accrued and unpaid Class C Servicing Fee
for such Distribution Date over the amount of Class C Available Funds and
Excess Spread and Excess Finance Charges allocated to Series 199 - and
available to fund such amount; and
(e) the excess, if any, of the Class C Investor Default Amount for such
Distribution Date over the amount of Excess Spread and Excess Finance
Charges allocated to Series 199 - and available to fund such amount.
"Required Cash Collateral Amount" means, for 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 the Prefunded Amount], and (b) [ %], and (II) $ ;
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 199 - , 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 199 - 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 199 - .
If the Available Cash Collateral Amount on any Distribution Date is less than
the Required Cash Collateral Amount, certain Excess Spread and Excess Finance
Charges allocated to Series 199 - 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 199 - Supplement and the Class C
Supplemental Agreement and will not be available to the Investor
Certificateholders.
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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 for 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
199 - 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 199 - or from amounts available under the
Cash Collateral Account and Reallocated Principal Collections allocable to the
Class C Interests and applied as described above in "--Application of
Collections--Excess Spread; Excess Finance Charges" and "--Reallocation of Cash
Flows."
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 199 - , 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 199 - and available for such purpose as described
above 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 199 - 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
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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 199 -
and available for such purpose as described above under "--Application of
Collections--Excess Spread; Excess Finance Charges."
Shared Principal Collections[; Excess Shared Principal Collections]
Series 199 - is a Principal Sharing Series [and a Subordinated Excess
Principal Series]. See "Description of the Certificates--Shared Principal
Collections; Excess Shared Principal Collections" in the accompanying
Prospectus.
The "Principal Shortfall" for Series 199 - will be (a) for any Distribution
Date for the Revolving Period, zero, (b) for any Distribution Date for the
Class A Accumulation Period and the Class B Amortization Period (but not
including the Class B Expected Final Payment Date), the excess, if any, of the
sum of (i) the Controlled Deposit Amount and (ii) if such Distribution Date is
the Distribution Date immediately following the Class A Expected Final Payment
Date, one-half of the Class B Initial Invested Amount, over the amount of
Available Investor Principal Collections for such Distribution Date (excluding
any portion of Available Investor Principal Collections attributable to Shared
Principal Collections or Excess Shared Principal Collections), (c) for any
Distribution Date for the Early Amortization Period, the excess, if any, of the
Invested Amount over the Available Investor Principal Collections for such
Distribution Date (excluding any portion of the Available Investor Principal
Collections attributable to Shared Principal Collections or Excess Shared
Principal Collections) [and (d) for any Distribution Date for the Principal
Payment Period, the excess, if any, of the amount that would have been the
Controlled Deposit Amount if the related Principal Payment Event had not
occurred over the Available Investor Principal Collections for such
Distribution Date (excluding any portion of Available Investor Principal
Collections attributable to Shared Principal Collections or Excess Shared
Principal Collections).
[The "Subordinated Excess Principal Shortfall" for Series 199 - will be (a)
for any Distribution Date for [the Principal Payment Period and for] each
Distribution Date from and including the Class B Principal Commencement Date,
the excess, if any, of the Invested Amount over the Available Investor
Principal Collections for such Distribution Date (excluding any portion of
Available Investor Principal Collections attributable to Excess Shared
Principal Collections but including any portion attributable to Shared
Principal Collections), and (b) for any other Distribution Date, zero.]
[Extension of Initial Principal Payment Date
Series 199 - will be an extendable Series.
Unless a Pay Out Event has occurred, principal on the Class A Certificates is
expected to be paid on the Class A Expected Final Payment Date and the final
principal payment on the Class B Certificates is expected to be paid on the
Distribution Date (the "Class B Expected Final Payment Date"). The
"Initial Principal Payment Date" will initially be the Distribution
Date, 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 (a "Principal Payment Event"); provided that the Initial
Principal Payment Date may not be later than the Class A Expected Final Payment
Date.
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 (the "Principal Payment
Period") will begin. During the Principal Payment Period, amounts then on
deposit in the Principal Funding Account and Available Investor Principal
Collections for each Distribution Date starting on the Initial Principal
Payment Date will be paid first to the Class A Certificateholders until the
earlier of the date on which the Class A Invested Amount is paid in full or the
Series 199 - 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
199 - Termination Date.
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The payment in full of the Invested Amount on the Initial Principal Payment
Date is dependent on Available Investor Principal Collections for such date and
any amounts then on deposit in the Principal Funding Account. For certain
principal payments during the Principal Payment Period 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 under "Description of the Certificates--Shared Principal Collections;
Excess Shared Principal Collections" in the accompanying Prospectus and "--
Shared Principal Collections; Excess Shared Principal Collections" in this
Prospectus Supplement.
The Servicer will cause the Trustee to provide written notice to each Series
199 - Holder, the Seller and each Rating Agency of any Principal Payment
Event. 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.
If a Principal Payment Event occurs, Class A Certificateholders will likely
receive full principal payment on their Class A Certificates before the Class A
Expected Final Payment Date and Class B Certificateholders will likely receive
full principal payment on their Class B Certificates before the Class B
Expected Final Payment Date. No prepayment premium will be payable to the
Investor Certificateholders for a Principal Payment Event. There is no
assurance that any such prepayment could be reinvested at a rate equivalent to
the rate on the Investor Certificates.]
Issuance of Additional Investor Certificates
The Series 199 - 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 (each such issuance, an "Additional Issuance")
additional Investor Certificates ("Additional Investor Certificates"). When
issued, the Additional Investor Certificates of each Class will be identical in
all respects to the other outstanding Investor Certificates of that Class and
will be equally and ratably entitled to the benefits of the Pooling Agreement
and the Series 199 - 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,
an increase in the amount on deposit in the Cash Collateral Account 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 199 - 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 199 - ; (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 199 - ,
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
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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 Invested
Amount will be increased to reflect the initial principal balance of the
Additional Investor Certificates of the respective Classes.
Paired Series
The Series 199 - Interests may be paired with one or more other Series
(each, a "Paired Series"). Each Paired Series could 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 could 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 could 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
could 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 could increase by up to a corresponding amount. Upon payment in full of
Series 199 - , 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 could 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 accompanying
Prospectus. There can be no assurance, however, that the terms of any Paired
Series might not have an impact on the calculation of the Principal Allocation
Percentage or the timing or amount of payments received by an Investor
Certificateholder. The full extent by which the timing or amount of payments
received by an Investor Certificateholder may be affected will be dependent
upon a number of factors and will not be readily determinable by the change
that may occur in the Principal Allocation Percentage. See "--Allocation
Percentages" in this Prospectus Supplement and "Risk Factors--Issuance of
Additional Series by the Trust May Adversely Affect Your Payments or Rights" in
the accompanying 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 accompanying 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
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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 199 - will include each of the
events specified in the accompanying Prospectus under "Description of the
Certificates--Pay Out Events" and the following:
(a) failure on the part of the Seller (i) to make any payment or deposit
required under the Pooling Agreement or the Series 199 - 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 Seller set forth in the Pooling Agreement or the Series 199 -
Supplement, which failure has a material adverse effect on the Series 199 -
Holders and which continues unremedied for a period of 60 days after
written notice;
(b) any representation or warranty made by the Seller in the Pooling
Agreement or the Series 199 - Supplement or any information required to be
given by the Seller 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 199 - Holders
are materially and adversely affected; provided, however, that a Pay Out
Event shall not be deemed to occur thereunder if the Seller 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 Seller 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 199 - 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 199 -
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 Seller is unable for any reason to transfer Receivables to the
Trust in accordance with the Pooling Agreement or the Series 199 -
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 Series 199 - Interests evidencing more
than 50% of the aggregate unpaid principal amount of Series 199 - by notice
then given in writing to the Seller 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 199 - 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 199 - , 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 "Federal Income
Tax Considerations--General" in the accompanying Prospectus, it is determined
that the Class A Certificates or the Class B
S-40
<PAGE>
Certificates do not constitute indebtedness for Federal income tax purposes,
such determination will not constitute a Pay Out Event with respect to Series
199 - .
For purposes of the Pay Out Event described in clause (e) above, the terms
"Base Rate" and "Portfolio Yield" will be defined as follows for Series 199 - :
"Base Rate" means, for 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 for Series 199 - for the related Distribution Date and
the denominator of which is the [Investor][Invested] Amount as of the last day
of the preceding Monthly Period; provided, however, that if the Seller 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, for 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 Distribution Date, [plus (c) 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 199 - , plus (e) the amount of funds
withdrawn from the Reserve Account and which are required to be included as
Class A Available Funds for the Distribution Date for such Monthly Period,
minus (f) the Investor Default Amount for the Distribution Date for such
Monthly Period, and the denominator of which is the [Investor][Invested] 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 Seller, as described in the accompanying
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 accompanying
Prospectus for a discussion of the impact of Federal law on the Trustee's
ability to liquidate the Receivables.
Servicing Compensation and Payment of Expenses
The share of the Servicing Fee allocable to Series 199 - for 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 for 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 for
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 for 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
collections of Finance Charge Receivables allocated to Series 199 - for such
Monthly Period
S-41
<PAGE>
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 for 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) for 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, for 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, for 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) for 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 (c) the Servicing Base Amount; provided,
however, for 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 will be paid by the Seller 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 Seller 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 that 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 Seller 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
S-42
<PAGE>
Account for allocation (together with the Available Final Distribution Amount)
to the Investor Certificateholders' Interest and the Class C Investors'
Interest.
Federal Income Tax Consequences
Subject to the matters discussed under "Federal Income Tax Consequences" in
the accompanying Prospectus, Tax Counsel will deliver its opinion that, under
existing law, the Investor 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 about 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 for 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 for
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].
ERISA CONSIDERATIONS
General
Subject to the considerations described below and in the Prospectus, the
Class A Certificates may be purchased by, on behalf of, or with "plan assets"
of any employee benefit or other plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended (each, a "Plan"). Any Plan
fiduciary that proposes to cause a Plan to acquire any of the Class A
Certificates should consult with its counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership
of such Class A Certificates. See "ERISA Considerations" in the accompanying
Prospectus.
The Class B Certificates may not be acquired or held by, on behalf of, or
with "plan assets" of any Plan, other than an insurance company investing
assets of its general account. By its acceptance of a Class B Certificate, each
Class B Certificateholder will be deemed to have represented and warranted that
either (i) it is not and will not be a Plan or (ii) it is an insurance company,
it acquired and will hold the Class B Certificates solely with assets of its
general account, and such acquisition and holding satisfies the conditions
applicable under Sections I and III of U.S. Department of Labor ("DOL")
Prohibited Transaction Class Exemption 95-60.
S-43
<PAGE>
The Authorization
On October 28, 1998, the DOL authorized Capital One (the "Authorization") to
rely upon the exemptive relief from certain of the prohibited transaction
provisions of ERISA and Section 4975 of the Code available under PTCE 96-62
relating to (1) the initial purchase, the holding and the subsequent resale by
Plans of Senior Certificates representing an undivided interest in a credit
card trust with respect to which Capital One is the sponsor; and (2) the
servicing, operation and management of such trust, provided that the general
conditions and certain other conditions set forth in the Authorization are
satisfied. The Authorization will apply to the acquisition, holding and resale
of the Class A Certificates by, on behalf of, or with "plan assets" of a Plan,
provided that certain conditions (certain of which are described below) are
met.
Among the conditions which must be satisfied for the Authorization to apply
are the following:
(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for such Class A Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Plan have received a rating
at the time of such acquisition in one of the two highest generic rating
categories from a Rating Agency; provided that, notwithstanding such
rating, credit support is provided to the Class A Certificates through a
senior-subordinated structure or other form of third-party credit support
which, at a minimum, represents 5% of the outstanding principal balance of
the Class A Certificates at the time of such acquisition;
(4) The Trustee is not an affiliate of any Underwriter, the Seller, the
Servicer, any obligor whose receivables constitute more than 0.5% of the
fair market value of the aggregate undivided interest in the Trust
allocated to Series 199 - , or any of their respective affiliates (the
"Restricted Group");
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Class A Certificates represents not
more than reasonable compensation for underwriting such Class A
Certificates; the consideration received by the Seller as a consequence of
the assignment of Receivables to the Trust, to the extent allocable to the
Class A Certificates, represents not more than the fair market value of
such Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Class A Certificates, represents
not more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith;
(6) The Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended;
(7) The Trustee is a substantial financial institution or trust company
experienced in trust activities, is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA and, as the
legal owner of (or holder of a perfected security interest in) the
Receivables, enforces all the rights created in favor of the Investor
Certificateholders, including Plans;
(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Class A
Certificates held by any Plan pursuant to the Authorization;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Pooling Agreement and the Rating Agencies require the
Seller to maintain a Seller's Interest of not less than 2% of the principal
balance of the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of the
Rating Agencies and as specified in the Pooling Agreement, and the Pooling
Agreement requires that any change in the terms of the cardholder
agreements must be made applicable to the comparable segment of accounts
owned or
S-44
<PAGE>
serviced by Capital One which are part of the same program or have the same
or substantially similar characteristics;
(11) The Pooling Agreement limits the number of newly originated Accounts
to be designated to the Trust, unless the Rating Agencies otherwise consent
in writing, to the following: (a) with respect to any three-month period,
15% of the number of existing Accounts designated to the Trust as of the
first day of such period, and (b) with respect to any twelve-month period,
20% of the number of existing Accounts designated to the Trust as of the
first day of such twelve-month period;
(12) The Pooling Agreement requires the Seller to deliver an opinion of
counsel semi-annually confirming the validity and perfection of the
transfer of Receivables in newly originated Accounts to the Trust if such
an opinion is not delivered with respect to each interim addition; and
(13) The Pooling Agreement requires the Seller and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Class A Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Pooling Agreement
and ending in the calendar month prior to the date such confirmation is
issued); provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Seller believes that the Authorization will apply to the acquisition and
holding of the Class A Certificates by Plans and that all conditions of the
Authorization, other than those within the control of the investors, will be
met.
Any Plan fiduciary considering whether to purchase any Class A Certificates
on behalf of, or with "plan assets" of, a Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code to such
investment. Among other things, before purchasing any Class A Certificates, a
Plan fiduciary should make its own determination as to the availability of the
relief provided in the Authorization and also consider the availability of any
other prohibited transaction exemptions.
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
the underwriters named below (the "Underwriters"), the Bank has agreed to sell
to the Underwriters, and each Underwriter has severally agreed to purchase, the
Class A Certificates and the Class B Certificates set forth opposite its name
below.
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
of Class A of Class B
Underwriters Certificates Certificates
- ------------ ------------ ------------
<S> <C> <C>
A Co. ................................................ $ $
B Co. ................................................
C Co. ................................................
---- ----
Total............................................... $ $
==== ====
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Investor Certificates is subject to the
approval of certain legal matters by their counsel and to certain other
conditions. All of the Investor Certificates offered hereby will be issued if
any are issued. Under
S-45
<PAGE>
the terms and conditions of the Underwriting Agreement, the Underwriters are
committed to take and pay for all the Investor Certificates offered hereby, if
any are taken.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers
at such price less concessions not in excess of % of the principal amount of
the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of % of the principal amount of the Class A
Certificates to certain brokers and dealers. After the initial public offering,
the public offering price of the Class A Certificates and other selling terms
may be changed by the Underwriters.
The Underwriters propose initially to offer the Class B Certificates to the
public at the price set forth on the cover page hereof and to certain dealers
at such price less concessions not in excess of % of the principal amount of
the Class B Certificates. The Underwriters may allow, and such dealers may
reallow concessions not in excess of % of the principal amount of the Class B
Certificates to certain brokers and dealers. After the initial public offering,
the public offering price of the Class B Certificates and other selling terms
may be changed by the Underwriters.
The price to public, the Underwriters' discounts and commissions and the
proceeds to the Seller are as follows:
<TABLE>
<CAPTION>
Per Class A Per Class B
Certificate Certificate Total
----------- ----------- -----
<S> <C> <C> <C>
Public Offering Price.......................... % % $
Underwriting Discounts and Commissions......... % % $
Proceeds to Seller............................. % % $
</TABLE>
Additional offering expenses are estimated to be $ .
Each 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 Underwriters 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 Investor Certificates in the open market
after the distribution has been completed in order to
S-46
<PAGE>
cover syndicate short positions. Penalty bids permit the Underwriters 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 Underwriters
represent that the Underwriters 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 Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
The 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 Underwriters and
their affiliates have engaged and may engage in investment banking and/or
commercial banking transactions with the Bank and its affiliates.
S-47
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounts....................... S-8
Additional Investor
Certificates.................. S-38
Additional Issuance............ S-38
Adjusted Invested Amount....... S-26
Authorization.................. S-44
Available Cash Collateral
Amount........................ S-34
Available Final Distribution
Amount........................ S-42
Available Investor Principal
Collections................... S-22
Available Reserve Account
Amount........................ S-28
Bank........................... S-8
Base Rate...................... S-41
Cash Collateral Account........ S-34
Class A Accumulation Period.... S-8
Class A Accumulation Period
Length........................ S-22
Class A Additional Interest.... S-31
Class A Adjusted Invested
Amount........................ S-25
Class A Available Funds........ S-19
Class A Certificate Rate....... S-18
Class A Certificateholders..... S-8
Class A Certificateholders'
Interest...................... S-19
Class A Certificates........... S-8
Class A Expected Final Payment
Date.......................... S-8
Class A Floating Percentage.... S-23
Class A Initial Invested
Amount........................ S-25
Class A Initial Investor
Amount........................ S-26
Class A Invested Amount........ S-25
Class A Investor Amount........ S-26
Class A Investor Charge-Off.... S-36
Class A Investor Default
Amount........................ S-36
Class A Monthly Interest....... S-30
Class A Monthly Principal...... S-33
Class A Outstanding Monthly
Interest...................... S-31
Class A Principal Percentage... S-24
Class A Required Amount........ S-28
Class A Servicing Fee.......... S-42
Class B Additional Interest.... S-31
Class B Amortization Period.... S-9
Class B Available Funds........ S-19
Class B Certificate Rate....... S-18
Class B Certificateholders..... S-8
Class B Certificateholders'
Interest...................... S-19
Class B Certificates........... S-8
Class B Expected Final Payment
Date.......................... S-22, S-37
Class B Floating Percentage.... S-24
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Class B Initial Invested Amount.. S-25
Class B Initial Investor Amount.. S-26
Class B Invested Amount.......... S-25
Class B Investor Amount.......... S-26
Class B Investor Charge-Off...... S-36
Class B Investor Default Amount.. S-36
Class B Monthly Interest......... S-31
Class B Monthly Principal........ S-34
Class B Outstanding Monthly
Interest........................ S-31
Class B Principal Commencement
Date............................ S-33
Class B Principal Percentage..... S-25
Class B Required Amount.......... S-29
Class B Servicing Fee............ S-42
Class C Additional Interest...... S-33
Class C Amortization Period...... S-24
Class C Available Funds.......... S-31
Class C Floating Percentage...... S-24
Class C Initial Invested Amount.. S-26
Class C Initial Investor Amount.. S-26
Class C Interest Holders......... S-8
Class C Interest Rate............ S-19
Class C Interests................ S-8
Class C Invested Amount.......... S-26
Class C Investor Amount.......... S-26
Class C Investor Default Amount.. S-26
Class C Investors' Interest...... S-21
Class C Monthly Interest......... S-33
Class C Monthly Principal........ S-34
Class C Outstanding Monthly
Interest........................ S-33
Class C Principal Commencement
Date............................ S-33
Class C Principal Percentage..... S-25
Class C Servicing Fee............ S-42
Class C Spread Account........... S-20
Class C Supplemental Agreement... S-8
Controlled Accumulation Amount... S-34
Controlled Deposit Amount........ S-34
Covered Amount................... S-27
Deficit Controlled Accumulation
Amount.......................... S-34
Distribution Date................ S-18
DOL.............................. S-43
ERISA............................ S-43
Excess Spread.................... S-31
Excluded Series.................. S-39
Floating Allocation Percentage... S-23
Funding Date..................... S-21
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Funding Period................... S-20
Group One........................ S-8
Highest Bid...................... S-42
Initial Cash Collateral Amount... S-34
Initial Invested Amount.......... S-26
Initial Investor Amount.......... S-26
Initial Principal Payment Date... S-37
Initial Servicing Fee............ S-41
Interest Period.................. S-20
Invested Amount.................. S-26
Investor Amount.................. S-26
Investor Certificateholders...... S-8
Investor Certificateholders'
Interest........................ S-19
Investor Certificates............ S-8
Investor Default Amount.......... S-36
LIBOR............................ S-20
LIBOR Determination Date......... S-20
Monthly Report................... S-43
Monthly Servicing Fee............ S-41
Net Servicing Fee Rate........... S-42
Paired Series.................... S-39
Plan............................. S-43
Pooling Agreement................ S-8
Portfolio Yield.................. S-41
Prefunded Amount................. S-21
Prefunding Account............... S-20
Principal Allocation Percentage.. S-24
Principal Funding Account........ S-9
Principal Funding Account
Balance......................... S-27
Principal Funding Investment
Proceeds........................ S-27
Principal Payment Event.......... S-37
Principal Payment Period......... S-37
Principal Shortfall.............. S-37
Reallocated Principal
Collections..................... S-28
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Receivables...................... S-8
Record Date...................... S-18
Reference Banks.................. S-20
Regulations...................... S-46
Required Cash Collateral Amount.. S-35
Required Funding Percentage...... S-21
Required Principal Balance....... S-39
Required Reserve Account Amount.. S-27
Reserve Account.................. S-27
Reserve Account Factor........... S-27
Reserve Account Funding Date..... S-27
Restricted Group................. S-44
Revolving Period................. S-21
Series 199 - Holders............ S-8
Series 199 - Interests.......... S-8
Series 199 - Supplement......... S-8
Series 199 - Termination Date... S-8
Series Cut-Off Date.............. S-10
Series Issuance Date............. S-11
Servicer Interchange............. S-41
Servicing Base Amount............ S-41
Servicing Fee Rate............... S-41
Special Payment Date............. S-8
Subordinated Excess Principal
Shortfall....................... S-37
Telerate Page 3750............... S-20
Termination Date................. S-8
Trust............................ S-8
Trust Cut-Off Date............... S-10
Trust Portfolio.................. S-10
Trustee.......................... S-8
Underwriters..................... S-46
Underwriting Agreement........... S-46
Zero Balance Accounts............ S-10
</TABLE>
S-49
<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.
1.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
Class B Expected Final Payment Date...............................March 1999
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
2.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
Class B Expected Final Payment Date..............................August 1999
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
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.
3.Series 1994-A Certificates
Initial Series 1994-A Invested Amount...........................$550,000,000
Maximum Certificate Invested Amount...........................$1,500,000,000
Certificate Rate...............................................Floating Rate
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Termination Date...............................................December 2003
- --------
/1/Subject to change if the commencement of the Accumulation Period is delayed.
A-1
<PAGE>
4.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
invested amount of $99,000,000.
5.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.
6.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
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-2
<PAGE>
7.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.
8.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 I 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.
9.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
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-3
<PAGE>
10.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
11.Series 1998-1 Certificates
Initial Series 1998-1 Invested Amount...........................$591,016,549
Initial Class A Invested Amount.................................$500,000,000
Initial Class B Invested Amount..................................$50,236,407
Initial Class C Invested Amount..................................$40,780,142
Class A Certificate Rate..............................................6.310%
Class B Certificate Rate..............................................6.356%
Class A Expected Final Payment Date...............................April 2008
Class B Expected Final Payment Date................................June 2008
Class A Controlled Accumulation Amount........................$25,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date............................................June 2011
12.Series 1998-2 Certificates
Initial Series 1998-2 Invested Amount...........................$501,638,814
Initial Class A Invested Amount.................................$410,000,000
Initial Class B Invested Amount..................................$55,270,000
Initial Class C Invested Amount..................................$36,368,814
Class A Certificate Rate..............................................7.625%
Class B Certificate Rate.......................................Floating Rate
Class A Expected Final Payment Date..............................August 1999
Class B Expected Final Payment Date.............................October 1999
Class A Controlled Accumulation Amount........................$41,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2000
- --------
/1/Subject to change if the commencement of the Accumulation Period is delayed.
A-4
<PAGE>
13.Series 1998-3 Certificates
Initial Series 1998-3 Invested Amount...........................$486,472,629
Initial Class A Invested Amount.................................$410,000,000
Initial Class B Invested Amount..................................$38,771,000
Initial Class C Invested Amount..................................$37,701,629
Class A Certificate Rate...............................................7.25%
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........................$20,500,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2004
14.Series 1998-4 Certificates
Initial Series 1998-4 Invested Amount...........................$750,000,000
Initial Class A Invested Amount.................................$631,875,000
Initial Class B Invested Amount..................................$60,000,000
Initial Class C Invested Amount..................................$58,125,000
Class A Certificate Rate...............................................5.43%
Class B Certificate Rate.......................................Floating Rate
Class A Expected Final Payment Date............................November 2003
Class B Expected Final Payment Date.............................January 2004
Class A Controlled Accumulation Amount........................$31,593,750/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................January 2007
15.Series 1998-5 Certificates
Initial Series 1998-5 Invested Amount.....................................$0
Maximum Certificate Invested Amount.............................$531,000,000
Certificate Rate...............................................Floating Rate
Group....................................................................One
Termination Date..................................................March 2007
16.Series 1998-6 Certificates
Initial Series 1998-6 Invested Amount.....................................$0
Maximum Certificate Invested Amount.............................$750,000,000
Certificate Rate...............................................Floating Rate
Group....................................................................One
Termination Date...............................................February 2005
- --------
/1/Subject to change if the commencement of the Accumulation Period is delayed.
A-5
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus and accompanying prospectus supplement is +
+not complete and may be amended. We may not sell these securities until we +
+deliver a final prospectus and accompanying prospectus supplement. This +
+prospectus and the accompanying prospectus supplement are not an offer to +
+sell nor are they seeking an offer to buy these securities in any state where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Prospectus
[LOGO OF CAPITAL ONE(R) APPEARS HERE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
ASSET BACKED CERTIFICATES
<TABLE>
<CAPTION>
The Trust--
<S> <C>
Consider . may periodically issue asset backed certificates in one or
carefully more series with one or more classes; and
the risk
factors . will own--
beginning on
page 6 in . receivables in a portfolio of revolving credit card
this accounts;
prospectus.
. payments due on those receivables; and
A . other property described in this prospectus and in the
certificate accompanying prospectus supplement.
is not a
deposit and The Certificates--
neither the
certificates . will represent interests in the trust and will be paid
nor the only from the trust assets;
underlying
accounts or . offered with this prospectus will be rated in one of the
receivables four highest rating categories by at least one nationally
are insured recognized rating organization;
or
guaranteed . may have one or more forms of credit enhancement; and
by the
Federal . will be issued as part of a designated series which may
Deposit include one or more classes of certificates and credit
Insurance enhancement.
Corporation
or any other The Certificateholders--
government
agency. . will receive interest and principal payments from a
varying percentage of credit card account collections.
The
certificates
represent
interests in
the trust
only and do
not
represent
interests in
or
obligations
of Capital
One Bank or
any of its
affiliates.
This
prospectus
may be used
to offer and
sell
certificates
of a series
only if
accompanied
by the
prospectus
supplement
for that
series.
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved the certificates or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
January 28, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the certificates is presented to you in two separate
documents: (a) this prospectus, which provides general information, some of
which may not apply to a particular series of certificates, including your
series, and (b) the accompanying prospectus supplement, which will describe the
specific terms of your series of certificates, including:
. the terms, including interest rates, for each class;
. the timing of interest and principal payments;
. information about the receivables;
. information about credit enhancement, if any, for each class;
. the ratings for each class being offered; and
. the method for selling the certificates.
If the terms of a particular series of certificates vary between the
description contained in this prospectus and the description in the prospectus
supplement, you should rely on the information in the prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find
additional, related discussions. The following table of contents and the table
of contents included in the accompanying prospectus supplement provide the
pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms for Prospectus"
beginning on page 71 in this prospectus.
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 1
The Trust And The Trustee................................................ 1
The Bank................................................................. 1
Trust Assets............................................................. 1
The Certificates......................................................... 1
The Seller's Interest.................................................... 2
Collections By The Servicer.............................................. 2
Allocation Of Trust Assets............................................... 2
Interest Payments On The Certificates.................................... 2
Principal Payments On The Certificates................................... 2
Revolving Period........................................................ 2
Accumulation Period..................................................... 3
Controlled Amortization Period.......................................... 3
Principal Payment Period................................................ 3
Early Amortization or Accumulation Period............................... 4
Pay Out Events.......................................................... 4
Shared Excess Finance Charge Collections................................. 4
Shared Principal Collections............................................. 4
Credit Enhancement....................................................... 4
Tax Status............................................................... 5
Certificate Ratings...................................................... 5
Optional Repurchase...................................................... 5
RISK FACTORS.............................................................. 6
Ability to Resell Certificates Not Assured............................... 6
Social, Economic and Geographic Factors Affect Credit Card Payments and
Are Unpredictable and May Cause a Delay or Default in Payment........... 6
Credit Ratings Assigned to Your Certificates Are Limited in Nature....... 6
Issuance of Additional Series by the Trust May Adversely Affect Your
Payments or Rights...................................................... 7
Use of Discount Option May Slow Payment Rate............................. 7
Credit Quality of Trust Assets May Be Eroded by the Addition of New
Assets.................................................................. 7
The Laws Relating to Insolvency and the Perfection of Security Interests
Involve Discretion and Uncertainty and May Result in Other Interests
Having Priority Over Your Certificates.................................. 8
Consumer Protection Laws May Restrict the Bank's Ability to Collect
Receivables and Maintain Yield on Portfolio and Lead to an Early
Amortization or Inability to Pay Certificates in Full................... 10
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Ability to Continue the Trust Will Be Dependent Upon the Ability to
Generate New Receivables................................................. 10
Timing of Principal Payments Is Not Certain............................... 12
Seller's Ability to Change Terms of the Receivables Could Alter Payment
Patterns................................................................. 12
For Some Purposes, Certificateholders of Other Series or Classes May Take
Actions Which Are Opposed to Your Interests.............................. 13
Optional Repurchase May Result in an
Early Return of Principal and a Reinvestment Risk........................ 13
THE BANK'S CREDIT CARD AND CONSUMER LENDING BUSINESS....................... 14
Business Overview......................................................... 14
Underwriting Procedures................................................... 14
Customer Service.......................................................... 16
Billing and Payments...................................................... 16
Delinquencies and Collections--Collection Efforts......................... 17
Interchange............................................................... 17
Year 2000................................................................. 18
THE ACCOUNTS............................................................... 19
THE BANK................................................................... 20
ASSUMPTION OF THE BANK'S OBLIGATIONS....................................... 21
USE OF PROCEEDS............................................................ 21
THE TRUST.................................................................. 21
DESCRIPTION OF THE CERTIFICATES............................................ 22
General................................................................... 22
Interest.................................................................. 23
Principal................................................................. 23
Addition of Trust Assets.................................................. 26
Removal of Accounts....................................................... 28
New Issuances............................................................. 29
Collection Account........................................................ 30
Allocation Percentages.................................................... 31
Deposits in Collection Account............................................ 32
Shared Principal Collections; Excess Shared Principal Collections......... 33
Excess Funding Account.................................................... 34
Sharing of Excess Finance Charges......................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Funding Period............................................................ 35
Paired Series............................................................. 35
Defaulted Receivables; Rebates and Fraudulent Charges; Recoveries......... 35
Credit Enhancement........................................................ 36
Pay Out Events............................................................ 40
Servicing Compensation and Payment of Expenses............................ 40
Record Date............................................................... 41
Optional Termination; Final Payment of Principal.......................... 41
Reports................................................................... 42
THE POOLING AGREEMENT GENERALLY............................................ 42
Book-Entry Registration................................................... 42
Definitive Certificates................................................... 46
The Bank Certificate; Additional Sellers.................................. 46
Defeasance................................................................ 47
Termination of Trust...................................................... 47
Conveyance of Receivables................................................. 48
Representations and Warranties............................................ 48
Indemnification........................................................... 51
Collection and Other Servicing Procedures................................. 51
Servicer Covenants........................................................ 52
Certain Matters Regarding the Servicer.................................... 53
Servicer Default.......................................................... 53
Evidence as to Compliance................................................. 54
Amendments................................................................ 54
Trustee................................................................... 55
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................................. 55
Transfer of Receivables.................................................. 55
Certain Matters Relating to Receivership................................. 57
Consumer Protection Laws................................................. 59
FEDERAL INCOME TAX CONSEQUENCES........................................... 60
General.................................................................. 60
Treatment of the Certificates as Debt.................................... 60
Treatment of the Trust................................................... 61
Taxation of Interest Income of U.S. Certificateholders................... 62
Sale or Exchange of Certificates......................................... 63
Non-U.S. Certificateholders.............................................. 63
Information Reporting and Backup Withholding............................. 64
State and Local Taxation................................................. 65
ERISA CONSIDERATIONS...................................................... 65
PLAN OF DISTRIBUTION...................................................... 68
LEGAL MATTERS............................................................. 69
REPORTS TO CERTIFICATEHOLDERS............................................. 69
WHERE YOU CAN FIND MORE
INFORMATION.............................................................. 69
INDEX OF TERMS FOR PROSPECTUS............................................. 71
ANNEX I: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES.... A-1
</TABLE>
ii
<PAGE>
PROSPECTUS SUMMARY
. This summary highlights selected information and does not contain all of the
information that you need in making your investment decision. Prior to making
your decision, you should carefully read this entire document and the
accompanying prospectus supplement.
. It also provides an overview of the trust assets including, in particular,
the receivables and how such receivables will be allocated. This summary is
qualified by the full description of such information in this prospectus and
the accompanying prospectus supplement.
THE TRUST AND THE TRUSTEE
Capital One Master Trust was formed in 1993 pursuant to a pooling and servicing
agreement between Capital One Bank, as seller and servicer, and The Bank of New
York, as trustee.
The trust is a master trust under which multiple series of certificates may be
issued. Each series is issued pursuant to a supplement to the pooling and
servicing agreement. The terms of a series are set forth in the series
supplement.
Some classes or series may not be offered by this prospectus. They may be
offered, for example, in a private placement.
THE BANK
The bank is a Virginia state-chartered credit card bank, which owns the credit
card accounts from which the receivables are sold to the trust. The bank is the
seller and servicer under the pooling and servicing agreement and owns all or a
portion of the seller's interest.
TRUST ASSETS
The bank and its predecessor have designated selected MasterCard(R) and
VISA(R)* revolving credit card accounts to the trust and have sold the
receivables in such accounts to the trust. The bank may designate additional
accounts to the trust. The bank selects the accounts to be designated to the
trust on the basis of criteria established in the
- --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
pooling and servicing agreement. All receivables in the accounts when
designated to the trust were transferred to the trust and all new receivables
generated in those accounts have been and will be transferred automatically to
the trust. The receivables transferred to the trust are the primary trust
assets. The total amount of receivables in the trust fluctuates daily as new
receivables are generated and payments are received on existing receivables.
The trust assets also include or may include:
. funds collected on the receivables;
. any collateral securing a cardholder's payment obligations under an account;
. rights to certain interchange fees that the bank receives through VISA and
MasterCard;
. monies and investments in the trust's bank accounts;
. recoveries (net of collection expenses) and proceeds of credit insurance
policies relating to the receivables;
. participations in other pools of secured or unsecured revolving credit card
accounts or other consumer revolving credit accounts owned by the bank; and
. credit enhancement that varies from one series to another and, within a
series, may vary from one class to another.
See "The Trust" in this prospectus.
THE CERTIFICATES
The trust has issued, and in the future will issue, asset backed certificates,
each evidencing an undivided interest in the trust. The certificates are
1
<PAGE>
issued in series. A series may contain one or more classes. The terms of any
future series or class will not be subject to your prior review or consent.
There can be no assurance that the terms of any future series might not have an
impact on the timing or amount of payments received by a certificateholder.
THE SELLER'S INTEREST
The interest in the assets not allocated to any series of certificates is the
seller's interest. The principal amount of the seller's interest fluctuates
with the amount of the principal receivables held in the trust and the amount
of certificates outstanding. The pooling and servicing agreement requires the
seller to designate additional accounts to the trust if the seller's interest
is less than a designated amount, referred to as the required seller's
interest. The bank may sell part, but not all, of its interest in the seller's
interest by issuing a supplemental certificate. The bank must retain an
interest in the trust. The seller's interest does not provide credit
enhancement for your series or any other series.
COLLECTIONS BY THE SERVICER
The bank services the receivables under the pooling and servicing agreement. In
limited cases, the bank may resign or be removed, and either the trustee or a
third party may be appointed as the new servicer. The servicer receives a
servicing fee from the trust, and each series is obligated to pay a portion of
that fee.
The servicer receives collections on the receivables, deposits those
collections in the collection account and keeps track of them as finance charge
receivables or principal receivables. The servicer then allocates those
collections as summarized below. See "Description of the Certificates--Deposits
in Collection Account" in this prospectus.
ALLOCATION OF TRUST ASSETS
The trust assets are allocated among the series of certificates outstanding and
the seller's interest. The servicer allocates (a) collections of finance charge
receivables and principal receivables and (b) receivables in accounts written
off as uncollectible, to each series based on varying percentages. The
accompanying prospectus supplement describes the allocation percentages
applicable to your series.
Certificateholders are only entitled to amounts allocated to their series equal
to the interest and principal payments on their certificates. See "Description
of the Certificates--General," "--Interest" and "--Principal" in this
prospectus.
INTEREST PAYMENTS ON THE CERTIFICATES
Each certificate entitles the holder to receive payments of interest as
described in the applicable prospectus supplement. If a series of certificates
consists of more than one class, each class may differ in, among other things,
priority of payments, payment dates, interest rates, methods for computing
interest, and rights to series enhancement.
Each class of certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the certificates. See
"Description of the Certificates--Interest" in this prospectus.
PRINCIPAL PAYMENTS ON THE CERTIFICATES
Each certificate entitles the holder to receive payments of principal as
described in the applicable prospectus supplement. If a series of certificates
consists of more than one class, each class may differ in, among other things,
the amounts allocated for principal payments, priority of payments, payment
dates, maturity, and rights to series enhancement. See "Description of the
Certificates--Principal" in this prospectus.
Revolving Period
Each series of certificates will begin with a period during which the trust
will not pay or accumulate principal for payment to the certificateholders. The
period when no principal is paid or accumulated is known as the revolving
period. The trust, during the revolving period, will pay available principal to
certificateholders of other series as shared principal collections or to the
bank as holder of the seller's
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interest, or in certain circumstances will deposit the available principal in
the excess funding account. The revolving period for a series begins on the
series cut-off date described in the applicable prospectus supplement, and ends
at the start of either an amortization period or an accumulation period.
Following the revolving period, each class of certificates will have one or
more of the following periods in which:
. principal is accumulated in specified amounts per month and paid on a
scheduled date;
. principal is paid in fixed amounts at scheduled intervals;
. principal is paid, at the option of the bank, in amounts and on dates
designated by the bank; or
. principal is paid or accumulated in varying amounts each month based on the
amount of principal receivables collected following certain adverse events or
following the servicer's decision not to extend an initial principal payment
date.
Accumulation Period
If a series or class of certificates is in an accumulation period during which
principal is accumulated in specified amounts per month and paid on an expected
final payment date, the trust is expected to pay available principal to those
certificateholders on the date specified in the prospectus supplement for such
series. If the series has more than one class, each class may have a different
priority for payment. For a period of time prior to the scheduled principal
payment date, the trust will deposit specified amounts of available principal
in a trust account. The accumulation period for a series or class begins on a
date specified in the applicable prospectus supplement and ends when any one of
the following occurs:
. the certificates of such series or class are paid in full;
. the beginning of a period in which principal is paid or accumulated in the
amount of available principal up to the full principal amount owing on the
certificates each month following certain adverse events or following the
servicer's decision not to extend an initial principal payment date; or
. the termination date for the series described in the applicable prospectus
supplement (also called the legal final maturity date).
Controlled Amortization Period
If a series or class of certificates is in a controlled amortization period
during which principal is paid in fixed amounts at scheduled intervals, the
trust will pay available principal up to such fixed amount to the
certificateholders on each distribution date during such period. The trust will
pay available principal in a fixed amount, plus any amounts not previously
paid. If the series has more than one class, each class may have a different
priority for payment. The controlled amortization period for a series or class
starts on the date specified in the prospectus supplement for such series and
ends when any one of the following occurs:
. the certificates of such series or class are paid in full;
. the beginning of a period in which principal is paid or accumulated in the
amount of available principal up to the full principal amount owing on the
certificates each month following certain adverse events or following the
servicer's decision not to extend an initial principal payment date; or
. the termination date for the series described in the applicable prospectus
supplement (also called the legal final maturity date).
Principal Payment Period
A series or class may have a principal payment period that begins if the
servicer decides not to extend an initial principal payment date. The first
initial principal payment date will be a distribution date described in the
applicable prospectus supplement, but will be automatically extended each month
to the next distribution date unless the servicer elects to stop the automatic
extension, causing a principal payment event to occur. A principal payment
event can occur during the revolving period, the controlled amortization period
or the accumulation period. A principal payment event will most likely cause
investors to receive payment of principal on their certificates earlier than
expected.
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During a principal payment period, the trust will pay certificateholders the
available principal up to the full principal amount on their certificates on
each distribution date until any of the following occurs:
. the certificates of such series or class are paid in full;
. the beginning of the early amortization period; or
. the termination date for the series described in the applicable prospectus
supplement (also called the legal final maturity date).
Early Amortization or Accumulation Period
If a series of certificates is in an early amortization or accumulation period
during which principal is paid or accumulated in the amount of available
principal up to the full principal amount owing on the certificates following
certain adverse events called pay out events, the trust will pay available
principal to those certificateholders on each distribution date or accumulate
amounts by making a deposit into an account on each distribution date. If the
series has more than one class, each class may have a different priority for
payment. The early amortization period or early accumulation period starts on
the day a pay out event occurs and ends when any of the following occurs:
. the certificates of such series are paid in full; or
. the termination date for the series described in the applicable prospectus
supplement (also called the legal final maturity date).
Pay Out Events
A pay out event for any series of certificates will include adverse events
described in the prospectus supplement for such series. In addition, the
following will be pay out events for all series:
. the occurrence of certain events of insolvency or receivership relating to
the seller (including any additional seller); or
. the trust becomes an "investment company" under the Investment Company Act of
1940.
See "Description of the Certificates--Pay Out Events" in this prospectus.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any series may be included in a group of series. If specified in the prospectus
supplement for such series, to the extent that collections of finance charge
receivables allocated to a series are not needed for that series, those
collections may be applied to cover certain shortfalls of other series in the
same group. See "Description of the Certificates--Sharing of Excess Finance
Charges" in this prospectus.
SHARED PRINCIPAL COLLECTIONS
If a series is identified in its prospectus supplement as a principal sharing
series, to the extent that collections of principal receivables allocated to
such series are not needed for that series, those collections may be applied to
cover principal payments for other principal sharing series, and vice versa.
Certain principal payments for certain principal sharing series may have
priority in receiving those collections over other principal payments for other
principal sharing series. See "Description of the Certificates--Shared
Principal Collections; Excess Shared Principal Collections" in this prospectus.
CREDIT ENHANCEMENT
Each class of a series may be entitled to credit enhancement. Credit
enhancement for the certificates of any class may take the form of one or more
of the following:
. subordination . letter of
. collateral credit
interest . surety bond
. insurance . spread
policy account
.cash collateral . reserve
account
guaranty or account
. swap arrangements
The type, characteristics and amount of any credit enhancement for a series
will be:
. based on several factors, including the characteristics of the receivables
and accounts at the time a series of certificates is issued; and
. established based on the requirements of the rating agencies.
See "Description of the Certificates--Credit Enhancement" in this prospectus.
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TAX STATUS
For information concerning the application of the United States federal income
tax laws, including whether the certificates will be characterized as debt for
federal income tax purposes, see "Federal Income Tax Consequences" in this
prospectus and "Summary of Terms--Tax Status" in the accompanying prospectus
supplement.
CERTIFICATE RATINGS
Any certificate offered by this prospectus and an accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization.
A rating is not a recommendation to buy, sell or hold securities, and may be
revised or withdrawn at any time by the assigning agency. Each rating should be
evaluated independently of any other rating. See "Risk Factors--Credit Ratings
Assigned to Your Certificates are Limited in Nature" in this prospectus.
OPTIONAL REPURCHASE
The bank has the option to repurchase any series of certificates once the
principal amount of the series has been reduced to an amount specified in the
prospectus supplement for such series.
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RISK FACTORS
You should consider the following risk factors before you decide whether or
not to purchase the certificates.
Ability to Resell
Certificates Not Assured The underwriters may assist in resales of the
certificates, but they are not required to do so.
A secondary market for any series or class of
certificates may not develop. If a secondary
market does develop, it may not continue
throughout the life of the series or it may not be
sufficiently liquid to allow you to meet your
needs. As a result, it may be difficult for you to
resell the certificates.
Social, Economic and
Geographic Factors
Affect Credit Card
Payments and Are
Unpredictable and May
Cause a Delay or Default
in Payment Changes in credit card use, payment patterns and
the rate of defaults by cardholders may result
from a variety of social, economic and geographic
factors. Social factors include changes in
consumer confidence levels, the public's
perception of the use of credit cards and changing
attitudes about incurring debt and the stigma of
personal bankruptcy. Economic factors include the
rates of inflation, the unemployment rates and the
relative interest rates offered for various types
of loans. Moreover, adverse changes in economic
conditions in states where cardholders are located
could have a direct impact on the timing and
amount of payments on the certificates of any
series.
Credit Ratings Assigned
to Your Certificates Are
Limited in Nature The credit rating assigned to your certificates
reflects only the rating agencies' assessment of
the likelihood that interest and principal will be
paid when required under the pooling and servicing
agreement, not when expected. These ratings are
based on the rating agencies' determination of the
value of receivables in the trust and the
availability of any credit enhancement.
The ratings do not address the following:
. the likelihood that the principal or interest
on your certificate will be prepaid, paid on an
expected final payment date or paid on any
particular date before the termination date of
your series;
. the possibility that your certificates will be
paid early or the possibility of the imposition
of United States withholding tax for non-U.S.
certificateholders;
. the marketability of the certificates, or any
market price; or
. that an investment in the certificates is a
suitable investment for you.
A rating is not a recommendation to purchase, hold
or sell certificates of a series or class of a
series. Furthermore, there is no assurance that
any rating will remain for any given period of
time or that any rating will not be lowered or
withdrawn entirely by a rating agency. If a rating
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assigned to your certificates is reduced or
withdrawn, the market value of your certificates
could be reduced.
Issuance of Additional
Series by the Trust May
Adversely Affect Your
Payments or Rights The trust is a master trust that has issued other
series of certificates and is expected to issue
additional series from time to time. All such
certificates are payable from the receivables in
the trust. The trust may issue additional series
with terms that are different from your series
without your prior review or consent. Before the
trust can issue a new series, each rating agency
that rated an outstanding series must confirm in
writing that the issuance of the new series will
not result in a reduction or withdrawal of its
earlier rating. Nevertheless, the terms of a new
series could affect the timing and amounts of
payments on any other outstanding series.
The owners of the certificates of any new series
will have voting rights that will reduce the
percentage interest represented by your series.
Such voting rights may relate to the ability to
approve waivers and give consents. The actions
which may be affected include directing the
appointment of a successor servicer following a
servicer default, amending the pooling and
servicing agreement and directing a reassignment of
the entire portfolio of accounts.
Use of Discount Option
May Slow Payment Rate The bank has the option, from time to time and
without your consent, to designate a fixed or
variable percentage of receivables to be treated as
finance charge receivables instead of principal
receivables. Such a designation could result in an
increase in the amount of finance charge
receivables and a slower payment rate of
collections of the principal receivables.
See "Description of the Certificates--Credit
Enhancement--Discount Option" in this prospectus.
Credit Quality of Trust
Assets May Be Eroded by
the Addition of New
Assets The assets of the trust are always changing.
Receivables are collected and new receivables are
added to the trust daily as cardholders pay their
credit card bills and charge new amounts to their
accounts. In addition, the bank periodically adds
additional accounts to the trust. The bank may
voluntarily add such additional accounts or it may,
at times, be obligated to make such additions to
maintain the level of receivables in the trust.
Additional accounts may include accounts that were
originated using criteria that are different from
those applicable to the accounts currently
designated to the trust. There are many factors
that could explain such differences, including that
the additional accounts were originated at a
different date or were acquired from an institution
that used different underwriting standards or
procedures. Consequently, there is no assurance
that future additional accounts will have the same
credit quality as those currently designated to the
trust or that the characteristics of the
receivables will be the same as those currently in
the trust.
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In addition, the pooling and servicing agreement
allows the bank to add participation interests in
other assets to the trust. The addition of such
participation interests and of additional accounts
will be subject to the satisfaction of certain
conditions described in this prospectus under
"Description of the Certificates--Addition of
Trust Assets."
The Laws Relating to
Insolvency and the
Perfection of Security
Interests Involve
Discretion and
Uncertainty and May
Result in Other
Interests Having
Priority Over Your
Certificates
The seller has represented in the pooling and
servicing agreement that the transfer of the
receivables to the trust is either a sale or the
grant of a security interest in the receivables.
To protect the purchasers of the certificates, the
bank has taken and will take the necessary actions
to ensure that if a court determines the transfer
to be a grant of a security interest and not a
transfer of the receivables to the trust, the
trust will have a "first priority perfected
security interest" in the receivables. However,
there are circumstances where, regardless of the
first priority perfected security interest, other
creditors may take priority over your interests:
. a tax, government or other nonconsensual lien
on the bank's property arising before new
receivables come into existence may have
priority over the trust's interests in the
receivables;
. if the Federal Deposit Insurance Corporation
(the United States agency that insures the
bank's deposits) were appointed conservator or
receiver of the bank, the FDIC's administrative
expenses may be paid before the
certificateholders are paid;
. if there is an insolvency of the bank, the
operation of insolvency laws and procedures
could cause delays in payment on your
certificates; and
. the bank, as servicer, receives collections on
the receivables and may hold such collections
for a period of time before depositing them
into the collection account; if the bank were
to become insolvent, or under certain
circumstances, if certain time periods were to
pass, the trust may not have a first priority
perfected security interest in the collections
held by the bank and not deposited into the
collection account, which may result in a loss
to the certificateholders.
For certain receivables, the accountholder has
provided the bank with collateral to secure the
bank's interest in those receivables. The
collateral typically takes the form of a check or
money order that is deposited in a federally-
insured depository institution. The bank will take
all necessary action to perfect its security
interest in the collateral. The Uniform Commercial
Code as in effect in Virginia may not govern the
perfection of a security interest in such
collateral, and the common law does not provide a
definitive method to perfect the lien. Therefore:
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. It is not entirely clear whether the grant of
the security interest in the collateral by
accountholders to the bank and by the bank to
the trust will be treated as a first priority
perfected security interest.
. In connection with the transfer of receivables
to the trust, the bank will sell and assign the
bank's interest as secured party in any related
collateral. The collateral will, however,
continue to be in the possession of the
depository institution and will not be
transferred to the trustee; furthermore, the
trust will not have a direct claim to the
collateral.
. The bank will take all necessary actions to
perfect the trust's interests in the
receivables and the collateral, if any. There
can be no definite assurance, however, that the
bank's first priority perfected security
interest in the collateral will exist for the
benefit of the trust.
The Federal Deposit Insurance Act, as amended by
the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, and policy statements
issued by the FDIC provide that the FDIC should
respect a security interest granted by a bank
where the security interest (a) is validly
perfected before the bank's insolvency and (b) was
not taken in contemplation of the bank's
insolvency or with the intent to hinder, delay or
defraud the bank or its creditors.
FDIC staff positions taken prior to the passage of
FIRREA do not suggest that the FDIC would
interrupt the timely transfer to the trust of
payments collected on the receivables.
If the FDIC were to assert a different position,
your payments of outstanding principal and
interest could be delayed and possibly reduced.
For example, under the FDIA, the FDIC could--
. require the trustee to go through an
administrative claims procedure to establish
its right to those payments;
. request a stay of proceedings on the bank; or
. reject the bank's sales contract and limit the
trust's resulting claim to "actual direct
compensatory damages."
If a conservator or receiver were appointed for the
bank, this could cause an early amortization of
principal on all outstanding series. Under the
terms of the pooling and servicing agreement, new
principal receivables would not be transferred to
the trust. The trustee would sell the receivables
unless a sufficient amount of the holders of the
certificates, and anyone else authorized to vote
on those matters, gave the trustee other
instructions. The trust then would terminate
earlier than was planned and you could have a loss
if the sale of the receivables produced
insufficient amounts to pay you in full. However,
the conservator or receiver may have the power--
. regardless of the terms of the pooling and
servicing agreement, (a) to prevent the early
amortization of the certificates, (b) to
prevent the early sale of the receivables and
termination of the trust or (c) to require new
principal receivables to continue being
transferred to the trust; or
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. regardless of the instructions of those
authorized to direct the trustee's actions
under the pooling and servicing agreement, (a)
to require the early sale of the receivables,
(b) to require termination of the trust and
retirement of the certificates or (c) to
prohibit the continued transfer of principal
receivables to the trust.
In addition, if a conservator or receiver is
appointed for the servicer, the conservator or
receiver may have the power to prevent either the
trustee or the certificateholders from appointing
a new servicer. See "Certain Legal Aspects of the
Receivables-- Transfer of Receivables" and "--
Certain Matters Relating to Receivership" in this
prospectus.
Consumer Protection Laws
May Restrict the Bank's
Ability to Collect
Receivables and Maintain
Yield on Portfolio and
Lead to an Early
Amortization or
Inability to Pay
Certificates in Full
Federal and state consumer protection laws regulate
the creation and enforcement of consumer loans.
The United States Congress and the states may
enact additional laws and amend existing laws to
regulate further the credit card and consumer
revolving loan industry or to reduce finance
charges or other fees or charges. These laws, as
well as many new laws, regulations or rulings
which may be adopted, may materially adversely
affect the servicer's ability to collect the
receivables or the bank's ability to maintain
previous levels of finance charges or fees.
The bank makes representations and warranties about
its compliance with legal requirements. The bank
also makes certain representations and warranties
in the pooling and servicing agreement about the
validity and enforceability of the accounts and
the receivables. However, the trustee will not
make any examination of the receivables or the
records about the receivables for the purpose of
establishing the presence or absence of defects,
compliance with such representations and
warranties, or for any other purpose. If any such
representation or warranty is breached, the only
remedy is that the seller or the servicer must
accept the transfer and reassignment of
receivables affected by the breach.
Receivables also may be written off as
uncollectible if a debtor seeks relief under
federal or state bankruptcy laws. This could
result in a loss of available funds to pay the
certificateholders. See "Description of the
Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges; Recoveries" in this
prospectus.
Ability to Continue the
Trust Will Be Dependent
Upon the Ability to
Generate New Receivables
The continuation of the trust will depend upon the
generation, on an ongoing basis, of new
receivables for the trust. As accountholders make
payments on their accounts, receivables in the
trust decline.
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When accountholders charge additional amounts or
when new accounts are designated to the trust,
receivables increase. Continued generation of new
receivables depends, in part, on the number of
accounts or account balances lost to competing
card issuers and the bank's ability to designate
new accounts to the trust. The credit card
industry is highly competitive and the bank must
compete with numerous other credit card providers
for new accounts and for use of the credit cards.
In addition, the bank's ability to grow and
generate new accounts will also depend on its
ability to obtain funding through continued
securitization of credit card loans and access to
the capital markets at attractive rates and terms.
The bank has offered accounts with introductory
rates, which are generally at low levels during
some initial period and which generally rise to
higher variable rates after the initial period
expires. Much of the initial growth in the bank's
account originations was attributable to customers
who, attracted by the bank's 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 decide to switch accounts
or transfer account balances to competing card
issuers. Although the bank has developed
methodologies to retain these accounts after
expiration of the initial period, there can be no
assurance that attrition in these accounts will
not be significant.
Credit card customers choose their credit card
issuers largely on the basis of price, credit
limit and other product features and once an
account is originated, customer loyalty may be
limited. Customers can and frequently do move
accounts from one credit card issuer to another,
or cease or limit use of one credit card in favor
of another.
The credit card and consumer revolving loan
industry is highly competitive and operates in a
legal and regulatory environment increasingly
focused on the cost of services charged to
consumers. There is increased use of advertising,
target marketing, pricing competition, incentive
programs and new credit card issuers seeking to
expand or to enter the market and compete for
customers. Certain credit card issuers and other
revolving credit providers assess periodic rate
finance charges or other fees or charges at rates
lower than the rate currently being assessed on
most of the accounts and more of the bank's
competitors have begun to do so. In addition, some
of the bank's competitors are now attempting to
employ programs similar to the specialized
marketing programs and information based
strategies through which the bank has solicited
new accounts. The bank may also solicit existing
accountholders to open other revolving credit card
accounts or revolving credit accounts which offer
special benefits such as lower periodic rate
finance charges or reduced late charges.
The pooling and servicing agreement requires that
the bank make an addition to the trust in the
event that the seller's interest is not maintained
at the required minimum level. The required
minimum
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level is 5% but may be reduced under certain
circumstances described in this prospectus under
"Description of the Certificates--Addition of
Trust Assets." The bank may not always be able to
make such additions. If the bank fails to make an
addition and if the terms of your series so
provide, a pay out event will occur with respect
to your series.
A decline in the amount of receivables in the
accounts for any reason (including the decision by
accountholders to use competing sources of credit,
an economic downturn, increased convenience use or
other factors) could result in the occurrence of a
pay out event and the start of an early
amortization period. In such event, you would bear
the risk of reinvestment of the principal amounts
of your certificates.
Timing of Principal
Payments Is Not Certain The receivables may be paid at any time. We cannot
assure you that the creation of additional
receivables in the accounts will occur or that any
particular pattern of cardholder payments will
occur. The timing of the payment of principal on
your certificates may be different than expected
if the principal payment pattern of the
receivables is different than expected or if
certain adverse events happen to the bank or the
trust. A significant decline in the amount of
receivables generated could result in the
occurrence of a pay out event for one or more
series. If a pay out event occurs for your series,
you could receive payment of principal sooner than
expected. In addition to other factors discussed
above in this "Risk Factors" section, changes in
finance charges can alter the monthly payment
rates of cardholders. A significant decrease in
monthly payment rates could slow the return or
accumulation of principal during a controlled
amortization period or accumulation period.
Seller's Ability to
Change Terms of the
Receivables Could Alter
Payment Patterns The bank, as seller, transfers the receivables to
the trust but continues to own the accounts. As
owner of the accounts, the bank retains the right
to change various account terms (including the
periodic interest rate, fees and the required
monthly minimum payment). A pay out event could
occur if the seller reduced the periodic interest
rate and any fees, resulting in a corresponding
decrease in the collection of finance charges. In
addition, changes in the account terms may alter
payment patterns. If payment rates decrease
significantly at a time when you are scheduled to
receive principal, you might receive principal
more slowly than expected.
The bank ordinarily will not reduce the interest
rate it charges on the receivables or any fees if
that action would result in a pay out event,
unless the bank is required by law to do so or it
determines that such reduction is necessary to
maintain its credit card business on a competitive
basis.
The bank may change the terms of the accounts or
its servicing practices (including the reduction
of the required minimum monthly payment and the
calculation of the amount or the timing of
periodic interest
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rates, fees and charge offs) if it takes the same
action on its other substantially similar
accounts.
The seller has no restrictions on its ability to
change the terms of the accounts except as
described above or in the accompanying prospectus
supplement. Changes in relevant law, changes in
the marketplace, including recent announcements by
other credit card issuers lowering interest rates,
or prudent business practices could impel the bank
to change account terms.
For Some Purposes,
Certificate-holders of
Other Series or Classes
May Take Actions Which
Are Opposed to Your
Interests
In some circumstances, the consent or approval of a
specified percentage of certificateholders of all
outstanding series or by each class of a series is
required. As a result, the certificateholders of
any one series or class may control
notwithstanding the concerns of other series or
classes. Such circumstances include:
. requiring the appointment of a successor
servicer following a servicer default;
. amending the pooling and servicing agreement
and directing a reassignment of the entire
portfolio of accounts;
. voting, by an aggregate of more than 50% of the
certificateholders or by each class of a
series, to direct the trustee not to sell or
liquidate the receivables, following an
insolvency event for the bank.
Optional Repurchase May
Result in an Early
Return of Principal and
a Reinvestment Risk
When the amount of certificates of a series is
reduced to a stated percentage of such series'
original amount, the seller may repurchase the
remaining certificates. It is possible that the
repurchase option could be exercised when 10% or
more of the principal amount of your series
remains outstanding. Such repurchase may result in
an early return of your investment. It is not
expected that the trust or the seller will pay any
premium if the seller exercises the repurchase
option, and there can be no assurance that you
will be able to invest such early repayment amount
at a similar rate of return.
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THE BANK'S CREDIT CARD AND CONSUMER LENDING BUSINESS
Business Overview
Capital One Bank, a Virginia banking corporation (the "Bank" or "Capital
One") is engaged in secured and unsecured consumer lending nationwide,
principally through prescreened direct mail and telemarketing. The Bank's
consumer revolving receivables portfolio (the "Bank Portfolio") consists
primarily of unsecured consumer loans for which the credit extension vehicle is
principally a check or credit card. The Bank is a member of both the VISA and
MasterCard associations. References in this Prospectus to the "Bank" shall,
unless the context otherwise requires, mean Signet Bank prior to November 22,
1994 and Capital One for all periods after November 22, 1994.
The receivables (the "Receivables") conveyed initially and to be conveyed by
the Bank to the Capital One Master Trust (the "Trust") pursuant to the Pooling
and Servicing Agreement (the "Pooling Agreement") between the Bank, as seller
(in such capacity, the "Seller") and servicer (together with any successors in
such capacity, the "Servicer"), and The Bank of New York, as trustee (the
"Trustee"), have been and will be generated from transactions made by holders
of selected VISA and MasterCard credit card accounts, including premium
accounts and standard accounts (the "Accounts"). Generally, both premium and
standard accounts undergo the same credit analysis, but premium accounts have
higher initial credit limits. In addition, premium accounts offer a wider
variety of services to accountholders.
The consumer credit card and revolving loan industry is highly competitive.
See "Risk Factors--Ability to Continue the Trust Will Be Dependent Upon the
Ability to Generate New Receivables" and "--Seller's Ability to Change Terms of
the Receivables Could Alter Payment Patterns" in this Prospectus. The Bank has
responded to this competition by targeting its origination of new accounts
through the creation of products for multiple customer segments using various
marketing channels. For example, the Bank offers credit cards and revolving
loans with different periodic rate finance charges and annual fee combinations
or other special features such as a balance transfer option. The Bank approves
prospective accountholders through preapproval as well as full application
underwriting procedures as described below under "--Underwriting Procedures."
Using information derived from proprietary statistical models, the Bank matches
prospective accountholders who meet the various applicable underwriting
criteria with an acceptable credit card or revolving loan product.
The Bank and its affiliate Capital One Services, Inc. currently service the
credit card accounts through facilities in Richmond, Virginia, Fredericksburg,
Virginia, Tampa, Florida and Dallas, Texas. The Bank's underwriting, customer
service and collection procedures, described below, are subject to change as
the competitive environment, industry practice, legal requirements or the
Bank's business objectives may require. In addition, the Bank or its affiliates
may acquire accounts originated by third parties from time to time in the
future.
Underwriting Procedures
The Bank originates accounts through (i) applications mailed directly to
prospective accountholders, (ii) direct mail and telemarketing solicitations
for accounts from individuals whose creditworthiness was prescreened, (iii)
arrangements with affinity groups, (iv) conversion of existing non-premium
accounts to premium accounts, (v) application information taken over the
telephone from prospective accountholders, (vi) newspaper, magazine, radio and
television advertisements and (vii) location or event marketing. For account
originations and solicitation activity since 1990, the Bank has focused largely
on prescreened direct mail and telemarketing targeted to multiple customer
segments with varying combinations of product structure and pricing. In
general, the Bank's prescreening and underwriting criteria are intended to
identify and avoid potential losses. These procedures are based on limited
information, however, and it is not possible for the Bank to identify all
potential losses. The following describes the process by which the Bank
originates accounts.
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Generally, the credit risk of each applicant is evaluated by use of a credit
scoring system, which is intended to provide a general indication, based on the
information available, of the applicant's willingness and ability to repay his
or her obligations. Most applications are scored based on the information
received on the application as well as data obtained from an independent credit
reporting agency. In select cases, based on certain criteria, including
likelihood of fraud, and in accordance with criteria established by Bank
management, further verification of information by telephone or in writing may
be required. Credit limits, and with respect to the secured credit card
program, deposit amounts, are determined based on information obtained from the
application and the independent credit reporting agency. Accountholder requests
for increased credit limits are evaluated based on a current credit reporting
agency report, updated application data and prior account performance.
The Bank's accounts are grouped into solicitations for purposes of
administrative convenience. A solicitation represents a group of accounts
established from replies to a specific mailing, telemarketing program or
advertisement program. Each program has a discrete set of underwriting criteria
corresponding to it. Product information for a particular solicitation is
mailed within a discrete period, normally two to three weeks in length.
The Bank's prescreened account solicitation process generally utilizes
information from credit reporting agencies to identify consumers who are likely
to be approved for a credit card account. In the prescreening process, the Bank
is provided anonymous credit report information on potential customers which is
screened against underwriting standards determined by the Bank to produce
appropriate lists of anonymous credit reports with desired credit attributes.
The list of names associated with the anonymous credit bureau reports is also
refined through the use of appropriate criteria developed by the Bank. The
resulting lists of names and anonymous credit reports are linked together by a
third party vendor to produce the final list of consumers who will receive
direct mail solicitations. The sets of underwriting criteria used to prescreen
potential applicants vary from time to time in accordance with the Bank's
established policies and procedures relating to the operation of its consumer
revolving lending business, as such policies may be changed from time to time
(the "Lending Guidelines") and include various models, including risk models,
designed to predict the credit risk of potential cardholders.
In order to establish the amount of the customer's credit line, returned
applications are subject to the back-end verification process. Each customer
whose credit request meets all of the underwriting criteria is generally
offered a line of credit in excess of a minimum level, which is currently $200,
although lower levels may also be offered.
The Bank tracks and continually tests the results of each mailing. Extensive
management information systems and processes enable management to monitor
continuously the effectiveness of prescreening and underwriting criteria.
Criteria are periodically modified based on the results obtained from this
process.
Each accountholder is subject to an agreement governing the terms and
conditions of the account under which the Bank reserves the right to change or
terminate any terms, conditions, services or features of the account (including
increasing or decreasing periodic rate finance charges, other charges, minimum
payments or, with respect to secured credit card accounts, the amount of the
related deposit). The terms of the lending agreements are governed by Virginia
law. Credit limits are adjusted periodically based upon the Bank's continuing
evaluation of an accountholder's credit behavior.
For non-preapproved solicitations, the Bank acquires prospect names from a
variety of sources, including list vendors, and then edits the list utilizing
internal and external sources to ensure quality and accuracy. The prospective
customers on the final list are mailed solicitations. Respondents are approved
or declined based on both the characteristics drawn from the application and a
credit reporting agency check.
Under the Bank's secured credit card program, an accountholder provides the
Bank with a sum of money in the form of a check or money order (the "Funds") as
security for such accountholder's payment obligations
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arising under the secured credit card. The Funds equal all, or a portion, of
the credit limit available to the accountholder and are deposited by the Bank,
on behalf of the accountholder, in an FDIC-insured deposit account (the
"Deposit Account," and together with the Funds, the "Funds Collateral") at an
FDIC-insured depositary institution, which may be the Bank, an affiliate of the
Bank or an unaffiliated third party (a "Depositary") as selected by the Bank.
Pursuant to a security agreement, each such accountholder pledges and assigns
to the Bank all of its right, title and interest in any and all Funds delivered
by the accountholder to the Bank and in the Deposit Account to secure the full
performance and payment of the obligations of such accountholder. If a secured
credit card account becomes delinquent, the Bank may immediately withdraw funds
from the Deposit Account to satisfy the accountholder's payment obligations.
Notwithstanding this right to immediately withdraw funds, the Bank typically
will not withdraw funds until shortly before the secured credit card account is
charged off as uncollectible. See "--Delinquencies and Collections--Collection
Efforts" below.
Customer Service
Customer service representatives are currently available 24 hours a day,
seven days a week. Such representatives have on-line access to the customer's
account history in order to resolve immediately the majority of questions. When
charges are in dispute, the Bank's current policy is to credit the
accountholder's monthly billing statement for such portion of the balance that
is in dispute. If the dispute is resolved so that the customer accepts the
charge, it is re-billed to the customer's account. However, finance charges are
not applied retroactively on any disputed balances. Multiple tracking and
reporting systems are employed to ensure that service standards are achieved
and maintained.
Billing and Payments
The accounts in the Bank Portfolio currently have various billing and payment
characteristics, including varying periodic rate finance charges and fees.
Currently, monthly billing statements are sent by the Bank to accountholders
with balances at the end of each billing period. Generally, with some
exceptions, each month an accountholder must make a minimum payment equal to
the sum of (i) the greater of a percentage (either 2% or 3%) of the outstanding
balance (including purchases, cash advances, finance charges and fees posted to
the account) or $10.00 plus (ii) any past due amounts. If the accountholder's
outstanding balance is less than $10.00, then the minimum monthly payment
equals the amount of the outstanding balance. With certain exceptions,
accountholders are also permitted to make payments in advance for up to three
months.
A daily periodic rate finance charge is assessed on the accounts in the Bank
Portfolio. Accounts may have a different periodic rate finance charge for
purchase, cash and account management balance transfer activity. Daily periodic
rate finance charges are calculated from the date that a purchase, cash advance
or balance transfer is made and are equal to the sum of the amount computed for
each day during the billing cycle by multiplying the daily periodic rate by the
daily balance of the account during the billing cycle. No periodic rate finance
charges are assessed on new purchases if the accountholder's balance from the
preceding billing cycle is paid in full by the due date and if new purchases
are paid in full by the next statement cycle date. The Bank does not currently
offer products that have no grace period for purchases.
There can be no assurance that periodic rate finance charges, fees and other
charges on Accounts the Receivables in which are included in the Trust from
time to time will remain at current levels. See "Risk Factors--Seller's Ability
to Change Terms of the Receivables Could Alter Payment Patterns" in this
Prospectus.
Currently, payments by accountholders to the Bank are processed at the Bank's
credit card operations center and other offices in Richmond, Virginia and
Fredericksburg, Virginia. Payments are applied first to finance charges
assessed with respect to the preceding billing period, then to any fees billed
to the account and
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<PAGE>
then to the principal balance outstanding at the end of such billing period.
See "The Pooling Agreement Generally--Collection and Other Servicing
Procedures" in this Prospectus.
Delinquencies and Collections--Collection Efforts
The Bank generally considers an account delinquent if a minimum payment due
thereunder is not received by the Bank by the accountholder's payment due date.
The Bank makes use of behavioral scoring models designed to predict the
probability of an account charging off. Based on the behavioral score and
certain other factors, the Bank determines the timing of the collection
activity to be implemented for the account. Delinquent accounts are currently
referred for contact by phone between seven and 60 days after contractual
delinquency, depending on the accountholder's risk profile. In any event, the
accountholder's statement reflects the request for payment of past due amounts.
Efforts to collect delinquent credit card accounts are generally made by the
Bank's regular collection group, supplemented in certain cases by collection
agencies.
The focus of the Bank's response to an early stage delinquency is
rehabilitation and identification of the causes for delinquency. The Bank's
policies and procedures are designed to encourage cardholders to pay delinquent
amounts; for example, once a delinquent account has re-established a payment
pattern with three consecutive minimum monthly payments, it can be re-aged as
current. An account generally can be re-aged once in the life of the account.
The Bank reserves the right to suspend charging privileges at any time after
an account enters the collections process. In most cases, an account is
restricted and charging privileges are suspended no later than 105 days after
contractual delinquency. The Bank may also, at its discretion, enter into
arrangements with delinquent accountholders to extend or otherwise change
payment schedules. During the fourth quarter of 1997, the Bank modified its
methodology for charging off credit card accounts. The Bank now charges off an
account (net of collateral) at 180 days past due. The Bank's prior practice had
been to charge off as uncollectible an account in the next billing cycle after
the account became 180 days past due. In connection with a secured credit card
account, except as set forth below, funds will generally be withdrawn from the
Deposit Account by the Servicer shortly before the secured credit card account
is charged off as uncollectible in an amount equal to the lesser of (i) all
Principal Receivables plus all Finance Charge Receivables related to such
secured credit card account and (ii) the amount of funds for such secured
credit card account in the Deposit Account. The Bank generally charges off
bankrupt customers' accounts within 30 days after the Bank receives the
bankruptcy petition and with respect to secured credit card accounts, funds
will be withdrawn from the Deposit Account and applied as set forth above, only
after the bankruptcy automatic stay is lifted. The Bank charges off accounts of
deceased accountholders within 60 days of receiving proper notice if no estate
exists against which a proof of claim can be filed, no other parties remit
payments or no other responsible party is available. The credit evaluation,
servicing and charge-off policies and collection practices of the Bank may
change over time in accordance with the business judgment of the Bank,
applicable law and guidelines established by applicable regulatory authorities.
Interchange
Members participating in the VISA USA, Inc. ("VISA") and MasterCard
International Incorporated ("MasterCard") associations receive certain fees
("Interchange") as partial compensation for taking credit risk, absorbing fraud
losses, funding receivables and servicing accountholders for a limited period
prior to initial billing. Under the VISA and MasterCard systems, Interchange in
connection with accountholder charges for merchandise and services is passed
from banks which clear the transactions for merchants to credit card-issuing
banks. Interchange ranges from approximately 1% to 2% of the transaction
amount, although VISA and MasterCard may from time to time change the amount of
Interchange reimbursed to banks issuing their credit cards. Interchange paid to
the Bank will be allocated to the Trust for each Monthly Period on the basis of
the percentage equivalent of the ratio that the amount of accountholder sales
charges in the Accounts bears to the total amount of accountholder sales
charges for all accounts in the Bank Portfolio, in each case for such Monthly
Period. This percentage is an estimate of the actual Interchange paid to the
Bank from time to time in
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respect of the Accounts and may be greater or less than the actual amount of
Interchange so paid. The Bank will be required, pursuant to the terms of the
Pooling Agreement, to transfer to the Trust for the benefit of holders of
interests in Certificates (the "Certificateholders") the percentage of the
Interchange allocable to the Certificateholders' Interest. All or a portion of
Interchange allocable to the Certificates as specified in the related
Prospectus Supplement for a Series will be used exclusively to pay the Servicer
part of its Monthly Servicing Fee. See "Description of the Certificates--
Servicing Compensation and Payment of Expenses" in this Prospectus.
Interchange, if any, in excess of the portion required to be used exclusively
to pay the Servicer part of its Monthly Servicing Fee will be included in
Finance Charge Receivables pursuant to the Pooling Agreement for purposes of
determining the amount of Finance Charge Receivables and allocating collections
and payments to the Certificateholders. Interchange (including the portion used
exclusively to pay the Servicer a portion of its Monthly Servicing Fee) will be
included in Finance Charge Receivables for purposes of calculating the average
yield on the portfolio of Accounts included in the Trust applicable to any
Series as specified in the related supplement to the Pooling Agreement (each, a
"Supplement").
Year 2000
The year 2000 problem is a result of computer systems using two digits rather
than four digits to define an applicable year and therefore may not recognize a
date using "00" as the Year 2000. The Bank utilizes a significant number of
internal computer software programs and operating systems across its entire
organization. In addition, the Bank depends on its external business partners
and vendors to provide external services for its operations. To the extent the
software applications of the Bank or its vendors contain a code that is unable
to appropriately interpret the year 2000 and beyond, some level of
modification, or even possibly replacement of such applications may be
necessary.
In October 1996, the Bank formed a Year 2000 Project Office to identify
software systems and computer-related devices that required modification for
the year 2000. Shortly after its inception, the Project Office executed a five
step program for the Bank's information technology computer based systems. This
strategy calls for awareness of the existence of information technology systems
at the Bank, assessment of those systems for year 2000 readiness, renovation of
those systems and their date coding functions, validation of those renovations
and implementation of all renovations made. This strategy is based in large
part on the regulatory guidelines published by the Federal Financial
Institutions Examination Counsel (the "FFIEC").
The Bank has substantially completed the awareness and assessment stages of
this strategy and is in the process of renovating, validating and testing its
systems. The Bank expects to have all system renovations and applications in
place and fully tested by the end of first quarter 1999, and will use the
remaining time in 1999 for any system refinements that may be needed. In
addition, the Bank is assessing the year 2000 readiness of its external
business partners and vendors, placing extensive focus on its high priority
vendors. These vendors include credit bureaus, collection agencies, utilities
and other related service providers, the U.S. postal service, telephone
companies, technology vendors, banks that are creditors of the Company or which
provide cash management, trustee, paying agent, stock transfer agent or other
services. The Bank will continue to actively monitor the efforts of its vendors
and develop contingency plans to mitigate exposure to year 2000 issues
resulting from the failure of its business partners and vendors to be
compliant.
The Bank's expectations on its year 2000 readiness, including year 2000
compliance by its business partners and vendors, are forward-looking statements
that are based on management's reasonable estimates and assumptions about
future events and are subject to risks and uncertainties. Although the Bank
believes that it has taken the necessary precautionary measures to assure that
the year 2000 will not adversely affect its business and operations, unforeseen
problems could arise in the year 2000, giving rise to delays and malfunctions
which may impact the Bank's business and operations, including the timely
payment of obligations to Certificateholders.
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THE ACCOUNTS
The Receivables arise in certain Eligible Accounts selected by the Bank from
the Bank Portfolio. The Bank has identified a pool of accounts, from which the
Initial Accounts were selected, based on the eligibility and other criteria
specified in the Pooling Agreement.
The Bank has transferred and will transfer to the Trust all Receivables
existing in each Account and any Funds Collateral on the date of transfer to
the Trust and all Receivables and any Funds Collateral generated in such
Account after such date. All monthly calculations for such Accounts are
computed based on activity occurring during a processing month (each, a
"Monthly Period"), which is a period of approximately 30 days, that (a)
contains a full set of processing cycles with respect to the Accounts, as
defined by the Servicer, (b) commences on the day immediately succeeding the
last day of the immediately preceding Monthly Period and (c) ends prior to the
date, on or about the fourth business day preceding each Distribution Date,
when the Servicer calculates the amounts to be allocated to the
Certificateholders of each Class or Series and the Bank (the "Determination
Date") for the related Distribution Date, provided that the initial Monthly
Period for any Series will commence on the series cut-off date for such Series.
The "Distribution Date" is the 15th day of each calendar month (or, if any such
15th day is not a business day, the following business day). The Initial
Accounts do (and any Additional Accounts may) include certain Accounts for
which Receivables have been charged off as uncollectible prior to their
addition to the Trust in accordance with the Bank's normal servicing policies
and the Lending Guidelines. On the date when any Receivable in an Account
becomes a Defaulted Receivable, the Trust automatically transfers the Defaulted
Receivables to the Bank together with all monies due or to become due with
respect thereto, all proceeds thereof and any insurance proceeds. Pursuant to
the Pooling Agreement, the Bank has the right, and in certain cases the
obligation (subject to certain limitations and conditions described below), to
designate from time to time additional qualifying secured or unsecured VISA or
MasterCard consumer revolving credit card accounts and other consumer revolving
credit accounts to be included as Accounts and to convey to the Trust all
Receivables in such Additional Accounts, whether such Receivables are then
existing or thereafter created. These Accounts must be Eligible Accounts as of
the date the Bank designates such accounts as Additional Accounts. Since the
Trust Cut-Off Date, the Bank has conveyed Receivables to the Trust in certain
Additional Accounts in accordance with the provisions of the Pooling Agreement.
In addition, as of the Trust Cut-Off Date (or as of the addition date for any
Account) and on the date any new Receivables are created, the Bank will
represent and warrant to the Trust that each of the Receivables in any Account
or Additional Account which is conveyed to the Trust on such day meets the
eligibility requirements specified in the Pooling Agreement. See "The Pooling
Agreement Generally--Representations and Warranties" in this Prospectus.
However, there can be no assurance that all the Accounts will continue to meet
the applicable eligibility requirements throughout the life of the Trust. The
Pooling Agreement also provides that the Bank may convey Participations to the
Trust, which may have different eligibility requirements, characteristics and
risks than the Accounts. See "Description of the Certificates--Addition of
Trust Assets" in this Prospectus.
Accounts may also include any account or accounts (each, a "Related Account")
having the following characteristics: (a) such Related Account was established
in compliance with the Lending Guidelines pursuant to a lending agreement; (b)
the accountholder or accountholders with respect to such Related Account are
the same person or persons as the accountholder or accountholders of the
Account; (c) such Related Account is originated (i) as a result of the credit
card for the Account being lost or stolen; (ii) as a result of the
accountholder requesting a change in his or her billing cycle; (iii) as a
result of the accountholder requesting the discontinuance of responsibility for
an Account; (iv) as a result of the accountholder requesting a product change;
or (v) for any other reasons permitted by the Lending Guidelines; and (d) such
Related Account can be traced or identified by reference to or by way of the
computer or other records of the Bank.
Subject to certain limitations and restrictions, the Bank may also designate
certain Accounts ("Removed Accounts") the Receivables and Funds Collateral in
which will be removed from the Trust. In such case, the Receivables and Funds
Collateral in the Removed Accounts, together with any related Funds Collateral,
will be
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<PAGE>
reassigned to the Bank. Throughout the term of the Trust, the Accounts will
consist of the Initial Accounts, plus any Additional Accounts and
Participations added to the Trust, and minus any Removed Accounts.
Additional Accounts might not be accounts of the same type or with the same
characteristics as those the Receivables in which were previously included in
the Trust. Therefore, there can be no assurance that such Additional Accounts
will be of the same credit quality as the Initial Accounts or the Additional
Accounts the Receivables in which have been conveyed previously to the Trust.
Moreover, Additional Accounts may contain Receivables that consist of fees,
charges and amounts that are different from the fees, charges and amounts
described in this Prospectus. Such Additional Accounts may also be subject to
different credit limits, balances and ages. Consequently, there can be no
assurance that the Accounts will continue to have the characteristics described
in this Prospectus as Additional Accounts are added. In addition, the inclusion
in the Trust of Additional Accounts with lower periodic rate finance charges
may have the effect of reducing the average yield of the portfolio of Accounts
in the Trust. The Bank may add Participations to the Trust from time to time
without the approval of Certificateholders of any Series. In addition to the
periodic reports otherwise required to be filed by the Bank with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Bank intends to file, on
behalf of the Trust, a Report on Form 8-K with respect to any addition of
Accounts which would have a material effect on the composition of the Accounts
or any addition of Participations.
THE BANK
Capital One is a limited purpose Virginia state-chartered credit card bank, a
subsidiary of Capital One Financial Corporation and a member of the Federal
Reserve System whose deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation (the "FDIC"). Capital One (i) engages
only in credit card operations, (ii) does not accept demand deposits or
deposits that the depositor may withdraw by check or similar means for payment
to third parties or others, (iii) does not accept any savings or time deposit
of less than $100,000 although it may accept deposits of under $100,000 as
collateral for extension of credit, (iv) maintains only one office that accepts
deposits and (v) does not engage in the business of making commercial loans.
Capital One (through its predecessor) is one of the oldest continually
operating bank card issuers in the United States, having commenced operations
in 1953, the same year as the formation of what is now MasterCard
International.
Prior to November 22, 1994, Capital One conducted its operations as a
division of Signet Bank ("Signet Bank"), a wholly-owned subsidiary of Signet
Banking Corporation ("Signet"). Pursuant to the terms of an agreement among
Signet, Signet Bank and Capital One Financial Corporation (the "Separation
Agreement"), Signet Bank contributed designated assets and liabilities of its
credit card division and $358 million of equity capital to Capital One on
November 22, 1994 (the "Separation"). Following the contribution of assets and
the assumption of liabilities, Signet Bank distributed the capital stock of
Capital One to Signet, which then contributed such stock to Capital One
Financial Corporation. Concurrently with the Separation, Capital One Financial
Corporation consummated an initial public offering of 7,125,000 shares of its
common stock (or approximately 10.8% of its outstanding shares), the net
proceeds of which were approximately $102 million. Approximately $92 million of
such net proceeds were contributed as capital to Capital One. On February 28,
1995, Signet divested its remaining ownership interest in Capital One Financial
Corporation by means of a tax-free distribution to its stockholders. Signet
Bank and Signet have since been acquired by First Union National Bank and First
Union Corporation, respectively, as of November 30, 1997.
Capital One was incorporated under the laws of Virginia on May 3, 1994. Its
main office is currently located at 11011 West Broad Street, Richmond, Virginia
23260. Capital One's telephone number is (804) 967-1000.
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ASSUMPTION OF THE BANK'S OBLIGATIONS
The Pooling Agreement permits a transfer of all of the Bank's consumer
revolving credit card accounts and other revolving credit accounts and the
receivables arising thereunder, which may include all, but not less than all,
of the Accounts and the Bank's remaining interest in the Receivables arising
thereunder, its interest in Participations and its interest in the Trust
(collectively, the "Assigned Assets"), together with all servicing functions
and other obligations under the Pooling Agreement or relating to the
transactions contemplated thereby (collectively, the "Assumed Obligations"), to
another entity (the "Assuming Entity") which may or may not ultimately be
affiliated with the Bank. Pursuant to the Pooling Agreement, the Bank is
permitted to assign, convey and transfer the Assigned Assets and the Assumed
Obligations to the Assuming Entity, without the consent or approval of the
holders of any Certificates, if the following conditions, among others, are
satisfied: (i) the Assuming Entity, the Bank and the Trustee shall have entered
into an Assumption Agreement (as defined in the Pooling Agreement) providing
for the Assuming Entity to assume the Assumed Obligations, including the
obligation under the Pooling Agreement to transfer the Receivables arising
under the Accounts and the Receivables arising under any Additional Accounts to
the Trust, (ii) each provider of Series Enhancement, if any, shall have
consented to the transfer and assumption, (iii) all filings required to perfect
the interest of the Trustee in the Receivables arising under such Accounts
shall have been duly made and copies thereof shall have been delivered by the
Bank to the Trustee, (iv) if the Assuming Entity is a savings and loan
association, a national banking association, a bank or other entity that is not
subject to Title 11 of the United States Code (a "Non-Code Entity"), the Bank
shall have delivered notice of such transfer and assumption to each Rating
Agency (in which case there is no requirement that such transfer and assumption
will not have a Ratings Effect) or, if the Assuming Entity is not a Non-Code
Entity, the Bank shall have received written notice from each Rating Agency
that such transfer and assumption will not have a Ratings Effect, (v) the
Trustee shall have received an opinion of counsel about clause (iii) above and
as to certain other matters specified in the Pooling Agreement, and (vi) the
Trustee shall have received an opinion of counsel acceptable to the Trustee
that for Federal income tax purposes and Virginia income and franchise tax
purposes and for income and franchise tax purposes of the jurisdiction in which
the Assuming Entity engages in its principal servicing activities, if different
from Virginia, (x) following the transaction the Trust will not be deemed to be
an association (or publicly traded partnership) taxable as a corporation and
(y) such transaction will not affect the tax characterization as debt of
Certificates of any outstanding Series or Class that were characterized as debt
at the time of their issuance and will not cause a taxable event to the holders
of the Certificates (an opinion of counsel about any matter to the effect
referred to in clauses (x) and (y) about any action is referred to in this
Prospectus as a "Tax Opinion"). The Pooling Agreement provides that the Bank,
the Assuming Entity and the Trustee may enter into amendments to the Pooling
Agreement to permit the transfer and assumption described above without the
consent of the holders of any Certificates. After any permitted transfer and
assumption, the Assuming Entity will be considered to be the "Bank" for all
purposes hereof, and the Bank will have no further liability or obligation
under the Pooling Agreement. It was pursuant to this provision of the Pooling
Agreement that Capital One assumed the roles of Seller and Servicer under the
Trust. See "Prospectus Summary--The Bank" in this Prospectus.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds from the sale of the Certificates of any Series offered hereby will be
paid to the Bank and will be used for general corporate purposes.
THE TRUST
The Trust, as a master trust, previously has issued other series (each, a
"Series") of asset-backed certificates (the "Certificates") and is expected to
issue additional Series from time to time. The Trust has not engaged and will
not engage in any business activity other than acquiring and holding Trust
Assets and
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proceeds therefrom, issuing Series of Certificates and the exchangeable
certificate evidencing the Seller's Interest (the "Bank Certificate" and,
together with any Supplemental Certificates, collectively, the "Seller's
Certificate") and making payments thereon and related activities. As a
consequence, the Trust does not and is not expected to have any source of
capital resources other than the Trust Assets. The Trust is formed under and
administered in accordance with the laws of the State of New York.
The Bank has conveyed to the Trust, without recourse, its interest in all
Receivables arising under the Accounts. The assets of the Trust (the "Trust
Assets") consist of the Receivables, all monies due or to become due
thereunder, the proceeds of the Receivables, recoveries (net of collection
expenses) received by the Servicer including proceeds from the sale or
securitization of Defaulted Receivables and proceeds of credit insurance
policies relating to the Receivables, the right to receive certain Interchange
attributed to accountholder charges for merchandise and services in the
Accounts, all monies on deposit in the Collection Account and in certain
accounts maintained for the benefit of the Certificateholders, Funds Collateral
relating to secured accounts and any Series Enhancements. The Receivables
consist of all amounts charged by accountholders for goods and services and
cash advances ("Principal Receivables") and all related periodic rate finance
charges, annual membership fees, cash advance fees, late charge fees, returned
check charges, overlimit fees and any other fees and charges billed on the
Accounts from time to time ("Finance Charge Receivables"). The Trust Assets are
expected to change over the life of the Trust as secured and unsecured consumer
revolving credit card accounts, other consumer revolving credit accounts and
related assets become subject to the Trust and as Accounts are closed, charged
off or removed and are no longer subject to the Trust. The Pooling Agreement
provides that, subject to certain limitations and conditions, Trust Assets may
also include Participations. Pursuant to the Pooling Agreement, the Bank will
have the right (subject to certain limitations and conditions), and in some
circumstances will be obligated, to designate as Trust Assets Receivables
arising in Additional Accounts or, in lieu thereof or in addition thereto,
Participations. See "Description of the Certificates--Addition of Trust Assets"
in this Prospectus. In addition, the Bank will have the right to remove from
the Trust Receivables arising in designated Accounts as described herein under
"Description of the Certificates--Removal of Accounts" in this Prospectus.
The Trust was originated by Signet Bank in 1993 as Signet Master Trust. In
connection with the Separation and as permitted by the Pooling Agreement, (i)
Signet Bank transferred to Capital One, and Capital One accepted and assumed,
all of Signet Bank's rights and obligations under the Pooling Agreement,
(ii) Capital One became Seller and Servicer of the Trust, (iii) Signet Bank was
released from any continuing obligations under the Pooling Agreement, (iv) the
Trust's name was changed to Capital One Master Trust and (v) Signet Bank and
Capital One filed with the appropriate governmental authorities Uniform
Commercial Code ("UCC") financing statements and amendments to financing
statements reflecting the transfer to and assumption by Capital One.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of a Series will be issued pursuant to the Pooling
Agreement, a supplement to the Pooling Agreement (a "Supplement") relating to
such Certificates, between the Bank, as seller of the interests in the
Receivables and servicer of the Accounts, and the Trustee. See "Description of
the Certificates--New Issuances" in this Prospectus. Each Series will consist
of one or more classes of Certificates (each, a "Class"). The Trustee will
provide a copy of the Pooling Agreement (without exhibits or schedules),
including any Supplements, to Certificateholders upon written request. The
following summary describes certain terms generally applicable to the
Certificates of each Series.
Unless otherwise specified in a prospectus supplement for a Series of
Certificates offered hereby (the "Prospectus Supplement"), the Certificates of
each Series offered hereby will initially be represented by one or more
certificates registered in the name of the nominee of The Depository Trust
Company ("DTC") or Cedel or
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Euroclear (together with any successor depository selected by the Bank, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series offered hereby
will be available for purchase in minimum denominations of $1,000 and in
integral multiples thereof in book-entry form. The Bank has been informed by
DTC that DTC's nominee will be Cede & Co. ("Cede"). See "The Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates" in this
Prospectus.
The Certificates of each Series offered hereby will evidence undivided
interests in the Trust Assets allocated among the holders of an interest in the
Certificates (the "Certificateholders") of a particular Series (the
"Certificateholders' Interest"), representing the right to receive from such
Trust Assets funds up to (but not in excess of) the amounts required to make
payments of interest and principal with respect thereto as described in the
related Prospectus Supplement.
Interest
Interest will accrue on the Invested Amount of the Certificates of a Series
or Class offered hereby at the per annum rate either specified in or determined
in the manner specified in the related Prospectus Supplement. If the Prospectus
Supplement for a Series of Certificates so provides, the interest rate and
interest payment dates applicable to each Certificate of that Series may be
subject to adjustment from time to time. Any such interest rate adjustment
would be determined by reference to one or more indices or by a remarketing
firm, in each case as described in the Prospectus Supplement for such Series.
Except as otherwise provided in this Prospectus or in the related Prospectus
Supplement, collections of Finance Charge Receivables and certain other amounts
allocable to the Certificateholders' Interest of a Series offered hereby will
be used to make interest payments to Certificateholders of such Series on each
Interest Payment Date specified in the related Prospectus Supplement; provided
that if an Early Amortization Period begins for such Series, thereafter
interest will be distributed to such Certificateholders monthly on each Special
Payment Date. If the Interest Payment Dates for a Series or Class occur less
frequently than monthly, such collections or other amounts (or the portion
thereof allocable to such Class) will be deposited in one or more trust
accounts (each, an "Interest Funding Account") and used to make interest
payments to Certificateholders of such Series or Class on the following
Interest Payment Date. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. Funds on deposit
in an Interest Funding Account will be invested in Eligible Investments.
Interest with respect to the Certificates of each Series offered hereby will
accrue and be calculated on the basis described in the related Prospectus
Supplement.
Principal
The method for payment of principal for each Series of Certificates offered
by this Prospectus will be described in the Prospectus Supplement for such
Series. Generally, the principal for a Series will be scheduled to be paid
either in full on an expected date (the "Expected Final Payment Date"), in
which case such Series will have an Accumulation Period as described below, or
in installments each month beginning on a specified date (the "Principal
Commencement Date"), in which case such Series will have a Controlled
Amortization Period as described below. If a Series has more than one Class of
Certificates, a different method of paying principal, Expected Final Payment
Date or Principal Commencement Date, may be assigned to each Class. The payment
of principal on the Certificates of a Series or Class may start earlier than
the Expected Final Payment Date or Principal Commencement Date if a Pay Out
Event or Principal Payment Event happens with respect to such Series or Class.
See "Risk Factors--Timing of Principal Payments Is Not Certain" in this
Prospectus for a description of factors that may affect the timing of principal
payments on Certificates.
The Certificates of each Series will have a revolving period (the "Revolving
Period") which will begin on a date described in the Prospectus Supplement (the
"Series Cut-Off Date") and continue to the earlier of (a) the beginning of the
Early Amortization Period or Principal Payment Period and (b) the date
specified in the Prospectus Supplement as the end of the Revolving Period.
During the Revolving Period, collections of Principal Receivables and certain
other amounts otherwise allocable to the Certificateholders' Interest of a
Series, including Miscellaneous Payments so allocated, will not be paid to the
Certificateholders, but instead
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will be treated as Shared Principal Collections and will be distributed to, or
for the benefit of, the Certificateholders of other Series, if the Supplement
therefor so provides, or the Bank or deposited in the Excess Funding Account.
Unless an Early Amortization Period begins for a Series, following the
Revolving Period for such Series, to the extent specified in the related
Prospectus Supplement, such Series will have either an accumulation period (the
"Accumulation Period") or a controlled amortization period (the "Controlled
Amortization Period").
The Certificates of any Series or Class may have an Accumulation Period that
will begin on a date certain or on a date determined in the manner described in
the Prospectus Supplement and will continue until the earliest of (a) the start
of an Early Amortization Period or Principal Payment Period for such Series,
(b) the payment in full of the Certificates of such Series or Class or (c) the
Series Termination Date for such Series. During the Accumulation Period for a
Series or any Class, collections of Principal Receivables and certain other
amounts allocable to such Series or such Class (including Miscellaneous
Payments and, if the Supplement so provides, Shared Principal Collections, if
any, allocable to such Series or such Class) will be deposited on each
Distribution Date in a trust account established for the benefit of the
Certificateholders of such Series or such Class (a "Principal Funding Account")
and used to make principal distributions to the Certificateholders of such
Series or such Class when due on the applicable Expected Final Payment Date.
The amount to be deposited in a Principal Funding Account for any Series or any
Class thereof on any Distribution Date may, but will not necessarily, be
limited to an amount (the "Controlled Deposit Amount") equal to an amount
specified in the related Prospectus Supplement (the "Controlled Accumulation
Amount") plus any existing deficit Controlled Accumulation Amount arising from
prior Distribution Dates (the "Deficit Controlled Accumulation Amount"). If a
Series has more than one Class of Certificates that has an Accumulation Period,
each Class may have a separate Principal Funding Account and Controlled
Accumulation Amount. In addition, the related Prospectus Supplement may
describe certain priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts.
The Certificates of any Series or Class may have a Controlled Amortization
Period that will begin on a date certain or on a date determined in the manner
described in the Prospectus Supplement and will continue until the earliest of
(a) the start of an Early Amortization Period or Principal Payment Period, (b)
the payment in full of the Certificates of such Series or Class or (c) the
Series Termination Date for such Series. During the Controlled Amortization
Period for a Series or any Class, collections of Principal Receivables and
certain other amounts allocable to such Series or such Class (including
Miscellaneous Payments and, if the Supplement so provides, Shared Principal
Collections, if any, allocable to such Series or such Class) will be used on
each Distribution Date to make principal distributions to any Class of
Certificateholders then scheduled to receive such distributions. The amount to
be distributed to Certificateholders of any Series or any Class thereof offered
hereby on any Distribution Date may, but will not necessarily, be limited to an
amount (the "Controlled Distribution Amount") equal to an amount (the
"Controlled Amortization Amount") specified in the related Prospectus
Supplement plus any existing deficit Controlled Amortization Amount arising
from prior Distribution Dates (the "Deficit Controlled Amortization Amount").
If a Series has more than one Class of Certificates, each Class may have a
separate Controlled Amortization Amount. In addition, the related Prospectus
Supplement may describe certain priorities among such Classes with respect to
such distributions.
If a Series is designated an extendable Series in its Prospectus Supplement,
the Certificateholders of a Series may receive payments of principal earlier
than the Expected Final Payment Date or Principal Commencement Date if the
Servicer elects not to extend the "Initial Principal Payment Date." The first
Initial Principal Payment Date will be a Distribution Date specified in the
Prospectus Supplement, and will be automatically extended to the next
Distribution Date (which will then automatically become the current Initial
Principal Payment Date) each month unless the Servicer, at least 30 days before
a Distribution Date, elects to stop the automatic extensions of the Initial
Principal Payment Date.
If the Servicer elects to stop the automatic extensions of the Initial
Principal Payment Date (any such election called a "Principal Payment Event"),
the Revolving Period, the Controlled Amortization Period or the Accumulation
Period will end and a period called the "Principal Payment Period" will begin.
During the
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Principal Payment Period, interest will be payable on each Distribution Date
(if interest had previously been payable less frequently) and collections of
Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Miscellaneous Payments
and, if the Supplement so provides, Shared Principal Collections, if any,
allocable to such Series) will be distributable as principal payments to the
Certificateholders monthly on each Distribution Date starting with the Initial
Principal Payment Date. During the Principal Payment Period, distributions of
principal will not be limited to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, any funds on deposit in a Principal Funding
Account for such Series will be paid to the Certificateholders of the relevant
Class or Classes on the Initial Principal Payment Date. No prepayment premium
will be payable to the Certificateholders of a Series that experiences a
Principal Payment Event unless the Prospectus Supplement specifically provides
otherwise. There can be no assurance that any prepayment of principal that a
Certificateholder receives as a result of a Principal Payment Event could be
reinvested at a rate equivalent to the rate being earned on the Certificates
held by such Certificateholder.
During the period (the "Early Amortization Period") beginning at the close of
business on the business day immediately preceding the day on which a Pay Out
Event occurs with respect to a Series and ending upon the earlier to occur of
(i) the payment in full of the Invested Amount of such Series or (ii) the
Series Termination Date for a Series, collections of Principal Receivables and
certain other amounts allocable to the Certificateholders' Interest of such
Series (including Miscellaneous Payments and, if the Supplement so provides,
Shared Principal Collections, if any, allocable to such Series) will be
distributed as principal payments to the applicable Certificateholders monthly
on each Distribution Date beginning with the first Special Payment Date. During
the Early Amortization Period for a Series, distributions of principal to
Certificateholders of such Series will not be limited to any Controlled Deposit
Amount or Controlled Distribution Amount. In addition, upon the start of the
Early Amortization Period, any funds on deposit in a Principal Funding Account
for such Series will be paid to the Certificateholders of the relevant Class or
Series on the first Special Payment Date. See "Description of the
Certificates--Pay Out Events" in this Prospectus for a discussion of the events
which might lead to the start of the Early Amortization Period for a Series.
Funds on deposit in any Principal Funding Account established for a Class or
Series offered by this Prospectus will be invested in Eligible Investments, and
may be subject to a guarantee or guaranteed investment contract or other
mechanism specified in the related Prospectus Supplement intended to assure a
minimum rate of return on the investment of such funds. In order to enhance the
likelihood of the payment in full of the principal amount of a Class of
Certificates at the end of its Accumulation Period, such Class may be subject
to a maturity liquidity facility or other similar mechanism specified in the
relevant Prospectus Supplement. A maturity liquidity facility is a financial
contract that generally provides that sufficient principal will be available to
retire the Certificates on a certain date.
Certificates of a Series may also be subject to purchase from time to time,
generally at their respective principal amounts, in connection with a
remarketing, under the terms of a liquidity facility established for the
benefit of such Series or in the event that the Seller's Interest is less than
the minimum level equal to the Required Seller's Percentage of the aggregate
amount of Principal Receivables in the Trust (the "Required Seller's Interest")
on the last business day of any Monthly Period, in each case if so specified in
the related Prospectus Supplement. The "Required Seller's Percentage" is equal
to 5% but may be reduced under certain circumstances described below under
"Description of the Certificates--Addition of Trust Assets." A purchase of
Certificates of such a Series, depending on the circumstances giving rise to
such purchase, may result in a decrease in the outstanding principal amount of
such Series prior to the start of any Controlled Amortization Period,
Accumulation Period or Early Amortization Period. The Prospectus Supplement for
any Series subject to purchase as described in this paragraph will describe the
conditions to and procedures for any such purchase. The proceeds of any such
purchase would be paid to the holders of the Certificates so purchased.
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Addition of Trust Assets
If, as of the close of business on the last business day of any Monthly
Period, the Seller's Interest is less than the Required Seller's Interest on
such date, the Bank shall on or prior to the close of business on the tenth
business day following the last business day of such Monthly Period (the
"Required Designation Date") unless the Seller's Interest exceeds the Required
Seller's Interest as of the close of business on any day after the last
business day of such Monthly Period and prior to the Required Designation Date,
make an Addition to the Trust as of the Required Designation Date or any
earlier date in a sufficient amount such that, after giving effect to such
Addition, the Seller's Interest as of the close of business on the date of such
Addition (the "Addition Date") is at least equal to the Required Seller's
Interest on such date. An "Addition" will consist of (i) receivables arising in
Eligible Accounts owned by the Bank and related Funds Collateral, if any, or
(ii) participations representing undivided interests in a pool of assets
primarily consisting of secured and unsecured consumer revolving credit card
accounts or other consumer revolving credit accounts owned by the Bank or any
affiliate thereof and collections thereon ("Participations"). Participations
may be evidenced by one or more certificates of ownership issued under a
separate pooling and servicing or similar agreement (a "participation
agreement") entered into by the Bank or an affiliate of the Bank that entitles
the certificateholder to receive percentages of collections generated by the
pool of assets subject to such participation agreement from time to time and to
certain other rights and remedies specified therein. Participations may have
their own credit enhancement, pay out events, servicing obligations and
servicer defaults, all of which are likely to be enforceable by a separate
trustee under the participation agreement and may be different from those
described in this Prospectus. The rights and remedies of the Trust as the
holder of a Participation (and therefore the Certificateholders) will be
subject to all the terms and provisions of the participation agreement. The
Bank may, upon 30 days' prior notice to the Trustee, each Rating Agency and
certain providers of Series Enhancement, reduce the Required Seller's
Percentage; provided that (a) the Bank shall have received written notice from
each nationally recognized statistical rating organization selected by the Bank
(the rating agency or agencies rating any series, a "Rating Agency") that such
reduction will not result in any Rating Agency reducing or withdrawing its
rating of the Certificates of any outstanding Series (any such reduction or
withdrawal is referred to in this Prospectus as a "Ratings Effect") and (b) the
Bank shall have delivered to the Trustee and certain providers of Series
Enhancement 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 reduction will not at the time of its occurrence 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 any Series; and provided
further that the Required Seller's Percentage shall never be less than 2%,
unless the Bank shall have delivered to the Trustee, each Rating Agency and
certain providers of Series Enhancement a Tax Opinion about the lowering of
such percentage. In addition, the Bank may from time to time, at its sole
discretion, subject to the conditions described below, voluntarily make an
Addition to the Trust.
The Bank may from time to time, at its sole discretion, designate certain
types of Eligible Accounts approved by the Rating Agencies to be included as
Accounts ("Automatic Additional Accounts"), subject to the limitations
specified in this paragraph. Unless each Rating Agency otherwise consents, the
number of Automatic Additional Accounts plus the number of Accounts added to
maintain the Seller's Interest as specified above, without prior Rating Agency
notice, shall not either (i) for any three consecutive Monthly Periods, exceed
15% of the number of Accounts at the end of the ninth Monthly Period before the
start of such three Monthly Periods (or, the Trust Cut-Off Date, whichever is
later) and (ii) for any twelve Monthly Periods, exceed 20% of the number of
Accounts as of the first day of such twelve Monthly Periods (or, the Trust Cut-
Off Date, whichever is later) (the "Aggregate Addition Limit"). On or before
March 31, June 30, September 30 and December 31 of each calendar year, or more
frequently if required by any Rating Agency, the Bank shall have delivered to
the Trustee, each Rating Agency and certain providers of Series Enhancement an
opinion of counsel about the Automatic Additional Accounts included as Accounts
during the preceding three-month period that confirms the validity and
perfection of each transfer of such Automatic Additional Accounts. Such opinion
of counsel shall be provided by outside counsel. If such opinion of counsel for
any Automatic Additional Accounts is not so received, the ability of the Bank
to designate Automatic Additional
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Accounts will be suspended until such time as each Rating Agency otherwise
consents in writing or such Accounts are removed from the Trust. The addition
to the Trust of Receivables in Automatic Additional Accounts will be subject to
the further condition that revolving credit card accounts and other revolving
credit accounts either (i) not originated by the Bank or (ii) not of a type
included in the Accounts at the time of their addition may only be designated
as Automatic Additional Accounts upon compliance with the conditions described
below about Additions. Additions of Participations must also comply with such
conditions. Automatic Additional Accounts and Accounts relating to any Addition
are collectively referred to in this Prospectus as "Additional Accounts."
In connection with an Addition, the Bank will convey to the Trust the
Receivables arising in Additional Accounts and Participations subject to the
following conditions, among others (provided that the following conditions
(other than the delivery of a written assignment and a computer file or
microfiche list as described in clause (b)) shall not apply to the transfer to
the Trust of Receivables in Automatic Additional Accounts): (a) on or before
the fifth business day immediately preceding such Addition the Bank shall have
given the Trustee, the Servicer, each Rating Agency and certain providers of
Series Enhancement written notice that the Additional Accounts or
Participations will be included as Trust Assets; (b) within ten business days
of the date on which any such Receivables or Participations are added to the
Trust, the Bank shall have delivered to the Trustee a written assignment and a
computer file or microfiche list containing a true and complete list of the
related Additional Accounts or Participations specifying for each such Account
its account number, the collection status, the aggregate amount outstanding in
such Account, the aggregate amount of Principal Receivables outstanding in such
Account or comparable information in the case of Participations and, for any
Funds Collateral relating to such Account, the account number for, and the
amount of Funds on deposit in, the applicable Deposit Account; (c) the Bank
shall have delivered to the Trustee copies of all filings necessary to perfect
the Trust's interest in the Receivables in Additional Accounts; (d) in the case
of an addition other than a required Addition, the Bank shall have received
written notice from each Rating Agency that such Addition will not have a
Ratings Effect; (e) in the case of a required Addition that exceeds the
Aggregate Addition Limit, the Bank shall have provided each Rating Agency with
15 days' prior written notice and each Rating Agency shall have notified the
Bank in writing that such Addition will not have a Ratings Effect; (f) the Bank
shall have delivered to the Trustee, each Rating Agency and any provider of
Series Enhancement entitled thereto an opinion of counsel that for Federal
income tax purposes and Virginia income and franchise tax purposes (or, if
there has been a transfer and assumption as described under "Assumption of the
Bank's Obligations" in this Prospectus, for income and franchise tax purposes
of the jurisdiction in which the Assuming Entity engages in its principal
servicing activities, if other than Virginia), such Addition will not cause a
taxable event to the holders of the Certificates and certain other opinions of
counsel; and (g) prior to or on the date any such Receivables or Participations
are added to the Trust, the Bank shall have delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized officer
to the effect that any related Additional Accounts are Eligible Accounts and
that, in the reasonable belief of the Bank, (i) such Addition will not, based
on the facts known to such officer at the time, cause a Pay Out Event or an
event that, after the giving of notice or lapse of time, would cause a Pay Out
Event, to occur with respect to any Series and (ii) in the case of Additional
Accounts, no selection procedure was utilized by the Bank that would result in
a selection of Additional Accounts (from the available Eligible Accounts owned
by the Bank) that would be materially adverse to the interests of the
Certificateholders of any Series as of the date of the Addition.
Affiliates of the Bank may originate or acquire portfolios of revolving
credit card accounts or other revolving credit accounts the receivables in
which may be participated to the Bank and sold to the Trust. Such a sale of
receivables to the Trust will be subject to the conditions described above
relating to Additions.
Additional Accounts may include accounts originated using criteria different
from those which were applied to the Initial Accounts because such accounts
were originated at a different date or were part of a portfolio of revolving
credit card accounts or other revolving credit accounts which were not part of
the Bank Portfolio as of the Trust Cut-Off Date or which were acquired from
another institution. Moreover, Additional Accounts may not be accounts or
assets of the same type or having the same characteristics as those previously
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included in the Trust. See "The Pooling Agreement Generally--Representations
and Warranties" in this Prospectus. Consequently, there can be no assurance
that such Additional Accounts will be of the same credit quality or have the
same payment characteristics as the Initial Accounts or the Additional Accounts
previously included in the Trust.
Additional Accounts of a type different than the Initial Accounts may contain
Receivables that consist of fees, charges and amounts that are different from
the fees, charges and amounts that have been designated as Finance Charge
Receivables and Principal Receivables in this Prospectus and Participations may
be added to the Trust as Additions. In either case, the Servicer will designate
the portions of funds collected or to be collected in respect of such
Receivables to be treated for purposes of the Pooling Agreement as Principal
Receivables and Finance Charge Receivables. The Pooling Agreement provides that
the Bank may add Participations to the Trust that may have characteristics
substantially different than those of Accounts or Additional Accounts,
including substantially different eligibility requirements, payment
characteristics and risks.
Removal of Accounts
On any day of any Monthly Period, the Bank will have the right to require the
reassignment to it or its designee of all the Trust's right, title and interest
in, to and under the Receivables and the related Funds Collateral, if any, then
existing and thereafter created, all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof in or with
respect to the Removed Accounts owned and designated by the Bank, upon
satisfaction of the following conditions: (a) on or before the fifth business
day (the "Removal Notice Date") immediately preceding the date upon which the
Removed Accounts are to be removed from the Trust, the Bank shall have given
the Trustee, the Servicer, each Rating Agency and certain providers of Series
Enhancement written notice of such removal specifying the date for removal of
the Removed Accounts (the "Removal Date"); (b) on or prior to the date that is
ten business days after the Removal Date, the Bank shall have delivered to the
Trustee a computer file or microfiche list containing a true and complete list
of the Removed Accounts specifying for each such Account, as of the Removal
Notice Date, its account number, the aggregate amount outstanding in such
Account and the aggregate amount of Principal Receivables outstanding in such
Account and, for any Funds Collateral relating to such Account, the account
number for, and the amount of Funds on deposit in, the applicable Deposit
Account; (c) the aggregate amount of Principal Receivables to be removed shall
not equal or exceed 5% of the aggregate amount of Principal Receivables in the
Trust; (d) the Bank shall have represented and warranted as of each Removal
Date that the list of Removed Accounts delivered pursuant to clause (b) above,
as of the Removal Date, is true and complete in all material respects; (e) the
Bank shall have received written notice from each Rating Agency that such
removal will not have a Ratings Effect; and (f) as of the Removal Notice Date,
either (i) the Removed Accounts are not more than 15% delinquent by estimated
principal amount and the weighted average delinquency of such Removed Accounts
is not more than 60 days or (ii) the Removed Accounts are not more than 7%
delinquent by estimated principal amount and the weighted average delinquency
of such Removed Accounts does not exceed 90 days. Such removal could occur for
a number of reasons, including a determination by the Bank that the Trust
contains more Receivables than the Bank is obligated to retain in the Trust
under the Pooling Agreement and any applicable Supplements and a determination
that the Bank does not desire to obtain additional financing at the time
through the Trust. In addition, the Pooling Agreement permits the Bank to
designate as a Removed Account without the consent of the Trustee, any
Certificateholders or any Rating Agency any Account that has had a zero balance
with no activity for the twelve months preceding such designation.
Upon satisfaction of the above conditions, the Trustee shall execute and
deliver to the Bank a written reassignment and shall be deemed to sell,
transfer, assign, set over and otherwise convey to the Bank or its designee,
without recourse, representation or warranty, all the right, title and interest
of the Trust in and to the Receivables arising in the Removed Accounts, all
monies due and to become due and all amounts received with respect thereto and
all proceeds thereof.
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In addition to the foregoing, on the date when any Receivable in an Account
becomes a Defaulted Receivable (including any related Finance Charge
Receivables), the Trust shall automatically be deemed to transfer, set over and
otherwise convey to the Bank all right, title and interest of the Trust in and
to the Defaulted Receivables (including any related Finance Charge Receivables)
in such Account, all monies due or to become due with respect thereto, all
proceeds thereof and any insurance proceeds relating thereto; provided that
Recoveries of such Account which include any proceeds of the sale or
securitization of such Defaulted Receivables shall be applied as provided in
the Pooling Agreement. See "--Allocation Percentages" below.
New Issuances
The Pooling Agreement provides that, pursuant to any one or more Supplements,
the Bank may direct the Trustee to issue from time to time new Series subject
to the conditions described below (each such issuance, a "New Issuance"). Each
New Issuance will have the effect of decreasing the Seller's Interest to the
extent of the Invested Amount of such new Series.
Under the Pooling Agreement, the Bank may designate, for any newly issued
Series: (i) its name or designation; (ii) its initial principal amount (or
method for calculating such amount) and its invested amount in the Trust (the
"Invested Amount"); (iii) its certificate rate (or method for the determination
thereof) and the manner, if any, in which such rate may be adjusted from time
to time; (iv) the interest payment date or dates (the "Interest Payment Dates")
and the manner, if any, in which the Interest Payment Dates may be reset from
time to time and the date or dates from which interest shall accrue; (v) the
method for allocating collections to Certificateholders of such Series; (vi)
any bank accounts to be used by such Series and the terms governing the
operation of any such bank accounts; (vii) the method of calculating its
servicing fee; (viii) the provider and the terms of any form of Series
Enhancement for such Series; (ix) the terms on which the Certificates of such
Series may be exchanged for Certificates of another Series, repurchased by the
Bank or remarketed to other investors; (x) the Series Termination Date; (xi)
the number of Classes of Certificates of such Series, and if such Series
consists of more than one Class, the rights and priorities of each such Class;
(xii) the extent to which the Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for such
global certificate or certificates, the terms and conditions, if any, upon
which such global certificate may be exchanged, in whole or in part, for
definitive certificates, and the manner in which any interest payable on a
global certificate will be paid); (xiii) whether the Certificates of such
Series may be issued in bearer form and any limitations imposed thereon; (xiv)
the priority of such Series with respect to any other Series; (xv) the rating
agency or agencies, if any, rating the Series; (xvi) the name of the clearing
agent, if any; (xvii) the base rate applicable to any Series; (xviii) the
minimum amount of Principal Receivables required to be maintained through the
designation of Additional Accounts; (xix) any deposit into any account
maintained for the benefit of Certificateholders; (xx) the rights of the
holders of the Seller's Certificate that have been transferred to the holders
of such Series; (xxi) the Group, if any, in which the Series will be included;
(xxii) whether or not such Series is entitled to receive Shared Principal
Collections; and (xxiii) any other relevant terms (all such terms, the
"Principal Terms" of such Series). None of the Bank, the Servicer, the Trustee
or the Trust is required or intends to obtain the consent of any
Certificateholder of any outstanding Series to issue any additional Series. The
Bank may offer any Series to the public under a Prospectus Supplement or other
disclosure document in transactions either registered under the Securities Act
of 1933, as amended (the "Act"), or exempt from registration thereunder
directly, through one or more underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise. See "Plan of
Distribution" in this Prospectus. Any such Series may be issued in fully
registered, bearer or book-entry form in minimum denominations determined by
the Bank. The Bank intends to offer, from time to time, additional Series.
The Pooling Agreement provides that the Bank may designate Principal Terms
such that each Series has an Accumulation Period or a Controlled Amortization
Period that may have different lengths and begin on different dates than such
periods for any other Series or Class. Further, one or more Series or Classes
may be in their Accumulation or Controlled Amortization Periods while other
Series or Classes are not. Collections of Principal Receivables and
Miscellaneous Payments otherwise allocable to a Series or Class which is not
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amortizing or accumulating principal will be treated as Shared Principal
Collections and, if the Supplement for another Series which is amortizing or
accumulating principal so provides, reallocated to such Series. Moreover, each
Series may have the benefits of Series Enhancement issued by enhancement
providers different from the providers of Series Enhancement for any other
Series. Under the Pooling Agreement, the Trustee will hold any Series
Enhancement only on behalf of the Series to which such Series Enhancement
relates. With respect to each such Series Enhancement, the Bank may deliver a
different form of Series Enhancement agreement. Additionally, if specified in
the related Prospectus Supplement, certain Series may be subordinated to
certain other Series, or Classes within a Series may have different priorities.
The Bank also has the option under the Pooling Agreement to vary among Series
the terms upon which a Series may be repurchased by the Bank or remarketed to
other investors. There is no limit to the number of New Issuances that the Bank
may cause under the Pooling Agreement. The Trust will terminate only as
provided in the Pooling Agreement. There can be no assurance that the terms of
any Series might not have an impact on the timing and amount of payments
received by a Certificateholder of another Series.
Under the Pooling Agreement and pursuant to a Supplement, a New Issuance may
only occur upon the satisfaction of certain conditions provided in the Pooling
Agreement. The obligation of the Trustee to issue the Certificates of such new
Series and to execute and deliver the related Supplement is subject to the
satisfaction of the following conditions: (a) on or before the fifth business
day immediately preceding the date upon which the New Issuance is to occur, the
Bank shall have given the Trustee, the Servicer, each Rating Agency and certain
providers of Series Enhancement written notice of such New Issuance and the
date upon which the New Issuance is to occur; (b) the Bank shall have delivered
to the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling Agreement other than the Trustee; (c) the
Bank shall have delivered to the Trustee any related Series Enhancement
agreement executed by each of the parties to such agreement; (d) the Bank shall
have received written notice from each Rating Agency that such New Issuance
will not have a Ratings Effect; (e) the Bank shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer, dated the date upon which the New Issuance is to occur, to
the effect that, based on the facts known to such officer at the time, the Bank
reasonably believes that such issuance will not at the time of its occurrence
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 any Series;
(f) the Bank shall have delivered to the Trustee, each Rating Agency and
certain providers of Series Enhancement a Tax Opinion; (g) the Bank's remaining
interest in Principal Receivables shall not be less than 2% (unless the Bank
shall have delivered to the Trustee, each Rating Agency and certain providers
of Series Enhancement a Tax Opinion with respect to a lower percentage) of the
total amount of Principal Receivables, in each case as of the date upon which
the New Issuance is to occur after giving effect to such issuance; and (h) any
other conditions specified in any Supplement. Upon satisfaction of the above
conditions, the Trustee will execute the Supplement and issue to the Bank the
Certificates of such new Series for execution and redelivery to the Trustee for
authentication.
Collection Account
The Servicer has established and maintains for the benefit of the
Certificateholders of each Series, in the name of the Trustee, on behalf of the
Trust, an Eligible Deposit Account bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Certificateholders of each Series (the "Collection Account"). "Eligible Deposit
Account" means either (a) a segregated account with an Eligible Institution or
(b) a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States or any one
of the states thereof, including the District of Columbia (or any domestic
branch of a foreign bank), or a trust company acceptable to each Rating Agency,
and acting as a trustee for funds deposited in such account, so long as any of
the securities of such depository institution or trust company shall have a
credit rating from each Rating Agency in one of its generic credit rating
categories that signifies investment grade. "Eligible Institution" means (a) a
depository institution (which may be the Trustee) organized under the laws of
the United States or any one of the states thereof which at all times (i) has
either (x) a long-term unsecured debt rating of A2 or better by Moody's
Investors
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Service, Inc. ("Moody's") or (ii) a certificate of deposit rating of P-1 by
Moody's, (ii) has either (x) a long-term unsecured debt rating of AA by
Standard & Poor's Ratings Group ("Standard & Poor's") or (y) a certificate of
deposit rating of A-1+ by Standard & Poor's and (iii) is a member of the FDIC
or (b) any other institution that is acceptable to each Rating Agency.
The Collection Account is maintained with The Bank of New York. If at any
time the Collection Account ceases to be an Eligible Deposit Account, the
Collection Account must be moved so that it will again be qualified as an
Eligible Deposit Account.
Funds in the Collection Account generally will be invested in (i) direct
obligations of, and obligations fully guaranteed by, the United States of
America, (ii) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of foreign banks) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time of the Trust's investment or
contractual commitment to invest therein, the short-term debt of such
depository institution or trust company shall be in the highest rating category
from each Rating Agency, (iii) commercial paper (or other short-term
obligations) having, at the time of the Trust's investment therein, a rating in
the highest rating category from each Rating Agency, (iv) demand deposits, time
deposits and certificates of deposit that are fully insured by the FDIC, with
an entity the commercial paper of which has a credit rating from each Rating
Agency in its highest rating category, (v) notes or bankers' acceptances
(having original maturities of no more than 365 days) issued by any depository
institution or trust company referred to in (ii) above, (vi) investments in
money market funds that have the highest rating from, or have otherwise been
approved in writing by, each Rating Agency, (vii) time deposits (having
maturities of not more than 30 days) other than as referred to in clause (iv)
above, with an entity the commercial paper of which has the highest rating from
each Rating Agency and (viii) any other investments approved in writing by each
Rating Agency (collectively, "Eligible Investments"). Such funds may be
invested in debt obligations of the Bank or its affiliates so long as such
obligations qualify as Eligible Investments. Any earnings (net of losses and
investment expenses) on funds in the Collection Account will be paid to, or at
the direction of, the Bank except as otherwise specified in any Supplement.
The Servicer will have the revocable power to withdraw funds from the
Collection Account and to instruct the Trustee to make withdrawals and payments
from the Collection Account for the purpose of carrying out its duties under
the Pooling Agreement and any Supplement. The Paying Agent shall have the
revocable power to withdraw funds from the Collection Account for the purpose
of making distributions to the Certificateholders. Unless specified otherwise
in the related Prospectus Supplement, the "Paying Agent" for each Series will
be Harris Trust and Savings Bank.
Allocation Percentages
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Certificateholders' Interest of each Series and interest in the Trust Assets
not allocated to the Certificateholders' Interest of any Series (the "Seller's
Interest") all amounts collected for Finance Charge Receivables and Principal
Receivables and the Defaulted Amount for any Monthly Period and will allocate
among the Certificateholders' Interest of each Series all Adjustment Payments
and Transfer Deposit Amounts (collectively, "Miscellaneous Payments") for any
Monthly Period as follows:
(a) collections of Finance Charge Receivables and the Defaulted Amount
will at all times be allocated to the Certificateholders' Interest of a
Series based on the Floating Allocation Percentage for such Series;
(b) collections of Principal Receivables will at all times be allocated
to the Certificateholders' Interest of a Series based on the Principal
Allocation Percentage for such Series; and
(c) Miscellaneous Payments will at all times be allocated among the
Certificateholders' Interests of each Series based on their respective
Invested Amounts.
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The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" for any Series will be determined as set forth in the related
Supplement and, for each Series offered by this Prospectus, in the related
Prospectus Supplement. Amounts not allocated to the Certificateholders'
Interest of any Series as described above will be allocated to the Seller's
Interest.
Notwithstanding the foregoing, amounts collected as annual membership fees
for any Monthly Period will be held in the Collection Account and will be
amortized in twelve equal installments over twelve Monthly Periods beginning
with the Monthly Period following the Monthly Period in which the annual fee is
billed. Each such installment of annual membership fees will be treated as a
collection of Finance Charge Receivables in the Monthly Period in which it is
amortized and allocated in the manner described above.
With respect to Recoveries constituting the proceeds of any sale or initial
securitization of Defaulted Receivables, such Recoveries will be treated as
Finance Charge Collections and allocated as described above over a period of
time. With respect to each Monthly Period, the amount of Recoveries received
from the sale or initial securitization of Defaulted Receivables which shall be
treated as collections of Finance Charge Receivables for such Monthly Period
shall be an amount equal to the total amount of such Recoveries collected
during the three Monthly Periods ending with such Monthly Period divided by
three.
Collections of Receivables for any Monthly Period will be allocated by the
Servicer first to annual membership fees billed during the preceding Monthly
Period, second to Finance Charge Receivables, to the extent of Finance Charge
Receivables billed (or, in the case of annual membership fees, amortized)
during the preceding Monthly Period, and third to Principal Receivables. The
Servicer will, to the extent it is required to make daily deposits into the
Collection Account, make an estimated allocation of collections between annual
membership fees, Finance Charge Receivables and Principal Receivables on each
deposit date and will deposit amounts into the Collection Account as set forth
above in accordance with such allocation.
Deposits in Collection Account
For as long as (i) the Bank remains the Servicer under the Pooling Agreement
and (ii) either (x) the Bank, as the Servicer, provides to the Trustee a letter
of credit covering collection risk of the Servicer acceptable to each Rating
Agency (as evidenced by a letter from such Rating Agency) or (y) if the
Collection Account is maintained with the Bank, the Bank has and maintains a
certificate of deposit rating of at least A-1 and P-1 (or their equivalent) by
each Rating Agency, the Bank may use for its own benefit all collections
received on the Receivables in each Monthly Period until the business day
before the related Distribution Date or, in the case of any collections
consisting of Interchange, not later than 12:00 noon, Richmond, Virginia time,
on each Distribution Date, at which time the Bank will deposit all such
collections, to the extent described below, into the Collection Account, and
the Servicer will make the deposits and payments to the accounts and parties
described in this Prospectus and in the related Prospectus Supplement on the
date of such deposit. However, if the Bank is no longer the Servicer or fails
to maintain the required letter of credit covering collection risk or
certificate of deposit rating, the Servicer will make such deposits, as
described below, not later than two business days after the business day a
record of any transaction is first recorded on the Servicer's computer file of
consumer revolving accounts (without regard to the effective date of such
recordation) (the "Date of Processing") or, in the case of collections
consisting of Interchange, not later than 12:00 noon, Richmond, Virginia time,
on each Distribution Date. Whether the Servicer is required to make deposits of
collections pursuant to the first or the second preceding sentence, (i) the
Servicer will only be required to deposit collections into the Collection
Account up to the aggregate amount of collections required to be deposited into
an account established for any Series or, without duplication, distributed on
or prior to the related Distribution Date to Certificateholders of any Series
or to the issuer of any Series Enhancement pursuant to the terms of any
Supplement or Series Enhancement agreement plus the aggregate amount of the
unamortized portion of any collections of annual membership fees plus the
aggregate amount of the unamortized portion of any collections representing
Recoveries and (ii) if at any time prior to such Distribution Date the amount
of collections deposited in the Collection Account exceeds the amount required
to be deposited pursuant to clause (i) above,
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the Servicer will be permitted to withdraw such excess from the Collection
Account. Unless otherwise agreed by each Rating Agency, if at any time the Bank
or another eligible affiliate of the Bank is not the Servicer, the Collection
Account will be moved from the Bank, if then maintained there.
On the earlier of (i) the second business day after the Date of Processing
and (ii) the day any such deposit is made into the Collection Account or, in
the case of any collections consisting of Interchange, not later than 12:00
noon, Richmond, Virginia time, on each Distribution Date, the Servicer will pay
to the holder of the Seller's Interest (i) the portion of collections on
Principal Receivables allocated to the Seller's Interest; provided that the
Seller's Interest in Principal Receivables on such day (after giving effect to
any new Receivables transferred to the Trust on such day) exceeds the Required
Seller's Interest and the aggregate amount of Principal Receivables exceeds the
Required Principal Balance and otherwise such amounts will be deposited into
the Excess Funding Account; and (ii) the portion of collections on Finance
Charge Receivables allocated to the Seller's Interest. The "Required Principal
Balance" is an amount, as of any date of determination, equal to (a) 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 (b) 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 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.
Shared Principal Collections; Excess Shared Principal Collections
The Prospectus Supplement for any Series offered by this Prospectus will
designate whether a Series is a "Principal Sharing Series." Collections on
Principal Receivables and certain other amounts, including Miscellaneous
Payments, for any Monthly Period allocated to the Certificateholders' Interest
of any Series offered hereby will first be used to cover certain amounts
described in the related Prospectus Supplement (including any required deposits
into a Principal Funding Account or required distributions to
Certificateholders of such Series). If a Series is a Principal Sharing Series,
the Servicer will then determine the amount of collections of Principal
Receivables for any Monthly Period (plus Miscellaneous Payments and certain
other amounts described in the related Prospectus Supplement) allocated to such
Series remaining after covering such required deposits and distributions and
any similar amount remaining for any other Principal Sharing Series
(collectively, "Shared Principal Collections"), and will allocate the Shared
Principal Collections to cover any principal distributions to
Certificateholders and deposits to Principal Funding Accounts for any Principal
Sharing Series which are either scheduled or permitted and which have not been
covered out of the investor principal collections and Miscellaneous Payments
and certain other amounts for such Series; provided that all or a portion of
such shortfall may be subordinated as described below if a Series is a
Subordinated Excess Principal Series (collectively, "Principal Shortfalls"). If
Principal Shortfalls exceed Shared Principal Collections for any Monthly
Period, Shared Principal Collections will be allocated pro rata among the
Principal Sharing Series based on the respective Principal Shortfalls of such
Series. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will be allocated to the Seller; provided, however,
that such Shared Principal Collections will be distributed to the Seller only
if the Seller's Interest on such Distribution Date exceeds the Required
Seller's Interest and the aggregate amount of Principal Receivables exceeds the
Required Principal Balance and otherwise such amounts will be deposited into
the Excess Funding Account. The Prospectus Supplement for any Series offered by
this Prospectus will designate whether a Principal Sharing Series is a
"Subordinated Excess Principal Series." If a Principal Sharing Series is a
Subordinated Excess Principal Series, then the excess of the Shared Principal
Collections over the Principal Shortfalls for all Principal Sharing Series
("Excess Shared Principal Collections") will also be allocated to each such
Series in an amount equal to the lesser of (i) the Subordinated Excess
Principal Shortfall for such Series and (ii) the product of (x) the Excess
Shared Principal Collections and (y) a fraction, the numerator of which is the
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Subordinated Excess Principal Shortfall for such Series and the denominator of
which is the sum of Subordinated Excess Principal Shortfalls for all
Subordinated Excess Principal Series. The "Subordinated Excess Principal
Shortfall" for a Subordinated Excess Principal Series will be defined in the
Supplement and, for any Series offered by this Prospectus, the Prospectus
Supplement for such Series.
Any such reallocation of collections on Principal Receivables and other
amounts will not result in a reduction in the Invested Amount of the Series to
which such collections were initially allocated. There can be no assurance that
there will be any Shared Principal Collections or Excess Shared Principal
Collections for any Monthly Period.
Excess Funding Account
If on any date the Seller's Interest is less than or equal to the Required
Seller's Interest or the aggregate amount of Principal Receivables is less than
the Required Principal Balance, the Servicer will not distribute to the Bank
any Shared Principal Collections that otherwise would be distributed to the
Bank, but will deposit such funds in an Eligible Deposit Account established
and maintained by the Servicer for the benefit of the Certificateholders of
each Series, in the name of the Trustee, on behalf of the Trust, and bearing a
designation clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholders of each Series (the "Excess Funding
Account"). Funds on deposit in the Excess Funding Account will be withdrawn and
paid to the Seller on any business day to the extent that the Seller's Interest
exceeds the Required Seller's Interest and the aggregate amount of Principal
Receivables exceeds the Required Principal Balance; provided, however, that if
an Accumulation Period, Controlled Amortization Period, Principal Payment
Period or Early Amortization Period starts for any Principal Sharing Series,
any funds on deposit in the Excess Funding Account will be treated as Shared
Principal Collections to the extent needed to cover principal payments due to
or for the benefit of such Series.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any
earnings (net of losses and investment expenses) earned on amounts on deposit
in the Excess Funding Account during any Monthly Period will be withdrawn from
the Excess Funding Account and treated as collections of Finance Charge
Receivables for such Monthly Period.
Sharing of Excess Finance Charges
Any Series offered by this Prospectus may be included in a group of Series (a
"Group"). Each Series in a specific Group will be entitled to share Excess
Finance Charges in the manner, and to the extent, described below with each
other Series, if any, in such Group. The Prospectus Supplement for a Series
offered by this Prospectus will specify whether such Series will be included in
a Group and whether any previously issued Series have been included in such
Group. Subsequently issued Series may also be included in such Group.
Collections of Finance Charge Receivables and certain other amounts allocable
to the Certificateholders' Interest of any Series that is included in a Group
in excess of the amounts necessary to make required payments for such Series
(including payments to the provider of any related Series Enhancement) that are
payable out of collections of Finance Charge Receivables ("Excess Finance
Charges") will be applied to cover any shortfalls in amounts payable from
collections of Finance Charge Receivables allocable to any other Series
included in such Group, pro rata based upon the amount of the shortfall, if
any, for each other Series in such Group; provided, however, that the sharing
of Excess Finance Charges among Series in any Group will continue only until
such time, if any, at which the Bank shall deliver to the Trustee a certificate
of an authorized officer to the effect that, in the reasonable belief of the
Bank or its counsel, the continued sharing of Excess Finance Charges among
Series in any Group would have adverse regulatory implications for the Bank.
Following the delivery by the Bank of any such certificate to the Trustee there
will not be any further sharing of Excess Finance Charges among the Series in
any Group. In all cases, any Excess Finance Charges remaining after covering
shortfalls for all outstanding Series in a Group will be paid to the Seller.
While any Series offered hereby may be included in a Group, there can be no
assurance that (i) any other Series will be included in such Group, (ii) there
will be any Excess Finance Charges for such Group for any Monthly Period or
(iii) the
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Bank will not at any time deliver a certificate as described above. While the
Bank believes that, based upon applicable rules and regulations as currently in
effect, the sharing of Excess Finance Charges among Series in a Group will not
have adverse regulatory implications for it, there can be no assurance that
this will continue to be true in the future.
Funding Period
For any Series, the related Prospectus Supplement may specify that during a
period beginning on the Series Issuance Date for such Series and ending on a
specified date before the start of the Controlled Amortization Period or
Accumulation Period for such Series (the "Funding Period"), the aggregate
amount of Principal Receivables in the Trust allocable to such series may be
less than the aggregate principal amount of the Certificates of such Series. If
so specified in the related Prospectus Supplement, the amount of such
deficiency (the "Prefunded Amount") will be held in a Prefunding Account
pending the transfer of additional Receivables to the Trust or pending the
reduction of the Certificateholders' Interests of other Series issued by the
Trust. The related Prospectus Supplement will specify the initial
Certificateholders' Interest for such Series, the Initial Investor Amount and
the date by which the Certificateholders' Interest is expected to equal the
Initial Investor Amount. The Certificateholders' Interest will increase as
Receivables are delivered to the Trust or as the Certificateholders' Interests
of other Series of the Trust are reduced. The Certificateholders' Interest may
also decrease due to charge-offs or the occurrence of a Pay Out Event with
respect to such Series as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in a trust account established
with the Trustee for the benefit of Certificateholders of such Series (the
"Prefunding Account") for a Series will be withdrawn and paid to the Bank to
the extent of any increases in the Certificateholders' Interest. In the event
that the Certificateholders' Interest does not for any reason equal the initial
principal amount of the Certificates of such Series (the "Initial Investor
Amount") by the end of the Funding Period, any amount remaining in the
Prefunding Account and any additional amounts specified in the related
Prospectus Supplement will be payable to the Certificateholders of such Series
in the manner and at such time as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, monies in the
Prefunding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Prefunding Account during the
related Monthly Period will be withdrawn from the Prefunding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Collection Account
for distribution of interest on the Certificates of the related Series in the
manner specified in the related Prospectus Supplement.
Paired Series
If so provided in the Prospectus Supplement for a Series, a Series of
Certificates may be paired with another Series issued by the Trust (a "Paired
Series"). As the Certificateholders' Interest of the Series having a Paired
Series is reduced, the Certificateholders' Interest in the Trust of the Paired
Series may increase by an equal amount. If a Pay Out Event occurs with respect
to the Series having a Paired Series or with respect to the Paired Series when
the Series is in a Controlled Amortization Period, the Principal Allocation
Percentage in respect of collections of Principal Receivables for the Series
and the Principal Allocation Percentage for the Paired Series may be reset as
provided in the related Prospectus Supplement.
Defaulted Receivables; Rebates and Fraudulent Charges; Recoveries
"Defaulted Receivables" for any Monthly Period are Principal Receivables that
were charged off as uncollectible in such Monthly Period in accordance with the
Lending Guidelines and the Servicer's customary and usual servicing procedures
for servicing consumer revolving credit card and other consumer revolving
credit account receivables comparable to the Receivables other than due to any
Adjustment Payment. The
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"Defaulted Amount" for any Monthly Period will be an amount (not less than
zero) equal to (a) the amount of Principal Receivables that became Defaulted
Receivables for such Monthly Period minus (b) the sum of (i) the amount of any
Defaulted Receivables of which the Bank or the Servicer becomes obligated to
accept reassignment or assignment during such Monthly Period (unless an
Insolvency Event has occurred with respect to the Bank or the Servicer, in
which event the amount of such Defaulted Receivables will not be added to the
sum so subtracted), (ii) the aggregate amount of Recoveries (net of collection
expenses) received in such Monthly Period with respect to both Finance Charge
Receivables and Principal Receivables previously charged off as uncollectible
and (iii) the excess, if any, for the immediately preceding Monthly Period of
the sum computed pursuant to this clause (b) for such Monthly Period over the
amount of Principal Receivables that became Defaulted Receivables in such
Monthly Period.
The current policy of the Bank is to charge off as uncollectible an account
at 180 days past due. The Bank generally charges off a bankrupt customer's
account within 30 days after the Bank receives the bankruptcy petition. The
Bank charges off accounts of deceased accountholders within 60 days of
receiving proper notice if no estate exists against which a proof of claim can
be filed, no other parties remit payments or no other responsible party is
available. Generally, shortly before a secured credit card account is charged
off as uncollectible or in the case of a bankruptcy, after the bankruptcy
automatic stay is lifted, the Servicer will withdraw funds from the Deposit
Account in an amount equal to the lesser of (i) all Principal Receivables plus
all Finance Charge Receivables related to such secured credit card account and
(ii) the amount of funds for such secured credit card account in the Deposit
Account, and the Servicer will allocate such amount for treatment as
Collections of Principal Receivables and Finance Charge Receivables.
On the date when any Receivable in an Account becomes a Defaulted Receivable
(including any related Finance Charge Receivables), the Trust will
automatically transfer to the Bank all right, title and interest of the Trust
in and to the Defaulted Receivables (including any related Finance Charge
Receivables) in such Account, all monies due or to become due with respect
thereto, all proceeds thereof and any insurance proceeds relating thereto;
provided that Recoveries of such Account shall be applied as provided in the
Pooling Agreement. See "--Allocation Percentages" above. "Recoveries," as
defined in the Pooling Agreement and as used in this Prospectus, means all
amounts, excluding insurance proceeds, received by the Servicer with respect to
Receivables which have previously become Defaulted Receivables (including any
related Finance Charge Receivables), net of any out-of-pocket costs and
expenses of collection (including attorneys' fees and expenses) deducted
therefrom, plus the net proceeds of any sale or securitization of such
Defaulted Receivables (plus any related Finance Charge Receivables), plus any
residual payments from any such securitization, but excluding any interest,
principal and servicing fees or other fees payable with respect to the
securitization of such Defaulted Receivables and the related Finance Charge
Receivables.
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables which have been, or are to be, reassigned to
the Bank) because of a rebate, refund, counterclaim, defense, error, fraudulent
charge or counterfeit charge to an accountholder or such Principal Receivable
was created in respect of merchandise which was refused or returned by an
accountholder, or, if the Servicer otherwise adjusts downward the amount of any
Principal Receivable without receiving collections therefor or charging off
such amount as uncollectible, the amount of the Principal Receivables in the
Trust with respect to the Monthly Period in which such adjustment takes place
will be reduced by the amount of the adjustment. Furthermore, in the event that
the exclusion of any such Receivables would cause the Seller's Interest in
Principal Receivables at such time to be a negative number, the Bank shall be
required to pay an amount equal to such deficiency into the Collection Account
(each such payment, an "Adjustment Payment" with respect to such Distribution
Date).
Credit Enhancement
General. For any Series, Credit Enhancement may be provided with respect to
one or more Classes thereof. "Credit Enhancement" for one or more Classes of a
Series offered by this Prospectus may include a
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letter of credit, the establishment of a cash collateral guaranty or account, a
surety bond, an insurance policy, a spread account, a reserve account, a
subordinated interest in the Receivables or certain cash flows in respect of
the Receivables, or another form of credit enhancement described in the related
Prospectus Supplement or any combination of the foregoing. The term "Series
Enhancement" means any Credit Enhancement for the benefit of Certificateholders
of a particular Series or Class. Credit Enhancement may also be provided to a
Series or Class or Classes of a Series by subordination provisions that require
that distributions of principal and/or interest be made for the Certificates of
such Series or such Class or Classes before distributions are made to one or
more Series or one or more Classes of such Series, if the Supplements so
provide. If so specified in the related Prospectus Supplement, any form of
Credit Enhancement may be structured so as to be available to more than one
Class or Series to the extent described therein.
The presence of Credit Enhancement for a Class is intended to enhance the
likelihood of receipt by Certificateholders of such Class of the full amount of
principal and interest and to decrease the likelihood that such
Certificateholders will experience losses. However, unless otherwise specified
in the Prospectus Supplement for a Series offered by this Prospectus, the
Credit Enhancement, if any, for a Series will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal
balance of the Certificates and interest thereon. If losses occur that exceed
the amount covered by the Credit Enhancement or that are not covered by the
Credit Enhancement, Certificateholders will bear their allocable share of
deficiencies. In addition, if specific Credit Enhancement is provided for the
benefit of more than one Class or Series, Certificateholders of any such Class
or Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided for a Series offered hereby, the
accompanying Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described in this Prospectus, (c) the conditions (if any) under
which the amount payable under such Credit Enhancement may be reduced and under
which such Credit Enhancement may be terminated or replaced and (d) any
material provisions of any agreement relating to such Credit Enhancement.
Additionally, in certain cases, the related Prospectus Supplement may set forth
certain information about the provider of any third-party Credit Enhancement
(the "Credit Enhancer"), including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to
do business, (iii) if applicable, the identity of regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' equity or policyholders' surplus, if
applicable, as of a date specified in the Prospectus Supplement. If so
described in the related Prospectus Supplement, Credit Enhancement for a Series
offered by this Prospectus may be available to pay principal of the
Certificates of such Series following the occurrence of certain Pay Out Events
with respect to such Series. In such an event and in certain other instances
described in the related Prospectus Supplement, the Credit Enhancer may have a
subordinated interest in the Receivables or certain cash flows in respect of
the Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount").
Subordination. If so specified in the related Prospectus Supplement, one or
more Series or one or more Classes of a Series offered by this Prospectus may
be subordinated to one or more other Series or one or more Classes of such
Series. If so specified in the related Prospectus Supplement, the rights of the
holders of the subordinated Certificates to receive distributions of principal
and/or interest on any Payment Date will be subordinated to the rights of the
holders of the Certificates that are senior to the subordinated Certificates to
the extent set forth in the related Prospectus Supplement. The related
Prospectus Supplement will also set forth information concerning the amount of
subordination of a Series or Class or Classes of subordinated Certificates in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the amount of subordination will decrease over time,
and the conditions under which amounts available from payments that would
otherwise be made to holders of such subordinated Certificates will be
distributed to holders of Certificates that are senior to such subordinated
Certificates. The amount of subordination will decrease whenever amounts
otherwise payable to the holders of subordinated Certificates are paid to the
holders of the Certificates that are senior to such subordinated Certificates.
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Letter of Credit. If so specified in the related Prospectus Supplement, a
letter of credit for a Series or Class of Certificates offered hereby may be
issued by a bank or financial institution specified in the related Prospectus
Supplement (the "L/C Issuer"). Subject to the terms and conditions specified in
the related Prospectus Supplement, an L/C Issuer will be obligated to honor
drawings under a letter of credit in an aggregate dollar amount (which may be
fixed or may be reduced as described in the related Prospectus Supplement), net
of unreimbursed payments thereunder, equal to the amount described in the
related Prospectus Supplement. The amount available under a letter of credit
will be reduced to the extent of the unreimbursed payments thereunder.
Cash Collateral Guaranty or Cash Collateral Account. If specified in the
related Prospectus Supplement, support for the Certificates of any Class or
Series offered by this Prospectus will be provided by (i) a guaranty (the "Cash
Collateral Guaranty") issued by a cash collateral trust (the "Cash Collateral
Trust") or similar entity and secured by the deposit of cash or certain
Eligible Investments in an account (the "Cash Collateral Guaranty Account")
owned by the beneficiaries of the Cash Collateral Trust or (ii) an account of
the Trust (a "Cash Collateral Account"). A Cash Collateral Account for a Class
or Series will be funded by cash or certain Eligible Investments on the Series
Issuance Date. The amount available pursuant to the Cash Collateral Guaranty or
the Cash Collateral Account will be the lesser of the amount on deposit in the
Cash Collateral Guaranty Account or the Cash Collateral Account, as the case
may be, and an amount specified in the related Prospectus Supplement. The
related Prospectus Supplement will set forth the circumstances under which
payments are made to beneficiaries of the Cash Collateral Guaranty from the
Cash Collateral Trust or funds are to be released from the Cash Collateral
Account, as the case may be.
The Servicer will determine on each Determination Date for the Series
enhanced by a Cash Collateral Account or a Cash Collateral Guaranty whether a
deficiency exists in the payment of interest and/or principal on the
Certificates so enhanced. If the Servicer determines that a deficiency exists,
it will instruct the Trustee to draw an amount equal to such deficiency from
the Cash Collateral Account or Cash Collateral Guaranty Account, as the case
may be, up to the maximum amount available thereunder.
Surety Bond or Insurance Policy. If so specified in the related Prospectus
Supplement, insurance for any Series or Class of Certificates offered by this
Prospectus may be provided by one or more insurance companies. Such insurance
will guarantee, with respect to one or more Classes of the related Series,
distributions of interest or principal in the manner and amount specified in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of Certificates
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement, support
for a Series or one or more Classes of a Series offered by this Prospectus may
be provided by the periodic deposit of certain available excess cash flow from
the Trust Assets into an account (the "Spread Account") intended to assure the
subsequent distributions of interest and principal on the Certificates of such
Class or Series in the manner specified in the related Prospectus Supplement.
Reserve Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes thereof will be provided by the
establishment of a reserve account (the "Reserve Account"). The Reserve Account
may be funded, to the extent provided in the related Prospectus Supplement, by
an initial cash deposit, the retention of certain periodic distributions of
principal or interest or both otherwise payable to one or more Classes of
Certificates or the provision of a letter of credit, guarantee, insurance
policy or other form of credit enhancement or any combination thereof. The
Reserve Account will be established to help assure the subsequent distribution
of principal or interest on the Certificates of such Series or Class thereof in
the manner provided in the related Prospectus Supplement.
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Swap Agreement. If so provided in the related Prospectus Supplement, the
Trustee, on behalf of the Trust, may enter into one or more interest rate swap
agreements for the benefit of a Class or Series, the terms of which will be
specified in the related Prospectus Supplement.
Discount Option. The Pooling Agreement provides that the Bank may at any time
and from time to time, but without any obligation to do so, designate a fixed
percentage or a variable percentage based on a formula (the "Discount
Percentage") of the amount of Receivables arising in the Accounts on and after
the date such designation becomes effective that would otherwise constitute
Principal Receivables to be treated as Finance Charge Receivables (the
"Discount Option Receivables"). Although there can be no assurance that the
Bank will do so, such designation may occur because the Bank determines that
the exercise of the discount option is needed to provide a sufficient yield on
the Receivables to cover interest and other amounts due and payable from
Finance Charge Receivables or to avoid the occurrence of a Pay Out Event
relating to the reduction of the average yield on the portfolio of Accounts in
the Trust, if the Supplement for a Series provides for such a Pay Out Event.
After any such designation, pursuant to the Pooling Agreement, the Bank may,
without notice to or the consent of Certificateholders, from time to time
reduce or eliminate the percentage of Receivables subject to such designation
or reduction; provided, however, that such reduction or elimination will only
occur at such time, if any, at which the Bank shall deliver to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Bank, such reduction or elimination would not have adverse
regulatory or other accounting implications for the Bank. The Bank must provide
30 days' prior written notice to the Servicer, the Trustee, each Rating Agency
and any Credit Enhancer of any such designation or reduction, and such
designation or reduction will become effective on the date specified therein
only if (i) the Bank shall have delivered to the Trustee and certain providers
of Series Enhancement a certificate of an authorized officer to the effect
that, based on the facts known to such officer at the time, the Bank reasonably
believes that such designation or reduction will not at the time of its
occurrence cause a Pay Out Event or an event which with notice or the lapse of
time would constitute a Pay Out Event, to occur with respect to any Series and
(ii) the Seller shall have received written notice from each Rating Agency that
such designation or reduction will not have a Ratings Effect.
On the Date of Processing of any collections on or after the date the
exercise of the Discount Option takes effect, the product of (a) a fraction the
numerator of which is the amount of the Discount Option Receivables and the
denominator of which is the sum of the Principal Receivables (other than
Discount Option Receivables) and the Discount Option Receivables in each case
(for both numerator and denominator) at the end of the prior Monthly Period and
(b) collections of Principal Receivables that arise in the Accounts on such day
on or after the date such option is exercised that otherwise would be Principal
Receivables will be deemed "Discount Option Receivables Collections." An amount
equal to the product of (i) the aggregate Floating Allocation Percentages with
respect to all Series of Certificates issued and outstanding and (ii) the
aggregate amount of such Discount Option Receivables Collections processed in
such day will be deposited by the Bank into the Collection Account and an
amount equal to the balance of such Discount Option Receivables Collections
will be paid to the Seller. The former amount deposited into the Collection
Account will be applied as provided in this Prospectus regarding payments of
collections of Finance Charge Receivables.
The Pooling Agreement also provides that the Bank may at any time and from
time to time designate an amount of Principal Receivables in Additional
Accounts to be treated as Finance Charge Receivables (such amount, the
"Addition Discount Receivables"); provided, however, that the Bank may not make
such designation unless (i) the Bank shall have received written notice from
each Rating Agency that such designation will not have a Ratings Effect and
shall have delivered copies of each such written notice to the Servicer and the
Trustee and (ii) the Bank shall have delivered to the Trustee and certain
providers of Series Enhancement an Officer's Certificate of the Bank, to the
effect that the Bank reasonably believes that such designation will not, based
on the facts known to such officer at the time of such certification, then
cause a Pay Out Event or any event that, after the giving of notice or the
lapse of time, would constitute a Pay Out Event to occur with respect to any
Series. On or prior to each Determination Date after such designation is made,
the Servicer shall deliver to the Trustee a certificate setting forth (a) the
amount of Addition Discount Receivables
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to be included as collections of Finance Charge Receivables with respect to the
preceding Monthly Period, as calculated in accordance with the formula set
forth in the applicable Assignment of Receivables or accretion designation
letter delivered to the Trustee, and (b) the portion of such Addition Discount
Receivables which have not been treated as Collections of Finance Charge
Receivables for the preceding Monthly Period.
Pay Out Events
As described above, the Revolving Period for a Series will continue until the
start of the Accumulation Period or the Controlled Amortization Period, which
will continue until the Invested Amount of such Series shall have been paid in
full or the Series Termination Date for such Series occurs, unless a Pay Out
Event occurs with respect to such Series prior to any of such dates. A "Pay Out
Event" with respect to a Series refers to any of the following events and any
other events specified as such in the related Prospectus Supplement:
(a) the occurrence of an Insolvency Event relating to the Seller
(including any Additional Seller); or
(b) the Trust becomes an investment company within the meaning of the
Investment Company Act of 1940, as amended.
In the case of either event described above, a Pay Out Event with respect to
all Series will be deemed to have occurred without any notice or other action
on the part of the Trustee or the Certificateholders of any Series immediately
upon the occurrence of such event. The Early Amortization Period for a Series
will begin at the close of business on the day immediately preceding the day on
which a Pay Out Event occurs with respect thereto. Distributions of principal
to the Certificateholders of such Series will begin on the Distribution Date in
the Monthly Period following the Monthly Period in which such Pay Out Event
occurs (such Distribution Date and each following Distribution Date with
respect to such Series, including any Distribution Date following a Principal
Payment Event, a "Special Payment Date"). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account for such Series at such time
will be distributed on such first Special Payment Date to the
Certificateholders of such Series. If a Series has more than one Class of
Certificates, each Class may have different Pay Out Events which, in the case
of any Series of Certificates offered hereby, will be described in the related
Prospectus Supplement.
In addition to the consequences of a Pay Out Event discussed above, if a
conservator or receiver were appointed for the Bank or if certain other events
relating to the bankruptcy, insolvency or receivership of the Bank (an
"Insolvency Event") occur, pursuant to the Pooling Agreement, on the day of
such Insolvency Event, the Bank will immediately cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
Insolvency Event. Under the terms of the Pooling Agreement, within 15 days the
Trustee will publish a notice of the occurrence of the Insolvency Event stating
that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms unless within 90 days from the date such notice is published each other
holder of the Seller's Certificate, the holders of Certificates of each Series
or, if a Series includes more than one Class, each Class of such Series
evidencing more than 50% of the aggregate unpaid principal amount of each such
Series or Class (and, to the extent provided in the related Supplement, any
Credit Enhancer for such Series) instruct the Trustee not to dispose of or
liquidate the Receivables and to continue transferring Principal Receivables as
before such Insolvency Event. The proceeds from any such sale, disposition or
liquidation of the Receivables will be deposited in the Collection Account and
allocated as described in the Pooling Agreement and each Supplement. If the sum
of (a) the portion of such proceeds allocated to the Certificateholders'
Interest of any Series and (b) the proceeds of any collections on the
Receivables in the Collection Account allocated to the Certificateholders'
Interest of such Series is not sufficient to pay the Invested Amount of the
Certificates of such Series in full, such Certificateholders will incur a loss.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly in an amount equal to one-
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twelfth of the product of (a) the weighted average of the applicable servicing
fee rates for each Series outstanding (based upon the applicable servicing fee
rate for each Series and the outstanding principal amount of each Series) and
(b) the amount of Principal Receivables outstanding on the last day of the
prior Monthly Period. The Servicing Fee will be allocated among the Seller's
Interest, the Certificateholders' Interests of each Series and the interest
represented by the Enhancement Invested Amount, if any, for such Series. The
share of the Servicing Fee allocable to the Certificateholders' Interest of a
particular Series, which includes the Enhancement Invested Amount, if any, of
such Series for any Monthly Period (the "Monthly Servicing Fee") will be
determined in accordance with the relevant Supplement. A portion of the
Servicing Fee as specified in the related Prospectus Supplement will be paid
solely from Interchange allocable to such Series, before such Interchange is
used for any other purpose. A portion of the Servicing Fee as specified in the
related Prospectus Supplement will be paid from collections of Finance Charge
Receivables allocable to Certificateholders of a Series. The portion of the
Servicing Fee not so allocated to a Series or payable from Interchange will be
paid by the Seller and in no event will the Trust, the Trustee or the
Certificateholders of any Series be liable for the share of the Servicing Fee
to be paid by the Bank or from Interchange. Except as otherwise provided in any
Supplement, in the case of the first Distribution Date for any Series, the
Servicing Fee and the Monthly Servicing Fee will accrue from the Series
Issuance Date for such Series. The Monthly Servicing Fee will be paid on the
Distribution Date for each Monthly Period from the Collection Account (unless
such amount has been netted against deposits to the Collection Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, expenses related to the enforcement of the Receivables, payment of
the fees and disbursements of the Trustee and independent accountants and other
fees that are not expressly stated in the Pooling Agreement to be payable by
the Trust, the Certificateholders of a Series or the Seller (other than
Federal, state, local and foreign income, franchise or other taxes based on
income, if any, or any interest or penalties with respect thereto, imposed upon
the Trust). In the event that the Bank is acting as Servicer and fails to pay
the fees and disbursements of the Trustee, the Trustee will be entitled to
receive the portion of the Servicing Fee that is equal to such unpaid amounts.
In no event will the Certificateholders of a Series be liable to the Trustee
for the Servicer's failure to pay such amounts, and any such amounts so paid to
the Trustee will be treated as paid to the Servicer for all other purposes of
the Pooling Agreement.
Record Date
Payments on the Certificates of a Series offered hereby will be made as
described in this Prospectus and in the relevant Prospectus Supplement to the
Certificateholders in whose names the Certificates were registered (expected to
be Cede, as nominee of DTC) at the close of business on the last day of the
calendar month preceding the date of such payment (each, a "Record Date").
However, the final payment on the Certificates of a Series offered hereby will
be made only upon presentation and surrender of such Certificates.
Distributions will be made to DTC in immediately available funds. See "The
Pooling Agreement Generally--Book-Entry Registration" in this Prospectus.
Optional Termination; Final Payment of Principal
If specified in the Prospectus Supplement for any Series offered by this
Prospectus and subject to any conditions described therein, on any day
occurring on or after the day that the Invested Amount of the Certificates of a
Series and the Enhancement Invested Amount, if any, for such Series is reduced
to a percentage of the initial outstanding aggregate principal amount of the
Certificates of such Series set forth in such Prospectus Supplement, the Bank
will have the option to repurchase the Certificateholders' Interest of such
Series. The purchase price will be equal to the sum of the Invested Amount of
such Series (less the amount, if any, on deposit in any Principal Funding
Account for such Series), plus the Enhancement Invested Amount, if any, for
such Series, plus accrued and unpaid interest on the unpaid principal amount of
the Certificates and (if applicable) on the Enhancement Invested Amount (and
accrued and unpaid interest for interest amounts that were due but not paid on
a prior Payment Date) through (a) if the day on which such repurchase occurs is
a Distribution Date, the day preceding such Distribution Date or (b) if the day
on which
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such repurchase occurs is not a Distribution Date, the day preceding the
Distribution Date following such day, at the applicable certificate rate.
Following any such repurchase and the deposit of the aggregate purchase price
into the Collection Account, the Certificateholders of such Series will have no
further rights with respect to the Receivables. In the event that the Bank
shall fail for any reason to deposit the aggregate purchase price for the
Certificateholders' Interest of a Series offered hereby, payments would
continue to be made to the Certificateholders of such Series as described in
this Prospectus and in the related Prospectus Supplement.
In any event, the last payment of principal and interest on the Certificates
of a Series offered hereby will be due and payable not later than the date (the
"Series Termination Date") specified in the related Prospectus Supplement. In
the event that the Invested Amount of the Certificates of such Series or the
Enhancement Invested Amount is greater than zero on the Series Termination
Date, the Trustee will sell or cause to be sold interests in the Principal
Receivables or certain Principal Receivables, together in each case with
related Finance Charge Receivables, as specified in the Pooling Agreement and
the related Supplement, in an amount equal to the sum of the Invested Amount
and the Enhancement Invested Amount, if any, for such Series at the close of
business on the Series Termination Date. The net proceeds of such sale will be
deposited in the Collection Account and allocated to the Certificateholders of
such Series or the Enhancement Invested Amount after such Certificateholders
are paid in full, as provided in the Pooling Agreement and the Supplement for
such Series.
Reports
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
certain providers of Series Enhancement for a Series a statement (the "Monthly
Report") prepared by the Servicer setting forth certain information about the
Trust and the Certificates of such Series (unless otherwise indicated), as
specified in the related Prospectus Supplement.
For each Interest Payment Date or Special Payment Date (each, a "Payment
Date"), as the case may be, the Monthly Report for any Series will include the
following additional information about the Certificates of such Series: (a) the
total amount distributed; (b) the amount of such distribution allocable to
principal on the Certificates; (c) the amount of such distribution allocable to
interest on the Certificates; and (d) the amount, if any, by which the unpaid
principal balance of the Certificates exceeds the Invested Amount as of the
Record Date for such Payment Date. On each Distribution Date, the Paying Agent,
on behalf of the Trustee, will forward to each Certificateholder of record a
copy of the Monthly Report.
On or before January 31 of each calendar year, the Paying Agent, on behalf of
the Trustee, will furnish (or cause to be furnished) to each person who at any
time during the preceding calendar year was a Certificateholder of record a
statement containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as is necessary to enable the
Certificateholders to prepare their tax returns. See "Federal Income Tax
Consequences" in this Prospectus.
THE POOLING AGREEMENT GENERALLY
Book-Entry Registration
If specified in the related Prospectus Supplement, Certificateholders may
hold Certificates of a Series offered by this Prospectus through DTC (in the
United States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
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Definitive Certificates are issued under the limited circumstances described
below, all references in this Prospectus to actions by Certificateholders will
refer to actions taken by DTC upon instructions from its Participants, and all
references in this Prospectus to distributions, notices, reports and statements
to Certificateholders shall refer to distributions, notices, reports and
statements to Cede, as registered holder of the Certificates, for distribution
to Certificateholders in accordance with DTC's procedures.
Cedel and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective Depositaries, which in turn will hold
such positions in customers' securities accounts in the Depositaries' names on
the books of DTC. Unless otherwise specified in the related Prospectus
Supplement, Citibank, N.A. ("Citibank"), will act as depositary for Cedel and
Morgan Guaranty Trust Company of New York ("Morgan") will act as depositary for
Euroclear (in such capacities, the "Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC's rules. Transfers between Cedel Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedel or Euroclear
Participants, on the other, will be effected in DTC in accordance with DTC's
rules on behalf of the relevant European international clearing system by its
Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for same-
day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel participant on such business day. Cash received in Cedel or
Euroclear as a result of sales of securities by or through a Cedel Participant
or a Euroclear Participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
For additional information regarding clearance and settlement procedures for
the Certificates, see Annex I included at the end of this Prospectus and for
information with respect to tax documentation procedures relating to the
Certificates, see Annex I included at the end of this Prospectus and "Federal
Income Tax Consequences--Non-U.S. Certificateholders" in this Prospectus.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the UCC and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Certificateholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificateholders will receive all distributions of principal of
and interest on the
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Certificates from the Paying Agent or the Trustee through DTC and its
Participants. Under a book-entry format, Certificateholders will receive
payments after the related Payment Date because, while payments are required to
be forwarded to Cede, as nominee for DTC, on each such date, DTC will forward
such payments to its Participants which thereafter will be required to forward
them to Indirect Participants or Certificateholders. It is anticipated that the
only "Certificateholder" (as such term is used in the Pooling Agreement and the
Supplements) will be Cede, as nominee of DTC, and that Certificateholders will
not be recognized by the Trustee as "Certificateholders" under the Pooling
Agreement and the Supplements. Certificateholders will only be permitted to
exercise the rights of Certificateholders under the Pooling Agreement and the
Supplements indirectly through DTC and its Participants, which in turn will
exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificateholders.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take action in respect to such
Certificates, may be limited due to lack of a physical certificate for such
Certificates.
DTC has advised the Bank that it will take any action permitted to be taken
by a Certificateholder under the Pooling Agreement or the Supplements only at
the direction of one or more Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Bank that it will
take such actions with respect to specified percentages of the
Certificateholders' Interest only at the direction of and on behalf of
Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interest.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in Cedel in any of the 32 currencies, including
United States dollars. Cedel provides to its Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include any underwriters, agents or dealers with respect to a Series of
Certificates offered hereby. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedel Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing, and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above.
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The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear Systems on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include any underwriters, agents or dealers with respect to a Series of
Certificates offered hereby. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants,
and has no record of or relationship with persons holding through Euroclear
Participants.
Distribution with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distribution will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences" in this Prospectus. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholder under the Pooling Agreement or the relevant
Supplement on behalf of a Cedel Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DTC management is aware that some computer applications, systems, and the
like for processing dates ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes
a testing phase, which is expected to be completed within appropriate time
frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires
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services to: (i) impress upon them the importance of such services being Year
2000 compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information about DTC has been provided to
the Industry for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
Definitive Certificates
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series offered by this Prospectus will be issued in fully
registered, certificate form to Certificateholders or their respective nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Bank advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to the
Certificates, and the Trustee or the Bank are unable to locate a qualified
successor, (ii) the Bank, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of a Servicer Default,
Certificateholders evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates of any Class of such Series advise the
Trustee and DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificateholders.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and instructions for
re-registration, the Trustee will issue such Certificates in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as "Certificateholders" under the Pooling
Agreement and the relevant Supplement ("Holders").
If Definitive Certificates are issued, distribution of principal and interest
on the Definitive Certificates will be made by the Paying Agent or the Trustee
directly to the Holders in whose names the Definitive Certificates were
registered on the related Record Date in accordance with the procedures set
forth in this Prospectus and in the Pooling Agreement and the relevant
Supplement. Distributions will be made by check mailed to the address of each
Holder as it appears on the register maintained by the Trustee, except that the
final payment on any Definitive Certificate will be made only upon presentation
and surrender of such Definitive Certificate on the date for such final payment
at such office or agency as is specified in the notice of final distribution to
Holders. The Trustee will provide such notice to Holders not later than the
fifth day of the month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which is Harris Trust and Savings Bank. No
service charge will be imposed for any registration of transfer or exchange,
but the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
The Bank Certificate; Additional Sellers
The Pooling Agreement provides that the Bank may exchange a portion of the
Bank Certificate for another certificate (a "Supplemental Certificate") or an
uncertificated interest in the Seller's Interest for transfer or exchange to a
person designated by the Bank upon the execution and delivery of a supplement
to the Pooling Agreement (which supplement will be subject to the amendment
section of the Pooling Agreement to the extent that it amends any of the terms
of the Pooling Agreement; see "--Amendments" below), provided that prior to
such transfer or exchange (a) the Bank shall have received written notice from
each Rating Agency that such transfer or exchange will not have a Ratings
Effect and (b) the Bank shall have delivered to the Trustee, each
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Rating Agency and certain providers of Series Enhancement a Tax Opinion about
the transfer or exchange. Any transfer or exchange of a Supplemental
Certificate or an uncertificated interest in the Seller's Interest is subject
to the conditions set forth in the preceding sentence. See "Assumption of the
Bank's Obligations" in this Prospectus. The Bank has amended the Pooling
Agreement to provide that the Bank Certificate and any Supplemental
Certificates may be in certificated or uncertificated form.
The Bank may designate affiliates of the Bank to be included as a Seller
(each, an "Additional Seller") under the Pooling Agreement (by means of an
amendment to the Pooling Agreement that will not require the consent of any
Certificateholder; see "--Amendments" in this Prospectus) and, in connection
with such designation, the Bank shall surrender the Bank Certificate to the
Trustee in exchange for a newly issued Bank Certificate modified to reflect
such Additional Seller's interest in the Seller's Interest; provided, however,
that (i) the conditions set forth in the preceding paragraph for the issuance
of a Supplemental Certificate shall have been satisfied for the designation of
an Additional Seller and (ii) any applicable conditions described in
"Description of the Certificates--Addition of Trust Assets" in this Prospectus
shall have been satisfied for the transfer of Receivables or Participations by
any Additional Seller to the Trust. Following the inclusion of an Additional
Seller, the Additional Seller will be treated in the same manner as the Seller
described herein and references herein to the Seller shall be references to
each Seller.
Defeasance
Pursuant to the Pooling Agreement, the Bank may terminate its substantive
obligations in respect of a Series or the Pooling Agreement (the "Defeased
Series") by depositing with the Trustee, under the terms of an irrevocable
trust agreement satisfactory to the Trustee, from amounts representing or
acquired with collections on the Receivables (allocable to the Defeased Series
and available to purchase additional Receivables) monies or Eligible
Investments sufficient to make all remaining scheduled interest and principal
payments on the Defeased Series on the dates scheduled for such payments and to
pay all amounts owing to any provider of Series Enhancement. To achieve that
end, the Bank has the right to use collections on Receivables to purchase
Eligible Investments rather than additional Receivables. Prior to its first
exercise of its right to substitute monies or Eligible Investments for
Receivables, the Bank shall deliver to the Trustee a Tax Opinion about such
deposit and termination of obligations and to the Servicer and the Trustee
written notice from each Rating Agency that such transaction will not have a
Ratings Effect. In addition, the Bank must comply with certain other
requirements set forth in the Pooling Agreement, including requirements that
the Bank deliver to the Trustee an opinion of counsel to the effect that the
deposit and termination of obligations will not require the Trust to register
as an "investment company" within the meaning of the Investment Company Act of
1940, as amended, and that the Bank deliver to the Trustee and certain
providers of Series Enhancement a certificate of an authorized officer stating
that, based on the facts known to such officer at the time, in the reasonable
opinion of the Bank, such deposit and termination of obligations will not at
the time of its occurrence 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 any Series. If the Bank discharges its substantive
obligations in respect of the Defeased Series, any Series Enhancement for the
affected Series might no longer be available to make payments.
Termination of Trust
Unless the Bank instructs the Trustee otherwise, the Trust will terminate
only on the earlier to occur of (a) the day following the Distribution Date on
which the aggregate Invested Amounts and Enhancement Invested Amounts, if any,
of all Series is zero, (b) September 1, 2014, or (c) if the Receivables are
sold, disposed of or liquidated following the occurrence of an Insolvency Event
as described under "Description of the Certificates--Pay Out Events" in this
Prospectus, immediately following such sale, disposition or liquidation (the
"Trust Termination Date"). Upon termination of the Trust, all right, title and
interest in the Receivables and other funds of the Trust (other than amounts in
accounts maintained by the Trust for the final payment of principal and
interest to Certificateholders) will be conveyed and transferred to the Bank.
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Conveyance of Receivables
Pursuant to the Pooling Agreement, the Bank has sold and assigned to the
Trust its interest in all Receivables in certain MasterCard and Visa consumer
credit card accounts (the "Initial Accounts") outstanding as of July 30, 1993
(the "Trust Cut-Off Date") and will sell and assign all Receivables in the
Additional Accounts as of the applicable additional cut-off date, all
Receivables thereafter created under the Accounts, any Participations added to
the Trust and the proceeds of all of the foregoing.
In connection with the transfer of any Receivables to the Trust, the Bank is
required to indicate in its computer records that the Receivables have been
conveyed to the Trust. In addition, the Bank has provided or will provide to
the Trustee a computer file or a microfiche list containing a true and complete
list showing for each Initial Account, as of the Trust Cut-Off Date, and for
each Additional Account, as of the applicable additional cut-off date (i) its
account number, (ii) the collection status and (iii) the aggregate amount
outstanding and the aggregate amount of Principal Receivables in such Account.
The Bank, as initial Servicer, will retain and will not deliver to the Trustee
any other records or agreements relating to the Accounts or the Receivables.
Except as set forth above, the records and agreements relating to the Accounts
and the Receivables will not be segregated from those relating to other
revolving credit accounts and receivables, and the physical documentation
relating to the Accounts or Receivables will not be stamped or marked to
reflect the transfer of Receivables to the Trust. The Bank has filed and is
required to file UCC financing statements for the sale of the Receivables to
the Trust meeting the requirements of applicable state law. See "Certain Legal
Aspects of the Receivables" in this Prospectus.
Representations and Warranties
As of the issuance date for a Series (the "Series Issuance Date") specified
in the related Prospectus Supplement, the Seller will make representations and
warranties to the Trust about the Accounts, the Receivables and, if any, the
Funds Collateral, to the effect, among other things, that (a) as of the Trust
Cut-Off Date (or as of the additional cut-off date) each Account or each
Additional Account was an Eligible Account, (b) as of the Trust Cut-Off Date
(or as of the additional cut-off date), each of the Receivables then existing
in any Account or Additional Account is an Eligible Receivable, (c) thereafter,
as of the date of creation of any new Receivable, such Receivable is an
Eligible Receivable and (d) each of the Receivables, and all Funds Collateral,
if any, have been transferred to the Trust free and clear of any lien other
than (i) liens for municipal or other local taxes if such taxes shall not at
the time be due and payable or if the Bank shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto, and (ii) with
respect to Funds Collateral, liens granted in favor of the Seller by secured
credit card accountholders. If the Seller breaches any representation and
warranty described in this paragraph and such breach remains uncured for 60
days, or such longer period, not in excess of 150 days, as may be agreed to by
the Trustee, after the earlier to occur of the discovery of such breach by the
Seller or receipt of written notice of such breach by the Seller, and such
breach has a material adverse effect on the Certificateholders' Interest of all
Series in any Receivable (which determination shall be made without regard to
the availability of funds under any Credit Enhancement), such
Certificateholders' Interest in all Receivables with respect to the affected
Account ("Ineligible Receivables") will be reassigned to the Seller on the
terms and conditions set forth below and such Account shall no longer be
included as an Account.
An Ineligible Receivable will be reassigned to the Seller on or before the
end of the Monthly Period in which such reassignment obligation arises by the
Seller directing the Servicer to deduct the portion of such Ineligible
Receivable that is a Principal Receivable from the aggregate amount of the
Principal Receivables used to calculate the Seller's Interest. In the event
that the exclusion of an Ineligible Receivable from the calculation of the
Seller's Interest would cause the Seller's Interest to be a negative number, on
the Distribution Date following the Monthly Period in which such reassignment
obligation arises, the Seller will make a deposit in immediately available
funds in an amount equal to the principal portion and the interest portion of
the amount by which the Seller's Interest would be reduced below zero into the
Excess Funding Account and the Collection Account, respectively. Any amount
deposited into the Excess Funding Account and the Collection
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Account, respectively, in connection with the reassignment of an Ineligible
Receivable (the amount of any such deposit being referred to in this Prospectus
as a "Transfer Deposit Amount") shall be considered a payment in full of the
Ineligible Receivable. The reassignment of any Ineligible Receivable to the
Seller is the sole remedy respecting any breach of the representations and
warranties described in the preceding paragraph about such Receivable available
to Certificateholders of any Series (or the Trustee on behalf of such
Certificateholders) or any provider of Series Enhancement.
The Bank will also make representations and warranties to the Trust to the
effect, among other things, that as of each Series Issuance Date (a) it is a
Virginia banking corporation validly existing under the laws of the
Commonwealth of Virginia, it has, in all material respects, full power and
authority to consummate the transactions contemplated by the Pooling Agreement
and the related Supplement and each of the Pooling Agreement and the related
Supplement constitutes a valid, binding and enforceable agreement of the Bank
and (b) subject, in each case pertaining to proceeds, to Section 9-306 of the
UCC, and further subject to certain tax liens as specified in the Pooling
Agreement, the Pooling Agreement constitutes a valid sale, transfer and
assignment to the Trust of all right, title and interest of the Bank in the
Receivables, whether then existing or thereafter created and the proceeds
thereof (including proceeds in any of the accounts established for the benefit
of the Certificateholders) or the grant of a first priority perfected security
interest in such Receivables and the proceeds thereof (including proceeds in
any of the accounts established for the benefit of the Certificateholders)
under the UCC as in effect in Virginia and in any other state where the filing
of a financing statement is required to perfect the Trust's interest in the
Receivables and the proceeds thereof, which is effective as to each Receivable
then existing on the Series Issuance Date or, as to each Receivable arising
thereafter, upon the creation thereof and until termination of the Trust.
In the event that the breach of any of the representations and warranties
described in the above paragraph has a material adverse effect on the
Certificateholders' Interest of all Series in the Receivables transferred to
the Trust by the Bank, either the Trustee or the holders of Certificates
evidencing not less than 50% of the aggregate unpaid principal amount of the
Certificates of all Series, by written notice to the Bank and the Servicer (and
to the Trustee if given by the holders of the requisite percentage of
Certificates of all Series), may direct the Bank to accept the reassignment of
the Receivables if such breach and any material adverse effect caused by such
breach is not cured within 60 days of such notice (or within such longer
period, not in excess of 150 days, as may be specified in such notice). The
Bank will be obligated to accept the reassignment of such Receivables on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises. Such reassignment will not be required to be made, however,
if (i) at the end of such applicable period, the representations and warranties
shall then be true and correct in all material respects as if made on such day
and (ii) the Bank shall have delivered to the Trustee a certificate of an
authorized officer of the Bank describing the nature of such breach and the
manner in which the relevant representation and warranty became true and
correct and the breach of such representation and warranty shall no longer
materially adversely affect the Certificateholders and any material adverse
effect caused by such breach shall have been cured. The price for such
reassignment will generally be equal to the aggregate Invested Amounts and
Enhancement Invested Amounts of all Series on the Distribution Date on which
the purchase is scheduled to be made plus accrued and unpaid interest on the
unpaid principal amount of all Series and any interest amounts that were due
but not paid on a prior date and interest on such overdue interest amounts (if
the applicable Supplement so provides) at the applicable certificate rates
through the day preceding such Distribution Date. The payment of such
reassignment price, in immediately available funds, will be considered a
payment in full of all Receivables and the principal portion of such funds and
the interest portion of such funds will be deposited in the Excess Funding
Account and the Collection Account, respectively. If the Trustee or the
requisite percentage of Certificateholders of all Series gives a notice as
provided above, the obligation of the Bank to make any such deposit will
constitute the sole remedy respecting a breach of the representations and
warranties available to Certificateholders of all Series (or the Trustee on
behalf of such Certificateholders) or any provider of Series Enhancement.
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An "Eligible Account" is defined to mean a MasterCard or Visa consumer
revolving credit card account or other consumer revolving credit account owned
by the Bank which as of the Trust Cut-Off Date with respect to an Initial
Account or as of the related Addition Date with respect to an Additional
Account: (a) is in existence and maintained with the Bank or any affiliate
thereof on the Trust Cut-Off Date or the Addition Date, as the case may be; (b)
is payable in United States dollars; (c) has not been identified as an account
the credit cards or checks, if any, with respect to which have been reported to
the Bank as having been lost or stolen; (d) the accountholder of which has
provided, as his or her current billing address, an address located in the
United States (or its territories or possessions or a military address); (e)
has not been, and does not have any Receivables which have been, sold, pledged,
assigned or otherwise conveyed to any person (except pursuant to the Pooling
Agreement); (f) except as provided below, does not have any Receivables which
are Defaulted Receivables; (g) does not have any Receivables which have been
identified by the Bank or the relevant accountholder as having been incurred as
a result of fraudulent use of any related credit card or check; (h) relates to
an accountholder who is not identified by the Bank in its computer files as
being the subject of a voluntary or involuntary bankruptcy proceeding; and (i)
is not an account with respect to which the accountholder has requested
discontinuance of responsibility. Eligible Accounts may include accounts, the
receivables of which have been charged off; provided, however, that (a) the
balance of all receivables included in such accounts is reflected on the books
and records of the Bank (and is treated for purposes of the Pooling Agreement)
as "zero" and (b) charging privileges with respect to all such accounts have
been canceled in accordance with the Lending Guidelines of the Bank and will
not be reinstated by the Bank or the Servicer.
An "Eligible Receivable" is defined to mean each Receivable (a) which has
arisen under an Eligible Account; (b) which was created in compliance in all
material respects with the Lending Guidelines and all requirements of law
applicable to the Bank, the failure to comply with which would have a material
adverse effect on Certificateholders, and pursuant to a lending agreement which
complies with all requirements of law applicable to the Bank, the failure to
comply with which would have a material adverse effect on Certificateholders;
(c) with respect to which all consents, licenses, approvals or authorizations
of, or registrations or declarations with, any governmental authority required
to be obtained or given by the Bank in connection with the creation of such
Receivable or the execution, delivery and performance by the Bank of the
related lending agreement have been duly obtained or given and are in full
force and effect as of the date of the creation of such Receivable; (d) as to
which, at the time of its transfer to the Trust, the Bank or the Trust will
have good and marketable title free and clear of all liens and security
interests (other than any lien for municipal or other local taxes if such taxes
are not then due and payable or if the Bank is then contesting the validity
thereof in good faith by appropriate proceedings and has set aside on its books
adequate reserves with respect thereto); (e) which has been the subject of
either a valid transfer and assignment from the Bank to the Trust of all the
Bank's right, title and interest therein (including any proceeds thereof), or
the grant of a first priority perfected security interest therein (and in the
proceeds thereof), effective until the termination of the Trust; (f) which at
and after the time of transfer to the Trust is the legal, valid and binding
payment obligation of the accountholder thereof, legally enforceable against
such accountholder in accordance with its terms (with certain bankruptcy and
equity-related exceptions); (g) which constitutes either an "account" or a
"general intangible" under Article 9 of the UCC as then in effect in the
Commonwealth of Virginia and in any other state where the filing of a financing
statement is required to perfect the Trust's interest in the Receivables and
the proceeds thereof; (h) which, at the time of its transfer to the Trust, has
not been waived or modified except as permitted by the Pooling Agreement; (i)
which, at the time of its transfer to the Trust, is not subject to any right of
rescission, setoff, counterclaim or other defense of the accountholder
(including the defense of usury), other than certain bankruptcy and equity-
related defenses and adjustments permitted by the Pooling Agreement to be made
by the Servicer; (j) as to which, at the time of its transfer to the Trust, the
Bank has satisfied all obligations to be fulfilled at the time it is
transferred to the Trust; and (k) as to which, at the time of its transfer to
the Trust, the Bank has not taken any action which, or failed to take any
action the omission of which would, at the time of its transfer to the Trust,
impair in any material respect the rights of the Trust or Certificateholders
therein.
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It is not required or anticipated that the Trustee will make any initial or
periodic general examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence or
absence of defects, compliance with the Bank's representations and warranties
or for any other purpose. In addition, it is not anticipated or required that
the Trustee will make any initial or periodic general examination of the
Servicer for the purpose of establishing the compliance by the Servicer with
its representations or warranties or the performance by the Servicer of its
obligations under the Pooling Agreement or for any other purpose. The Servicer,
however, will deliver to the Trustee on or before April 30 of each calendar
year an opinion of counsel with respect to the validity of the interest of the
Trust in and to the Receivables and certain other components of the Trust.
Indemnification
The Pooling Agreement provides that the Servicer will indemnify the Trust and
the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained arising out of the Servicer's actions or omissions with
respect to the Trust pursuant to the Pooling Agreement.
Under the Pooling Agreement, the Bank has agreed to be liable directly to an
injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Certificateholder in the capacity
of an investor in the Certificates or those which arise from any action on the
part of any Certificateholder) arising out of or based on the arrangement
created by the Pooling Agreement as though such agreement created a partnership
under the Uniform Partnership Act in which the Bank was a general partner. The
Bank has agreed to pay, indemnify and hold harmless each holder of Certificates
of any Series against and from any such losses, claims, damages or liabilities
except to the extent that they arise from any action by such holder. In the
event of a Service Transfer, the successor Servicer will indemnify and hold
harmless the Bank for any losses, claims, damages and liabilities of the Bank
as described in this paragraph arising from the actions or omissions of such
successor Servicer.
Except as provided in the two preceding paragraphs, the Pooling Agreement
provides that none of the Bank, the Servicer or any of their directors,
officers, employees or agents will be under any other liability to the Trust,
the Trustee, the holders of Certificates of any Series, any provider of Series
Enhancement or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the Pooling Agreement. However,
none of the Bank, the Servicer or any of their directors, officers, employees
or agents will be protected against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence of any
such person in the performance of their duties or by reason of reckless
disregard of their obligations and duties thereunder.
In addition, the Pooling Agreement provides that the Servicer is not under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Pooling Agreement. The
Servicer may, in its sole discretion, undertake any such legal action which it
may deem necessary or desirable for the benefit of holders of Certificates of
any Series with respect to the Pooling Agreement and the rights and duties of
the parties thereto and the interest of such Certificateholders thereunder.
Collection and Other Servicing Procedures
Pursuant to the Pooling Agreement, the Servicer is responsible for servicing,
collecting, enforcing and administering the Receivables, including the Funds
Collateral, if any, in accordance with its customary and usual procedures for
servicing receivables comparable to the Receivables and the Lending Guidelines.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with accountholders, investigating payment
delinquencies, evaluating the increase of credit limits and the issuance of
credit cards, providing billing and tax records to accountholders and
maintaining internal records with respect to each Account. Managerial and
custodial services performed by the Servicer on behalf of the Trust include
providing assistance in any inspections of the documents and records relating
to the
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Accounts and Receivables by the Trustee pursuant to the Pooling Agreement,
maintaining the agreements, documents and files relating to the Accounts and
Receivables as custodian for the Trust and providing related data processing
and reporting services for Certificateholders of any Series and on behalf of
the Trustee.
Pursuant to the Pooling Agreement, the Bank, as Servicer, has the right to
delegate its duties as Servicer to any Person who agrees to conduct such duties
in accordance with the Pooling Agreement and the Lending Guidelines. The Bank
has contracted with Capital One Services, Inc. ("Capital One Services"), an
affiliate of the Bank, to act as sub-servicer and to perform its servicing
activities. Notwithstanding any such delegation to Capital One Services, the
Servicer will continue to be liable for all of its obligations under the
Pooling Agreement. In certain circumstances, however, the Bank could be
relieved of its duties as Servicer upon the assumption of such duties by
another entity. See "Assumption of the Bank's Obligations" in this Prospectus.
Servicer Covenants
In the Pooling Agreement, the Servicer has covenanted as to each Receivable
and related Account that: (a) it will duly fulfill all obligations on its part
to be fulfilled under or in connection with the Receivables or Accounts, and
will maintain in effect all qualifications required in order to service the
Receivables or Accounts the failure to comply with which would have a material
adverse effect on the Certificateholders or any provider of Series Enhancement;
(b) it will not permit any rescission or cancellation of a Receivable except as
ordered by a court of competent jurisdiction or other governmental authority in
accordance with the Lending Guidelines; (c) it will take no action which, nor
omit to take any action the omission of which, would substantially impair the
rights of the Certificateholders in the Receivables, the Funds Collateral, if
any, or the Accounts; (d) it will not reschedule, revise or defer collections
due on the Receivable except in accordance with the ordinary course of business
and the Lending Guidelines; and (e) except in connection with its enforcement
or collection of an Account, it will take no action to cause or permit any
Receivables to be evidenced by any instrument (as defined in the UCC) and if
any Receivable is so evidenced, it shall be reassigned or assigned to the
Servicer as provided below.
Under the terms of the Pooling Agreement, in the event any of the
representations, warranties or covenants of the Servicer contained in clauses
(a) through (e) above with respect to any Receivable or the related Account is
breached, and such breach has a material adverse effect on the
Certificateholders' Interest of all Series in such Receivable (which
determination shall be made without regard to the availability of funds under
any Credit Enhancement) and is not cured within 60 days (or such longer period,
not in excess of 150 days, as may be agreed to by the Trustee) of the earlier
to occur of the discovery of such event by the Servicer, or receipt by the
Servicer of written notice of such event given, by the Trustee, then all
Receivables in the Account or Accounts to which such event relates shall be
reassigned or assigned to the Servicer on the terms and conditions set forth
below; provided, however, that such Receivables will not be reassigned or
assigned to the Servicer if, on any day prior to the end of such 60-day or
longer period, (i) the relevant representation and warranty shall be true and
correct, or the relevant covenant shall have been complied with, in all
material respects and (ii) the Servicer shall have delivered to the Trustee a
certificate of an authorized officer describing the nature of such breach and
the manner in which such breach was cured. If the Bank is the Servicer, such
reassignment will be made on or before the Distribution Date following the
Monthly Period in which such reassignment obligation arises by the Servicer
deducting the portion of any such Receivable which is a Principal Receivable
from the aggregate amount of Principal Receivables used to calculate the
Seller's Interest. In addition, if the deduction of such Principal Receivable
would reduce the Seller's Interest below zero, the Bank as the Servicer will
deposit into the Collection Account the applicable Transfer Deposit Amount
described above under "--Representations and Warranties." If the Bank is not
the Servicer, such assignment and transfer will be made when the Servicer
deposits an amount equal to the amount of such Receivable in the Collection
Account on the business day preceding the Distribution Date following the
Monthly Period during which such obligation arises. The amount of such deposit
shall be deemed a Transfer Deposit Amount hereunder. This reassignment or
transfer and assignment to the Servicer constitutes the sole remedy available
to the Certificateholders of any Series if such covenant or warranty of the
Servicer is not satisfied and the Trust's interest in any such reassigned
Receivables shall be automatically assigned to the Servicer.
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Certain Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the Pooling
Agreement, except upon determination that such duties are no longer permissible
under applicable law. No such resignation will become effective until the
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Pooling Agreement. Notwithstanding
the foregoing, subject to compliance with certain conditions described under
"Assumption of the Bank's Obligations" in this Prospectus, the Bank may
transfer its servicing obligations to another entity and be relieved of its
obligations and duties under the Pooling Agreement and related agreements.
Any person into which, in accordance with the Pooling Agreement, the Bank or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Bank or the Servicer is a party, or any
person succeeding to the business of the Bank or the Servicer, will be the
successor to the Bank, as servicer, or the Servicer, as the case may be, under
the Pooling Agreement.
Servicer Default
In the event of any Servicer Default, either the Trustee or
Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all outstanding Series, by written notice
to the Servicer (and to the Trustee and certain providers of Series
Enhancement, if given by the Certificateholders) (a "Termination Notice"), may
terminate all of the rights and obligations of the Servicer, as servicer, under
the Pooling Agreement. If the Trustee within 60 days of receipt of a
Termination Notice is unable to obtain any bids from eligible Servicers and the
Bank delivers an officer's certificate to the effect that the Servicer cannot
in good faith cure the Servicer Default which gave rise to the Termination
Notice, then the Trustee shall offer the Bank a right of first refusal to
purchase the Certificateholders' Interest for all Series. The purchase price
for such a purchase shall be paid on a Distribution Date and shall generally be
equal to, with respect to each Series, the higher of (a) the sum of the
Invested Amount and the Enhancement Invested Amount, if any, of such Series on
such Distribution Date (less the amount, if any, on deposit in any Principal
Funding Account with respect to such Series) plus accrued and unpaid interest
at the applicable certificate rate (together with, if applicable, interest on
interest amounts that were due and not paid on a prior date), through the last
day of the calendar month preceding such Distribution Date and (b) the sum of
(i) the average bid price quoted by two recognized dealers for similar
securities rated in the same rating category as the initial rating of the
Certificates of such Series with a remaining maturity approximately equal to
the remaining maturity of the Certificates of such Series and (ii) the
Enhancement Invested Amount, if any, of such Series.
The Trustee shall, as promptly as possible after giving a Termination Notice,
appoint a successor Servicer (a "Service Transfer"), and if no successor
Servicer has been appointed by the Trustee and has accepted such appointment by
the time the Servicer ceases to act as Servicer, all rights, authority, power
and obligations of the Servicer under the Pooling Agreement shall pass to and
be vested in the Trustee. Prior to any Service Transfer, the Trustee will seek
to obtain bids from potential Servicers meeting certain eligibility
requirements set forth in the Pooling Agreement to serve as a successor
Servicer for servicing compensation not in excess of the Trust Servicing Fee.
The rights and interest of the Bank under the Pooling Agreement and any
Supplement in the Seller's Interest will not be affected by any Termination
Notice or Service Transfer.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions or to give notice to the Trustee to make such payment,
transfer or deposit, on or before the date the Servicer is required to do
so under the Pooling Agreement or any Supplement, which is not cured within
a ten business day grace period;
(b) failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer in the
Pooling Agreement or any Supplement which has a material adverse effect on
the Certificateholders of any Series or Class (determined without regard to
the availability of funds under any Series Enhancement) and which continues
unremedied for a period of 60
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days after written notice, or the Servicer assigns or delegates its duties
under the Pooling Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer in
the Pooling Agreement or any Supplement or in any certificate delivered
pursuant to the Pooling Agreement or any Supplement proves to have been
incorrect when made, which has a material adverse effect on the rights of
the Certificateholders of any Series or Class (determined without regard to
the availability of funds under any Series Enhancement), and which material
adverse effect continues for a period of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (a) above for an additional period of five business days or
referred to under clause (b) or (c) for an additional period of 60 days, shall
not constitute a Servicer Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Servicer and such
delay or failure was caused by an act of God or other similar occurrence. Upon
the occurrence of any such event the Servicer shall not be relieved from using
its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Pooling Agreement and any Supplement and the Servicer
shall provide the Trustee, the Bank, any provider of Series Enhancement and the
Certificateholders of each Series prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations. The
Servicer shall immediately notify the Trustee in writing of any Servicer
Default.
Evidence as to Compliance
The Pooling Agreement provides that on or before May 31 of each calendar year
the Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the Bank) to
furnish a report to the effect that they have attested to the assertion of
authorized officers of the Servicer that the servicing was conducted in
compliance with certain applicable provisions of the Pooling Agreement and each
Supplement in all material respects.
In addition, on or before May 31 of each year such accountants will also
furnish a report to the effect they have applied certain procedures agreed upon
with the Servicer to compare the mathematical calculations of certain amounts
contained in the monthly Servicer's certificates delivered during the preceding
calendar year with the Servicer's computer reports that generated such amounts,
and will deliver a report to the Trustee and each Rating Agency reporting all
discrepancies, regardless of materiality, revealed by such comparison.
The Pooling Agreement provides for delivery to the Trustee, each Rating
Agency and certain providers of Series Enhancement on or before May 31 of each
calendar year of a statement signed by an officer of the Servicer to the effect
that the Servicer has, or has caused to be, fully performed its obligations in
all material respects under the Pooling Agreement throughout the preceding year
or, if there has been a default in the performance of any such obligation in
any material respect, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
Amendments
The Pooling Agreement and any Supplement may be amended from time to time
(including in connection with (v) the assumption by the Assuming Entity of the
Bank's obligations under the Pooling Agreement, (w) the provision of additional
Series Enhancement for the benefit of Certificateholders of any Series, (x) the
issuance of a Supplemental Certificate, (y) the addition of Participations to
the Trust or (z) the designation of an Additional Seller) by agreement of the
Trustee, the Bank and the Servicer without the consent of the
Certificateholders of any Series or the consent of the provider of any Series
Enhancement provided that (i) the
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Bank shall have received written notice from each Rating Agency that such
amendment will not have a Ratings Effect, (ii) the Bank delivers to the Trustee
and each provider of Series Enhancement a certificate of an authorized officer
to the effect that, in the reasonable belief of the Bank, such amendment will
not, based on the facts known to the officer at the time, have a material
adverse effect on the interests of the Certificateholders, and (iii) in the
case of an amendment relating to the assumption by the Assuming Entity of the
Bank's obligations, all other conditions to such assumption specified in the
Pooling Agreement shall have been satisfied (see "Assumption of the Bank's
Obligations" in this Prospectus).
The Pooling Agreement and any Supplement may also be amended from time to
time by the Bank, the Servicer and the Trustee with the consent of the holders
of Certificates evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of all adversely affected Series for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Pooling Agreement or any Supplement or of
modifying in any manner the rights of such Certificateholders. No such
amendment, however, may (a) reduce in any manner the amount of or delay the
timing of any distributions to be made to Certificateholders or deposits of
amounts to be so distributed or the amount available under any Series
Enhancement without the consent of each Certificateholder affected; (b) change
the definition or the manner of calculating the interest of any
Certificateholder without the consent of each affected Certificateholder;
(c) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of each Certificateholder; or (d) adversely affect the
rating of any Series or Class by any Rating Agency without the consent of the
holders of Certificates of such Series or Class evidencing not less than 66
2/3% of the aggregate unpaid principal amount of the Certificates of such
Series or Class. Promptly following the execution of any such amendment (other
than an amendment described in the preceding paragraph), the Trustee will
furnish written notice of the substance of such amendment to each
Certificateholder.
Trustee
The Bank of New York is the Trustee under the Pooling Agreement. The
Corporate Trust Department of The Bank of New York is located at 101 Barclay
Street, New York, New York 10286. The Bank, the Servicer and their respective
affiliates may from time to time enter into normal banking and trust
relationships with the Trustee and its affiliates. The Trustee, the Bank, the
Servicer and any of their respective affiliates may hold Certificates of any
Series in their own names; however, any Certificates so held shall not be
entitled to participate in any decisions made or instructions given to the
Trustee by such Certificateholders as a group. In addition, for purposes of
meeting the legal requirements of certain local jurisdictions, the Trustee
shall have the power to appoint a co-trustee or separate trustees of all or any
part of the Trust. In the event of such appointment, all rights, powers, duties
and obligations shall be conferred or imposed upon the Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
Trustee shall be incompetent or unqualified to perform certain acts, singly
upon such separate trustee or co-trustee, who shall exercise and perform such
rights, powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Bank will be obligated
to appoint a successor Trustee. The Servicer may also remove the Trustee if the
Trustee ceases to be eligible to continue as such under the Pooling Agreement
or if the Trustee becomes insolvent. In such circumstances, the Servicer will
be obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Bank has represented and warranted in the Pooling Agreement that the
transfer of Receivables by it to the Trust is either a valid sale and
assignment to the Trust of all right, title and interest of the Bank in and to
such Receivables, except for the interest of the Bank as holder of the Bank
Certificate (or the interests of transferees, if any, of a portion of the
Seller's Certificate), or a grant to the Trust of a security interest in such
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Receivables. The Bank also represents and warrants in the Pooling Agreement
that in the event the transfer of Receivables by the Bank to the Trust is
deemed to create a security interest under the UCC, there will exist a valid,
subsisting and enforceable first priority perfected security interest in such
Receivables created thereafter in favor of the Trust on and after their
creation, except for certain governmental liens. For a discussion of the
Trust's rights arising from a breach of these warranties, see "The Pooling
Agreement Generally--Representations and Warranties" in this Prospectus.
Certain Receivables may be added to the Trust from time to time with respect
to which the related accountholders have provided the Bank with Funds
Collateral as security for such accountholder's obligations to the Bank. The
Funds Collateral is expected to be held by a Depositary selected by the Bank.
The Bank will take certain actions as it believes are required or reasonably
requested under applicable state law to perfect the Bank's security interest in
the Funds Collateral. The perfection of a security interest in the Funds
Collateral may not be governed by the UCC, and existing common law authority
does not definitively establish what steps are necessary to perfect such a
lien. This uncertainty exists both with respect to the grant of a security
interest in the Funds Collateral by accountholders to the Bank and with respect
to the grant of a security interest in the Bank's interest in the Funds
Collateral by the Bank to the Trust. While not free from doubt, a Virginia
court properly presented with the issue should determine that the Bank has
taken sufficient action and has adequately divested the accountholders of
control over the Funds Collateral so as to perfect a security interest therein.
In connection with the transfer of the Bank's interest in the Receivables to
the Trust, the Bank will also sell and assign to the Trust its interest as
secured party in the related Funds Collateral, if any. Because possession of
such Funds Collateral will be maintained by the Depositary and will not be
transferred to the Trustee, the Trust will not have a direct claim to the Funds
Collateral. The Bank will represent and warrant in the Pooling Agreement that
the transfer of the Bank's interest in the Receivables and the related Funds
Collateral, if any, to the Trust is either a valid sale and assignment of the
Bank's interest in such Receivables and such Funds Collateral to the Trust or
the grant to the Trust of a security interest in the Bank's interest in such
Receivables and such Funds Collateral. The Bank will also represent and warrant
in the Pooling Agreement that in the event the transfer of the Bank's interest
in the Receivables and the related Funds Collateral, if any, by the Bank to the
Trust is deemed to create a security interest, there will exist a valid,
subsisting and enforceable first priority perfected security interest in the
Bank's interest in the Receivables and the related Funds Collateral, if any,
created thereafter in favor of the Trust on and after their creation, except
for certain governmental liens and other non-consensual liens or certain
subsequent transferees of the Funds Collateral. Although the Bank has taken
steps it believes appropriate to perfect interests given to the Trust, and on
the basis of its belief has made the related representations and warranties,
the legal uncertainty in these areas is such that no definitive assurance can
be given that a first priority perfected security interest in the Bank's
interest in the Funds Collateral will exist for the benefit of the Trust. For a
discussion of the Trust's rights arising from a breach of these warranties, see
"The Pooling Agreement Generally--Representations and Warranties" in this
Prospectus.
The Bank has represented as to previously conveyed Receivables, and will
represent as to Receivables and the related Funds Collateral, if any, to be
conveyed, that the Bank's interest in the Receivables and the related Funds
Collateral, if any, are "accounts" or "general intangibles" for purposes of the
UCC. Both the transfer and assignment of accounts and the transfer of accounts
as security for an obligation are treated under Article 9 of the UCC as
creating a security interest therein and are subject to its provisions, and the
filing of an appropriate financing statement or statements is required to
perfect the security interest of the Trust. If a transfer of general
intangibles is deemed to create a security interest, the UCC applies and filing
of an appropriate financing statement or statements is also required in order
to perfect the Trust's security interest in the Receivables and the related
Funds Collateral, if any. Financing statements covering the Receivables and the
related Funds Collateral, if any, have been and will be filed with the
appropriate state and local governmental authority to protect the interests of
the Trust in the Receivables and the related Funds Collateral, if any. If a
transfer of general intangibles is deemed to be a sale, the filing of a
financing statement is not required to protect the Trust's interest from third
parties. Although the priority of a transfer of general intangibles arising
after the formation of the Trust is not as clear under the laws of the
Commonwealth of Virginia as the priority
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of interests governed by the UCC, the Bank believes that it would be
inconsistent for a court to afford the Trust less favorable treatment if the
transfer of the Receivables and the related Funds Collateral, if any, is deemed
to be a sale than if it were deemed to be a security interest and that a court
should conclude that a sale of Receivables and the related Funds Collateral, if
any, consisting of general intangibles would be deemed to have occurred as of
the date of execution of the Pooling Agreement or the applicable date
Receivables arising in Additional Accounts have been conveyed to the Trust.
In connection with the transfer of the Bank's interest in the Receivables and
the related Funds Collateral, if any, to the Trust, the Bank is required to
indicate in its computer records that the Bank's interest in such Receivables
and such Funds Collateral has been conveyed to the Trust. In addition, the Bank
has provided or will provide to the Trustee a computer file or a microfiche
list containing a true and complete list showing for each Initial Account, as
of the Trust Cut-Off Date, and for each Additional Account, as of the
applicable additional cut-off date (i) its account number, (ii) the collection
status and (iii) the aggregate amount outstanding, the aggregate amount of
Principal Receivables in such Account and the amount of the related Funds
Collateral, if any. The Bank as initial Servicer, will retain and will not
deliver to the Trustee any other records or agreements relating to the
Accounts, the Receivables or the Funds Collateral. Except as set forth above,
the records and agreements relating to the Accounts, the Receivables and the
Funds Collateral will not be segregated from those relating to other revolving
credit accounts and receivables, and the physical documentation relating to the
Accounts, the Receivables or the Funds Collateral will not be stamped or marked
to reflect the transfer of the Receivables and the Funds Collateral to the
Trust. The Bank has filed and is required to file UCC financing statements with
respect to the sale of the Receivables and the Funds Collateral and the
proceeds thereof to the Trust meeting the requirements of applicable state law.
With respect to the Funds Collateral, in order to perfect its interest in the
Funds Collateral, the Depositary or a person unaffiliated with the
accountholders has obtained and will maintain continuous possession and control
of such Funds Collateral.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables and the related Funds Collateral, if any,
coming into existence after the date of the Pooling Agreement could have an
interest in such Receivables and the related Funds Collateral, as applicable,
with priority over the Trust's interest. Under the Pooling Agreement, however,
the Bank has represented and warranted that it transferred the Receivables to
the Trust, and will represent and warrant that it will transfer the Bank's
interest in the Receivables and the related Funds Collateral, if any, to the
Trust, free and clear of the lien of any third party except for certain
governmental liens. In addition, the Bank has covenanted and will covenant that
it will not sell, pledge, assign, transfer or grant any lien on any Receivable
or any related Funds Collateral (or any interest therein) other than to the
Trust. A tax or government lien or other nonconsensual lien arising prior to
the time a Receivable comes into existence may have priority over the interest
of the Trust in such Receivables and any related Funds Collateral. In addition,
through fraud or negligence of the Bank, a subsequent transferee of the
Receivables or the Funds Collateral may also have priority over the interests
of the Trust. Furthermore, if the FDIC were appointed as a conservator or
receiver of the Bank, the conservator's or receiver's administrative expenses
may also have priority over the interest of the Trust in the Bank's interest in
such Receivables and related Funds Collateral.
In addition, while the Bank is the Servicer, cash collections held by the
Bank may, subject to certain conditions, be commingled and used for the benefit
of the Bank prior to the date on which such collections are required to be
deposited in the Collection Account. In the event of the conservatorship or
receivership of the Bank or, in certain circumstances, the lapse of certain
time periods, the Trust may not have a perfected interest in such collections
and, in such event, the Trust may suffer a loss of all or part of such
collections, which may result in a loss to Certificateholders.
Certain Matters Relating to Receivership
The Bank is chartered under the laws of Virginia. In Virginia, the Virginia
State Corporation Commission (the "SCC"), which supervises and examines the
Bank, may apply to any Virginia court having jurisdiction
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over the appointment of receivers to appoint a receiver upon determination that
certain events relating to the Bank's financial condition have occurred. The
SCC is authorized, but not required, to apply for the appointment of the FDIC
as receiver and, as a matter of Federal law, the FDIC would be authorized, but
not obligated, to accept such appointment. The SCC has informally indicated
that it would seek to have the FDIC appointed as receiver in any receivership
proceeding involving a bank such as the Bank. Virginia law sets forth certain
powers that could be exercised by the FDIC upon its appointment as receiver.
There are no Virginia or statutory provisions governing the appointment of a
conservator for a Virginia-chartered bank. In addition, the FDIC could be
appointed as receiver or conservator of the Bank as a matter of federal law.
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (as amended,
"FIRREA"), sets forth certain powers that the FDIC in its capacity as
conservator or receiver for the Bank could exercise. Positions taken by the
FDIC staff prior to the passage of FIRREA do not suggest that the FDIC, if
appointed as conservator or receiver for the Bank, would interfere with the
timely transfer to the Trust of payments collected on the Receivables or
applications of the Funds Collateral or interfere with the timely liquidation
of such Receivables or the Trust's interest in such Funds Collateral, as
described below. To the extent that the Bank has granted a security interest in
the Receivables and in the Bank's security interest in the related Funds
Collateral, if any, to the Trust, and that interest was validly perfected
before the Bank's insolvency and was not taken in contemplation of insolvency
or with the intent to hinder, delay or defraud the Bank or its creditors, the
FDIA and policy statements of the FDIC provide that such security interest
should not be subject to avoidance. As a result, payments to the Trust with
respect to the Receivables and the related Funds Collateral, if any, should not
be subject to recovery by the FDIC as conservator or receiver for the Bank.
These policy statements are not binding on the FDIC, however, and if the FDIC,
as conservator or receiver for the Bank, were to assert a contrary position, or
were to require the Trustee to establish its right to such payments or the
Funds Collateral by submitting to and completing the administrative claims
procedure established under the FDIA, or the conservator or receiver were to
request a stay of proceedings with respect to the Bank as provided under the
FDIA, delays in payments on Certificates of all Series and possible reductions
in the amount of those payments could occur.
The Pooling Agreement provides that, upon the occurrence of an Insolvency
Event, the Bank will promptly give notice thereof to the Trustee and a Pay Out
Event will occur with respect to all Series then outstanding under the Trust.
Pursuant to the Pooling Agreement, neither newly created Principal Receivables
nor the Bank's interest in the Funds Collateral, if any, related to such newly
created Principal Receivables will be transferred to the Trust and the Trustee
will proceed to sell, dispose of or otherwise liquidate the Receivables and the
Trust's interest in the related Funds Collateral in a commercially reasonable
manner and on commercially reasonable terms, unless otherwise instructed within
a specified period by each other holder of the Bank Certificate and the
Certificateholders holding Certificates of each Series or, if a Series includes
more than one Class, each Class of such Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or Class (and, in the
case of any Series with respect to which there is an Enhancement Invested
Amount, any Series Enhancer with respect thereto). Under the Pooling Agreement,
the proceeds from the sale of the Receivables and the Trust's interest in any
related Funds Collateral would be treated as collections on the Receivables.
This procedure, however, could be delayed as described above. If a conservator
or receiver is appointed for the Bank and no Pay Out Event other than such
conservatorship or receivership or insolvency of the Bank exists, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and of the Trust's interest in
any related Funds Collateral and the commencement of the Early Amortization
Period, and may have the power to require that new Receivables continue to be
purchased by the Trust. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and of the Trust's interest in
any related Funds Collateral and the early retirement of the Certificates or to
prohibit the continued transfer of Principal Receivables and of the Bank's
security interest in the related Funds Collateral, if any, to the Trust. See
"Description of the Certificates--Pay Out Events" in this Prospectus. In
addition, the FDIC as conservator or receiver for the Bank has the power under
the FDIA to repudiate contracts, including secured contracts of the Bank. The
FDIA provides that a claim for damages arising from the repudiation of a
contract is limited to "actual direct compensatory damages." In the
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event the FDIC as a conservator or receiver of the Bank were to repudiate the
Agreement, then the amount payable to the Certificateholders could be lower
than the outstanding principal and accrued interest on the Certificates.
In the event of a Servicer Default, if a conservator, receiver or liquidator
is appointed for the Servicer, and no Servicer Default other than such
conservatorship, receivership, liquidation or insolvency of the Servicer
exists, the conservator, receiver or liquidator may have the power to prevent
either the Trustee or the requisite percentage of holders of Certificates of
all Series from appointing a successor Servicer. See "The Pooling Agreement
Generally--Servicer Default" in this Prospectus.
The Bank will establish the Deposit Account and maintain records regarding
each accountholder's beneficial interest in the Funds sufficient to afford each
accountholder federal deposit insurance up to applicable limits. In the event
of the insolvency of the Depositary, although the Funds will be FDIC insured up
to applicable limits, such an insolvency may result in a delay in the payment
of such Funds to the accountholder or to the Trust by the FDIC as receiver for
the Depositary.
Consumer Protection Laws
The relationship between an accountholder and consumer lender is extensively
regulated by Federal, state and local consumer protection laws. With respect to
consumer revolving credit accounts owned by the Bank, the most significant
Federal laws include the Federal Truth-in-Lending, Equal Credit Opportunity,
Fair Credit Reporting and Fair Debt Collection Practices Acts. These statutes
impose disclosure requirements before and when an Account is opened and at the
end of monthly billing cycles and, in addition, limit accountholder liability
for unauthorized use, prohibit certain discriminatory practices in extending
credit, impose certain limitations on the type of account-related charges that
may be issued and regulate collection practices. In addition, accountholders
are entitled under these laws to have payments and credits applied to their
accounts promptly and to require billing errors to be resolved promptly. The
Trust may be liable for certain violations of consumer protection laws that
apply to the Receivables or the Funds Collateral, if any, either as assignee
from the Bank with respect to obligations arising before transfer of the
Receivables or the Funds Collateral, if any, to the Trust or as the party
directly responsible for obligations arising after the transfer. In addition,
an accountholder may be entitled to assert such violations by way of setoff
against the obligation to pay the amount of Receivables owing. See "Risk
Factors--Seller's Ability to Change Terms of the Receivables Could Alter
Payment Patterns" in this Prospectus. All Receivables, including any Funds
Collateral, that were not created or serviced in compliance in all material
respects with the requirements of such laws, subject to certain conditions
described under "The Pooling Agreement Generally--Representations and
Warranties" in this Prospectus, will be reassigned to the Bank. The Servicer
has also agreed in the Pooling Agreement to indemnify the Trust, among other
things, for any liability arising from such violations. For a discussion of the
Trust's rights if the Receivables were not created in compliance in all
material respects with applicable laws, see "The Pooling Agreement Generally--
Representations and Warranties" in this Prospectus.
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty at 6%. In addition, subject to judicial discretion, any
action or court proceeding in which an individual in military service is
involved may be stayed if the individual's rights would be prejudiced by denial
of such a stay.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of Certificateholders in the Receivables if such laws
result in any Receivables being charged off as uncollectible when there are no
funds available from Series Enhancement or other sources and could delay
realization on any related Funds Collateral or otherwise affect the ability of
the Bank to realize on such Funds Collateral. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges;
Recoveries" in this Prospectus.
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FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of certain material federal income tax
consequences relating to the purchase, ownership and disposition of a
Certificate offered hereunder. This discussion is based on current law, which
is subject to changes that could prospectively or retroactively modify or
adversely affect the tax consequences summarized below. The discussion does not
address all of the tax consequences relevant to a particular Certificateholder
in light of that Certificateholder's circumstances, and some Certificateholders
may be subject to special tax rules and limitations not discussed below. Each
prospective Certificateholder is urged to consult its own tax adviser in
determining the federal, state, local and foreign income and any other tax
consequences of the purchase, ownership and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident of
the United States, a corporation or partnership organized in or under the laws
of the United States, any state thereof, or any political subdivision of either
(including the District of Columbia), or an estate or trust the income of which
is includible in gross income for U.S. federal income tax purposes regardless
of its source. The term "U.S. Certificateholder" means any U.S. Person and any
other person to the extent that the income attributable to its interest in a
Certificate is effectively connected with that person's conduct of a U.S. trade
or business.
Treatment of the Certificates as Debt
The Bank expresses in the Pooling Agreement the intent that for federal,
state and local income and franchise tax purposes, the Certificates will be
debt of the Bank secured by the Receivables. The Bank, by entering into the
Pooling Agreement, and each investor, by the acceptance of a beneficial
interest in a Certificate, will agree to treat the Certificates as debt of the
Bank for federal, state and local income and franchise tax purposes. However,
the Pooling Agreement generally refers to the transfer of Receivables as a
"sale," and because different criteria are used in determining the non-tax
accounting treatment of the transaction, the Bank will treat the Pooling
Agreement for certain non-tax accounting purposes as causing a transfer of an
ownership interest in the Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of a
transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers as well as the Internal Revenue Service (the "IRS") to treat a
transaction in accordance with its economic substance, as determined under
federal income tax law, even though the participants in the transaction have
characterized it differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the seller has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Except to the extent otherwise
specified in the related Prospectus Supplement, Orrick, Herrington & Sutcliffe
LLP, special counsel to the Bank ("Tax Counsel"), will deliver its opinion
generally to the effect that, under current law as in effect on the Series
Issuance Date, although no transaction closely comparable to that contemplated
in this Prospectus has been the subject of any Treasury regulation, revenue
ruling or judicial decision, for federal income tax purposes the Certificates
offered hereunder will not constitute an ownership interest in the Receivables
but will properly be characterized as debt. Except where indicated to the
contrary, the following discussion assumes that the Certificates offered
hereunder are debt for federal income tax purposes.
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Treatment of the Trust
General. The Pooling Agreement permits the issuance of Certificates and
certain other interests in the Trust (including certain undivided interests in
the Trust, or "Collateral Indebtedness Interests" or "Class C Interests" such
as may be set forth in the Supplement), each of which may be treated for
federal income tax purposes either as debt or as equity interests in the Trust.
If all of the Certificates and other interests (other than the Seller's
Certificate) in the Trust were characterized as debt, the Trust might be
characterized as a security arrangement for debt collateralized by the
Receivables and issued directly by the Bank (or other holder of the Seller's
Certificate). Under such a view, the Trust would be disregarded for federal
income tax purposes. Alternatively, if some of the Certificates or other
interests (other than the Seller's Certificate) in the Trust were characterized
as equity, the Trust might be characterized as a separate entity owning the
Receivables, issuing its own debt, and jointly owned by the Bank (or other
holder of the Seller's Certificate) and the other holders of equity interests
in the Trust. However, Tax Counsel will deliver its opinion generally to the
effect that, under current law as in effect on the Series Issuance Date, any
such entity constituted by the Trust will not be an association or publicly
traded partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Tax Counsel will deliver its opinion
that the Certificates offered hereunder will properly be treated as debt and
that the Trust will not be treated as an association or publicly traded
partnership taxable as a corporation for federal income tax purposes, such
opinion will not bind the IRS and thus no assurance can be given that such
treatment will prevail. If the IRS were to contend successfully that some or
all of the Certificates or any other interest in the Trust (other than the
Seller's Certificate), including any Collateral Indebtedness Interest, were not
debt obligations for federal income tax purposes, all or a portion of the Trust
could be classified as a partnership or a publicly traded partnership taxable
as a corporation for such purposes. Because Tax Counsel will deliver its
opinion that the Certificates offered hereunder will be characterized as debt
for federal income tax purposes and because any holder of an interest in a
Collateral Indebtedness Interest will agree to treat that interest as debt for
such purposes, no attempt will be made to comply with any tax reporting
requirements that would apply as a result of such alternative
characterizations.
If the Trust were treated in whole or in part as a partnership in which some
or all holders of interests in the publicly offered Certificates were partners,
that partnership could be classified as a publicly traded partnership, and so
could be taxable as a corporation. Further, regulations published by the
Treasury Department on December 4, 1995 (the "Regulations") could cause the
Trust to constitute a publicly traded partnership even if all holders of
interests in publicly offered Certificates are treated as holding debt. The
Regulations generally apply to taxable years beginning after December 31, 1995,
and thus could affect the classification of presently existing entities and the
ongoing tax treatment of already completed transactions. Although the
Regulations provide for a 10-year grandfather period for a partnership actively
engaged in an activity before December 4, 1995, it is not clear whether the
Trust would qualify for this grandfather period. If the Trust were classified
as a publicly traded partnership, whether by reason of the treatment of
publicly offered Certificates as equity or by reason of the Regulations, it
would avoid taxation as a corporation if its income was not derived in the
conduct of a "financial business," however, whether the income of the Trust
would be so classified is unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Bank has taken and intends to take
measures designed to reduce the risk that the Trust could be classified as a
publicly traded partnership by reason of interests in the Trust other than the
publicly traded Certificates. However, certain of the actions that may be
necessary for avoiding the treatment of such interests as "readily tradable on
a secondary market (or the substantial equivalent thereof)" are not fully
within the control of the Bank, and certain Series predating the Regulations
may not conform to the requirements of the regulations. As a result, there can
be no assurance that the measures the Bank has taken and intends to take will
in all circumstances be sufficient to prevent the Trust from being classified
as a publicly traded partnership under the Regulations.
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If the Trust was treated as a partnership but nevertheless was not treated as
a publicly traded partnership taxable as a corporation, that partnership would
not be subject to federal income tax. Rather, each item of income, gain, loss
and deduction of the partnership generated through the ownership of the related
Receivables would be taken into account directly in computing taxable income of
the Bank (or the holder of the Seller's Certificate) and any Certificateholders
treated as partners in accordance with their respective partnership interests
therein. The amounts and timing of income reportable by any Certificateholders
treated as partners would likely differ from that reportable by such
Certificateholders had they been treated as owning debt. In addition, if the
Trust were treated in whole or in part as a partnership other than a publicly
traded partnership, income derived from the partnership by any
Certificateholder that is a pension fund or other tax-exempt entity may be
treated as unrelated business taxable income. Partnership characterization also
may have adverse state and local income or franchise tax consequences for a
Certificateholder. If the Trust were treated in whole or in part as a
partnership and the number of holders of interests in the publicly offered
Certificates and other interests in the Trust treated as partners equaled or
exceeded 100, the Bank may cause the Trust to elect to be an "electing large
partnership." The consequence of such election to investors could include the
determination of certain tax items at the partnership level and the
disallowance of otherwise allowable deductions. No representation is made as to
whether such election will be made.
If the arrangement created by the Pooling Agreement were treated in whole or
in part as a publicly traded partnership taxable as a corporation, that entity
would be subject to federal income tax at corporate tax rates on its taxable
income generated by ownership of the related Receivables. That tax could result
in reduced distributions to Certificateholders. No distributions from the Trust
would be deductible in computing the taxable income of the corporation, except
to the extent that any Certificates were treated as debt of the corporation and
distributions to the related Certificateholders were treated as payments of
interest thereon. In addition, distributions to Certificateholders not treated
as holding debt would be dividend income to the extent of the current and
accumulated earnings and profits of the corporation (and Certificateholders may
not be entitled to any dividends received deduction in respect of such income).
Taxation of Interest Income of U.S. Certificateholders
General. Stated interest on a beneficial interest in a Certificate will be
includible in gross income in accordance with a U.S. Certificateholder's method
of accounting.
Original Issue Discount. It is not expected that the Certificates will be
issued with original issue discount ("OID"). If the Certificates are issued
with OID, the provisions of sections 1271 through 1273 and 1275 of the Internal
Revenue Code of 1986 (the "Code") will apply to the Certificates. Under those
provisions, a U.S. Certificateholder (including a cash basis holder) generally
would be required to accrue the OID on its interest in a Certificate income for
federal income tax purposes on a constant yield basis, resulting in the
inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as
having OID to the extent that its "stated redemption price" exceeds its "issue
price," if such excess is more than 0.25 percent multiplied by the weighted
average life of the Certificate (determined by taking into account only the
number of complete years following issuance until payment is made for any
partial principal payments). Under section 1272(a)(6) of the Code, special
provisions apply to debt instruments on which payments may be accelerated due
to prepayments of other obligations securing those debt instruments. However,
no regulations have been issued interpreting those provisions, and the manner
in which those provisions would apply to the Certificates is unclear.
Additionally, the IRS could take the position based on Treasury regulations
that none of the interest payable on a Certificate is "unconditionally payable"
and hence that all of such interest should be included in the Certificate's
stated redemption price at maturity. If sustained, such treatment should not
significantly affect the tax liability of most Certificateholders, but
prospective U.S. Certificateholders should consult their own tax advisers
concerning the impact to them in their particular circumstances. Except where
indicated to the contrary, this discussion assumes that the interest payable on
a Certificate is "unconditionally payable."
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Market Discount. A U.S. Certificateholder who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to
the "market discount" rules of sections 1276 through 1278 of the Code. These
rules provide, in part, that gain on the sale or other disposition of a
Certificate and partial principal payments on a Certificate are treated as
ordinary income to the extent of accrued market discount. The market discount
rules also provide for deferral of interest deductions with respect to debt
incurred to purchase or carry a Certificate that has market discount.
Market Premium. A U.S. Certificateholder who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest
income over the remaining term of the Certificate in accordance with the
provisions of section 171 of the Code.
Sale or Exchange of Certificates
Upon a disposition of an interest in a Certificate, a U.S. Certificateholder
generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. Certificateholder's adjusted
basis in its interest in the Certificate. The adjusted basis in the interest in
the Certificate will equal its cost, increased by any OID or market discount
includible in income with respect to the interest in the Certificate prior to
its sale and reduced by any principal payments previously received with respect
to the interest in the Certificate and any amortized premium. Subject to the
market discount rules, gain or loss will be capital gain or loss if the
interest in the Certificate was held as a capital asset. Capital losses
generally may be used only to offset capital gains.
Non-U.S. Certificateholders
In general, a non-U.S. Certificateholder will not be subject to U.S. federal
income tax on interest (including OID) on a beneficial interest in a
Certificate unless (i) the non-U.S. Certificateholder actually or
constructively owns 10 percent or more of the total combined voting power of
all classes of stock of the Bank entitled to vote (or of a profits or capital
interest of the Trust if characterized as a partnership), (ii) the non-U.S.
Certificateholder is a controlled foreign corporation that is related to the
Bank (or the Trust if treated as a partnership) through stock ownership, (iii)
the non-U.S. Certificateholder is a bank receiving interest described in Code
Section 881(c)(3)(A), (iv) such interest is described in the applicable
Prospectus Supplement as contingent interest described in Code Section
871(h)(4), or (v) the non-U.S. Certificateholder bears certain relationships to
any holder of either the Seller's Certificate other than the Bank or any other
interest in the Trust not properly characterized as debt. To qualify for the
exemption from taxation, under currently applicable procedures, the last U.S.
Person in the chain of payment prior to payment to a non-U.S. Certificateholder
(the "Withholding Agent") must have received (in the year in which a payment of
interest or principal occurs or in either of the two preceding years) a
statement that (i) is signed by the non-U.S. Certificateholder under penalties
of perjury, (ii) certifies that the non-U.S. Certificateholder is not a U.S.
Person and (iii) provides the name and address of the non-U.S.
Certificateholder. The statement may be made on a Form W-8 or substantially
similar substitute form, and the non-U.S. Certificateholder must inform the
Withholding Agent of any change in the information on the statement within 30
days of the change. If a Certificate is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in that case, the signed statement must be accompanied by Form W-8 or
substitute form provided by the non-U.S. Certificateholder to the organization
or institution holding the Certificate on behalf of the non-U.S.
Certificateholder. The U.S. Treasury Department is considering implementation
of further certification requirements aimed at determining whether the issuer
of a debt obligation is related to holders thereof. The U.S. Treasury
Department recently issued final regulations which will revise some of the
foregoing procedures whereby, a non-U.S. Certificateholder may establish an
exemption from withholding beginning January 1, 2000. Non-U.S.
Certificateholders should consult their tax advisers concerning the impact to
them, if any, of such procedures.
Generally, any gain or income realized by a non-U.S. Certificateholder upon
retirement or disposition of an interest in a Certificate will not be subject
to U.S. federal income tax; provided that (i) in the case of a
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Certificateholder that is an individual, such Certificateholder is not present
in the United States for 183 days or more during the taxable year in which such
retirement or disposition occurs and (ii) in the case of gain representing
accrued interest, the conditions described in the preceding paragraph for
exemption from withholding are satisfied. Certain exceptions may be applicable,
and an individual non-U.S. Certificateholder should consult a tax adviser.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificateholder to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. Certificateholder would be required to file a federal income tax return
and, in general, would be subject to U.S. federal income tax (including the
branch profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificateholder
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
Information Reporting and Backup Withholding
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Certificateholder must be reported to the IRS, unless the
U.S. Certificateholder is an exempt recipient or otherwise establishes an
exemption. Compliance with the identification procedures (described in the
preceding section) would establish an exemption from backup withholding for a
non-U.S. Certificateholder who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either (i)
the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides certain identifying information in the
required manner, and in the case of a non-Certificateholder certifies that the
seller is a non-U.S. Certificateholder (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either (i)
the broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence. As defined by Treasury
regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker,
and the information reporting requirements generally will apply to a foreign
office of a U.S. broker as well as to a foreign office of a foreign broker (i)
that is a controlled foreign corporation within the meaning of section 957(a)
of the Code or (ii) 50 percent or more of whose gross income from all sources
for the three year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the foreign broker has been
existence) was effectively connected with the conduct of a trade or business
within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificateholder would be allowed as a refund or a credit against such
Certificateholder's U.S. federal income tax, provided that the required
information is furnished to the IRS.
Recently issued final Treasury regulations will revise some of the foregoing
information reporting and backup withholding procedures beginning January 1,
2000. Certificateholders should consult their tax advisers concerning the
impact to them, if any, of such revised procedures.
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State and Local Taxation
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local law. Each investor should consult its own
tax advisor regarding state or local tax consequences.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively, "Plans")
from engaging in certain transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to the Plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and Section 4975 of the Code for such persons, unless a
statutory, regulatory or administrative exemption is available. Plans that are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) are not subject to ERISA
requirements.
A violation of the prohibited transaction rules could occur if Certificates
or any Class or Series were to be purchased with "plan assets" of any Plan if
the Seller, the Trustee, any underwriters of such Class or Series or any of
their affiliates were a Party in Interest with respect to such Plan, unless a
statutory, regulatory, or administrative exemption is available or an exception
applies under a regulation (the "Plan Asset Regulation") issued by the
Department of Labor (the "DOL"). The Seller, the Trustee, any underwriters of a
Class or Series and their affiliates are likely to be Parties in Interest with
respect to many Plans. Before purchasing Certificates, a Plan fiduciary or
other Plan investor should consider whether a prohibited transaction might
arise by reason of the relationship between the Plan and the Seller, the
Trustee, any underwriters of such Class or Series or any of their affiliates
and consult their counsel regarding the purchase in light of the considerations
described below. The DOL has issued five class exemptions that may apply to
otherwise prohibited transactions arising from the purchase or holding of the
Certificates: DOL Prohibited Transaction Class Exemptions ("PTCE") 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-House Asset Managers),
95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts) and 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in the
Trust, and despite the agreement of the Seller and the Certificateholders to
treat each Class of Certificates as debt instruments, the Certificates are
likely to be considered equity interests in the Trust for purposes of the Plan
Asset Regulation, with the result that the assets of the Trust are likely to be
treated as "plan assets" of the investing Plans for purposes of ERISA and
Section 4975 of the Code and result in non-exempt prohibited transactions,
unless one of the following exceptions applies.
The first exception applies to a "publicly-offered security." A publicly-
offered security is a security that is (a) freely transferable, (b) part of a
class of securities that is owned, immediately subsequent to the initial
offering, by 100 or more investors who were independent of the issuer and of
one another ("Independent Investors") and (c) either is (i) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act, or (ii)
sold to the plan as part of an offering of securities to the public pursuant to
an effective registration statement under the Act and the class of securities
of which such security is a part is registered under the Exchange Act within
120 days (or such later time as may be allowed by the Commission) after the end
of the fiscal year of the issuer during which the offering of such securities
to the public occurred. For purposes of the 100 Independent Investor criterion,
except to the extent otherwise disclosed in the
65
<PAGE>
accompanying Prospectus Supplement, each Class of Certificates should be deemed
to be a "class" of securities that would be tested separately from any other
securities that may be issued by the Trust.
A second exception applies if equity participation in the entity by "benefit
plan investors" (i.e., Plans and other employee benefit plans not subject to
ERISA, such as governmental or foreign plans, as well as entities holding
assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in the Trust is not significant on any date on
which any Series of Certificates is issued and outstanding if, immediately
after the most recent acquisition of any equity interest in the Trust, less
than 25% of the value of each class of equity interests in the Trust (excluding
interests held by the Seller, the Trustee or their affiliates) is held by
benefit plan investors. No assurance can be given by the Seller as to whether
the value of each class of equity interests in the Trust held by benefit plan
investors will be "significant" upon completion of the offering of any Series
of Certificates or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions to this exception.
A third exception may also be available. On October 28, 1998, the DOL
authorized Capital One (the "Authorization") to rely upon the exemptive relief
from certain of the prohibited transaction provisions of ERISA and Section 4975
of the Code available under PTCE 96-62 relating to (1) the initial purchase,
the holding and the subsequent resale by Plans of classes of senior
certificates ("Senior Certificates") representing an undivided interest in a
credit card trust with respect to which Capital One is the sponsor; and (2) the
servicing, operation and management of such trust, provided that the general
conditions and certain other conditions set forth in the Authorization are
satisfied. The Authorization will apply to the acquisition, holding and resale
of the Senior Certificates by, on behalf of, or with "plan assets" of a Plan,
provided that certain conditions (certain of which are described below) are
met.
Among the conditions which must be satisfied for the Authorization to apply
are the following:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for such Senior Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a rating
at the time of such acquisition that is either in one of the two highest
generic rating categories from a Rating Agency or (ii) for Senior
Certificates of one year or less, the highest short-term generic rating
category from a Rating Agency; provided that, notwithstanding such rating,
credit support is provided to the Senior Certificates through a senior-
subordinated structure or other form of third-party credit support which,
at a minimum, represents 5% of the outstanding principal balance of the
Senior Certificates at the time of such acquisition;
(4) The Trustee is not an affiliate of any member of the Restricted Group
(as defined below);
(5) The sum of all payments made to and retained by the underwriters in
connection with the distribution of the Senior Certificates represents not
more than reasonable compensation for underwriting such Senior
Certificates; the consideration received by the Seller as a consequence of
the assignment of Receivables to the Trust, to the extent allocable to the
Senior Certificates, represents not more than the fair market value of such
Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Senior Certificates, represents
not more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith;
(6) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Act;
(7) The Trustee is a substantial financial institution or trust company
experienced in trust activities, is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA and, as the
legal owner
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<PAGE>
of (or holder of a perfected security interest in) the Receivables,
enforces all the rights created in favor of the Certificateholders,
including Plans;
(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Senior
Certificates held by any Plan pursuant to the Authorization;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Pooling Agreement and the Rating Agencies require the
Seller to maintain a Seller's Interest of not less than 2% of the principal
balance of the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of the
Rating Agencies and as specified in the Pooling Agreement, and the Pooling
Agreement requires that any change in the terms of the cardholder
agreements must be made applicable to the comparable segment of accounts
owned or serviced by the Bank which are part of the same program or have
the same or substantially similar characteristics;
(11) The Pooling Agreement limits the number of newly originated Accounts
to be designated to the Trust, unless the Rating Agencies otherwise consent
in writing, to the following: (a) with respect to any three-month period,
15% of the number of existing Accounts designated to the Trust as of the
first day of such period, and (b) with respect to any twelve-month period,
20% of the number of existing Accounts designated to the Trust as of the
first day of such twelve-month period;
(12) The Pooling Agreement requires the Seller to deliver an opinion of
counsel semi-annually confirming the validity and perfection of the
transfer of Receivables in newly originated Accounts to the Trust if such
an opinion is not delivered with respect to each interim addition; and
(13) The Pooling Agreement requires the Seller and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Senior Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Pooling Agreement
and ending in the calendar month prior to the date such confirmation is
issued); provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Trust also must meet the following requirements:
(a) The corpus of the Trust must consist only of Receivables of the type
which have been included in other investment pools;
(b) Certificates evidencing interests in such other investment pools have
been rated in one of the two highest generic rating categories by at least
one of the Rating Agencies for at least one year prior to the Plan's
acquisition of Certificates; and
(c) Certificates evidencing an interest in such other investment pools
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Senior Certificates.
Moreover, the Authorization provides relief from certain self-
dealing/conflict of interest prohibited transactions that may occur when a Plan
fiduciary causes a Plan to acquire Senior Certificates if the fiduciary (or its
affiliate) is an obligor on the Receivables held in the Trust; provided that
among other requirements: (a) in the case of an acquisition in connection with
the initial issuance of Senior Certificates, at least 50% of each Class of
Certificates in which Plans have invested is acquired by persons independent of
the Restricted Group and at least 50% of the aggregate interest in the Trust is
acquired by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the Trust is acquired by persons independent of the
Restricted Group; (b) such fiduciary (or its affiliate) is an obligor with
respect to 0.5% or less of the fair market value of the obligations contained
in the Trust; (c) the Plan's investment in Senior Certificates does not
67
<PAGE>
exceed 25% of all of the Senior Certificates outstanding after the acquisition;
and (d) no more than 25% of the assets of the Plan are invested in securities
representing an interest in one or more trusts containing assets sold or
serviced by the same entity. The Authorization does not apply to Plans
sponsored by the Seller, any underwriter of the Senior Certificates, the
Trustee, the Servicer, any obligor with respect to obligations included in the
Trust constituting more than 0.5% of the fair market value of the aggregate
undivided interest in the Trust allocated to the Senior Certificates of a
Series, determined on the date of the initial issuance of such Series, or any
affiliate of any such party (the "Restricted Group").
The DOL has designated the Authorization as an "underwriter exemption." As a
result, an insurance company investing solely assets of its general account may
be able to acquire and hold certain subordinated Certificates of a Series;
provided that (i) the Senior Certificates of that Series are eligible for
relief under the Authorization and (ii) such acquisition and holding satisfies
the conditions applicable under Sections I and III of PTCE 95-60.
If none of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to the Trust and the Trust were considered to hold "plan
assets" of Plans, transactions involving the Trust and Parties in Interest with
respect to a Plan that is a Certificateholder might be prohibited under Section
406 of ERISA and/or Section 4975 of the Code and result in excise tax and other
liabilities under ERISA and Section 4975 of the Code unless an exemption were
available. The five DOL class exemptions mentioned above may not provide relief
for all transactions involving the assets of the Trust even if they would
otherwise apply to the purchase of a Certificate by a Plan.
The Certificates of any Series may not be purchased with "plan assets" of a
Plan if the Seller, the Servicer, the Trustee or any of their affiliates (a)
has investment or administrative discretion with respect to such Plan assets;
(b) has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets, for a fee and pursuant to an agreement
or understanding that such advice (i) will serve as a primary basis for
investment decisions with respect to such Plan assets, and (ii) will be based
on the particular investment needs of such Plan; or (c) unless PTCE 95-60, 91-
38 or 90-1 applies, is an employer maintaining or contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates on behalf or with "plan assets" of any Plan should
consult their own counsel regarding whether the Trust Assets represented by the
Certificates would be considered "plan assets," the consequences that would
apply if the Trust Assets were considered "plan assets," and the availability
of exemptive relief from the prohibited transaction rules under the
Authorization or otherwise.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion
of the Plan's assets in the Certificates. Accordingly, among other factors,
Plan fiduciaries and other Plan investors should consider whether the
investment (i) satisfies the diversification requirement of ERISA or other
applicable law, (ii) is in accordance with the Plan's governing instruments,
and (iii) is prudent in light of other factors discussed in this Prospectus and
in the accompanying Prospectus Supplement.
PLAN OF DISTRIBUTION
The Bank may sell Certificates in any of three ways: (i) through underwriters
or dealers; (ii) directly to one or more purchasers; or (iii) through agents.
The related Prospectus Supplement will set forth the terms of the offering of
any Certificates offered hereby, including, without limitation, the names of
any underwriters, the purchase price of such Certificates and the proceeds to
the Bank from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
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<PAGE>
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of
commitment therefor. Such Certificates may be offered to the public either
through underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Unless otherwise set forth in the related
Prospectus Supplement, the obligations of the underwriters to purchase such
Certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Certificates if any of
such Certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Certificates of a Series offered hereby may also be offered and sold, if so
indicated in the related Prospectus Supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption or repayment
pursuant to their terms, by one or more firms ("remarketing firms") acting as
principals for their own accounts or as agents for the Bank. Any remarketing
firm will be identified and the terms of its agreement, if any, with the Bank
and its compensation will be described in the related Prospectus Supplement.
Remarketing firms may be deemed to be underwriters in connection with the
Certificates remarketed thereby.
Certificates may also be sold directly by the Bank or through agents
designated by the Bank from time to time. Any agent involved in the offer or
sale of Certificates will be named, and any commissions payable by the Bank to
such agent will be set forth in the related Prospectus Supplement. Unless
otherwise indicated in the related Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Certain
agents and underwriters may be entitled under agreements entered into with the
Bank to indemnification by the Bank against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Bank or its affiliates in the ordinary
course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Bank and the Trust by Orrick, Herrington & Sutcliffe LLP, Washington, D.C.,
and McGuire, Woods, Battle & Boothe LLP, Richmond, Virginia and for any
underwriters, agents or dealers by counsel named in the applicable Prospectus
Supplement. Certain Federal income tax matters will be passed upon for the Bank
by Tax Counsel, Orrick, Herrington & Sutcliffe LLP.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Certificates are issued, the reports
will be sent to Cede, as the nominee of DTC and the registered holder of the
Certificates. No financial reports will be sent to you.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Certificates with the
Commission. This Prospectus is part of the registration statement, but the
registration statement includes additional information.
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<PAGE>
The Servicer will file with the Commission all required annual, monthly and
special Commission reports and other information about the Trust.
You may read and copy any reports, statements or other information we file at
the Commission's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the Commission. Please call the Commission at
(800) SEC-0330 for further information on the operation of the public reference
rooms. Our Commission filings are also available to the public on the
Commission Internet site (http://www.sec.gov).
The Commission allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus. Information that we file later with
the Commission will automatically update the information in this Prospectus. In
all cases, you should rely on the later information over different information
included in this Prospectus or the accompanying Prospectus Supplement. We
incorporate by reference any future annual, monthly and special reports for the
Commission and proxy materials filed by or on behalf of the Trust until we
terminate our offering of the Certificates.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing us at:
Capital One Bank, in care of Capital One Services, Inc., 2980 Fairview Park
Drive, Suite 1300, Falls Church, Virginia 22042-4525, attention: Treasury
Department or calling us at (703) 205-1000.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounts............................................................. 14
Accumulation Period.................................................. 24
Act.................................................................. 29
Addition............................................................. 26
Addition Date........................................................ 26
Addition Discount Receivables........................................ 39
Additional Accounts.................................................. 27
Additional Seller.................................................... 47
Adjustment Payment................................................... 36
Aggregate Addition Limit............................................. 26
Assigned Assets...................................................... 21
Assumed Obligations.................................................. 21
Assuming Entity...................................................... 21
Authorization........................................................ 66
Automatic Additional Accounts........................................ 26
Bank................................................................. 14, 21
Bank Certificate..................................................... 22
Bank Portfolio....................................................... 14
Capital One.......................................................... 14
Capital One Services................................................. 52
Cash Collateral Account.............................................. 38
Cash Collateral Guaranty............................................. 38
Cash Collateral Guaranty Account..................................... 38
Cash Collateral Trust................................................ 38
Cede................................................................. 23
Cedel................................................................ 44
Cedel Participants................................................... 44
Certificateholder.................................................... 44
Certificateholders................................................... 18, 23, 46
Certificateholders' Interest......................................... 23
Certificates......................................................... 21
Citibank............................................................. 43
Class................................................................ 22
Class C Interests.................................................... 61
Code................................................................. 62
Collateral Indebtedness Interests.................................... 61
Collection Account................................................... 30
Commission........................................................... 20
Controlled Accumulation Amount....................................... 24
Controlled Amortization Amount....................................... 24
Controlled Amortization Period....................................... 24
Controlled Deposit Amount............................................ 24
Controlled Distribution Amount....................................... 24
Cooperative.......................................................... 45
Credit Enhancement................................................... 36
Credit Enhancer...................................................... 37
Date of Processing................................................... 32
Defaulted Amount..................................................... 36
Defaulted Receivables................................................ 35
Defeased Series...................................................... 47
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Deficit Controlled Accumulation
Amount.................................................................... 24
Deficit Controlled Amortization Amount..................................... 24
Definitive Certificates.................................................... 46
Deposit Account............................................................ 16
Depositaries............................................................... 43
Depositary................................................................. 16
Depository................................................................. 23
Determination Date......................................................... 19
Discount Option Receivables................................................ 39
Discount Option Receivables Collections.................................... 39
Discount Percentage........................................................ 39
Distribution Date.......................................................... 19
DOL........................................................................ 65
DTC........................................................................ 22
DTC Services............................................................... 45
Early Amortization Period.................................................. 25
Eligible Account........................................................... 50
Eligible Deposit Account................................................... 30
Eligible Institution....................................................... 30
Eligible Investments....................................................... 31
Eligible Receivable........................................................ 50
Enhancement Invested Amount................................................ 37
ERISA...................................................................... 65
Euroclear.................................................................. 45
Euroclear Operator......................................................... 45
Euroclear Participants..................................................... 44
Excess Finance Charges..................................................... 34
Excess Funding Account..................................................... 34
Excess Shared Principal Collections........................................ 33
Exchange Act............................................................... 20
Excluded Series............................................................ 33
Expected Final Payment Date................................................ 23
FDIA....................................................................... 58
FDIC....................................................................... 20
FFIEC...................................................................... 18
Finance Charge Receivables................................................. 22
FIRREA..................................................................... 58
Floating Allocation Percentage............................................. 32
Funding Period............................................................. 35
Funds...................................................................... 15
Funds Collateral........................................................... 16
Group...................................................................... 34
Holders.................................................................... 46
Independent Investors...................................................... 65
Indirect Participants...................................................... 43
Industry................................................................... 45
Ineligible Receivables..................................................... 48
Initial Accounts........................................................... 48
Initial Invested Amount.................................................... 33
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Initial Investor Amount.................................................... 35
Initial Principal Payment Date............................................. 24
Insolvency Event........................................................... 40
Interchange................................................................ 17
Interest Funding Account................................................... 23
Interest Payment Dates..................................................... 29
Invested Amount............................................................ 29
IRS........................................................................ 60
L/C Issuer................................................................. 38
Lending Guidelines......................................................... 15
MasterCard................................................................. 17
Miscellaneous Payments..................................................... 31
Monthly Period............................................................. 19
Monthly Report............................................................. 42
Monthly Servicing Fee...................................................... 41
Moody's.................................................................... 31
Morgan..................................................................... 43
New Issuance............................................................... 29
Non-Code Entity............................................................ 21
OID........................................................................ 62
Paired Series.............................................................. 35
Participants............................................................... 43
Participations............................................................. 26
Parties in Interest........................................................ 65
Pay Out Event.............................................................. 40
Paying Agent............................................................... 31
Payment Date............................................................... 42
Plan Asset Regulation...................................................... 65
Plans...................................................................... 65
Pooling Agreement.......................................................... 14
Prefunded Amount........................................................... 35
Prefunding Account......................................................... 35
Principal Allocation Percentage............................................ 32
Principal Commencement Date................................................ 23
Principal Funding Account.................................................. 24
Principal Payment Event.................................................... 24
Principal Payment Period................................................... 24
Principal Receivables...................................................... 22
Principal Sharing Series................................................... 33
Principal Shortfalls....................................................... 33
Principal Terms............................................................ 29
Prospectus Supplement...................................................... 22
PTCE....................................................................... 65
Rating Agency.............................................................. 26
Ratings Effect............................................................. 26
Receivables................................................................ 14
Record Date................................................................ 41
Recoveries................................................................. 36
Regulations................................................................ 61
Related Account............................................................ 19
Removal Date............................................................... 28
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ------
<S> <C>
Removal Notice Date...................................................... 28
Removed Accounts......................................................... 19
Required Designation Date................................................ 26
Required Principal Balance............................................... 33
Required Sellers' Interest............................................... 25
Required Sellers' Percentage............................................. 25
Reserve Account.......................................................... 38
Restricted Group......................................................... 68
Revolving Period......................................................... 23
SCC...................................................................... 57
Seller................................................................... 14
Seller's Certificate..................................................... 22
Seller's Interest........................................................ 31
Senior Certificates...................................................... 66
Separation............................................................... 20
Separation Agreement..................................................... 20
Series................................................................... 21
Series Cut-Off Date...................................................... 23
Series Enhancement....................................................... 37
Series Issuance Date..................................................... 48
Series Termination Date.................................................. 42
Service Transfer......................................................... 53
Servicer ................................................................ 14
Servicer Default......................................................... 53
Servicing Fee............................................................ 40
Shared Principal Collections............................................. 33
Signet................................................................... 20
Signet Bank.............................................................. 20
Special Payment Date..................................................... 40
Spread Account........................................................... 38
Standard & Poor's........................................................ 31
Subordinated Excess Principal Series..................................... 33
Subordinated Excess Principal Shortfall.................................. 34
Supplement............................................................... 18, 22
Supplemental Certificate................................................. 46
Systems.................................................................. 45
Tax Counsel.............................................................. 60
Tax Opinion.............................................................. 21
Termination Notice....................................................... 53
Terms and Conditions..................................................... 45
Transfer Deposit Amount.................................................. 49
Trust.................................................................... 14
Trust Assets............................................................. 22
Trust Cut-Off Date....................................................... 48
Trust Termination Date................................................... 47
Trustee.................................................................. 14
U.S. Certificateholder................................................... 60
U.S. Person.............................................................. 60
UCC...................................................................... 22
VISA..................................................................... 17
Withholding Agent........................................................ 63
</TABLE>
72
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Certificates
(the "Global Securities") will be available only in book-entry form. Unless
otherwise specified in a Prospectus Supplement for a Series, investors in the
Global Securities may hold such Global Securities through any of DTC, Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments
in both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
participants holding Global Securities will be effected on a delivery-against-
payment basis through Citibank and Morgan as the respective depositaries of
Cedel and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S. withholding
taxes, provided that such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or
their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co., as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
depositaries, Citibank and Morgan, which in turn will hold such positions in
accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to conventional asset-backed securities.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no "lock-
up" or restricted period. Global Securities will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to conventional
asset-backed securities.
Trading between Cedel and/or Euroclear Participants. Secondary market trading
between Cedel Participants and/or Euroclear Participants will be settled using
the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a participant at least one
business day prior to settlement. Cedel or Euroclear will instruct Citibank or
Morgan, respectively, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date. Payment will then be made by Citibank or Morgan to the DTC participant's
account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedel Participant's or Euroclear Participant's account. The Global
Securities credit will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day, when settlement
occurred in New York). If settlement is not completed on the intended value
date (i.e., the trade fails), the Cedel or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, Cedel
Participants or Euroclear Participants purchasing Global Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Securities were credited to their accounts. However, interest on the
Global Securities would accrue from the value date. Therefore, in many cases
the investment income on the Global Securities earned during that one-day
period may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each participant's particular cost of
funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending Global Securities to
Citibank or Morgan for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time zone
differences in their favor, Cedel and Euroclear Participants may employ their
customary procedures for transactions in which Global Securities are to be
transferred by the respective clearing system, through Citibank or Morgan, to a
DTC participant. The seller will send instructions to Cedel or Euroclear
through a participant at least one business day prior to settlement. In these
cases, Cedel or Euroclear will instruct Citibank or Morgan, as appropriate, to
deliver the Global Securities to the DTC participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the Cedel or Euroclear Participant's account would be back-valued to the value
date (which would be the preceding day, when settlement occurred in New York).
Should the Cedel or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedel or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically
A-2
<PAGE>
fail on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(1) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(2) borrowing the Global Securities in the U.S. from a DTC participant no
later than one day prior to settlement, which give the Global Securities
sufficient time to be reflected in their Cedel or Euroclear account in
order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside of the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless, under currently applicable law, (i) each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Certificates
that are non-U.S. Persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are beneficial owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Global Security holder, or
in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting
the appropriate form to the person through whom he holds (the clearing agency,
in the case of persons holding directly on the books of the clearing agency).
Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States, any state thereof, or any political subdivision of either (including
the District of Columbia), or (iii) an estate or trust of the income of which
is includible in
A-3
<PAGE>
gross income for United States tax purposes, regardless of its source. This
summary does not deal with all aspects of U.S. Federal income tax withholding
that may be relevant to foreign holders of these Global Securities. Investors
are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of these Global Securities. Further, the
U.S. Treasury Department has recently finalized new regulations that will
revise some aspects of the current system for withholding on amounts paid to
foreign persons. Under these regulations, interest or OID paid to a nonresident
alien would continue to be exempt from U.S. withholding taxes (including backup
withholding) provided that the holder complies with the new certification
procedure.
A-4
<PAGE>
[LOGO OF CAPITAL ONE(R) APPEARS HERE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
$
Floating Rate Asset Backed Certificates
SERIES 199 -
----------------
PROSPECTUS SUPPLEMENT
Dated ,
----------------
Underwriters of the Series 199 - certificates
A Co.
B Co.
C Co.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and
the accompanying prospectus. We have not authorized anyone to
provide you with different information.
We are not offering the Class A certificates and Class B
certificates in any state where the offer is not permitted.
Dealers will deliver a prospectus supplement and prospectus
when acting as underwriters of the Class A certificates and
Class B certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling
the Class A certificates and Class B certificates will deliver
a prospectus supplement and prospectus until , .
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Statement Fee..................................... $ 695,000**
Printing and Engraving Expenses................................ 300,000*
Trustee's Fees and Expenses.................................... 30,000*
Legal Fees and Expenses........................................ 400,000*
Blue Sky Fees and Expenses..................................... 50,000*
Accountants' Fees and Expenses................................. 120,000*
Rating Agency Fees............................................. 1,600,000*
Miscellaneous Fees and Expenses................................ 20,000*
----------
Total.................................................... $3,215,000*
==========
</TABLE>
- --------
* Estimate
** Actual
Item 15. Indemnification of Directors and Officers.
Article 10 of the Virginia Stock Corporation Act and the Bank's Articles of
Incorporation provide for indemnification of the Bank's directors and officers
in a variety of circumstances, which may include liabilities under the
Securities Act of 1933. In addition, the Bank carries insurance on behalf of
directors, officers, employees or agents which may cover liabilities under the
Securities Act of 1933.
Pursuant to Section [7] of the form of Underwriting Agreement, which is
attached as Exhibit 1.1 hereto, the Underwriters will agree to indemnify the
registrant, its directors and certain of its officers against certain civil
liabilities under the Securities Act of 1933.
Item 16. Exhibits.
1.1 --Form of Underwriting Agreement for the Certificates.
4.1 --Pooling and Servicing Agreement (incorporated by reference to Exhibit
5.1 to the registrant's Current Report on Form 8-K (File No. 0-23750)
filed with the Securities and Exchange Commission on February 2,
1994).
4.2 --Amendment No. 1 to the Pooling and Servicing Agreement, dated as of
May 17, 1994, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee (incorporated by reference to Exhibit
2 to the registrant's Current Report on Form 8-K (File No. 0-23750)
filed with the Securities and Exchange Commission on July 29, 1994).
4.3 --Form of Transfer and Assumption Agreement, dated as of November 22,
1994, by and among Signet Bank/Virginia, Capital One Bank, as Assuming
Entity, The Bank of New York, as Trustee and the other parties thereto
(incorporated by reference to Exhibit 4.5 to the registrant's Current
Report on Form 8-K (File No. 0-23750) filed with the Securities and
Exchange Commission on January 13, 1995).
4.4 --Amendment No. 2 to the Pooling and Servicing Agreement, dated as of
May 23, 1995, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee (incorporated by reference to the
registrant's Current Report on Form 8-K (File No. 0-25762) filed with
the Securities and Exchange Commission on September 29, 1995).
4.5 --Amendment No. 3 to the Pooling and Servicing Agreement, dated as of
October 15, 1997, between Capital One Bank, as Seller and Servicer,
and The Bank of New York, as Trustee (incorporated by reference to
Exhibit 99.1 to the registrant's Current Report on Form 8-K (File No.
0-25762) filed with the Securities and Exchange Commission on October
16, 1997).
II-1
<PAGE>
4.6 --Amendment No. 4 to the Pooling and Servicing Agreement, dated as of
April 24, 1998, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee.
4.7 --Form of Series Supplement (including form of Certificates).
5.1 --Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.
8.1 --Opinion of Orrick, Herrington & Sutcliffe LLP with respect to federal
tax matters.
23.1 --Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion
filed as Exhibit 5.1).
23.2 --Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion
filed as Exhibit 8.1).
24.1 --Powers of Attorney (included on Page II-4).*
- --------
* Previously filed.
Item 17. Undertakings.
The undersigned Registrant on behalf of the Capital One Master Trust (the
"Trust") hereby undertakes as follows:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; (iii) to
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement; provided,
however, that (a)(1)(i) and (a)(1)(ii) will not apply if the information
required to be included in a post-effective amendment thereby is contained
in periodic reports filed pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering hereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
under Item 15 above, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
II-2
<PAGE>
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final adjudication
of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, reasonably believes that the
security rating requirement contained in Transaction Requirement B.5 of Form S-
3 will be met by the time of sale of the securities registered hereunder and
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Falls Church,
Virginia, on January 28, 1999.
Capital One Bank, as Servicer,
on behalf of Capital One Master
Trust
/s/ John G. Finneran, Jr.
By: _________________________________
John G. Finneran, Jr.
Senior Vice President, General
Counsel
and Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed on January 28, 1999 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Richard D. Fairbank* Chairman of the Board of Directors and
______________________________________ Chief Executive Officer
Richard D. Fairbank
/s/ Nigel W. Morris* President, Chief Operating Officer and
______________________________________ Director
Nigel W. Morris
/s/ James M. Zinn* Chief Financial Officer and Director
______________________________________ (Principal Financial Officer and
James M. Zinn Principal Accounting Officer)
/s/ James A. Flick, Jr.* Director
______________________________________
James A. Flick, Jr.
/s/ James V. Kimsey* Director
______________________________________
James V. Kimsey
/s/ Stanley I. Westreich* Director
______________________________________
Stanley I. Westreich
/s/ John G. Finneran, Jr.*
______________________________________
John G. Finneran, Jr.
Attorney-in-Fact
</TABLE>
*Note: A Power of Attorney appointing John G. Finneran, Jr. and James M. Zinn,
or either of them acting singly, to execute the Registration Statements and any
amendments thereto on behalf of the above-named individuals previously was
filed with the Securities and Exchange Commission.
II-4
<PAGE>
EXHIBIT INDEX
Ehibitx
Number Descriptiion
1.1--Form of Underwriting Agreement for the Certificates.
4.1--Pooling and Servicing Agreement (incorporated by reference to Exhibit
5.1 to the registrant's Current Report on Form 8-K (File No. 0-23750)
filed with the Securities and Exchange Commission on February 2,
1994).
4.2--Amendment No. 1 to the Pooling and Servicing Agreement, dated as of
May 17, 1994, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee (incorporated by reference to Exhibit
2 to the registrant's Current Report on Form 8-K (File No. 0-23750)
filed with the Securities and Exchange Commission on July 29, 1994).
4.3--Form of Transfer and Assumption Agreement, dated as of November 22,
1994, by and among Signet Bank/Virginia, Capital One Bank, as Assuming
Entity, The Bank of New York, as Trustee and the other parties thereto
(incorporated by reference to Exhibit 4.5 to the registrant's Current
Report on Form 8-K (File No. 0-23750) filed with the Securities and
Exchange Commission on January 13, 1995).
4.4--Amendment No. 2 to the Pooling and Servicing Agreement, dated as of
May 23, 1995, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee (incorporated by reference to the
registrant's Current Report on Form 8-K (File No. 0-25762) filed with
the Securities and Exchange Commission on September 29, 1995).
4.5--Amendment No. 3 to the Pooling and Servicing Agreement, dated as of
October 15, 1997, between Capital One Bank, as Seller and Servicer,
and The Bank of New York, as Trustee (incorporated by reference to
Exhibit 99.1 to the registrant's Current Report on Form 8-K (File No.
0-25762) filed with the Securities and Exchange Commission on October
16, 1997).
4.6--Amendment No. 4 to the Pooling and Servicing Agreement, dated as of
April 24, 1998, between Capital One Bank, as Seller and Servicer, and
The Bank of New York, as Trustee.
4.7--Form of Series Supplement (including form of Certificates).
5.1--Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.
8.1--Opinion of Orrick, Herrington & Sutcliffe LLP with respect to federal
tax matters.
23.1--Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion
filed as Exhibit 5.1).
23.2--Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion
filed as Exhibit 8.1).
24.1--Powers of Attorney (included on Page II-4).*
- --------
* Previously filed.
<PAGE>
EXHIBIT 1.1
CAPITAL ONE BANK
$_________________ Class A Floating Rate Asset Backed Certificates,
Series 199_-_
Capital One Master Trust
REPRESENTATIVE FORM OF CLASS A UNDERWRITING AGREEMENT
________ __, 199_
[Class A Underwriter]
Ladies and Gentlemen:
Section 1. Introductory. Capital One Bank (the "Seller" and the
"Servicer"), has formed a master trust entitled the Capital One Master Trust
(the "Trust"), which has issued and will continue to issue, from time to time,
asset-backed securities (whether in certificated or uncertificated form, the
"Certificates") in one or more series (each, a "Series"). Each Certificate
evidences a fractional, undivided percentage interest or beneficial interest in
the Trust. 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 related property which has been conveyed and which will
continue to be conveyed to the Trust by the Seller. The Certificates to which
this Agreement applies will be issued pursuant to the Pooling and Servicing
Agreement, dated as of September 30, 1993, as amended and supplemented from time
to time (the "Base Pooling and Servicing Agreement"), between Capital One Bank
(as assignee and successor to Signet Bank/Virginia), as Seller and Servicer, and
The Bank of New York, as trustee (the "Trustee"), as supplemented by the Series
199_-_ Supplement, expected to be dated as of _________ __, 199_, between
Capital One Bank, as Seller and Servicer, and the Trustee (the "Series
Supplement," and together with the Base Pooling and Servicing Agreement, the
"Pooling and Servicing Agreement").
To the extent not defined herein, capitalized terms used herein shall
have the meanings specified in the Pooling and Servicing Agreement.
Pursuant to this Agreement, and subject to the terms hereof, the
Seller agrees to cause the Trust to sell to ___________________ (the "Class A
Underwriter") U.S. $____________ aggregate initial principal amount of Class A
Floating Rate Asset Backed Certificates, Series 199_-_ (the "Class A
Certificates"). Concurrently with the sale of the Class A Certificates, the
Seller proposes to cause the following to occur:
(a) The Trust will sell to ____________ (the "Class B Underwriter") U.S.
$___________ aggregate initial principal amount of Class B Floating Rate Asset
Backed Certificates, Series 199_-_ (the "Class B Certificates"), which will be
sold pursuant to a
<PAGE>
separate underwriting agreement between the Seller and the Class B Underwriter
(the "Class B Underwriting Agreement").
(b) The Trust will issue to a purchaser or purchasers to be determined
(the "Class C Interest Holder") U.S. $___________ aggregate initial principal
amount of Class C Floating Rate Asset Backed Interests, Series 199_-_ (the
"Class C Interests," and together with the Class B Certificates and Class A
Certificates, the "Series Interests"), which Class C Interests will be sold to
the Class C Interest Holder pursuant to a loan agreement (the "Loan
Agreement") among the Seller and the Servicer, the Class C Interest Holder and
the agent for the Class C Interest Holder.
(c) The Trust will cause a cash collateral account (the "Cash Collateral
Account") to be established in the name of the Trustee for the benefit of the
holders of the Series Interests and funded in the amount of $__________.
Section 2. Representations and Warranties of the Seller. The Seller
represents and warrants to the Class A Underwriter as of the date hereof and as
of the Closing Date as follows:
(a)(i) A registration statement on Form S-3 (No. 333-66335),
including a prospectus and such amendments thereto as may have been
required to the date hereof, relating to the offering of certificates as
described therein from time to time in accordance with Rule 415 under the
Securities Act of 1933 (the "Act") has been filed with the Securities and
Exchange Commission (the "Commission") (which may have included one or more
preliminary prospectuses and prospectus supplements (each, a "Preliminary
Prospectus") meeting the requirements of Rule 430 of the Act) and such
registration statement, as amended, has become effective; such registration
statement, as amended, and the prospectus relating to the sale of the Class
A Certificates and the Class B Certificates offered thereby by the Seller
constituting a part thereof, as from time to time amended or supplemented
(including any prospectus filed with the Commission pursuant to Rule 424(b)
of the rules and regulations of the Commission (the "Rules and
Regulations") under the Act), are respectively referred to herein as the
"Registration Statement" and the "Prospectus"; provided that a supplement
to the Prospectus prepared pursuant to Section 5(a) shall be deemed to have
supplemented the Prospectus only with respect to the offering of the Series
of the Certificates to which it relates; and the conditions to the use of a
registration statement on Form S-3 under the Act, as set forth in the
General Instructions to Form S-3, and the conditions of Rule 415 under the
Act, have been satisfied with respect to the Registration Statement.
(ii) As of the Closing Date, the Registration Statement and the
Prospectus, except with respect to any modification to which the Class A
Underwriter has agreed in writing, shall be in all substantive respects in
the form furnished to the Class A Underwriter before such date or, to the
extent not completed on such date, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus that has previously been furnished to the
Class A Underwriter) as the Seller has advised the Class A Underwriter,
before such time, will be included or made therein.
2
<PAGE>
(iii) On the effective date of the Registration Statement, the
Registration Statement conformed in all material respects with the
applicable requirements of the Act and the Rules and Regulations, and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and, on the Closing Date, the
Registration Statement and the Prospectus will conform in all material
respects with the applicable requirements of the Act and the Rules and
Regulations, and neither of such documents will include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that the foregoing does not apply to
information contained in or omitted from either of the documents based upon
written information furnished to the Seller by the Class A Underwriter
specifically for use in connection with the preparation of the Registration
Statement or the Prospectus.
(b) The Seller has been duly incorporated and is a banking
corporation validly existing under the laws of the Commonwealth of Virginia
and has, in all material respects, full power and authority to own its
properties and conduct its business as described in the Prospectus, is duly
qualified to do business and is in good standing (or is exempt from such
requirements), and has obtained all necessary material licenses and
approvals (except with respect to the state securities or Blue Sky laws of
various jurisdictions), in each jurisdiction in which failure to so qualify
or obtain such licenses and approvals would have a material adverse effect
on the interests of holders of the Certificates under the Pooling and
Servicing Agreement.
(c) The execution, delivery and performance by the Seller of this
Agreement, the Loan Agreement and the Pooling and Servicing Agreement, and
the issuance of the Series Interests and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Seller. Neither the
execution and delivery by the Seller of such instruments, nor the
performance by the Seller of the transactions herein or therein
contemplated, nor the compliance by the Seller with the provisions hereof
or thereof, will (i) conflict with or result in a breach of any of the
material terms and provisions of, or constitute a material default under,
any of the provisions of the Articles of Incorporation or By-laws of the
Seller, or (ii) conflict with any of the provisions of any law,
governmental rule, regulation, judgment, decree or order binding on the
Seller or its properties, or (iii) conflict with any of the provisions of
any material indenture, mortgage, agreement, contract or other instrument
to which the Seller is a party or by which it is bound, or (iv) result in
the creation or imposition of any lien, charge or encumbrance upon any of
its property pursuant to the terms of any such indenture, mortgage,
contract or other instrument.
(d) The Seller has duly executed and delivered this Agreement.
3
<PAGE>
(e) The Seller has authorized the conveyance of the Receivables and
the conveyance of an interest in the Seller's interest in any related Funds
Collateral to the Trust, and the Seller has authorized the Trust to issue
and sell the Class A Certificates.
(f) The Seller has delivered to the Class A Underwriter complete and
correct copies of publicly available portions of the Consolidated Reports
of Condition and Income of the Seller for the year ended _________ __,
199_, as submitted to the Governors of the Federal Reserve System. Except
as set forth in or contemplated in the Prospectus, there has been no
material adverse change in the condition (financial or otherwise) of the
Seller since __________ __, 199_.
(g) Any taxes, fees and other governmental charges in connection
with the execution, delivery and performance by the Seller of this
Agreement, the Loan Agreement, the Pooling and Servicing Agreement, and the
Class A Certificates shall have been paid or will be paid by the Seller at
or before the Closing Date to the extent then due.
(h) The Class A Certificates have been duly authorized. The Class A
Certificates, when validly issued in accordance with the Pooling and
Servicing Agreement and sold to the Class A Underwriter pursuant to this
Agreement, will conform in all material respects to the descriptions
thereof contained in the Prospectus and will be validly issued and entitled
to the benefits and security afforded by the Pooling and Servicing
Agreement. When executed and delivered by the parties thereto, each of the
Class A Certificates, the Pooling and Servicing Agreement and this
Agreement will constitute a legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms, except
to the extent that the enforceability thereof may be subject to bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
in general and the rights of creditors of state banking corporations as
such laws would apply in the event of the insolvency, liquidation or
reorganization or other similar occurrence with respect to the Seller or in
the event of any moratorium or similar occurrence affecting the Seller and
to general principles of equity. All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization,
or of any court, governmental agency or body or official (except with
respect to the state securities or Blue Sky laws of various jurisdictions),
required in connection with the valid and proper authorization, issuance
and sale of the Class A Certificates pursuant to this Agreement and the
Pooling and Servicing Agreement have been or will be taken or obtained on
or before the Closing Date.
(i) The Trust is not now, and following the sale of the Series
Interests, will not be, required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
(j) Except for the Class A Underwriter, the Seller has employed or
retained no broker, finder, commission agent or other person in connection
with the sale of the Class A Certificates, and the transactions
contemplated by this Agreement, and neither
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the Seller nor the Trust are under any obligation to pay any broker's fee
or commission in connection with such transactions.
(k) No Pay Out Event or any event which after any applicable grace
period will become a Pay Out Event is subsisting in relation to any
outstanding Certificates and no event has occurred which would constitute
(after an issue of Certificates) a Pay Out Event or any event which after
any applicable grace period will become a Pay Out Event.
(l) Based on information currently available to, and in the
reasonable belief of, the management of the Seller, the Seller is not
engaged (whether as defendant or otherwise) in, nor has the Seller
knowledge of the existence of, or any threat of, any legal, arbitration,
administrative or other proceedings the result of which might have a
material adverse effect on the Class A Certificateholders.
(m) The representations and warranties of the Seller and Servicer in
the Pooling and Servicing Agreement are true and correct in all material
respects.
Section 3. Purchase, Sale and Issuance of Class A Certificates. (a)
Subject to the terms and conditions and in reliance upon the covenants,
representations and warranties herein set forth, the Seller agrees to cause the
Trust to sell to the Class A Underwriter, and the Class A Underwriter agrees to
purchase, the Class A Certificates. The Class A Certificates will bear interest
at [one-month LIBOR] as determined each month plus __% per year. The sale and
purchase of the Class A Certificates shall take place at a closing (the
"Closing") at the offices of Orrick, Herrington & Sutcliffe LLP, 3050 K Street,
N.W., Washington, D.C., at 10:00 a.m., New York City time, on _____________ __,
199_ (the "Closing Date"). The purchase price for the Class A Certificates
shall be equal to ______% of the aggregate initial principal amount of the Class
A Certificates. On the Closing Date, the Class A Underwriter shall against
delivery of the Class A Certificates as set forth in clause (b), pay (or cause
to be paid) the purchase price to an account to be designated by the Seller.
(b) The Seller shall deliver the Class A Certificates to the Class A
Underwriter through the facilities of The Depository Trust Company ("DTC") of
Book-Entry Certificates. The Class A Certificates shall be global certificates
registered in the name of Cede & Co., as nominee for DTC. The number and
denominations of definitive certificates so delivered shall be as specified by
DTC. The definitive certificates for the Class A Certificates will be made
available for inspection by the Class A Underwriter at the offices of Orrick,
Herrington & Sutcliffe LLP, at the address set forth above, not later than 1:00
P.M., New York City time, or as the Class A Underwriter and the Seller shall
agree, on the Business Day before the Closing Date.
Section 4. Offering by Class A Underwriter.
(a) The Seller authorizes the Class A Underwriter to take all such
action as it may deem advisable in respect of all matters pertaining to
sales of the Class A Certificates to dealers and to retail purchasers and
to member firms and specialists, including the right to make variations in
the selling arrangements with respect to such sales. Upon the authorization
by the Class A Underwriter of the release of the Class A
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Certificates, the Class A Underwriter proposes to offer the Class A
Certificates for sale upon the terms and conditions set forth in the
Prospectus. If the Prospectus specifies an initial public offering price or
a method by which the price at which such Class A Certificates are to be
sold, then after the Class A Certificates are released for sale to the
public, the Class A Underwriter may vary from time to time the public
offering price, selling concessions and reallowances to dealers that are
members of the National Association of Securities Dealers, Inc. ("NASD")
and other terms of sale hereunder and under such selling arrangements.
(b) Notwithstanding the foregoing, the Class A Underwriter agrees
that it will not offer or sell any Class A Certificates within the United
States, its territories or possession or to persons who are citizens
thereof or residents therein, except in transactions that are not
prohibited by any applicable securities, bank regulatory or other
applicable law.
(c) The Class A Underwriter agrees that:
(i) 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 Class A Certificates in, from or otherwise
involving the United Kingdom;
(ii) 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 Class A 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;
(iii) 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 the
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
(iv) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (investment Advisements) (Exemptions)
Order 1996.
Section 5. Covenants of the Seller. The Seller covenants and agrees with
the Class A Underwriter that:
(a) The Seller will prepare a Prospectus Supplement setting forth
the amount of Class A Certificates covered thereby and the terms thereof
not otherwise specified in
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the Prospectus, the price at which the Class A Certificates are to be
purchased by the Class A Underwriter from the Seller, the initial public
offering price at which the Class A Certificates are to be sold, the
selling concessions and allowances, if any, and such other information as
the Seller deems appropriate in connection with the offering of the Class A
Certificates, but the Seller will not file any amendments to the
Registration Statement as in effect with respect to the Class A
Certificates, or any amendments or supplements to the Prospectus, without
the Class A Underwriter's prior consent (which consent shall not be
unreasonably withheld or delayed); the Seller will immediately advise the
Class A Underwriter and its counsel (i) when notice is received from the
Commission that any post-effective amendment to the Registration Statement
has become or will become effective and (ii) of any order or communication
suspending or preventing, or threatening to suspend or prevent, the offer
and sale of the Class A Certificates or of any proceedings or examinations
that may lead to such an order or communication, whether by or of the
Commission or any authority administering any state securities or Blue Sky
law, as soon as practicable after the Seller is advised thereof, and will
use its reasonable efforts to prevent the issuance of any such order or
communication and to obtain as soon as possible its lifting, if issued.
(b) If, at any time when a Prospectus relating to the Class A
Certificates is required to be delivered under the Act, any event occurs as
a result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with
the Act or the Rules and Regulations, the Seller will promptly prepare and
(subject to review and no reasonable objection by the Class A Underwriter
as described in Section 5(a)) file with the Commission, an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance; provided, however, that the Class A
Underwriter's consent to any amendment shall not constitute a waiver of any
of the conditions of Section 6.
(c) The Seller will make generally available to the holders of the
Class A Certificates (the "Certificateholders") (the Certificates being the
applicable clearing Agency in the case of Book-Entry Certificates), in each
case as soon as practicable, a statement which will satisfy the provisions
of Section 11(a) of the Act and Rule 158 of the Commission with respect to
the related Series of Certificates.
(d) The Seller will furnish to the Class A Underwriter copies of the
Registration Statement (at least one copy to be delivered to the Class A
Underwriter will be signed and will include all documents and exhibits
thereto or incorporated by reference therein), the Prospectus, and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as the Class A Underwriter reasonably
requests.
(e) The Seller will assist the Class A Underwriter in arranging for
the qualification of the Class A Certificates for sale and the
determination of their eligibility
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<PAGE>
for investment under the laws of such jurisdictions as the Class A
Underwriter may designate and will continue to assist the Class A
Underwriter in maintaining such qualifications in effect so long as
required for the distribution; provided, however, that neither the Seller
nor the Trust shall be required to qualify to do business in any
jurisdiction where it is now not qualified or to take any action which
would subject it to general or unlimited service of process in any
jurisdiction in which it is now not subject to service of process.
Section 6. Conditions to the Obligations of the Class A Underwriter. The
obligations of the Class A Underwriter to purchase and pay for the Class A
Certificates will be subject to the accuracy of the representations and
warranties on the part of the Seller herein as of the date hereof and the
Closing Date, to the accuracy of the statements of the Seller made pursuant to
the provisions thereof, to the performance by the Seller in all material
respects of its obligations hereunder and to the following additional conditions
precedent:
(a) The Class A Underwriter shall have received, with respect to the
Seller, a certificate, dated the Closing Date, of an authorized officer of
the Seller in which such officer, to the best of his or her knowledge after
reasonable investigation, shall state that (i) the representations and
warranties of the Seller in this Agreement are true and correct in all
material respects on and as of the Closing Date, (ii) the Seller has
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or before
the Closing Date, (iii) the Registration Statement has become effective, no
stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
threatened by the Commission, and (iv) since the date of the Prospectus,
there has been no material adverse change in the condition (financial or
otherwise) of the Seller except as set forth in or contemplated in the
Registration Statement and the Prospectus or as described in such
certificate.
(b) The Class A Underwriter shall have received an opinion of McGuire,
Woods, Battle & Boothe, L.L.P., Virginia counsel for the Seller, dated the
Closing Date, in form and substance satisfactory to the Class A Underwriter
and its counsel, to the effect that the statements in the Prospectus under
the heading "Certain Legal Aspects of the Receivables -- Transfer of
Receivables" to the extent they constitute matters of Virginia law or legal
conclusions with respect thereto, have been reviewed by such counsel and
are correct in all material respects. In rendering such opinion counsel
may (i) as to matters involving the application of laws other than the laws
of any jurisdiction other than the Commonwealth of Virginia, assume the
conformity of such laws with the laws of the Commonwealth of Virginia and
(ii) rely as to matters of fact, to the extent deemed proper and as stated
therein, on certificates of responsible officers of the Trust, the Seller
and public officials.
(c) The Class A Underwriter shall have received an opinion of General
Counsel of the Seller, dated the Closing Date, in form and substance
satisfactory to the Class A Underwriter and its counsel, to the effect
that:
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(i) The Seller has been duly incorporated and is a banking
corporation under the laws of the Commonwealth of Virginia, and has,
in all material respects, full corporate power and authority to own
its assets and operate its business as described in the Prospectus,
and had at all relevant times and now has, the corporate power and
authority to acquire, own and service the Receivables and its interest
in any related Funds Collateral transferred or proposed to be
transferred to the Trust as described in the Prospectus.
(ii) The Seller has full corporate power and authority to sign
the Registration Statement and to execute and deliver this Agreement,
and the Seller and the Servicer each have full corporate power and
authority to execute and deliver the Pooling and Servicing Agreement
and to consummate the transactions contemplated herein and therein.
(iii) The agreements referred to in clause (ii) have been
authorized by all necessary corporate action on the part of the Seller
and the Servicer and have been duly executed and delivered by the
Seller and the Servicer.
(iv) The Class A Certificates have been duly authorized by all
necessary corporate action on the part of the Seller and have been
duly executed and delivered by the Seller.
(v) No consent, approval, authorization or order of, or filing
with, any Virginia governmental agency or body or any Virginia court
is required on the part of the Seller or the Servicer under applicable
Virginia banking or other Virginia law for the consummation by the
Seller or the Servicer of the transactions contemplated in this
Agreement and in the Pooling and Servicing Agreement, except such as
have been obtained or made and such as may be required under state
securities or Blue Sky laws.
(vi) Neither the execution, delivery and performance by the
Seller or the Servicer of their obligations under this Agreement or
the Pooling and Servicing Agreement, the transfer by the Seller of the
Receivables and its interest in any related Funds Collateral to the
Trust, the issuance and sale of the Series Interests, nor the
consummation by the Seller or the Servicer of any other of the
transactions contemplated in this Agreement or the Pooling and
Servicing Agreement, will conflict with, result in a material breach
of or violation of any of the terms of, or constitute a default under,
the Articles of Incorporation or By-laws of the Seller or the
Servicer, each as amended, or any rule, order (known to such counsel),
statute or regulation, to the extent the foregoing relate to Virginia
banking or other Virginia laws, of any Virginia court, regulatory
body, administrative agency or governmental body having jurisdiction
over the Seller or
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the terms of any material indenture or other material agreement or
instrument known to such counsel to which the Seller or the Servicer
is a party or by which it or its properties are bound; provided,
however, that such counsel need express no opinion as to state
securities or Blue Sky laws.
(vii) No consent, approval, authorization or order of, or filing
with, any United States governmental agency or body or any United
States Federal court is required on the part of the Seller under
United States Federal law for consummation by the Seller of the
transactions contemplated in this Agreement or the Pooling and
Servicing Agreement, except such as have been obtained or made and
such as may be required under state securities or Blue Sky laws.
(viii) Neither the execution, delivery and performance by the
Seller or the Servicer of their obligations under this Agreement or
the Pooling and Servicing Agreement, the transfer by the Seller of the
Receivables and its interest in any related Funds Collateral to the
Trust, the issuance and sale of the Series Interests, nor the
consummation by the Seller or the Servicer of any other of the
transactions contemplated in this Agreement or the Pooling and
Servicing Agreement, will conflict with, result in a material breach
of or violation of any of the terms of, or constitute a default under
any rule, order, statute or regulation, to the extent the foregoing
relate to United States Federal law, of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Seller or the terms of any material indenture or other material
agreement or instrument which the Seller or the Servicer is a party or
by which it or its properties are bound; provided, however, that no
opinion is expressed with respect to any state securities or Blue Sky
laws.
(ix) Except as otherwise disclosed in the Prospectus or the
Registration Statement, to the knowledge of such counsel, there are no
actions, proceedings or investigations pending or threatened before
any court, administrative agency or other tribunal (A) asserting the
invalidity of this Agreement, the Pooling and Servicing Agreement or
the Series Interests, (B) seeking to prevent the issuance of the
Series Interests or the consummation of any of the transactions
contemplated by this Agreement, the Pooling and Servicing Agreement or
the Series Interests, which if adversely determined would materially
and adversely affect the holders of the Series Interests, or the
validity or enforceability of, this Agreement, the Pooling and
Servicing Agreement or the Class A Certificates, or (C) seeking
adversely to affect the United States Federal income tax attributes of
the Class A Certificates as described in the Prospectus under the
headings "Prospectus Summary -- Tax Status" and "Federal Income Tax
Consequences."
Subject to its customary practices and limitations relating to the scope of such
counsel's participation in the preparation of the Prospectus and its
investigation or verification of
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information contained therein, such counsel also shall state that nothing has
come to the attention of such counsel to cause it to believe that the Prospectus
on the Closing Date contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (other than tax,
ERISA, financial, numerical and statistical information contained therein and
distribution information as to which such counsel need express no opinion); in
rendering such opinion counsel may (x) as to matters involving the application
of laws other than the laws of any jurisdiction other than New York and the
United States of America, assume the conformity of such laws with the laws of
New York and (y) rely as to matters of fact, to the extent deemed proper and as
stated therein, on certificates of responsible officers of the Trust, the Seller
and the Servicer and public officials (references to the Prospectus in this
clause include any supplements thereto). In rendering such opinion counsel may
(x) as to matters involving the application of laws other than the laws of any
jurisdiction other than the Commonwealth of Virginia, assume the conformity of
such laws with the laws of the Commonwealth of Virginia and (y) rely as to
matters of fact, to the extent deemed proper and as stated therein, on
certificates of responsible officers of the Trust, the Seller and the Servicer
and public officials.
(d) The Class A Underwriter shall have received an opinion of Orrick,
Herrington & Sutcliffe LLP, special counsel for the Seller and the
Servicer, dated the Closing Date, in form and substance satisfactory to the
Class A Underwriter and its counsel, to the effect that:
(i) Each of this Agreement, the Pooling and Servicing Agreement
and the Class A Certificates constitutes the legal, valid and binding
obligation of the Seller and the Servicer enforceable against the
Seller and the Servicer in accordance with its terms.
(ii) The sale and delivery of the Class A Certificates in the
manner contemplated by this Agreement and the Pooling and Servicing
Agreement does not require (B) the registration of the Trust under the
1940 Act, or (C) the qualification of the Pooling and Servicing
Agreement under the United States Trust Indenture Act of 1939, as
amended.
(iii) The Class A Certificates when executed and authenticated in
accordance with the terms of the Pooling and Servicing Agreement and
paid for by the Class A Underwriter pursuant to this Agreement will be
duly issued and outstanding and will be entitled to the benefits of
the Pooling and Servicing Agreement.
(iv) This Agreement, the Pooling and Servicing Agreement and the
Class A Certificates conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(v) The statements in the Prospectus under the heading "Federal
Income Tax Consequences" and the summary thereof under the heading
"Summary of Terms -- Tax Status" and under the headings "Certain Legal
Aspects of the Receivables" and "ERISA Considerations" to the extent
they constitute matters of United States
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Federal law or legal conclusions with respect thereto, have been
reviewed by such counsel and are correct in all material respects.
Subject to its customary practices and limitations relating to the scope of such
counsel's participation in the preparation of the Prospectus and its
investigation or verification of information contained therein, such counsel
also shall state that nothing has come to the attention of such counsel to cause
it to believe that the Prospectus on the Closing Date contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading (other than financial, numerical and statistical
information contained therein and distribution information as to which such
counsel need express no opinion); in rendering such opinion counsel may (x) as
to matters involving the application of laws other than the laws of any
jurisdiction other than New York and the United States of America, assume the
conformity of such laws with the laws of New York and (y) rely as to matters of
fact, to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Trust, the Seller and the Servicer and public
officials (references to the Prospectus in this clause include any supplements
thereto).
(e) The Class A Underwriter shall have received (i) an opinion or
opinions of Orrick, Herrington & Sutcliffe LLP, special counsel for the
Seller and the Servicer, dated the Closing Date, in form and substance
satisfactory to the Class A Underwriter and its counsel, with respect to
certain matters relating to the transfer by the Seller of the Receivables
and its interest in any related Funds Collateral to the Trust, with respect
to the applicability of certain provisions of the Federal Deposit Insurance
Act, as amended by the Financial Institutions, Reform, Recovery and
Enforcement Act of 1989, with respect to the effect of receivership of the
Seller on such interest in the Receivables and any related Funds Collateral
and with respect to other related matters in a form approved by the Class A
Underwriter and its counsel and (ii) an opinion or opinions of McGuire,
Woods, Battle & Boothe, L.L.P., Virginia counsel for the Seller and the
Servicer, dated the Closing Date, in form and substance satisfactory to the
Class A Underwriter and its counsel, with respect to the perfection of the
Trust's interests in the Receivables and in the Seller's interest in any
related Funds Collateral and certain other matters relating to any
applicable Enhancement, with respect to the applicability of certain
provisions of the Virginia Banking Act and any applicable Virginia
insolvency law and with respect to Virginia tax consequences relating to
the Trust and the Series Interests in a form approved by the Class A
Underwriter and its counsel; in addition, the Class A Underwriter shall
have received a reliance letter with respect to any opinion that the Seller
or Servicer is required to deliver to any Rating Agency;
(f) The Class A Underwriter shall have received from Cravath, Swaine &
Moore a favorable opinion dated the Closing Date, with respect to the
issuance and sale of the Class A Certificates, the Pooling and Servicing
Agreement, the Prospectus and such other related matters as the Class A
Underwriter may reasonably require; and the Seller shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass on all such matters.
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(g) At the Closing Date, Ernst & Young, LLP, shall have furnished to
the Class A Underwriter a letter or letters, dated as of the Closing Date,
in form and substance satisfactory to the Class A Underwriter and its
counsel, confirming that they are certified independent public accountants
and stating in effect that they have performed certain specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the general
accounting records of the Trust and the Seller) set forth in the Prospectus
Supplement, agrees with the accounting records of the Trust and the Seller,
excluding any questions of legal interpretation.
(h) The Class A Underwriter shall have received evidence satisfactory
to it that, on or before the Closing Date, UCC-1 financing statements have
been filed in the offices of the State Corporation Commission of the
Commonwealth of Virginia, reflecting the interests of the Trust in the
Receivables and in the Seller's interest in any related Funds Collateral
and the proceeds thereof.
(i) The Class A Underwriter shall have received an opinion of Emmet,
Marvin & Martin, LLP, counsel to the Trustee, dated the Closing Date, in
form and substance satisfactory to the Class A Underwriter and its counsel,
to the effect that:
(i) The Trustee has been duly incorporated and is validly
existing as a banking corporation under the laws of the State of New
York and has the power and authority to enter into and to perform all
actions required of it under the Pooling and Servicing Agreement.
(ii) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and constitutes a
legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its terms, except as such
enforceability may be limited by (A) bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship, receivership
or other similar laws now or hereinafter in effect relating to the
enforcement of creditors' rights in general, as such laws would apply
in the event of a bankruptcy, insolvency, liquidation, reorganization,
moratorium, conservatorship, receivership or similar occurrence
affecting the Trustee, and (B) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) as well as concepts of reasonableness,
good faith and fair dealing.
(iii) The Class A Certificates have been duly authenticated and
delivered by the Trustee.
(iv) The execution and delivery of the Pooling and Servicing
Agreement by the Trustee and the performance by the Trustee of their
respective terms do not conflict with or result in a violation of (A)
any law or regulation of the United States of America or the State of
New York governing the banking or trust powers of the Trustee, or (B)
the Certificate of Incorporation or By-laws of the Trustee.
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(v) No approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the State of New York having jurisdiction over the banking or trust
powers of the Trustee is required in connection with the execution and
delivery by the Trustee of the Pooling and Servicing Agreement or the
performance by the Trustee thereunder.
(j) The Class A Certificates shall be rated at the time of issuance in
the highest rating category by Standard & Poor's Ratings Group and Moody's
Investors Service, Inc. and shall not have been placed on any credit watch
with a negative implication for downgrade.
(k) At or before the closing of the Class A Certificates, the Trust
shall have sold to the Class B Underwriter $__________ aggregate principal
amount of the Class B Certificates.
(l) At or before the closing of the Class A Certificates, the Trust
shall have duly issued to the Class C Interest Holder $____________
aggregate principal amount of the Class C Interests.
(m) At or before the closing of the Class A Certificates, the Cash
Collateral Account shall have been established in the name of the Trustee
for the benefit of the holders of the Series Interests, and shall have been
funded in the amount of $_________.
(n) The Class A Underwriter shall have received such information,
certificates and documents as the Class A Underwriter and its counsel may
reasonably request.
(o) All actions required to be taken and all filings required to be
made by the Seller under the Securities Act before the Closing Date for the
Certificates of such Series shall have been duly taken or made; and before
the applicable Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the Seller,
threatened by the Commission.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions or certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Class A Underwriter and its counsel, this Agreement and all
its obligations hereunder may be canceled at, or at any time before, the Closing
Date by the Class A Underwriter. Notice of such cancellation shall be given to
the Trust and the Seller in writing or by telephone or telecopy confirmed in
writing.
Section 7. Expenses. (a) Except as expressly set forth in this Agreement,
the Seller will pay all expenses incidental to the performance of its
obligations under this Agreement and will reimburse the Class A Underwriter for
any expenses reasonably incurred by it in connection with qualification of the
Class A Certificates and determination of their eligibility for investment
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under the laws of such jurisdictions as the Class A Underwriter may designate
(including reasonable fees and disbursements of its counsel) and the printing of
memoranda relating thereto, for any fees charged by investment rating agencies
for the rating of the Class A Certificates and for expenses incurred in
distributing the Prospectus (including any amendments and supplements thereto)
to the Class A Underwriter. Except as specifically provided in this Section and
in Section 8 of this Agreement, the Class A Underwriter will pay all of its own
costs and expenses (including the fees and disbursements of counsel), transfer
taxes on resales of Class A Certificates by it and any advertising expenses
connected with any offers it may make.
(b) If the sale of the Class A Certificates provided for herein is not
consummated because any condition to the obligations of the Class A Underwriter
set forth in Section 6 is not satisfied or because of any refusal, inability or
failure on the part of the Seller to perform any agreement herein or to comply
with any provision hereof other than by reason of (i) a default by the Class A
Underwriter or (ii) the occurrence of any event specified in Section 14(a), (b)
or (c) of this Agreement, the Seller will reimburse the Class A Underwriter upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by the Class A
Underwriter in connection with the proposed purchase, sale and offering of the
Class A Certificates.
Section 8. Indemnification. (a) The Seller will indemnify and hold
harmless the Class A Underwriter and each person, if any, who controls the Class
A Underwriter within the meaning of the Act or the Exchange Act and the
respective officers, directors and employees of each such person, against any
losses, claims, damages or liabilities, joint or several, to which the Class A
Underwriter or such controlling person may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse the Class A Underwriter and each such officer, director,
employee or controlling person for any legal or other expenses reasonably
incurred by the Class A Underwriter and each such officer, director, employee or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that (i) the Seller will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement in or omission or alleged omission made in any such documents
in reliance upon and in conformity with written information furnished to the
Seller by the Class A Underwriter specifically for use therein, and (ii) the
Seller shall not be liable to the Class A Underwriter to the extent that any
such loss, claim, damage or liability of the Class A Underwriter arises as a
result of a misstatement or omission or alleged misstatement or omission in any
Preliminary Prospectus that was corrected in the Prospectus (and copies of which
Prospectus were furnished to the Class A Underwriter) and the Class A
Underwriter, if required by law, failed to give or send to the purchaser, at or
before the written confirmation of sale, a copy of the Prospectus. This
indemnity agreement will be in addition to any liability which the Seller may
otherwise have.
15
<PAGE>
(b) The Class A Underwriter will indemnify and hold harmless the Seller
against any losses, claims, damages or liabilities to which the Seller may
become subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Seller by the Class A Underwriter specifically for use therein,
and will reimburse any legal or other expenses reasonably incurred by the Seller
in connection with investigating or defending any such loss, claim, damage,
liability or action. The Seller agrees with the Class A Underwriter that the
only information furnished to the Seller by the Class A Underwriter specifically
for use in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, is the information
under the heading "Underwriting" in any preliminary prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability that
the Class A Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
clause (a) or (b), notify the indemnifying party of the commencement thereof;
but the omission and/or delay so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under clause (a) or (b). In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with
defense thereof other than reasonable costs of investigation. If the defendants
in any action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to
16
<PAGE>
indemnify any indemnified party from and against any loss or liability by reason
of such settlement or judgment.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under this Section, then
such indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in this Section, (i) in such proportion as is appropriate to reflect
the relative benefits received by the Seller on the one hand and the Class A
Underwriter on the other from the offering of the Class A Certificates or (ii)
if the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Seller on the one
hand and the Class A Underwriter on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Seller on the one hand and the Class A Underwriter on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Seller bear to the total
underwriting discounts and commissions received by the Class A Underwriter. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Seller or by the Class A Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this clause (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
clause (d). Notwithstanding the provisions of this clause (d), the Class A
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Class A Certificates underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which the Class A Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the indemnifying party under this Section shall
be in addition to any liability which the indemnifying party may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls the indemnified party within the meaning of the Act.
Section 9. Survival of Representations and Obligations. The respective
agreements, representations, warranties and other statements made by the Seller
or its officers, including any such agreements, representations, warranties and
other statements relating to the Trust, and of the Class A Underwriter set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Class A Underwriter, the Seller or any of their respective
officers or directors or any controlling person, and will survive delivery of
and payment of the Class A Certificates. The
17
<PAGE>
provisions of Section 7 and Section 8 shall survive the termination or
cancellation of this Agreement.
Section 10. Notices. All communications hereunder shall be in writing and
effective only on receipt, and, if to the Class A Underwriter, will be mailed,
delivered or telecopied and confirmed to the address for the Class A Underwriter
set forth on the first page hereof, and, if sent to the Seller, will be mailed,
delivered or telecopied and confirmed to Capital One Bank, in care of Capital
One Services, Inc., 2980 Fairview Park Drive, Suite 1300, Falls Church, Virginia
22042, attention of General Counsel with a copy to Director of Securitization.
Section 11. Applicable Law, Entire Agreement. This Agreement will be
governed by and construed in accordance with the law of the State of New York.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.
Section 12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 8 hereof, and
their successors and assigns, and no other person will have any right or
obligation hereunder.
Section 13. Waivers; Headings. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
Section 14. Termination of the Obligations of the Class A Underwriter. The
obligations of the Class A Underwriter to purchase the Class A Certificates on
the Closing Date shall be terminable by the Class A Underwriter by written
notice delivered to the Seller if at any time on or before the Closing Date (a)
trading in securities generally on the New York Stock Exchange shall have been
suspended or materially limited, or there shall have been any setting of minimum
prices for trading on such exchange, (b) a general moratorium on commercial
banking activities in New York or Virginia shall have been declared by any of
Federal, New York or Virginia authorities, (c) there shall have occurred any
material outbreak or escalation of hostilities or other calamity or crisis, the
effect of which on the financial markets of the United States is such as to make
it, in the Class A Underwriter's judgment, impracticable to market the Class A
Certificates on the terms and in the manner contemplated in the Prospectus or
(d) any change or any development involving a prospective change, materially and
adversely affecting (i) the Trust Assets taken as a whole or (ii) the business
or properties of the Seller occurs, which, in the Class A Underwriter's
judgment, in the case of either clause (i) or (ii), makes it impracticable to
market the Class A Certificates on the terms and in the manner contemplated in
the Prospectus. Upon such notice being given, the parties to this Agreement
shall (except for the liability of the Seller under Section 7 and Section 8 and
the liability of the Class A Underwriter under Section 15) be released and
discharged from their respective obligations under this Agreement.
Section 15. Computational Materials and ABS Terms. (a) The Class A
Underwriter agrees to provide to the Seller, not less than two Business Days
prior to the date on which the
18
<PAGE>
Seller is required to file the Prospectus pursuant to Rule 424(b), any
information used by it (in such written or electronic format as required by the
Seller) with respect to the offering of the Class A Certificates that
constitutes "Computational Materials" as defined in the Commission's No-Action
Letter, dated May 20, 1994, addressed to Kidder, Peabody Acceptance Corporation
I, Kidder, Peabody & Co. Incorporated and Kidder Structured Asset Corporation
(as made generally applicable to registrants, issuers and underwriters by the
Commission's response to the request of the Public Securities Association dated
May 27, 1994 (the "Kidder/PSA Letter")), that is not contained in the Prospectus
(without taking into account information incorporated therein by reference).
(b) The Class A Underwriter agrees to provide to the Seller, not less
than two Business Days prior to the date on which the Seller is required to file
the Prospectus Supplement pursuant to Rule 424(b), any information used by it
(in such written or electronic format as required by the Seller) with respect to
the offering of the Class A Certificates that constitutes "ABS Term Sheets," as
defined in the Commission's No-Action Letter, dated February 17, 1995, addressed
to the Public Securities Association, that is not contained in the Prospectus
(without taking into account information incorporated therein by reference).
(c) The Class A Underwriter agrees, assuming all information provided by
the Seller is accurate and complete in all material respects, to indemnify and
hold harmless the Seller, each of the officers and directors of the Seller and
each person who controls the Seller within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Computational Materials or ABS Term Sheets, if any, provided by the Class A
Underwriter, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such indemnified party
for any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. The
obligations of the Class A Underwriter under this Section shall be in addition
to any liability that the Class A Underwriter may otherwise have. The procedures
set forth in Section 8(c) and 8(d) shall be equally applicable to this Section
17(c).
19
<PAGE>
If you are in agreement with the foregoing, please sign a counterpart
hereof and return it to the Seller, whereupon this letter and your acceptance
shall become a binding agreement between the Seller and the Class A Underwriter.
Very truly yours,
CAPITAL ONE BANK,
as Seller
By _____________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
[Class A Underwriter]
By ___________________________
Name:
Title:
<PAGE>
EXHIBIT 4.6
EXECUTION COPY
AMENDMENT NUMBER 4
TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NUMBER 4 TO THE POOLING AND SERVICING AGREEMENT, dated
as of April 24, 1998, (this "Amendment") is among CAPITAL ONE BANK, a Virginia
---------
banking corporation, as Seller and Servicer, and THE BANK OF NEW YORK, as
Trustee (the "Trustee") under the Pooling and Servicing Agreement dated as of
-------
September 30, 1993, between the Seller, the Servicer and the Trustee (as
amended, supplemented and in effect on the date hereof, the "Pooling and
-----------
Servicing Agreement").
- -------------------
RECITALS
WHEREAS, Capital One Bank wishes to amend certain provisions of the
Pooling and Servicing Agreement as provided herein in accordance with Section
13.01(a) of the Pooling and Servicing Agreement;
NOW THEREFORE, in consideration of the premises and the agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not
-----------
otherwise defined herein shall have the meanings specified in the Pooling and
Servicing Agreement.
SECTION 2. Amendment of Section 1.01.
-------------------------
(a) The definition of "Bank Certificate" in Section 1.01 of the
Pooling and Servicing Agreement shall be deleted in its entirety and replaced
with the following:
"Bank Certificate" shall mean, if the Bank or any Additional
----------------
Seller elects to evidence its interest in the Seller's Interest in
certificated form pursuant to Section 6.01, a certificate executed by
the Bank or any Additional Seller, as the case may be, and
authenticated by or on behalf of the Trustee, substantially in the
form of Exhibit A, as the same may be modified in accordance with
Section 2.08(f).
(b) The definition of "Certificateholder" or "Holder" in Section 1.01
of the Pooling and Servicing Agreement shall be deleted in its entirety and
replaced with the following:
<PAGE>
"Certificateholder" or "Holder" shall mean an Investor
----------------- ------
Certificateholder, a Person in whose name the Seller' Certificate is
registered in the Certificate Register, or any Person owning any part
of an uncertificated interest in the Seller's Interest.
SECTION 3. Amendment of Section 2.07(c). Section 2.07(c) of the
----------------------------
Pooling and Servicing Agreement shall be deleted in its entirety and replaced
with the following:
(c) Seller's Interest. Except for the conveyances hereunder, in
-----------------
connection with any transaction permitted by Section 7.02 or 7.05 and
as provided in Sections 2.08(f) and 6.03, the Seller agrees not to
transfer, assign, exchange or otherwise convey or pledge, hypothecate
or otherwise grant a security interest in the Seller's Interest,
whether represented by the Bank Certificate or any Supplemental
Certificate or by any uncertificated interest in the Seller's
Interest, and any such attempted transfer, assignment, exchange,
conveyance, pledge, hypothecation or grant shall be void; provided,
--------
however, that nothing in this Section 2.07(c) shall prevent the owner
-------
of an interest in the Seller's Interest, whether uncertificated or
represented by a certificate, from granting to an Affiliate a
participation interest or other beneficial interest in the rights to
receive cash flows related to the Seller's Interest, if (i) such
interest does not grant such Affiliate any rights hereunder or
delegate to such Affiliate any obligations or duties hereunder and
(ii) the transferor of such interest obtains the prior written consent
of the Bank and (iii) after giving effect to such transfer, the
interest in the Seller's Interest owned directly by the Bank
represents an undivided ownership interest in two percent (2.0%) or
more of the Trust Assets.
SECTION 4. Amendment of Section 2.08(f). Section 2.08(f) of the
----------------------------
Pooling and Servicing Agreement shall be deleted in its entirety and replaced
with the following:
(f) Additional Sellers. The Bank may designate Affiliates of
------------------
the Bank to be included as Sellers ("Additional Sellers") under this
Agreement by an amendment hereto pursuant to Section 13.01(a). If the
Bank elects to have its interest in the Seller's Interest evidenced by
a certificate as provided in Section 6.01 hereof, then in connection
with such designation, the Bank shall surrender the Bank Certificate
to the Trustee in exchange for a newly issued Bank Certificate
modified to reflect such Additional Seller's interest. If the Bank
elects to have its interest in the Seller's Interest be uncertificated
as provided in Section 6.01, the Bank shall instruct the Trustee in
writing to register the Additional Seller as the owner of the
appropriate interest in the Seller's Interest on the books and records
of the Trust. Prior to any such designation of an Additional Seller
and, if applicable, exchange of certificates, the conditions set forth
in section 6.03(c) or (d) as applicable, shall have been satisfied.
SECTION 5. Amendment of Section 2.11(b). Section 2.11(b) of the
----------------------------
Pooling and Servicing Agreement shall be amended by deleting the clause (ii) of
the first sentence thereof in its entirety and inserting in its place the
following:
2
<PAGE>
(ii) pay to the Holder of the Seller's Certificate, and if any owner
of an interest in the Seller's Interest elects to have such interest
be uncertificated as provided in Section 6.01 hereof, then to the
owner of such uncertificated interest in Seller's Interest, the
balance of such Discount Option Receivables Collections.
SECTION 6. Amendment of Section 4.01. Section 4.01 of the Pooling
-------------------------
and Servicing Agreement shall be amended by deleting the second sentence thereof
in its entirety and inserting in its place the following:
The Seller's Certificate shall represent the ownership interest in the
remainder of the Trust Assets not allocated pursuant to this Agreement
or any Supplement to the Certificateholders' Interest, including the
right to receive Collections with respect to the Receivables and other
amounts at the times and in the amounts specified in this Agreement or
any Supplement to be paid to the Seller on behalf of all of the
holders of the Seller's Certificate (the "Seller's Interest");
provided, however, that if the Bank or any Additional Seller elects to
-------- -------
have its interest in the Seller's Interest be uncertificated as
provided in Section 6.01 hereof, then such uncertificated interest,
together with any Seller's Certificate, shall represent the "Seller's
Interest"; provided further, that the Seller's Certificate, or any
-------- -------
uncertificated interest in the Seller's Interest, shall not represent
any interest in the Collection Account, the Excess Funding Account,
any Series Account or any Series Enhancement, except as specifically
provided in this Agreement or any Supplement; provided further that
----------------
the foregoing shall not be construed to limit the Trustee's
obligations to make payments to the Seller and the Servicer as and
when required under this Agreement and any Supplement.
SECTION 7. Amendment of Section 6.01. Section 6.01 of the Pooling
-------------------------
and Servicing Agreement shall be amended by deleting the second sentence thereof
in its entirety and inserting in its place the following:
The Bank or any Additional Seller may elect at any time, by written
notice to the Trustee, to have its interest in the Seller's Interest
be (i) an uncertificated interest or (ii) evidenced by a certificate.
If the Bank or any Additional Seller elects to have its interest in
the Seller's Interest be uncertificated, it shall deliver to the
Trustee for cancellation any Bank Certificate previously issued. If
the Bank or any Additional Seller elects to have its interest in the
Seller's Interest be evidenced by a certificate, the Bank Certificate
will be issued in registered form, substantially in the form of
Exhibit A and shall upon issue be executed and delivered by the Bank
to the Trustee for authentication and redelivery as provided in
Section 6.02. The Trustee shall keep with the books and records of
the Trust a register, in book-entry form, of each Person owning any
uncertificated interest in the Seller's Interest.
3
<PAGE>
SECTION 8. Amendment of Section 6.03(c).
----------------------------
(a) Section 6.03(c) of the Pooling and Servicing Agreement shall be
amended by deleting the first word "The" in the first sentence thereof and
inserting in its place the following:
If the Bank or any Additional Seller elects to have its interest in
the Seller's Interest evidenced by a certificate as provided in
Section 6.01 hereof, then the
(b) Section 6.03(c) of the pooling and Servicing Agreement shall be
further amendment by adding the following after the last sentence thereof:
If the Bank or any Additional Seller elects to have its interest in
the Seller's Certificate be uncertificated, then it may surrender such
interest in exchange for a Supplemental Certificate in accordance with
the requirements and subject to the satisfaction of the conditions in
this Section 6.03(c), and will instruct the Trustee in writing to
register such exchange on the books and records of the Trust.
Notwithstanding anything in this Agreement to the contrary and
subject to the related Supplement, any Holder of a Supplemental
Certificate that is an Affiliate of the Bank may elect at any time, by
written notice to the Trustee, to have its interest in the Seller's
Interest be (i) an uncertificated interest or (ii) evidenced by a
certificate. If the Holder of a Supplemental Certificate elects to
have its interest in the Seller's Interest be uncertificated, it shall
deliver to the Trustee for cancellation any Supplemental Certificate
previously issued and the Trustee make the appropriate entry in the
books and records of the Trust registering such uncertificated
interest in the Seller's Interest. If the owner of any such
uncertificated interest elects to have its interest in the Seller's
Interest be evidenced by a certificate, a Supplemental Certificate
will be issued in registered form and in the form provided in the
related Supplement.
SECTION 9. Amendment of Section 12.03. Section 12.03 of the Pooling
--------------------------
and Servicing Agreement shall be amended by deleting the first sentence thereof
in its entirety and inserting in its place the following:
Upon the termination of the Trust pursuant to Section 12.01 and, if
any part of the Seller's Interest is then evidenced by a certificate,
the surrender of such part the Seller's Certificate, the Trustee shall
sell, assign and convey to the Seller or its designee, without
recourse, representation or warranty, all right, title and interest of
the Trust in the Receivables, whether then existing or thereafter
created, all moneys due or to become due and all amounts received with
respect thereto and all proceeds thereof, except for amounts held by
the Trustee pursuant to Section 12.02(b).
SECTION 10. Effectiveness. The amendments provided for by this
-------------
Amendment shall become effective on the date that each of the following events
occur:
4
<PAGE>
(a) The Seller shall have delivered to the Trustee and each provider
of Series Enhancement an Officer's Certificate of the Seller stating that the
Seller reasonably believes that the execution and delivery of this Amendment
will not, based on the facts known to such officer at such time, have a material
adverse effect on the interests of the Certificateholders.
(b) The Seller shall have received from each Rating Agency written
confirmation that the execution and delivery of this Amendment will not have a
Ratings Effect and shall have delivered copies of each such confirmation to the
Servicer and the Trustee.
(c) The Servicer shall have delivered to the Trustee and any Series
Enhancer entitled thereto pursuant to the relevant Supplement an Opinion of
Counsel as to the matters specified in Exhibit H-1 to the Pooling and Servicing
Agreement with respect to this Amendment.
(d) Each of the parties hereto shall have received counterparts of
this Amendment, duly executed by each of the parties hereto.
(e) Each requirement of any Series Enhancement agreement applicable
to amendment of the Pooling and Servicing Agreement shall have been satisfied.
SECTION 11. Pooling and Servicing Agreement in Full Force and Effect
--------------------------------------------------------
as Amended. Except as specifically amended hereby, all of the terms and
- ----------
conditions of the Pooling and Servicing Agreement shall remain in full force and
effect. All references to the Pooling and Servicing Agreement in any other
document or instrument shall be deemed to mean such Pooling and Servicing
Agreement as amended by this Amendment. This Amendment shall not constitute a
novation of the Pooling and Servicing Agreement, but shall constitute an
amendment thereof. The parties hereto agree to be bound by the terms and
obligations of the Pooling and Servicing Agreement, as amended by this
Amendment, as though the terms and obligations of the Pooling and Servicing
Agreement were set forth herein.
SECTION 12. Counterparts. This Amendment may be executed in any
------------
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 13. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Pooling and Servicing Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
CAPITAL ONE BANK,
Seller and Servicer
By: /s/ Lee Jacobson
---------------------------------
Name: Lee Jacobson
Title: Assistant Treasurer
THE BANK OF NEW YORK,
Trustee
By: /s/ Cheryl Laser
--------------------------------
Name: Cheryl Laser
Title: Assistant Vice President
[Signature Page to Amendment Number 4 to the Pooling and Servicing Agreement]
<PAGE>
EXHIBIT 4.7
REPRESENTATIVE FORM OF SERIES SUPPLEMENT
================================================================================
SERIES 199_-_ SUPPLEMENT
Dated as of _________ __, 199_
to
POOLING AND SERVICING AGREEMENT
Dated as of September 30, 1993
$____________
CAPITAL ONE MASTER TRUST
SERIES 199_-_
between
CAPITAL ONE BANK
Seller and Servicer
and
THE BANK OF NEW YORK
Trustee
on behalf of the Series 199_-_ Certificateholders
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Creation of the Series 199_-_ Certificates
Section 1.01. Designation................................................... 1
ARTICLE II
Definitions
Section 2.01. Definitions................................................... 2
Section 2.02. Amendment to Section 2.08 of the Agreement................... 18
ARTICLE III
Servicer and Trustee
Section 3.01. Servicing Compensation....................................... 19
ARTICLE IV
Rights of Series 199_-_ Certificateholders and
Class C Interest Holders and
Allocation and Application of Collections
Section 4.01 Collections and Allocations.................................. 20
Section 4.02 Determination of Monthly Interest............................ 20
Section 4.03 Determination of Monthly Principal; Series 199_-_ Accounts;
Class A Accumulation Period.................................. 22
Section 4.04 Required Amount.............................................. 25
Section 4.05 Application of Class A Available Funds, Class B Available
Funds, Class C Available Funds and Available Investor Principal
Collections.................................................. 26
Section 4.06 Defaulted Amounts; Investor Charge-Offs...................... 28
Section 4.07 Excess Spread; Excess Finance Charges........................ 30
Section 4.08 Reallocated Principal Collections............................ 31
Section 4.09 Excess Finance Charges....................................... 33
Section 4.10 Shared Principal Collections; Excess Shared Principal
Collections.................................................. 33
Section 4.11 Reserve Account.............................................. 34
Section 4.12 Cash Collateral Account...................................... 35
<PAGE>
ARTICLE V
Distributions and Reports to Series 199_-_ Certificateholders
Section 5.01. Distributions.............................................. 37
Section 5.02. Reports and Statements to Series 199_-_ Certificateholders 38
ARTICLE VI
Additional Pay Out Events
Section 6.01. Additional Pay Out Events.................................. 39
ARTICLE VII
Optional Repurchase; Series Termination
Section 7.01. Optional Repurchase......................................... 40
Section 7.02. Series Termination.......................................... 41
ARTICLE VIII
Final Distributions
Section 8.01. Sale of Receivables or Certificateholders' Interest pursuant
to Section 2.06 or 9.01 of the Agreement.................... 41
Section 8.02. Distribution of Proceeds of Sale, Disposition or
Liquidation of the Receivables pursuant to Section 9.02
of the Agreement............................................ 43
ARTICLE IX
New Issuances; Addition of Accounts; Additional Issuances
Section 9.01. New Issuances............................................... 45
Section 9.02. Addition of Accounts........................................ 45
Section 9.03. Additional Issuances of Series 199_-_ Certificates.......... 45
ARTICLE X
Miscellaneous Provisions
Section 10.01. Ratification of Agreement................................... 47
Section 10.02. Counterparts................................................ 47
Section 10.03. Governing Law............................................... 47
Section 10.04. Determination of Material Adverse Effect.................... 48
Section 10.05. Book-Entry Certificates; Private Placement of Class B
Certificates................................................ 48
Section 10.06. Uncertificated Securities................................... 48
Section 10.07. Seller's Direction to the Trustee........................... 48
ii
<PAGE>
EXHIBITS
- --------
EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT B Form of Notification to the Trustee
EXHIBIT C Form of Monthly Certificateholders' Statement
EXHIBIT D Form of Monthly Servicing Officer's Certificate
iii
<PAGE>
SERIES 199_-_ SUPPLEMENT, dated as of _________ __, 199_
(the "Supplement"), between CAPITAL ONE BANK, a Virginia banking
corporation, as Seller and Servicer, and THE BANK OF NEW YORK, a
New York banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of September
30, 1993 (as amended and supplemented, the "Agreement"), among the Seller, the
Servicer and the Trustee, the Seller has created Capital One Master Trust (the
"Trust"). Section 6.03 of the Agreement provides that the Seller may from time
to time direct the Trustee to authenticate one or more new Series of Investor
Certificates representing fractional undivided interests in the Trust. The
Principal Terms of any new Series are to be set forth in a Supplement to the
Agreement.
Pursuant to this Supplement, the Seller and the Trustee shall create a
new Series of Investor Certificates and specify the Principal Terms thereof.
ARTICLE I
Creation of the Series 199_-_ Certificates
------------------------------------------
Section 1.01. Designation.
-----------
(a) There is hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Supplement to be known as "Capital One
Master Trust, Series 199_-_." The Series 199_-_ Certificates shall be issued in
two Classes, the first of which shall be known as the "Class A Floating Rate
Asset Backed Certificates, Series 199_-_" and the second of which shall be known
as the "Class B Floating Rate Asset Backed Certificates, Series 199_-_." In
addition, there is hereby created a third Class of uncertificated interests in
the Trust which, except as expressly provided herein, shall be deemed to be
"Investor Certificates" for all purposes under the Agreement and this Series
Supplement and which shall be known as the "Class C Floating Rate Asset Backed
Interests, Series 199_-_."
(b) Series 199_-_ shall be included in Group One and shall be a
Principal Sharing Series [and a Subordinated Excess Principal Series]. Series
199_-_ shall not be subordinated to any other Series. Notwithstanding any
provision in the Agreement or in this Supplement to the contrary, the first
Distribution Date with respect to Series 199_-_ shall be the _____________ 199_
Distribution Date.
(c) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Supplement shall govern.
(d) The Class C Interest Holders, as holders of an "Investor
Certificate" shall be entitled to the benefits of the Agreement and this
Supplement. Notwithstanding the
<PAGE>
foregoing, except as expressly provided herein, the provisions of Article VI and
Article XII of the Agreement relating to the registration, authentication,
delivery, presentation, cancellation and surrender of Registered Certificates
and clauses (a) and (c) of the definition of "Tax Opinion" in Section 1.01 of
the Agreement shall not be applicable to the Class C Interests. The Class C
Interests shall be deemed to arise upon the payment of the amounts due on the
Closing Date pursuant to the Loan Agreement.
ARTICLE II
Definitions
-----------
Section 2.01. Definitions.
-----------
(a) Whenever used in this Supplement, the following words and phrases
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Accumulation Period" shall mean the Class A Accumulation Period.
-------------------
"Additional Class A Certificates" shall have the meaning specified in
-------------------------------
Section 9.03(a).
"Additional Class B Certificates" shall have the meaning specified in
-------------------------------
Section 9.03(a).
"Additional Interest" shall mean, at any time of determination, the
-------------------
Class A Additional Interest, the Class B Additional Interest and the Class C
Additional Interest.
"Additional Investor Certificates" shall mean any one of the
--------------------------------
Additional Class A Certificates or the Additional Class B Certificates.
"Additional Issuance" shall have the meaning specified in Section
-------------------
9.03(a).
"Additional Issuance Date" shall have the meaning specified in Section
------------------------
9.03(a).
"Adjusted Invested Amount" shall mean, with respect to any date of
------------------------
determination, an amount equal to the Invested Amount less the Principal Funding
Account Balance on such date of determination.
"Available Cash Collateral Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) 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 with respect to such
date) and (b) the Required Cash Collateral Amount as of such date.
2
<PAGE>
"Available Expected Principal" for any date of determination with
----------------------------
respect to each Monthly Period shall be equal to the excess of (a) the Expected
Monthly Principal for such Monthly Period over (b) the sum of, without
duplication, all scheduled amortizations or accumulations of principal,
including past due shortfalls as of such date of determination, for all Non-
Variable Accumulation Series which are not scheduled to be in their revolving
periods as of such Monthly Period.
"Available Investor Principal Collections" shall mean, with respect to any
----------------------------------------
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to 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 which pursuant to
Section 4.08(a) or (b) are required to fund any deficiency in the amount to be
distributed pursuant to Sections 4.05(a)(i), (ii) and (iii), 4.05(b)(i) and (ii)
and 4.07(c)(II) for the related Distribution Date, plus (b) the amount of
----
Miscellaneous Payments, if any, for such Monthly Period that are allocated to
Series 199_-_ pursuant to Section 4.03 of the Agreement, plus (c) any Shared
----
Principal Collections with respect to other Series that are allocated to Series
199_-_ in accordance with Section 4.04 of the Agreement and Section 4.10 hereof,
plus (d) the amount of any Excess Shared Principal Collections from other Series
- ----
that are allocated to Series 199_-_, plus (e) the amount of funds to be
----
distributed pursuant to Section 4.05(a)(iii) with respect to the related
Distribution Date, plus (f) any other amounts which pursuant to Section 4.07
----
hereof are to be treated as Available Investor Principal Collections with
respect to the related Distribution Date plus (g) 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).
"Available Reserve Account Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and (b) the Required Reserve Account
Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Monthly Period, the
---------
annualized percentage equivalent of a fraction, the numerator of which is equal
to the sum of the Class A Monthly Interest, the Class B Monthly Interest, the
Class C Monthly Interest and the Monthly Servicing Fee with respect to the
related Distribution Date and the denominator of which is the Invested Amount as
of the last day of the preceding Monthly Period.
"Cash Collateral Account" shall have the meaning specified in Section
-----------------------
4.12(a).
"Cash Collateral Account Investments" shall mean Eligible Investments.
-----------------------------------
"Cash Collateral Surplus" shall mean, as of any date of determination,
-----------------------
the amount, if any, by which 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 on such date) exceeds the Required Cash
Collateral Amount. Any Cash Collateral Surplus shall be applied in accordance
with the Loan Agreement.
3
<PAGE>
"Class A Accumulation Period" shall mean, unless a Pay Out Event shall
---------------------------
have occurred prior thereto, the period commencing at the close of business on
the last day of the February 2002 Monthly Period or such later date as is
determined in accordance with Section 4.03(f) and ending on the first to occur
of (a) the commencement of the Early Amortization Period, (b) the payment in
full to Class A Certificateholders of the Class A Invested Amount or (c) the
Termination Date.
"Class A Accumulation Period Amount" shall mean for each Monthly
----------------------------------
Period, an amount equal to the product of (i) Available Expected Principal for
such Monthly Period and (ii) a fraction, the numerator of which is the Class A
Initial Invested Amount and the denominator of which is the sum of (a) the Class
A Initial Invested Amount and (b) the invested amounts of all other Variable
Accumulation Series which are not scheduled to be in their revolving periods as
of such Monthly Period; provided that, for purposes of this definition, the
--------
commencement date of the accumulation period of each such Variable Accumulation
Series shall be deemed to have been postponed to the latest permissible date,
determined as if the provisions of Section 4.03(f) applied to each such Series
with such changes as may be specified with respect to such Series (applying such
provisions first to the Variable Accumulation Series with the latest expected
final payment date and next to each Series with the next preceding expected
final payment date).
"Class A Accumulation Period Length" shall have the meaning specified
----------------------------------
in Section 4.03(f).
"Class A Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(a).
"Class A Adjusted Invested Amount" shall mean, with respect to any
--------------------------------
date of determination, an amount equal to the Class A Invested Amount less the
Principal Funding Account Balance on such date.
"Class A Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to 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 the Collections of Finance Charge Receivables
(other than Finance Charge Receivables allocated to Servicer Interchange with
respect to such Monthly Period) allocated to the Series 199_-_ Certificates
(including any investment earnings that are to be treated as Collections of
Finance Charge Receivables in accordance with the Agreement and this Supplement)
and (c) the amount of funds, if any, to be withdrawn from the Reserve Account
which, pursuant to Section 4.11(d), are required to be included in Class A
Available Funds with respect to such Distribution Date.
"Class A Certificate Rate" shall mean, for any Interest Period, a per
------------------------
annum rate equal to LIBOR for such Interest Period plus [__]%.
----
"Class A Certificateholder" shall mean the Person in whose name a
-------------------------
Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any of Certificates executed by the
--------------------
Bank and authenticated by or on behalf of the Trustee, substantially in the form
of Exhibit A-1. For the
4
<PAGE>
avoidance of doubt, when used in this Supplement the term "Class A Certificates"
shall include any Additional Class A Certificates.
"Class A Expected Final Payment Date" shall mean the __________ 200_
-----------------------------------
Distribution Date.
"Class A Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class A Adjusted Invested
Amount as of the close of business on the last day of the preceding Monthly
Period and the denominator of which is equal to the Adjusted Invested Amount as
of such day; provided, however, that, with respect to the first Monthly Period,
-------- -------
the Class A Floating Percentage shall mean the Class A Initial Percentage.
"Class A Initial Invested Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class A Certificates, which is $___________, and the
aggregate initial principal amount of any Additional Class A Certificates.
"Class A Initial Percentage" shall mean the percentage equivalent of a
--------------------------
fraction, the numerator of which is the Class A Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class A Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.02(a).
"Class A Invested Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) the Class A Initial Invested Amount, minus (b) the aggregate
-----
amount of principal payments made to the Class A Certificateholders on or prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
-----
Investor Charge-Offs for all prior Distribution Dates over the aggregate amount
----
of Class A Investor Charge-Offs reimbursed pursuant to Section 4.06(a) prior to
such date; provided, however, that the Class A Invested Amount may not be
-------- -------
reduced below zero.
"Class A Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.06(a).
"Class A Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class A Floating Percentage
for such Monthly Period.
"Class A Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(a).
"Class A Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(a).
"Class A Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class A Additional Interest previously due
but not paid to the Class A Certificateholders.
5
<PAGE>
"Class A Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class A Monthly Interest previously due but not
paid to the Class A Certificateholders.
"Class A Penalty Rate" shall mean the sum of the Class A Certificate
--------------------
Rate and 2.00% per annum.
"Class A Principal Percentage" shall mean, 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 A Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and the
denominator of which is the Invested Amount as of such day and (ii) during the
Class A Accumulation Period, Class B Amortization Period, Class C Amortization
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 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; provided,
--------
however, that, with respect to the first Monthly Period, the Class A Principal
- -------
Percentage shall mean the Class A Initial Percentage.
"Class A Required Amount" shall have the meaning specified in Section
-----------------------
4.04(a).
"Class A Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class B Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(b).
"Class B Amortization Period" shall mean the period commencing on the
---------------------------
Class B Principal Commencement Date and ending on the first to occur thereafter
of (a) the commencement of the Early Amortization Period, (b) the payment in
full to the Class B Certificateholders of the Class B Invested Amount or (c) the
Termination Date.
"Class B Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the Class B Floating Percentage of the Collections of
Finance Charge Receivables (other than Finance Charge Receivables allocated to
Servicer Interchange with respect to such Monthly Period) allocated to the
Series 199_-_ Certificates (including any investment earnings that are to be
treated as Collections of Finance Receivables in accordance with the Agreement).
"Class B Certificate Rate" shall mean, for any Interest Period, a per
------------------------
annum rate equal to LIBOR for such Interest Period plus [__]%.
----
"Class B Certificateholder" shall mean the Person in whose name a
-------------------------
Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed
--------------------
by the Bank and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-2.
6
<PAGE>
For the avoidance of doubt, the term "Class B
Certificates" when used in this Supplement shall include any Additional Class B
Certificates.
"Class B Expected Final Payment Date" shall mean the _________ 200_
-----------------------------------
Distribution Date.
"Class B Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Invested Amount as of
the close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Invested Amount as of the close of
business on such day; provided, however, that, with respect to the first Monthly
Period, the Class B Floating Percentage shall mean the Class B Initial
Percentage.
"Class B Initial Invested Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class B Certificates, which is $___________, and the
aggregate initial principal amount of any Additional Class B Certificates.
"Class B Initial Percentage" shall mean the percentage equivalent of a
--------------------------
fraction, the numerator of which is the Class B Initial Invested Amount and the
denominator of which is the Initial Invested Amount.
"Class B Interest Shortfall" shall have the meaning specified in
---------------------------
Section 4.02(b).
"Class B Invested Amount" shall mean, on any date of determination, an
------------------------
amount equal to (a) the Class B Initial Invested Amount, minus (b) the aggregate
-----
amount of principal payments made to the Class B Certificateholders prior to
such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
-----
all prior Distribution Dates, minus (d) the aggregate amount of Reallocated
-----
Principal Collections allocated on all prior Distribution Dates pursuant to
Section 4.08(a) (excluding any Reallocated Principal Collections that have
resulted in a reduction in the Class C Invested Amount pursuant to Section
4.06(c)), minus (e) an amount equal to the amount by which the Class B Invested
-----
Amount has been reduced on all prior Distribution Dates pursuant to Section
4.06(a), plus (f) the amount of Excess Spread and Excess Finance Charges
----
allocated and available on all prior Distribution Dates pursuant to Section
4.07(d) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e); provided, however, that the Class B Invested
-------- -------
Amount may not reduced below zero.
"Class B Investor Charge-Offs" shall have the meaning specified in
----------------------------
Section 4.06(b).
"Class B Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class B Floating Percentage
for such Monthly Period.
"Class B Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(b).
7
<PAGE>
"Class B Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(b).
"Class B Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class B Additional Interest previously due
but not paid to the Class B Certificateholders.
"Class B Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class B Monthly Interest previously due but not
paid to the Class B Certificateholders.
"Class B Penalty Rate" shall mean the sum of the Class B Certificate
--------------------
Rate and 2.00% per annum.
"Class B Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class A Invested Amount is paid in full.
"Class B Principal Percentage" shall mean, 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 Closing Date) and the
denominator of which is the Invested Amount as of such day and (ii) during the
Class A Accumulation Period, the Class B Amortization Period, the Class C
Amortization 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; provided,
however, that, with respect to the first Monthly Period, the Class B Principal
Percentage shall mean the Class B Initial Percentage.
"Class B Required Amount" shall have the meaning specified in Section
-----------------------
4.04(b).
"Class B Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class C Additional Interest" shall have the meaning specified in
---------------------------
Section 4.02(c).
"Class C Amortization Period" shall mean the period beginning on the
---------------------------
Class C Principal Commencement Date and ending on the first to occur thereafter
of (a) the commencement of the Early Amortization Period, (b) the payment in
full to the Class C Interest Holders of the Class C Invested Amount or (c) the
Termination Date.
"Class C Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the Class C Floating Percentage of the Collections of
Finance Charge Receivables (other than Finance Charge Receivables allocated to
Servicer Interchange with respect to such Monthly Period) allocated to the
Series 199_-_ Certificates (including any investment earnings that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement).
8
<PAGE>
"Class C Floating Percentage" shall mean, with respect to any Monthly
---------------------------
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class C Invested Amount as of the
close of business on the last day of the preceding Monthly Period and the
denominator of which is equal to the Adjusted Invested Amount as of such day;
provided, however, that with respect to the first Monthly Period, the Class C
- -------- -------
Floating Percentage shall mean the percentage equivalent of a fraction, the
numerator of which is the Class C Initial Invested Amount and the denominator of
which is the Initial Invested Amount.
"Class C Initial Invested Amount" shall mean $___________.
-------------------------------
"Class C Interest" shall mean a fractional undivided interest in the
----------------
Trust which shall consist of the right to receive, to the extent necessary to
make the required payments to a Class C Interest Holder under this Supplement
and under the Loan Agreement, the portion of Collections allocable thereto under
the Agreement and this Supplement, funds on deposit in the Collection Account
allocable thereto pursuant to the Agreement and this Supplement and, subject to
the rights of the other Series 199_-_ Certificateholders with respect thereto,
funds on deposit in the Cash Collateral Account and funds on deposit in the
Class C Spread Account available pursuant to the Loan Agreement.
"Class C Interest Holder" shall mean the entity so designated in the
-----------------------
Loan Agreement.
"Class C Interest Rate" shall mean the rate designated as such in the
---------------------
Loan Agreement, such rate not to exceed LIBOR plus [___]% per annum.
----
"Class C Interest Shortfall" shall have the meaning specified in
--------------------------
subsection 4.02(c).
"Class C Invested Amount" shall mean, when used with respect to any
-----------------------
date, an amount equal to (a) the Class C Initial Invested Amount, minus (b) 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 as provided in the Loan
Agreement), minus (c) an amount equal to the aggregate amount by which the Class
-----
C Invested Amount has been reduced on all prior Distribution Dates pursuant to
Section 4.06, plus (d) the aggregate amount of Excess Finance Charges and Excess
----
Spread allocated and available on all prior Distribution Dates pursuant to
Section 4.07(h) for the purpose of reimbursing amounts deducted pursuant to the
foregoing clause (c); provided, however, that the Class C Invested Amount may
-------- -------
not be reduced below zero.
"Class C Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Investor Default
Amount for the related Monthly Period and (ii) the Class C Floating Percentage
for such Monthly Period.
"Class C Monthly Interest" shall have the meaning specified in Section
------------------------
4.02(c).
9
<PAGE>
"Class C Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.03(c).
"Class C Outstanding Additional Interest" shall mean, with respect to
---------------------------------------
any Distribution Date, the amount of Class C Additional Interest previously due
but not paid to the Class C Interest Holders.
"Class C Outstanding Monthly Interest" shall mean, with respect to any
------------------------------------
Distribution Date, the amount of Class C Monthly Interest previously due but not
paid to the Class C Interest Holders.
"Class C Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class B Invested Amount is paid in full.
"Class C Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Class C Spread Account" shall mean the Spread Account as defined in
----------------------
the Loan Agreement.
"Closing Date" shall mean _________ __, 199_.
------------
"Controlled Accumulation Amount" shall mean for any Distribution Date
------------------------------
with respect to the Class A Accumulation Period, $____________; provided,
--------
however, that, if the Class A Accumulation Period is modified pursuant to
- -------
Section 4.03(f), (i) the Controlled Accumulation Amount for each Distribution
Date with respect to the Class A Accumulation Period shall mean the amount
specified in accordance with such Section on the date on which the Class A
Accumulation Period has most recently been modified, (ii) the Controlled
Accumulation Amount for each related Monthly Period shall be no greater than the
Class A Accumulation Period Amount for such Monthly Period and (iii) the sum of
the Controlled Accumulation Amounts for all Distribution Dates with respect to
the modified Class A Accumulation Period shall not be less than the Class A
Initial Invested Amount.
"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.
"Covered Amount" shall mean for any Distribution Date with respect to
--------------
the Class A Accumulation Period or the first Special Payment Date, if such
Special Payment Date occurs prior to the Class B Principal Commencement Date, an
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 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.
"Cut-Off Date" shall mean _____________ __, 199_.
------------
10
<PAGE>
"Deficit Controlled Accumulation Amount" shall mean (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.
"Early Amortization Period" shall mean the period commencing at the
-------------------------
close of business on the Business Day immediately preceding the day on which a
Pay Out Event with respect to Series 199_-_ is deemed to have occurred, and
ending on the first to occur of (i) the payment in full to the Class A
Certificateholders and the Class B Certificateholders of the Class A Invested
Amount and the Class B Invested Amount, respectively, and the payment in full to
the Class C Interest Holders of the Class C Invested Amount, if any, or (ii) the
Termination Date.
"Excess Shared Principal Collections" shall mean the excess of the
-----------------------------------
Shared Principal Collections over the aggregate amount of Principal Shortfalls
for all Series, as defined in each related Supplement, which are Principal
Sharing Series for such Distribution Date.
"Excess Spread" shall mean, with respect to any Distribution Date, the
-------------
sum of the amounts, if any, specified pursuant to Sections 4.05(a)(iv),
4.05(b)(iii) and 4.05(c)(ii) with respect to such Distribution Date.
"Expected Monthly Principal" shall be equal to the product of (i) the
--------------------------
lowest of the monthly principal payment rates (determined by dividing
Collections of Principal Receivables during a calendar month by the amount of
Principal Receivables in the Trust as of the last day of the preceding month,
adjusted for additions and removals occurring after such last day), expressed as
a decimal for the 12 calendar months preceding the date of such calculation (or
such lower principal payment rate as the Servicer may select) and (ii) the sum
of the Initial Invested Amounts (as defined in the related Supplement) of all
outstanding Series, other than Variable Funding Series.
"Finance Charge Shortfall" shall have the meaning specified in Section
------------------------
4.09.
"Fitch" shall mean Fitch IBCA, Inc.
-----
"Floating Allocation Percentage" shall mean, with respect to any
------------------------------
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Adjusted Invested Amount as
of the last day of the preceding Monthly Period and the denominator of which is
the sum of the total amount of Principal Receivables in the Trust and the
principal amount on deposit in the Excess Funding Account as of such last day;
provided, however, that, with respect to the first Monthly Period, the Floating
- -------- -------
Allocation Percentage shall mean the percentage equivalent of a fraction, the
numerator of which is the
11
<PAGE>
Initial Invested Amount and the denominator of which is the sum of the total
amount of Principal Receivables in the Trust on the Cut-Off Date and the
principal amount on deposit in the Excess Funding Account as of such day.
"Group One" shall mean Series 199_-_ and each other series specified
---------
in the related Supplement to be included in Group One.
"Initial Cash Collateral Amount" shall mean $___________.
------------------------------
"Initial Invested Amount" shall mean the sum of the Class A Initial
-----------------------
Invested Amount, the Class B Initial Invested Amount and the Class C Initial
Invested Amount.
"Initial Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Interest Payment Date" shall mean, with respect to the Class A
---------------------
Certificates, the Class B Certificates and the Class C Interests, the 15th day
of each month (or, if such day is not a Business Day, the next succeeding
Business Day), commencing on the __________ 199_ Distribution Date.
"Interest Period" shall mean with respect to any Payment Date, the
---------------
period from and including the Payment Date immediately preceding such Payment
Date (or, in the case of the first Payment Date, from and including the Closing
Date) to but excluding such Payment Date.
"Invested Amount" shall mean, as of any date of determination, an
---------------
amount equal to the sum of (a) the Class A Invested Amount as of such date, (b)
the Class B Invested Amount as of such date and (c) the Class C Invested Amount
as of such date.
"Investor Charge-Offs" shall mean Class A Investor Charge-Offs and
--------------------
Class B Investor Charge-Offs.
"Investor Default Amount" shall mean, with respect to any Distribution
-----------------------
Date, an amount equal to the product of (a) the Defaulted Amount for the related
Monthly Period and (b) the Floating Allocation Percentage for such Monthly
Period.
"LIBOR" shall mean, 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 shall 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
shall request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that day shall be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that day shall be
the arithmetic mean of the rates quoted by three major banks in New York City,
selected by the Servicer, at approximately
12
<PAGE>
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); provided, however, that
-------- -------
if the banks selected as aforesaid by the Servicer are not quoting as mentioned,
the rate for that day shall be the rate then in effect on such LIBOR
Determination Date.
"LIBOR Determination Date" shall mean, with respect to any Interest
------------------------
Period, the second London Business Day prior to the commencement of such
Interest Period (or, in the case of the initial Interest Period, the second
London Business Day prior to the Closing Date).
"Loan Agreement" shall mean the Loan Agreement among the Seller, the
--------------
Servicer, the Trustee, the Class C Interest Holders parties thereto from time to
time and the agent for the Class C Interest Holders, dated the date hereof, as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"London Business Day" shall mean a day on which dealings in deposits
-------------------
in United States dollars are transacted in the London interbank market.
"Monthly Interest" means, with respect to any Distribution Date, the
----------------
Class A Monthly Interest, the Class B Monthly Interest and Class C Monthly
Interest for such Distribution Date.
"Monthly Servicing Fee" shall have the meaning specified in Section
---------------------
3.01.
"Net Servicing Fee Rate" shall mean (i) so long as the Seller is the
----------------------
Servicer, 0.75%, (ii) if The Bank of New York is the Servicer, 1.25% per annum
and (iii) if the Seller or The Bank of New York is no longer the Servicer, 2.00%
per annum.
"Nonvariable Accumulation Series" shall mean Series 1993-1 and 1993-4
-------------------------------
and each outstanding Series that is not a Variable Funding Series or a Variable
Accumulation Series.
"Payment Date" shall mean any Interest Payment Date and any Special
------------
Payment Date.
"Portfolio Adjusted Yield" shall mean, with respect to any
------------------------
Distribution Date, the average of the percentages obtained for each of the three
preceding Monthly Periods by subtracting the Base Rate for each such Monthly
Period from the Portfolio Yield for each such Monthly Period.
"Portfolio Yield" shall mean, with respect to any Monthly Period, the
---------------
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) an amount equal to the product obtained by multiplying the Floating
Allocation Percentage with respect to such Monthly Period and the amount of
Collections of Finance Charge Receivables 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
Agreement) calculated on a billed basis, or, in the case of any such Collections
consisting of annual
13
<PAGE>
membership fees, on an amortized (rather than billed) basis, plus (b) the amount
----
of any Principal Funding Investment Proceeds for the related Distribution Date,
plus (c) any Excess Finance Charges that are allocated to Series 199_-_ with
- ----
respect to such Monthly Period, plus (d) the amount of funds, if any, withdrawn
----
from the Reserve Account which, pursuant to Section 4.11(d), are required to be
included as Class A Available Funds for the Distribution Date with respect to
such Monthly Period, minus (e) the Investor Default Amount for the Distribution
-----
Date with respect to such Monthly Period, and the denominator of which is the
Invested Amount as of the last day of the preceding Monthly Period.
"Principal Allocation Percentage" shall mean, with respect to any day
-------------------------------
during a 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 Cut-Off Date)
and (b) after the end of the Revolving 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 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 after the commencement of the Class A Accumulation
- -------- -------
Period, the Class B Amortization Period, the Class C Amortization Period or the
Early Amortization Period a Pay Out Event occurs with respect to another Series
that was designated in the Supplement therefor as a Series that is a "Paired
Series" with respect to Series 199_-_, the Seller may, by written notice
delivered to the Trustee and the Servicer, designate a different numerator for
the foregoing fraction, provided that (x) such numerator is not less than the
Adjusted Invested Amount as of the last day of the revolving period for such
Paired Series and (y) the Seller shall have received written notice from each
Rating Agency that such designation will not have a Ratings Effect and shall
have delivered copies of each such written notice to the Servicer and the
Trustee and the Seller shall have delivered to the Trustee an Officer's
Certificate to the effect that, based on the facts known to such officer at that
time, in the reasonable belief of the Seller, 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 199_-_.
"Principal Funding Account" shall have the meaning set forth in
-------------------------
Section 4.03(d)(i).
"Principal Funding Account Balance" shall mean, with respect to any
---------------------------------
date of determination during the Class A Accumulation Period, the principal
amount, if any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Funding Investment Proceeds" shall have the meaning
-------------------------------------
specified in Section 4.03(d)(ii).
"Principal Shortfall" shall have the meaning specified in Section
-------------------
4.10.
14
<PAGE>
"Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Monthly Period, the product of (a) the Principal Allocation Percentage with
respect to such Monthly Period, (b) the aggregate amount of Collections in
respect of Principal Receivables deposited in the Collection Account for such
Monthly Period and (c) the sum of the Class B Floating Percentage and the Class
C Floating Percentage with respect to such Monthly Period.
"Reassignment Amount" shall mean, with respect to any Distribution
-------------------
Date, after giving effect to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (i) the Adjusted Invested Amount on such
Distribution Date, plus (ii) Monthly Interest for such Distribution Date and any
----
Monthly Interest previously due but not distributed to the Series 199_-_
Certificateholders and the Class C Interest Holders on a prior Distribution
Date, plus (iii) the amount of Additional Interest, if any, for such
----
Distribution Date and any Additional Interest previously due but not distributed
to the Series 199_-_ Certificateholders and the Class C Interest Holders on a
prior Distribution Date.
"Reference Banks" shall mean four major banks in the London interbank
---------------
market selected by the Servicer.
"Required Cash Collateral Amount" shall mean, 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 date, and (b) ____% and (ii) $_________; provided,
--------
however, that (i) if there are any withdrawals from the Cash Collateral Account
- -------
pursuant to Section 4.12(c), or a Pay Out Event occurs with respect to Series
199_-_, then the Required Cash Collateral Amount for any Distribution Date 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,
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 199_-_ Certificateholders or the Class C Interest Holders, if (q) 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 Series 199_-_ Certificates or the Class C Interests and (r) 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 199_-_.
"Required Draw Amount" shall have the meaning specified in Section
--------------------
4.12(c).
"Required Reserve Account Amount" shall mean, with respect to any
-------------------------------
Distribution Date prior to the Reserve Account Funding Date, $_________, and on
or after the Reserve Account Funding Date, an amount equal to (a) the product of
(i) $_________ and (ii) the Reserve Account Factor for such Distribution Date,
or (b) any other amount designated by the Seller, provided that, if such
designation is of a lesser amount, the Seller (i) shall have received written
notice from each Rating Agency that such designation will not have a Ratings
Effect and
15
<PAGE>
shall have delivered copies of each such written notice to the Servicer and the
Trustee, and (ii) 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 designation will not
cause a Pay Out Event or an event that, after the giving of notice or the lapse
of time, would cause a Pay Out Event, to occur with respect to Series 199_-_.
"Reserve Account" shall have the meaning specified in Section 4.11(a).
---------------
"Reserve Account Factor" shall mean, with respect to any date of
----------------------
determination, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the number of Monthly Periods
scheduled to be included in the Class A Accumulation Period as of such date and
the denominator of which is twenty.
"Reserve Account Funding Date" shall mean the Distribution Date with
----------------------------
respect to the Monthly Period which commences 12 months prior to the Monthly
Period which as of the related Determination Date is scheduled to commence the
Class A Accumulation Period in accordance with Section 4.03(f) provided that the
Seller may delay the Reserve Account Funding Date to the Distribution Date which
occurs not later than the number of months prior to the scheduled commencement
date of the Class A Accumulation Period determined in accordance with the
following schedule:
<TABLE>
<CAPTION>
=============================================================================================
Portfolio Adjusted Yield Number of Months
- ------------------------ (rounded up to nearest whole number)
---------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Less than 2% 12 x Reserve Account Factor
- ---------------------------------------------------------------------------------------------
2% or more, but less than 3% 6 x Reserve Account Factor
- ---------------------------------------------------------------------------------------------
3% or more, but less than 4% 4 x Reserve Account Factor
- ---------------------------------------------------------------------------------------------
4% or more 3 x Reserve Account Factor
=============================================================================================
</TABLE>
"Reserve Account Surplus" shall mean, as of any date of determination,
-----------------------
the amount, if any, by which the amount on deposit in the Reserve Account
exceeds the Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in Section
-------------------
4.11(c).
"Revolving Period" shall mean the period beginning at the close of
----------------
business on the Cut-Off Date and ending on the earlier of (a) the close of
business on the day the Class A Accumulation Period commences and (b) the close
of business on the day the Early Amortization Period commences.
"Series 199_-_" shall mean the Series of Investor Certificates
-------------
(including any Additional Investor Certificates), the terms of which are
specified in this Supplement (and, for the Class C Interests, in the Loan
Agreement), and shall include the Class A Certificates, the Class B Certificates
and the Class C Interests.
"Series 199_-_ Certificateholder" shall mean a Class A
--------------------------------
Certificateholder or a Class B Certificateholder.
16
<PAGE>
"Series 199_-_ Certificate" shall mean a Class A Certificate or a
-------------------------
Class B Certificate.
"Series 199_-_ Holder" shall mean a Class A Certificateholder, a Class
--------------------
B Certificateholder or a Class C Interest Holder.
"Servicer Interchange" shall mean, for any Monthly Period, the product
--------------------
of (a) the Floating Allocation Percentage for such Monthly Period and (b) the
portion of Collections of Finance Charge Receivables allocated to the Series
199_-_ Certificates and the Class C Interests with respect to such Monthly
Period that is attributable 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)
___%.
"Servicing Base Amount" shall have the meaning specified in Section
---------------------
3.01.
"Servicing Fee Rate" shall mean ____%.
------------------
"Special Payment Date" shall mean each Distribution Date with respect
--------------------
to the Early Amortization Period.
"Subordinated Excess Principal Series," shall mean Series 199_-_ and
------------------------------------
each other Series specified in the related supplement to be a Subordinated
Excess Principal Series.
"Subordinated Excess Principal Shortfall" shall have the meaning
---------------------------------------
specified in Section 4.10.
"Telerate Page 3750" shall mean the display page currently so
------------------
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for purpose of displaying comparable rates or prices).
"Termination Date" shall mean the ___________ 200_ Distribution Date.
----------------
"Variable Accumulation Series" shall mean each outstanding Series,
----------------------------
other than Series 1993-1 and 1993-4 and any Variable Funding Series, for which,
pursuant to the terms of the related Supplement, at the time a determination is
made pursuant to Section 4.03(f), the commencement date of the Accumulation
Period may be changed.
"Variable Funding Series" shall mean any Series designated in the
-----------------------
related Supplement as a Variable Funding Series.
(b) Notwithstanding anything to the contrary in this Supplement or the
Agreement, the term "Rating Agency" shall mean, whenever used in this Supplement
or the Agreement with respect to Series 199_-_, Moody's and Standard & Poor's
and Fitch. As used in this Supplement and in the Agreement with respect to
Series 199_-_, "highest investment category" shall mean (i) in the case of
Standard & Poor's, A-1+, AAA, AAAm or AAAm-G, as
17
<PAGE>
applicable, (ii) in the case of Moody's, P-1 or Aaa, as applicable and (iii) in
the case of Fitch, if rated by Fitch, F-1+ or AAA, as applicable; provided,
--------
however, that notwithstanding any other provision of the Agreement or this
- -------
Supplement to the contrary, for purposes of the investment of funds in the Cash
Collateral Account on and after the Class B Principal Commencement Date,
"highest investment category" as used in the definition of "Eligible
Investments" shall mean (i) in the case of Standard & Poor's, A-1, A-1+ or AAA,
as applicable, (ii) in the case of Moody's, P-1 or Aaa, as applicable and (iii)
in the case of Fitch, if rated by Fitch, F-1 or F-1+, or AAA, as applicable.
(c) Notwithstanding any provision of the Agreement or this Supplement,
the term "Paying Agent" when used in the Agreement or this Supplement with
respect to Series 199_-_, shall mean, the Paying Agent specified pursuant to the
Agreement, and any successor paying agents with respect to the Class A
Certificates, the Class B Certificates and the Class C Interests as the Seller
may appoint from time to time in accordance with the provisions of the Pooling
and Servicing Agreement.
(d) All capitalized terms used herein and not otherwise defined herein
have the meanings ascribed to them in the Agreement.
(e) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Supplement shall refer to this Supplement as a whole
and not to any particular provision of this Supplement; references to any
Article, Section or Exhibit are references to Articles, Sections and Exhibits in
or to this Supplement unless otherwise specified; and the term "including" means
"including without limitation."
Section 2.02. Amendment to Section 2.08 of the Agreement. Section
------------------------------------------
2.08(c)(i) of the Agreement is hereby amended and restated in its entirety to
read as follows:
(c) Automatic Additional Accounts. (i) The Seller may from time to
-----------------------------
time, at its sole discretion, subject to and in compliance with the
limitations specified in clause (ii) below and the applicable conditions
specified in paragraph (d) below, designate Eligible Accounts to be
included as Accounts as of the applicable Additional Cut-Off Date. For
purposes of this paragraph, Eligible Accounts shall be deemed to include
only consumer revolving credit card accounts or other consumer revolving
credit accounts which (x) are originated by the Seller or any Affiliate of
the Seller, (y) are of a type included as Initial Accounts or which have
previously been included in any Addition which has been effected in
accordance with all of the conditions specified in paragraph (d) below and
(z) have a designation other than "Associate 20," "Associate 21,"
"Associate 195," "Associate 196" or "Associate 197" marketing programs in
the Seller's credit card master file.
18
<PAGE>
ARTICLE III
Servicer and Trustee
--------------------
Section 3.01. Servicing Compensation. The share of the Servicing Fee
----------------------
allocable to the Series 199_-_ Certificateholders and the Class C Interest
Holders with respect to any Distribution Date (the "Monthly Servicing Fee")
shall be equal to one-twelfth the product of (a) the Servicing Fee Rate and (b)
the Adjusted Invested Amount, if any, 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, with
-------- -------
respect to the first Distribution Date, the Monthly Servicing Fee (the "Initial
Servicing Fee") shall be equal to the Servicing Fee accrued on the Initial
Invested Amount at the Net Servicing Fee Rate for the period from the Closing
Date to but excluding the first Distribution Date. On each Distribution Date,
but only if the Seller 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. 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 of Servicer Interchange. The share of the Monthly
Servicing Fee allocable to the Class A Certificateholders (after giving effect
to the distribution of Servicer Interchange, if any, 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, that
-------- -------
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, and provided further, that with
-------- -------
respect to the first Distribution Date following the Monthly Period in which an
Additional Issuance Date occurs the Class A Servicing Fee shall be increased by
an amount equal to the product of (a) the Net Servicing Fee Rate, (b) 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 and the denominator of which is 360, (c) the increase in the Invested
Amount as a result of such Additional Issuance and (d) the Class A Floating
Percentage with respect to such Distribution Date. The share of the Monthly
Servicing Fee allocable to the Class B Certificateholders (after giving effect
to the distribution of Servicer Interchange, if any, 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, that
-------- -------
with respect to the first Distribution Date, the Class B Servicing Fee shall be
equal to product of the Class B Floating Percentage as of the first Distribution
Date and the Initial Servicing Fee, and provided, further, that with respect to
-------- -------
the first Distribution Date following the Monthly Period in which an Additional
Issuance Date occurs, the Class B Servicing Fee shall be increased by an amount
equal to the product of (a) the Net Servicing Fee Rate, (b) 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 and the
denominator of which is 360, (c) the increase in the Invested Amount as a result
of such Additional Issuance and (d) the Class B Floating Percentage with respect
to such Distribution Date. The share of the Monthly Servicing Fee allocable to
the Class
19
<PAGE>
C Interest Holders (after giving effect to the distribution of Servicer
Interchange, if any, to the Servicer) with respect to such Distribution Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(c) the Class C Floating Percentage, (b) the Net Servicing Fee Rate and (c) the
Servicing Base Amount; provided, however, that 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
Seller or the Certificateholders of other Series (as provided in the related
Supplements) and in no event shall the Trust, the Trustee, the Series 199_-_
Certificateholders or the Class C Interest Holders be liable for the share of
the Servicing Fee to be paid by the Seller or the Certificateholders of any
other Series. The (i) Class A Servicing Fee shall be payable to the Servicer
solely to the extent amounts are available for distribution in respect thereof
pursuant to Section 4.05(a)(ii), 4.07(a), 4.08(a) or 4.12(c); (ii) the Class B
Servicing Fee shall be payable solely to the extent amounts are available for
distribution in respect thereof pursuant to Section 4.05(b)(ii), 4.07(c),
4.08(b) or 4.12(c); and (iii) the Class C Servicing Fee shall be payable solely
to the extent amounts are available for distribution in respect thereof pursuant
to Section 4.05(c)(i), 4.07(f) or 4.12(c).
ARTICLE IV
Rights of Series 199_-_ Certificateholders and
Class C Interest Holders and
Allocation and Application of Collections
-----------------------------------------
Section 4.01. Collections and Allocations. The Servicer will apply,
---------------------------
or will instruct the Trustee to apply, all Collections and other funds on
deposit in the Collection Account that are allocated to the Series 199_-_
Certificates and the Class C Interests as described in this Article IV.
Section 4.02. Determination of Monthly Interest.
---------------------------------
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to the product of
(i) a fraction, the numerator of which is the actual number of days in the
period from and including the preceding Distribution Date (or, for the first
Distribution Date, the Closing Date) to but excluding such Distribution Date and
the denominator of which is 360, (ii) the Class A Certificate Rate and (iii) the
outstanding principal balance of the Class A Certificates as of the preceding
Record Date; provided, however, that, 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 and the denominator of which is 360, (b)
the Class A Certificate Rate and (c)
20
<PAGE>
the increase in the outstanding principal balance of the Class A Certificates as
a result of such Additional Issuance.
On the Determination Date preceding each Payment Date, the Servicer
shall determine the excess, if any (the "Class A Interest Shortfall"), of (x)
the Class A Monthly Interest for the Interest Period applicable to such Payment
Date over (y) the aggregate amount of funds allocated and available to pay such
----
Class A Monthly Interest on such Payment Date. If the Class A Interest
Shortfall with respect to any Payment Date is greater than zero, an additional
amount ("Class A Additional Interest") equal to the product of (i) a fraction,
the numerator of which is the actual number of days from and including the
preceding Distribution Date to but excluding such Distribution Date and the
denominator of which is 360, (ii) the Class A Penalty Rate and (iii) such Class
A Interest Shortfall (or the portion thereof which has not been paid to Class A
Certificateholders) shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such Payment Date to
and including the Payment Date on which such Class A Interest Shortfall is paid
to Class A Certificateholders. Notwithstanding anything to the contrary herein,
Class A Additional Interest shall be payable or distributed to Class A
Certificateholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to the product of
(i) a fraction, the numerator of which is the actual number of days from and
including the preceding Distribution Date (or, for the first Distribution Date,
the Closing Date) to but excluding such Distribution Date, and the denominator
of which is 360, (ii) the Class B Certificate Rate and (iii) the outstanding
principal balance of the Class B Certificates as of the preceding Record Date;
provided, however, 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 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.
On the Determination Date preceding each Payment Date, the Servicer
shall determine the excess, if any (the "Class B Interest Shortfall"), of (x)
the Class B Monthly Interest for the Interest Period applicable to such Payment
Date over (y) the aggregate amount of funds allocated and available to pay such
----
Class B Monthly Interest on such Payment Date. If the Class B Interest
Shortfall with respect to any Payment Date is greater than zero, an additional
amount ("Class B Additional Interest") equal to the product of (i) a fraction,
the numerator of which is the actual number of days from and including the
preceding Distribution Date to but excluding such Distribution Date and the
denominator of which is 360, (ii) the Class B Penalty Rate and (iii) such Class
B Interest Shortfall (or the portion thereof which has not been paid to Class B
Certificateholders) shall be payable as provided herein with respect to the
Class B Certificates on each Distribution Date following such Payment Date to
and including the Payment Date on which such Class B Interest Shortfall is paid
to Class B Certificateholders. Notwithstanding anything to the contrary herein,
Class B Additional Interest shall be payable or distributed to Class B
Certificateholders only to the extent permitted by applicable law.
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<PAGE>
(c) The amount of monthly interest ("Class C Monthly Interest")
distributable from the Collection Account with respect to the Class C Interests
on any Distribution Date shall be 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 (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
Class C Initial Invested Amount at the Class C Interest Rate for the period from
the Closing Date to but excluding the first Distribution Date.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class C Interest Shortfall"),
of (x) the Class C Monthly Interest for such Distribution Date over (y) the
----
aggregate amount of funds allocated and available to pay such Class C Monthly
Interest on such Distribution Date (including the proceeds of any draw made on
the Class C Spread Account as provided in the Loan Agreement). If the Class C
Interest Shortfall with respect to any Distribution Date is greater than zero,
an additional amount ("Class C Additional Interest") equal to the product of (i)
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, (ii) the Class C Interest
Rate and (iii) such Class C Interest Shortfall (or the portion thereof which has
not been paid to the Class C Interest Holders) shall be payable as provided
herein with respect to the Class C Interests on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class C Interest Shortfall is paid to the Class C Interest Holders.
Notwithstanding anything to the contrary herein, Class C Additional Interest
shall be payable or distributed to the Class C Interest Holders only to the
extent permitted by applicable law.
Section 4.03. Determination of Monthly Principal; Series 199_-_
-------------------------------------------------
Accounts; Class A Accumulation Period.
- -------------------------------------
(a) The amount of monthly principal ("Class A Monthly Principal")
distributable from the Collection Account with respect to the Class A
Certificates on each Distribution Date, beginning with the first to occur of (i)
the first Special Payment Date, if any, and (ii) the first Distribution Date
with respect to the Class A Accumulation Period, shall be equal to the least of
(x) the Available Investor Principal Collections on deposit in the Collection
Account with respect to such Distribution Date, (y) 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 (z) the Class A Adjusted Invested Amount on such
Distribution Date.
(b) The amount of monthly principal ("Class B Monthly Principal")
distributable from the Collection Account with respect to the Class B
Certificates on each Distribution Date, beginning with the Class B Principal
Commencement Date, shall be equal to the lesser of (x) the Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Investor Principal
-----
22
<PAGE>
Collections applied to Class A Monthly Principal on such Distribution Date) and
(y) the Class B Invested Amount on such Distribution Date.
(c) The amount of monthly principal ("Class C Monthly Principal")
distributable from the Collection Account with respect to the Class C Invested
Amount on each Distribution Date, beginning with the Class C Principal
Commencement Date, shall be equal to the lesser of (x) the Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Investor Principal
-----
Collections applied to Class A Monthly Principal and Class B Monthly Principal
on such Distribution Date) and (y) the Class C Invested Amount on such
Distribution Date.
(d)(i) The Servicer, for the benefit of the Class A
Certificateholders, shall establish and maintain in the name of the
Trustee, on behalf of the Trust, an Eligible Deposit Account (the
"Principal Funding Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Class A
Certificateholders. The Principal Funding Account shall initially be
established with Harris Trust and Savings Bank.
(ii) At the direction of the Servicer, funds on deposit in the
Principal Funding Account shall be invested by the Trustee in Eligible
Investments selected by the Servicer. All such Eligible Investments
shall be held by the Trustee for the benefit of the Class A
Certificateholders; provided that on each Distribution Date all interest
--------
and other investment income (net of losses and investment expenses)
("Principal Funding Investment Proceeds") on funds on deposit therein
shall be applied as set forth in paragraph (iii) below. Funds on deposit
in the Principal Funding Account shall be invested in Eligible
Investments that will mature so that such funds will be available at the
close of business on the Transfer Date preceding the following
Distribution Date. No Eligible Investment shall be disposed of prior to
its maturity; provided, however, that the Trustee may sell, liquidate or
-------- -------
dispose of an Eligible Investment before its maturity, if so directed by
the Servicer, the Servicer having reasonably determined that the interest
of the Class A Certificateholders may be adversely affected if such
Eligible Investment is held to its maturity. Unless the Servicer directs
otherwise, funds deposited in the Principal Funding Account on a Transfer
Date (which immediately precedes a Payment Date) upon the maturity of any
Eligible Investments are not required to be invested overnight.
(iii) On each Distribution Date with respect to the Class A
Accumulation Period, the Servicer shall direct the Trustee to withdraw
from the Principal Funding Account and deposit into the Collection
Account all Principal Funding Investment Proceeds then on deposit in the
Principal Funding Account and such Principal Funding Investment Proceeds
shall be treated as a portion of Class A Available Funds.
(iv) Reinvested interest and other investment income on funds
deposited in the Principal Funding Account shall not be considered to be
principal amounts on deposit therein for purposes of this Supplement.
23
<PAGE>
(e)(i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Principal Funding Account and
in all proceeds thereof. The Principal Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of the Class
A Certificateholders. If, at any time, the Principal Funding Account
ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on
its behalf) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Principal Funding Account meeting the conditions
specified in paragraph (d)(i) above as an Eligible Deposit Account and
shall transfer any cash and/or any investments to such new Principal
Funding Account.
(ii) Pursuant to the authority granted to the Servicer in Section
3.01(b) of the Agreement, the Servicer shall have the power, revocable by
the Trustee, to make withdrawals and payments or to instruct the Trustee
to make withdrawals and payments from the Principal Funding Account for
the purposes of carrying out the Servicer's or Trustee's duties
hereunder. Pursuant to the authority granted to the Paying Agent in
Section 5.01 of this Supplement and Section 6.07 of the Agreement, the
Paying Agent shall have the power, revocable by the Trustee, to withdraw
funds from the Principal Funding Account for the purpose of making
distributions to the Class A Certificateholders.
(f) The Class A Accumulation Period is scheduled to commence at the
close of business on the last day of ___________ 200_; provided, however, that
-------- -------
if the Class A Accumulation Period Length on any Determination Date (determined
as described below) is less than twenty months, upon notice to the Trustee, the
Seller and each Rating Agency, the Servicer, at its option, may elect to modify
the date on which the Class A Accumulation Period actually commences to the last
Business Day of any month that precedes the month that is the number of months
prior to the Class A Expected Final Payment Date equal to the Class A
Accumulation Period Length; provided, however, that (i) the length of the Class
-------- -------
A Accumulation Period will not be less than one month; and (ii) notwithstanding
any other provision of this Supplement to the contrary, no election to postpone
the commencement of the Class A Accumulation Period shall be made after a Pay
Out Event (as defined in the related Supplement) shall have occurred and is
continuing with respect to any other Series. On each Determination Date, the
Servicer will determine the "Class A Accumulation Period Length" which will
equal the number of months such that the Class A Accumulation Period Amount for
the Monthly Period immediately preceding the Class A Expected Final Payment
Date, when aggregated with the Class A Accumulation Period Amounts for each
preceding Monthly Period, will equal or exceed the Class A Initial Invested
Amount. Any notice by the Servicer electing to modify the commencement of the
Class A Accumulation Period pursuant to this subsection (f) shall specify (i)
the Class A Accumulation Period Length, (ii) the commencement date of the Class
A Accumulation Period and (iii) the Controlled Accumulation Amount with respect
to each Monthly Period during the Class A Accumulation Period.
24
<PAGE>
Section 4.04. Required Amount.
---------------
(a) With respect to each Distribution Date, on the related
Determination Date, the Servicer shall determine the amount (the "Class A
Required Amount"), if any, by which (x) 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 for such Distribution Date and any Class A
Outstanding Additional Interest, (iv) the Class A Servicing Fee for such
Distribution Date, (v) any Class A Servicing Fee previously due but not paid to
the Servicer and (vi) the Class A Investor Default Amount, if any, for such
Distribution Date exceeds (y) the Class A Available Funds. In the event that
the Class A Required Amount for such Distribution Date is greater than zero, the
Servicer shall give written notice to the Trustee of such positive Class A
Required Amount on the date of computation and all or a portion of the Excess
Spread and the Excess Finance Charges allocable to Series 199_-_ with respect to
the related Monthly Period in an amount equal to the Class A Required Amount for
such Distribution Date shall be distributed from the Collection Account on such
Distribution Date pursuant to Section 4.07(a). In the event that the Class A
Required Amount for such Distribution Date exceeds the amount of Excess Spread
and the amount of Excess Finance Charges allocable to Series 199_-_ with respect
to the related Monthly Period, all or a portion of the Available Cash Collateral
Amount with respect to such Distribution Date in an amount equal to such excess
shall be applied to fund the Class A Required Amount. In the event that the
Class A Required Amount for such Distribution Date exceeds the amount of Excess
Spread, the amount of Excess Finance Charges allocable to Series 199_-_ with
respect to the related Monthly Period and the Available Cash Collateral Amount
with respect to such Distribution Date, all or a portion of the Reallocated
Principal Collections with respect to such Monthly Period in an amount equal to
such excess shall be distributed from the Collection Account on such
Distribution Date pursuant to Section 4.08(a).
(b) With respect to each Distribution Date, on the related
Determination Date, the Servicer shall determine the amount (the "Class B
Required Amount") equal to the sum of (x) the amount, if any, by which (A) 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 for such
Distribution Date and any Class B Outstanding Additional Interest, (iv) the
Class B Servicing Fee for such Distribution Date and (v) any Class B Servicing
Fee previously due but not paid to the Servicer exceeds (B) the Class B
Available Funds and (y) the Class B Investor Default Amount for such
Distribution Date. In the event that the difference between the Class B
Required Amount for such Distribution Date and the Excess Spread and Excess
Finance Charges applied with respect thereto pursuant to subsection 4.07(c) on
such Distribution Date is greater than zero, the Servicer shall give written
notice to the Trustee of such excess Class B Required Amount on the date of
computation and all or a portion of the Available Cash Collateral Amount with
respect to such Distribution Date pursuant to Section 4.12(c) shall be applied
to fund such excess Class B Required Amount. In the event that the Class B
Required Amount for such Distribution Date exceeds the portion of Excess Spread
and Excess Finance Charges allocated to Series 199_-_ with respect to such
Monthly Period and not used to fund the Class A Required Amount and the portion
of the Available Cash Collateral Amount with respect to such Distribution Date
withdrawn from the Cash Collateral Account to fund the Class B Required Amount,
then a portion of the Reallocated Principal Collections with respect to such
25
<PAGE>
Monthly Period shall be distributed from the Collection Account on such
Distribution Date pursuant to Section 4.08(b).
Section 4.05. Application of Class A Available Funds, Class B
-----------------------------------------------
Available Funds, Class C Available Funds and Available Investor Principal
- -------------------------------------------------------------------------
Collections. The Servicer shall apply (if the Seller is the Servicer and the
- -----------
Collection Account is maintained with the Seller) or shall cause the Trustee to
apply, on each Distribution Date, Class A Available Funds, Class B Available
Funds, Class C Available Funds, and Available Investor Principal Collections on
deposit in the Collection Account with respect to such Distribution Date to make
the following distributions:
(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 and any Class A Outstanding Additional Interest, shall
be distributed to the Paying Agent with respect to the Class A
Certificates for payment to the Class A Certificateholders;
(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, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement);
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date shall 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 set forth in Section 4.07.
(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 and any Class B Outstanding Additional Interest, shall
be distributed to the Paying Agent with respect to the Class B
Certificates for payment to the Class B Certificateholders;
(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, shall be distributed to the Servicer (unless
26
<PAGE>
such amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement); and
(iii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.07.
(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, shall be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account in
accordance with Section 4.03 of the Agreement); and
(ii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.07.
(d) On each Distribution Date with respect to the Revolving Period,
an amount equal to the Available Investor Principal Collections (excluding
any amounts specified in clause (g) of the definition of Available Investor
Principal Collections) deposited in the Collection Account for the related
Monthly Period shall be treated as Shared Principal Collections and applied
in accordance with Section 4.04 of the Agreement.
(e) On each Distribution Date with respect to the Class A
Accumulation Period, the Class B Amortization Period, the Class C
Amortization Period or the Early Amortization Period, an amount equal to
the Available Investor Principal Collections (other than, for purposes of
clauses (e)(i), (ii) and (iv) below, any amounts specified in clause (g) of
the definition of Available Investor Principal Collections) deposited in
the Collection Account for the related Monthly Period will be distributed
in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date, up to the Class A Adjusted Invested Amount on such
Distribution Date, shall 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
Paying Agent for payment to the Class A Certificateholders;
(ii) 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, shall be distributed to the Paying Agent for payment to the Class B
Certificateholders;
(iii) for each Distribution Date beginning on the Class C Principal
Commencement Date, an amount equal to Class C Monthly Principal for such
27
<PAGE>
Distribution Date, up to the Class C Invested Amount on such Distribution
Date, plus the proceeds of any withdrawal from the Class C Spread Account
for the purpose of reimbursing previous reductions in the Class C
Invested Amount as provided in the Loan Agreement, shall be distributed
to the Paying Agent for payment to the Class C Interest Holders; and
(iv) for each Distribution Date, after giving effect to paragraphs
(i), (ii) and (iii) above, an amount equal to the balance, if any, of
such Available Investor Principal Collections then on deposit in the
Collection Account shall be treated as Shared Principal Collections and
applied in accordance with Section 4.04 of the Agreement.
Section 4.06. Defaulted Amounts; Investor Charge-Offs.
---------------------------------------
(a) On each Determination Date, the Servicer shall calculate the
Class A Investor Default Amount, if any, for the related Distribution Date. If,
on any Distribution Date, the Class A Required Amount for the related Monthly
Period exceeds the sum of (x) the amount of Reallocated Principal Collections
with respect to such Monthly Period, (y) the amount of Excess Spread and the
Excess Finance Charges allocable to Series 199_-_ with respect to such
Distribution Date and (z) the Available Cash Collateral Amount with respect to
such Distribution Date, the Class C Invested Amount will be reduced by the
amount of such excess, but not by more than the excess of the Class A Investor
Default Amount for such Distribution Date over the amount of Reallocated
----
Principal Collections, the amount of Excess Spread and Excess Finance Charges
and the amount withdrawn from the Cash Collateral Account used to fund 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
shall 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 and the amount of Reallocated Principal Collections, the
amount of Excess Spread and Excess Finance Charges and the amount withdrawn from
the Cash Collateral Account used to fund the Class A Investor Default Amount for
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 shall be
reduced to zero, and the Class A Invested Amount shall 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 aggregate amount of the reductions, if any, of the
----
Class C Invested Amount and the Class B Invested Amount for such Distribution
Date and the amount of Reallocated Principal Collections, the amount of Excess
Spread and Excess Finance Charges and the amount withdrawn from the Cash
Collateral Account used to fund the Class A Investor Default Amount for such
Distribution Date (a "Class A Investor Charge-Off"). Class A Investor Charge-
Offs shall thereafter be reimbursed and the Class A Invested Amount increased
(but not by an amount in excess of the aggregate unreimbursed Class A Investor
Charge-Offs) on any Distribution Date by the amount of Excess Spread and Excess
Finance Charges allocated and available for that purpose pursuant to Section
4.07(b).
28
<PAGE>
(b) On each Determination Date, the Servicer shall calculate the
Class B Required Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of Excess Spread and Excess Finance Charges
allocated to Series 199_-_ with respect to the related Monthly Period which are
not used to fund the Class A Required Amount and Class A Investor Charge-Offs on
the related Distribution Date, (y) the portion, if any, of the Available Cash
Collateral Amount to be withdrawn from the Cash Collateral Account pursuant to
Section 4.12(c) which is remaining after applying such amounts to fund any
deficiency of amounts payable pursuant to Section 4.07(a) with respect to such
Distribution Date and (z) the amount of Reallocated Principal Collections which
are available to fund the Class B Required Amount on such Distribution Date
pursuant to Section 4.08(b), then the Class C Invested Amount shall be reduced
by the amount of such excess, but not by more than the excess of the Class B
Investor Default Amount for such Distribution Date over the amount of
----
Reallocated Principal Collections, the amount of Excess Spread and Excess
Finance Charges, and the amount withdrawn from the Cash Collateral Account used
to fund the Class B 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 shall be reduced to zero, and the
Class B Invested Amount shall 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 and the amount of Reallocated Principal
Collections, the amount of Excess Spread and Excess Finance Charges, and the
amount withdrawn from the Cash Collateral Account used to fund the Class B
Investor Default Amount for such Distribution Date (a "Class B Investor Charge-
Off"). Class B Investor Charge-Offs shall thereafter be reimbursed and the
Class B Invested Amount increased (but not by an amount in excess of the
aggregate unreimbursed Class B Investor Charge-Offs) on any Distribution Date by
the amount of Excess Spread and Excess Finance Charges allocated and available
for that purpose pursuant to Section 4.07(d).
(c) If, on any Distribution Date, Reallocated Principal Collections
for such Distribution Date are applied pursuant to Section 4.08(a) or (b), the
Class C Invested Amount shall be reduced by the amount of such Reallocated
Principal Collections. In the event that such reduction would cause the Class C
Invested Amount to be a negative number, the Class C Invested Amount shall be
reduced to zero, and the Class B Invested Amount shall be reduced by the amount
by which the Class C Invested Amount would have been reduced below zero.
(d) If, on any Distribution Date, the Class C Investor Default
Amount exceeds the sum of (x) the amount of Excess Spread and Excess Finance
Charges available to fund the Class C Investor Default Amount pursuant to
Section 4.07(g) on such Distribution Date, (y) the portion, if any, of the
Available Cash Collateral Amount to be withdrawn from the Cash Collateral
Account to fund the Class C Investor Default Amount pursuant to Section 4.07(g)
on such Distribution Date and (z) funds withdrawn from the Class C Spread
Account pursuant to the Loan Agreement to fund the Class C Investor Default
Amount, then the Class C Invested Amount shall be reduced by the amount of such
excess; provided, however, that the Class C Invested Amount shall not be reduced
-------- -------
below zero.
29
<PAGE>
Section 4.07. Excess Spread; Excess Finance Charges. The Servicer
-------------------------------------
shall apply (if the Seller is the Servicer and the Collection Account is
maintained with the Seller) or shall cause the Trustee to apply, on each
Distribution Date, Excess Spread and Excess Finance Charges allocated to Series
199_-_ 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 shall be distributed by the Trustee to
fund any deficiency pursuant to Sections 4.05(a)(i), (ii) and (iii);
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 199_-_, such Excess Spread and Excess Finance
Charges shall be applied first to pay amounts due with respect to such
Distribution Date pursuant to Section 4.05(a)(i), second to pay the Class A
Servicing Fee pursuant to Section 4.05(a)(ii) and third to pay the Class A
Investor Default Amount for such Distribution Date pursuant to Section
4.05(a)(iii);
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed as provided in
Section 4.06(a) (after giving effect to the allocation on such Distribution
Date of any amount for that purpose pursuant to Section 4.06(a)) shall be
treated as a portion of Available Investor Principal Collections for such
Distribution Date;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee (I)
to fund any deficiency pursuant to Sections 4.05(b)(i) and (ii) and (II)
for application, up to the Class B Investor Default Amount, as a 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 199_-_ and available to pay such amount
pursuant to this clause (c), such Excess Spread and Excess Finance Charges
shall be applied first to pay amounts due with respect to such Distribution
Date pursuant to Section 4.05(b)(i), second to pay the Class B Servicing
Fee pursuant to Section 4.05(b)(ii) and third as a portion of Available
Investor Principal Collections for such Distribution Date pursuant to
clause (II) above;
(d) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of
the definition of "Class B Invested Amount" in Section 2.01 of this
Supplement (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 Class C Monthly Interest for such
Distribution Date, plus the amount of any Class C Outstanding Monthly
----
Interest, plus the amount of any Class C Additional Interest for such
----
Distribution Date and any Class C Outstanding Additional Interest shall be
distributed to the Paying Agent for payment to the Class C Interest
Holders;
30
<PAGE>
(f) an amount equal to the Class C Servicing Fee due but not paid
to the Servicer either 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 for such
Distribution Date 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 clause (c) of the definition
of "Class C Invested Amount" (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 with respect to
such Distribution Date;
(i) an amount up to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
----
effect to any deposit made on such date hereunder) 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 in Section 4.11(f), 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) (1) amounts required to be deposited in the Class C Spread Account
pursuant to the Loan Agreement shall be deposited into the Class C Spread
Account and (2) an amount equal to the aggregate of any other amounts then
owed pursuant to the Loan Agreement (excluding amounts required to be
deposited in the Class C Spread Account) shall be applied in accordance
with the Loan Agreement;
(l) an amount equal to the aggregate of any amounts then due to the
depositor of funds into the Cash Collateral Account (or any successor
thereto or assignee thereof) 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) will be distributed to the
depositor or its designee for application in accordance with such
agreement; and
(m) the balance, if any, will constitute Excess Finance Charges for
such Distribution Date and will be available for allocation to other Series
in Group One or to the Seller as described in Section 4.05 of the
Agreement.
Section 4.08. Reallocated Principal Collections. The Servicer shall
---------------------------------
apply (if the Seller is the Servicer and the Collection Account is maintained
with the Seller) or shall cause the Trustee to apply on each Distribution Date
Reallocated Principal Collections (applying all such
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<PAGE>
Collections with respect to the Class C Invested Amount prior to applying any
such Collections with respect to the Class B Invested Amount and applying no
such Collections with respect to the Class B Invested Amount pursuant to clause
(b) below) with respect to such Distribution Date, to make the following
distributions in the following priority:
(a) an amount equal to the excess, if any, of (i) the Class A Required
Amount, if any, with respect to such Distribution Date over (ii) the sum of
----
(x) the amount of Excess Spread and Excess Finance Charges allocated to
Series 199_-_ with respect to the related Monthly Period and (y) the
Available Cash Collateral Amount with respect to such Distribution Date,
shall be distributed by the Trustee to fund any deficiency pursuant to
Sections 4.05(a)(i), (ii) and (iii); provided that, in the event the
--------
Class A Required Amount for such Distribution Date exceeds the sum of the
Available Cash Collateral Amount for such Distribution Date, the amount of
Excess Spread and Excess Finance Charges allocated to Series 199_-_ and the
amount of Reallocated Principal Collections for such Distribution Date, the
amount withdrawn from the Cash Collateral Account with respect to such
Class A Required Amount, such Excess Spread and Excess Finance Charges
allocated to Series 199_-_ and Reallocated Principal Collections shall be
applied first to pay amounts due with respect to such Distribution Date
pursuant to Section 4.05(a)(i), second to pay the Class A Servicing Fee
pursuant to Section 4.05(a)(ii) and third to pay the Class A Investor
Default Amount for such Distribution Date pursuant to Section 4.05(a)(iii);
(b) an amount equal to the excess, if any, of (i) the Class B Required
Amount, if any, with respect to such Distribution Date over (ii) the sum of
----
(x) the amount of Excess Spread and Excess Finance Charges to be allocated
and available to the Class B Certificateholder's Interest pursuant to
Section 4.07(c) on such Distribution Date and (y) the amount withdrawn from
the Cash Collateral Account pursuant to Section 4.12(c) which is remaining
after application pursuant to Section 4.07(a) with respect to such
Distribution Date, shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.05(b)(i) and (ii) and Section
4.07(c)(II); provided that, in the event the Class B Required Amount for
--------
such Distribution Date exceeds the sum of the amount to be withdrawn from
the Cash Collateral Account pursuant to Section 4.12(c) which is remaining
after application pursuant to Section 4.08(a) with respect to such
Distribution Date, the amount of Excess Spread and Excess Finance Charges
to be allocated to the Class B Certificateholders' Interest on such
Distribution Date and the amount of Reallocated Principal Collections
(other than Reallocated Principal Collections distributed pursuant to
clause (a) above) for such Distribution Date, the amount withdrawn from the
Cash Collateral Account with respect to the Class B Required Amount, such
Excess Spread and Excess Finance Charges and such Reallocated Principal
Collections shall be applied first to pay the amounts due with respect to
such Distribution Date pursuant to Section 4.05(b)(i), second to pay the
Class B Servicing Fee pursuant to Section 4.05(b)(ii) and third to apply
any remaining amount as a portion of Available Investor Principal
Collections for such Distribution Date pursuant to Section 4.07(c)(II); and
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<PAGE>
(c) the balance, if any, of such Reallocated Principal Collections
shall be treated as a portion of Available Investor Principal Collections
to be applied in accordance with Sections 4.05(d) and (e).
Section 4.09. Excess Finance Charges. Series 199_-_ shall be
----------------------
included in Group One. Subject to Section 4.05 of the Agreement, Excess Finance
Charges with respect to the Series in Group One for any Distribution Date will
be allocated to Series 199_-_ in an amount equal to the product of (x) the
aggregate amount of Excess Finance Charges with respect to all the Series in
Group One for such Distribution Date and (y) a fraction, the numerator of which
is the Finance Charge Shortfall for Series 199_-_ for such Distribution Date and
the denominator of which is the aggregate amount of Finance Charge Shortfalls
for all the Series in Group One for such Distribution Date. The "Finance Charge
Shortfall" for Series 199_-_ for any Distribution Date will be equal to the
excess, if any, of (a) the full amount required to be paid, without duplication,
pursuant to Sections 4.05(a), 4.05(b), 4.05(c) and 4.07 on such Distribution
Date over (b) the Floating Allocation Percentage of Collections of Finance
----
Charge Receivables with respect to the related Monthly Period.
Section 4.10. Shared Principal Collections; Excess Shared Principal
-----------------------------------------------------
Collections. Subject to Section 4.04 of the Agreement, Shared Principal
- -----------
Collections for any Distribution Date will be allocated to Series 199_-_ in an
amount equal to the product of (x) the aggregate amount of Shared Principal
Collections with respect to all Series for such Distribution Date and (y) a
fraction, the numerator of which is the Principal Shortfall for Series 199_-_
for such Distribution Date and the denominator of which is the aggregate amount
of Principal Shortfalls for all the Series which are Principal Sharing Series
for such Distribution Date. The "Principal Shortfall" for Series 199_-_ will be
equal to (a) for any Distribution Date with respect to the Revolving Period,
zero, (b) for any Distribution Date with respect to the Class A Accumulation
Period and the Class B Amortization Period (but not including the Class B
Expected Final Payment Date), the excess, if any, of the sum of (i) the
Controlled Deposit Amount with respect to such Distribution Date and (ii) if
such Distribution Date is the Distribution Date immediately following the Class
A Expected Final Payment Date, one-half of the Class B Initial Invested Amount,
over the amount of Available Investor Principal Collections for such
- ----
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections or Excess Shared Principal Collections) and (c) for any
Distribution Date with respect to the Early Amortization Period and for each
Distribution Date on or after the Class B Expected Final Payment Date, the
excess, if any, of the Invested Amount over the amount of Available Investor
----
Principal Collections for such Distribution Date (excluding any portion thereof
attributable to Shared Principal Collections or Excess Shared Principal
Collections).
Series 199_-_ is a Subordinated Excess Principal Series. Excess
Shared Principal Collections for the Distribution Date, if any, will be
allocated to Series 199_-_ in an amount equal to the lesser of (i) the
Subordinated Excess Principal Shortfall of Series 199_-_ for such Distribution
Date and (ii) the product of (x) Excess Shared Principal Collections and (y) a
fraction, the numerator of which is the Subordinated Excess Principal Shortfall
of Series 199_-_ for such Distribution Date and the denominator of which is the
aggregate amount of Subordinated Excess Principal Shortfalls (as defined in each
related Supplement) of all Subordinated Excess Principal Series. The
"Subordinated Excess Principal Shortfall" of Series
33
<PAGE>
199_-_ for any Distribution
Date from and including the Class B Principal Commencement Date shall equal the
excess of the Invested Amount over the Available Investor Principal Collections
for such Distribution Date (excluding any portion thereof attributable to Excess
Shared Principal Collections but including any portion attributable to Shared
Principal Collections).
Section 4.11. Reserve Account.
---------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Class A
Certificateholders, an Eligible Deposit Account (the "Reserve Account") bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Class A Certificateholders. The Reserve Account shall
initially be established with The Bank of New York. The Trustee shall possess
all right, title and interest in all funds on deposit from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of the Trustee for the benefit of the Class A
Certificateholders. If at any time the Reserve Account ceases to be an Eligible
Deposit Account, the Trustee (or the Servicer on its behalf) shall within 10
Business Days (or such longer period, not to exceed 30 calendar days, as to
which each Rating Agency may consent) establish a new Reserve Account meeting
the conditions specified above as an Eligible Deposit Account, and shall
transfer any cash and/or any investments to such new Reserve Account. The
Trustee, at the direction of the Servicer, shall (i) make withdrawals from the
Reserve Account from time to time in an amount up to the Available Reserve
Account Amount at such time, for the purposes set forth in this Supplement, and
(ii) on each Distribution Date (from and after the Reserve Account Funding Date)
prior to the termination of the Reserve Account make a deposit into the Reserve
Account in the amount specified in, and otherwise in accordance with, Section
4.07(j).
(b) Funds on deposit in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Eligible Investments. Funds on
deposit in the Reserve Account on any Transfer Date, after giving effect to any
withdrawals from the Reserve Account on such Transfer Date, shall be invested in
such investments that will mature so that such funds will be available for
withdrawal on or prior to the following Transfer Date. The Trustee shall
maintain for the benefit of the Class A Certificateholders possession of the
negotiable instruments or securities, if any, evidencing such Eligible
Investments. No Eligible Investment shall be disposed of prior to its maturity;
provided, however, that the Trustee may sell, liquidate or dispose of an
- -------- -------
Eligible Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the Class A
Certificateholders may be adversely affected if such Eligible Investment is held
to its maturity. On each Distribution Date, all interest and earnings (net of
losses and investment expenses) accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account shall be retained in the Reserve Account
(to the extent that the Available Reserve Account Amount is less than the
Required Reserve Account Amount) and the balance, if any, shall be deposited in
the Collection Account and treated as Collections of Finance Charge Receivables
allocable to Series 199_-_. For purposes of determining the availability of
funds or the balance in the Reserve Account for any reason under this
Supplement, except as otherwise provided in the preceding sentence, investment
earnings on such funds shall be deemed not to be available or on deposit.
34
<PAGE>
(c) On the Determination Date preceding each Distribution Date with
respect to the Class A Accumulation Period and the first Special Payment Date,
the Servicer shall calculate the "Reserve Draw Amount" which shall be equal to
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 such
--------
amount will be reduced to the extent that funds otherwise would be available for
deposit in the Reserve Account under Section 4.07(j) with respect to such
Distribution Date or Special Payment Date.
(d) In the event that for any Distribution Date the Reserve Draw
Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on the
related Transfer Date by the Trustee (acting in accordance with the instructions
of the Servicer), deposited into the Collection Account and included in Class A
Available Funds.
(e) In the event that the Reserve Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Reserve Account, and pay to the Seller, an amount equal to
such Reserve Account Surplus.
(f) Upon the earliest to occur of (i) the termination of the Trust
pursuant to Article XII of the Agreement, (ii) the day on which the Class A
Invested Amount is paid in full to the Class A Certificateholders, (iii) if the
Class A Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to Series 199_-_ and (iv) if the Class A Accumulation Period has
commenced, the earlier of the first Special Payment Date and the Class A
Expected Final Payment Date, the Trustee, acting in accordance with the
instructions of the Servicer, after the prior payment of all amounts owing to
the Class A Certificateholders which are payable from the Reserve Account as
provided herein, shall withdraw from the Reserve Account and pay to the Seller
all amounts, if any, on deposit in the Reserve Account and the Reserve Account
shall be deemed to have terminated for purposes of this Supplement.
Section 4.12. Cash Collateral Account.
-----------------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, on behalf of the Trust, for the benefit of the Series 199_-_
Certificateholders and the Class C Interest Holders, as their interests appear
herein and in the Loan Agreement, an Eligible Deposit Account (the "Cash
Collateral Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Series 199_-_
Certificateholders and the Class C Interest Holders. The Cash Collateral
Account shall initially be established with the Trustee. The Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 199_-_ Certificateholders and the Class C Interest
Holders. The interest of the Class C Interest Holders in the Cash Collateral
Account shall be subordinated to the interests of the Series 199_-_
Certificateholders as provided herein and in the Loan Agreement. If at any time
the Cash
35
<PAGE>
Collateral Account ceases to be an Eligible Deposit Account, the Trustee (or the
Servicer on its behalf) shall within 10 Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Cash Collateral Account meeting the conditions specified above
as an Eligible Deposit Account, and shall transfer any cash and/or any
investments to such new Cash Collateral Account. The Trustee, at the direction
of the Servicer, shall make deposits to and withdrawals from the Cash Collateral
Account in the amounts and at the times set forth in this Supplement and the
Loan Agreement. All withdrawals from the Cash Collateral Account shall be made
in the priority set forth below. The Class C Interest Holders shall not be
entitled to reimbursement from the Trust Assets for any withdrawals from the
Cash Collateral Account except as specifically provided in this Supplement and
the Loan Agreement.
(b) On the Closing Date, the Trustee shall deposit the Initial Cash
Collateral Amount received by it from the Seller in immediately available funds
into the Cash Collateral Account. Funds on deposit in the Cash Collateral
Account shall be invested at the direction of the Servicer by the Trustee in
Cash Collateral Account Investments. Funds on deposit in the Cash Collateral
Account on any Transfer Date, after giving effect to any withdrawals from the
Cash Collateral Account on such Transfer Date, shall be invested in such
investments that will mature so that such funds will be available for withdrawal
on or prior to the following Transfer Date. No Eligible Investment shall be
disposed of prior to its maturity; provided, however, that the Trustee may sell,
-------- -------
liquidate or dispose of an Eligible Investment before its maturity, if so
directed by the Servicer, the Servicer having reasonably determined that the
interest of the 199_-_ Certificateholders may be adversely affected if such
Eligible Investment is held to its maturity. The proceeds of any such
investments shall be invested in such investments that will mature so that such
funds will be available for withdrawal on or prior to the Transfer Date
immediately following the date of such investment. The Trustee shall maintain
for the benefit of the Series 199_-_ Certificateholders and the Class C Interest
Holders possession of the negotiable instruments or securities, if any,
evidencing the Cash Collateral Account Investments. On each Transfer Date, all
interest and earnings (net of losses and investment expenses) accrued since the
preceding Transfer Date on funds on deposit in the Cash Collateral Account shall
be paid to the Seller. For purposes of determining the availability of funds or
the balances in the Cash Collateral Account for any reason under this
Supplement, all investment earnings on such funds shall be deemed not to be
available or on deposit.
(c) On each Determination Date, the Servicer shall calculate the
amount (the "Required Draw Amount") by which the amounts specified in clauses
(a) through (g) of Section 4.07 with respect to the related Distribution Date
exceed the amount of Excess Spread and Excess Finance Charges allocated with
respect to the related Monthly Period. In the event that for any Distribution
Date the Required Draw Amount is greater than zero, the Servicer shall give
written notice to the Trustee, in substantially the form of Exhibit B, of such
positive Required Draw Amount on the related Determination Date. On the related
Transfer Date, the Required Draw Amount, if any, up to the Available Cash
Collateral Amount shall be withdrawn from the Cash Collateral Account and
distributed to fund any deficiency pursuant to Section 4.07(a) through (g) (in
the order of priority set forth in Section 4.07).
(d) In the event that the Cash Collateral Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Cash
Collateral Account with
36
<PAGE>
respect to such Distribution Date, is greater than zero, the Trustee, acting in
accordance with the instructions of the Servicer, shall withdraw from the Cash
Collateral Account, and apply in accordance with the Loan Agreement, an amount
equal to such Cash Collateral Surplus.
ARTICLE V
Distributions and Reports to
Series 199_-_ Certificateholders
--------------------------------
Section 5.01. Distributions.
-------------
(a) On each Payment Date, the Paying Agent shall distribute to each
Class A Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class A Certificateholder's pro
rata share of the amounts that are allocated and available on such Payment Date
to pay interest on the Class A Certificates pursuant to this Supplement.
(b) On each Special Payment Date and on the Class A Expected Final
Payment Date, the Paying Agent shall distribute to each Class A
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class A Certificateholder's pro rata
share of the amounts on deposit in the Principal Funding Account or otherwise
held by the Paying Agent and which are allocated and available on such date to
pay principal of the Class A Certificates pursuant to this Supplement up to a
maximum amount on any such date equal to the Class A Invested Amount on such
date (unless there has been an optional repurchase of the Series 199_-_
Certificateholders' Interest pursuant to Section 10.01 of the Agreement, in
which event the foregoing limitation will not apply).
(c) On each Payment Date, the Paying Agent shall distribute to each
Class B Certificateholder of record on the related Record Date (other than as
provided in Section 12.02 of the Agreement) such Class B Certificateholder's pro
rata share of the amounts that are allocated and available on such Payment Date
to pay interest on the Class B Certificates pursuant to this Supplement.
(d) On each Distribution Date commencing with the Class B Principal
Commencement Date, the Paying Agent shall distribute to each Class B
Certificateholder of record on the related Record Date (other than as provided
in Section 12.02 of the Agreement) such Class B Certificateholder's pro rata
share of the amounts held by the Paying Agent and which are allocated and
available on such date to pay principal of the Class B Certificates pursuant to
this Supplement up to a maximum amount on any such date equal to the Class B
Invested Amount on such date (unless there has been an optional repurchase of
the Series 199_-_ Certificateholders' Interest pursuant to Section 10.01 of the
Agreement, in which event the foregoing limitation will not apply).
(e) On each Payment Date, the Paying Agent shall distribute to each
Class C Interest Holder of record on the related Record Date such Class C
Interest Holder's pro rata share
37
<PAGE>
of the amounts that are allocated and available on such Payment Date to pay
interest on the Class C Interests pursuant to this Supplement and the Loan
Agreement (including amounts available from any withdrawal from the Class C
Spread Account for the purpose of paying such interest).
(f) On each Distribution Date commencing with the Class C Principal
Commencement Date, the Paying Agent shall distribute to each Class C Interest
Holder of record on the related Record Date such Class C Interest Holder's pro
rata share of the amounts, if any, that are allocated and available on such date
to pay principal of the Class C Interests pursuant to this Supplement and the
Loan Agreement (including amounts available from any withdrawal from the Class C
Spread Account for the purpose of paying such principal) up to a maximum amount
on any such date equal to the Class C Invested Amount (unless there has been an
optional repurchase of the Series 199_-_ Certificateholders' Interest pursuant
to Section 10.01 of the Agreement, in which event the foregoing limitation will
not apply).
(g) The distributions to be made pursuant to this Section 5.01 are
subject to the provisions of Sections 2.06, 9.02, 10.01 and 12.02 of the
Agreement and Sections 8.01 and 8.02 of this Supplement.
(h) Except as provided in Section 12.02 of the Agreement with respect
to a final distribution, distributions to each Series 199_-_ Certificateholder
hereunder shall be made by check mailed to each Series 199_-_ Certificateholder
at such Series 199_-_ Certificateholder's address appearing in the Certificate
Register without presentation or surrender of any Series 199_-_ Certificate or
the making of any notation thereon; provided, however, that with respect to the
-------- -------
Series 199_-_ Certificates registered in the name of a Clearing Agency, such
distributions shall be made to such Clearing Agency in immediately available
funds. Distributions to each Class C Interest Holder hereunder shall be made
(i) by wire transfer in same day funds to an account at a bank or other
depository institution located within the United States as shall have been
designated by such Class C Interest Holder by notice in writing on or before the
related Payment Date or (ii) in the absence of such designation, by check mailed
to each Class C Interest Holder at the address appearing in the Loan Agreement.
Section 5.02. Reports and Statements to Series 199_-_
---------------------------------------
Certificateholders.
- ------------------
(a) On each Distribution Date, the Paying Agent, on behalf of the
Trustee, shall make available for inspection upon request to each Series 199_-_
Holder free of charge at the office of such Paying Agent a statement
substantially in the form of Exhibit C prepared by the Servicer for a period of
six months commencing on such Distribution Date.
(b) Not later than each Determination Date, the Servicer shall deliver
to the Trustee, the Paying Agent and each Rating Agency (i) a statement
substantially in the form of Exhibit C prepared by the Servicer and (ii) a
certificate of a Servicing Officer substantially in the form of Exhibit D.
(c) On or before January 31 of each calendar year, beginning with the
calendar year next succeeding the Closing Date, the Paying Agent, on behalf of
the Trustee, shall make available for inspection upon request to each Person who
at any time during the preceding
38
<PAGE>
calendar year was a Series 199_-_ Holder free of charge at the office of such
Paying Agents, a statement prepared by the Servicer containing the information
which is required to be contained in the statement to Series 199_-_ Holders, as
set forth in paragraph (a) or (b) above, as applicable, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Series 199_-_ Holder, together with other information as is required to be
provided by an issuer of indebtedness under the Internal Revenue Code for a
period of eighteen months commencing on February 1 of such calendar year. Such
obligation of the Servicer shall be deemed to have been satisfied to the extent
that substantially comparable information shall be made available for inspection
by the Paying Agent pursuant to any requirements of the Internal Revenue Code as
from time to time in effect.
ARTICLE VI
Additional Pay Out Events
-------------------------
Section 6.01. Additional Pay Out Events. If any one of the following
-------------------------
events shall occur with respect to the Series 199_-_ Certificates:
(a) failure on the part of the Seller (i) to make any payment or
deposit required by the terms of the Agreement or this Supplement on or
before the date occurring five Business Days after the date such payment or
deposit is required to be made therein or herein or (ii) duly to observe or
perform any other covenants or agreements of the Seller set forth in the
Agreement or this Supplement (including the covenants of the Seller
contained in Article IX of this Supplement), which failure has a material
adverse effect on the Series 199_-_ Holders and which continues unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Seller by the Trustee, or to the Seller and the Trustee by any Series 199_-
_ Holder;
(b) any representation or warranty made by the Seller in the Agreement
or this Supplement, or any information contained in a computer file or
microfiche list required to be delivered by the Seller pursuant to Section
2.01 or 2.08(g) of the Agreement shall prove to have been incorrect in any
material respect when made or when delivered, which continues to be
incorrect in any material respect for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given to the Seller by the Trustee, or to the Seller and
the Trustee by any Holder of the Series 199_-_ Interests and as a result of
which the interests of the Series 199_-_ Holders are materially and
adversely affected and continue to be materially and adversely affected for
such period; provided, however, that a Pay Out Event pursuant to this
-------- -------
Section 6.01(b) shall not be deemed to have occurred hereunder if the
Seller has accepted reassignment of the related Receivable, or all of such
Receivables, if applicable, during such period in accordance with the
provisions of the Agreement;
(c) a failure by the Seller to convey Receivables in Additional
Accounts or Participation Interests to the Trust within five Business Days
after the day on which it is
39
<PAGE>
required to convey such Receivables or Participation Interests pursuant to
Section 2.08(a) of the Agreement or Section 9.02 of this Supplement;
(d) any Servicer Default shall occur;
(e) a Transfer Restriction Event shall occur;
(f) the average Portfolio Yield for any three consecutive Monthly
Periods is reduced to a rate which is less than the average Base Rate for
such three Monthly Periods; or
(g) the Class A Invested Amount shall not be paid in full on the Class
A Expected Final Payment Date or the Class B Invested Amount shall not be
paid in full on the Class B Expected Final Payment Date;
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 (including the Class C Interest
Holders) of Series 199_-_ evidencing more than 50% of the aggregate unpaid
principal amount of Investor Certificates (including the Class C Interests) by
notice then given in writing to the Seller and the Servicer (and to the Trustee
if given by the holders of Investor Certificates (including the Class C Interest
Holders) of Series 199_-_) may declare that a Pay Out Event has occurred with
respect to Series 199_-_ 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 199_-_ without any notice or other action on the part of
the Trustee or holders of Investor Certificates (including the Class C Interest
Holders) of Series 199_-_ immediately upon the occurrence of such event.
ARTICLE VII
Optional Repurchase; Series Termination
---------------------------------------
Section 7.01. Optional Repurchase.
-------------------
(a) On any day occurring on or after the date on which the Invested
Amount is reduced to 5% or less of the Initial Invested Amount, the Seller shall
have the option to purchase the interest of the Series 199_-_ Holders, at a
purchase price equal to (i) if such day is a Distribution Date, the Reassignment
Amount for such Distribution Date or (ii) if such day is not a Distribution
Date, the Reassignment Amount for the Distribution Date following such day.
(b) The Seller shall give the Servicer and the Trustee at least 30
days prior written notice of the date on which the Seller intends to exercise
such purchase option. Not later than 12:00 noon, Richmond time, on such day the
Seller shall deposit the Reassignment Amount into the Collection Account in
immediately available funds. Such purchase option is subject to payment in full
of the Reassignment Amount. Following the deposit of the Reassignment Amount
into the Collection Account in accordance with the foregoing, the Invested
Amount for
40
<PAGE>
Series 199_-_ shall each be reduced to zero and the Series 199_-_
Certificateholders and the Class C Interest Holders shall have no further
interest in the Receivables. The Reassignment Amount shall be distributed as
set forth in Section 8.01(b).
Section 7.02. Series Termination.
------------------
(a) If, on the __________ 200_ Distribution Date, the Invested Amount
(after giving effect to all changes therein on such Distribution Date) would be
greater than zero, the Servicer, on behalf of the Trustee, shall, within the 40-
day period which begins on such Distribution Date, solicit bids for the sale of
Principal Receivables and the related Finance Charge Receivables (or interests
therein) 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, except
pursuant to this Section 7.02). Such bids shall require that such sale shall
(subject to Section 7.02(b)) occur on the Termination Date. The Seller shall be
entitled to participate in, and to receive from the Trustee a copy of each other
bid submitted in connection with, such bidding process.
(b) The Servicer, on behalf of the Trustee, shall sell such
Receivables (or interests therein) on the Termination Date to the bidder who
made the highest cash purchase offer. The proceeds of any such sale shall be
treated as Collections on the Receivables allocated to the Series 199_-_ Holders
pursuant to the Agreement and this Supplement; provided, however, that the
-------- -------
Servicer shall determine conclusively the amount of such proceeds which are
allocable to Finance Charge Receivables and the amount of such proceeds which
are allocable to Principal Receivables. During the period from the __________
200_ Distribution Date to the Termination Date, the Servicer shall continue to
collect payments on the Receivables and allocate and deposit such collections in
accordance with the provisions of the Agreement and the Supplements.
ARTICLE VIII
Final Distributions
-------------------
Section 8.01. Sale of Receivables or Certificateholders' Interest
---------------------------------------------------
pursuant to Section 2.06 or 9.01 of the Agreement.
- -------------------------------------------------
(a) Purchase Price. (i) The amount to be paid by the Seller with
--------------
respect to Series 199_-_ in connection with a reassignment of Receivables
to the Seller pursuant to Section 2.06 of the Agreement shall equal the
Reassignment Amount for the first Distribution Date following the Monthly
Period in which the reassignment obligation arises under the Agreement.
(ii) The amount to be paid by the Seller with respect to Series 199_-_
in connection with a repurchase of the Certificateholders' Interest
pursuant to Section 10.01 of the Agreement shall equal the sum of (x) the
Reassignment Amount for the Distribution Date of such repurchase and (y)
the sum of (A) the excess, if any, of (I) a
41
<PAGE>
price equivalent to the average of bids quoted on the Record Date preceding
the date of repurchase (or, if not a Business Day, on the next succeeding
Business Day) by at least two recognized dealers selected by the Trustee
(which may be selected from the list attached as Schedule 1), for the
purchase by such dealers of a security which is similar to the Class A
Certificates with a remaining maturity approximately equal to the remaining
maturity of the Class A Certificates and rated by each Rating Agency in the
rating category originally assigned to the Class A Certificates over (II)
----
the Reassignment Amount attributable to the Class A Certificates and (B)
the excess, if any, of (I) a price equivalent to the average of bids quoted
on such Record Date or, if not a Business Day, on the next succeeding
Business Day by at least two recognized dealers selected by the Trustee
(which may be selected from the list attached as Schedule 1), for the
purchase by such dealers of a security which is similar to the Class B
Certificates with a remaining maturity approximately equal to the remaining
maturity of the Class B Certificates and rated by each Rating Agency in the
rating category originally assigned to the Class B Certificates over (II)
----
the portion of the Reassignment Amount attributable to the Class B
Certificates.
(b) Distributions Pursuant to Section 7.01 or 7.02 of this Supplement
-----------------------------------------------------------------
and Section 10.01 of the Agreement. With respect to the Reassignment Amount
- ----------------------------------
deposited into the Collection Account pursuant to Section 7.01 or 8.01(a)(ii) or
any amounts allocable to the Series 199_-_ Certificateholders' Interest
deposited into the Collection Account pursuant to Section 7.02, the Trustee
shall, not later than 12:00 noon, Richmond time, on the related Distribution
Date, make deposits or distributions of the following amounts (in the priority
set forth below and, in each case, after giving effect to any deposits and
distributions otherwise to be made on such date) in immediately available funds:
(i) (x) the Class A Invested Amount on such Distribution Date will be
distributed to the Paying Agent for payment to the Class A Certificateholders
and (y) an amount equal to the sum of (A) Class A Monthly Interest for such
Distribution Date, (B) any Class A Outstanding Monthly Interest and (C) the
amount of Class A Additional Interest, if any, for such Distribution Date and
any Class A Outstanding Additional Interest, will be distributed to the Paying
Agent for payment to the Class A Certificateholders, (ii) (x) the Class B
Invested Amount on such Distribution Date will be distributed to the Paying
Agent for payment to the Class B Certificateholders and (y) an amount equal to
the sum of (A) Class B Monthly Interest for such Distribution Date, (B) any
Class B Outstanding Monthly Interest and (C) the amount of Class B Additional
Interest, if any, for such Distribution Date and any Class B Outstanding
Additional Interest, will be distributed to the Paying Agent for payment to the
Class B Certificateholders and (iii) (x) the Class C Invested Amount on such
Distribution Date will be distributed to the Paying Agent for payment to the
Class C Interest Holders and (y) an amount equal to the sum of (A) Class C
Monthly Interest for such Distribution Date, (B) any Class C Outstanding Monthly
Interest and (C) the amount of Class C Additional Interest, if any, for such
Distribution Date and any Class C Outstanding Additional Interest, will be
distributed to the Paying Agent for payment to the Class C Interest Holders.
Notwithstanding anything to the contrary contained in this Supplement or the
Agreement, the amount of any excess determined pursuant to paragraph (a)(ii)(y)
shall be distributed to the Series 199_-_ Certificateholders.
(c) Distributions Pursuant to Section 2.06 of the Agreement. With
-------------------------------------------------------
respect to any amounts deposited into the Collection Account pursuant to Section
8.01(a)(i), the Trustee
42
<PAGE>
shall, not later than 12:00 noon, Richmond time, on the related Distribution
Date, deposit the principal portion of such amounts that are allocable to the
Class A Certificateholders' Interest into the Principal Funding Account and the
principal portion of such amounts allocable to the Class B Certificateholders
shall be distributed to the Paying Agent for payment to the Class B
Certificateholders and the principal portion of such amounts that are allocable
to the Class C Interests shall be distributed to the Paying Agent for payment to
the Class C Interest Holders.
(d) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to Section
8.01(b) for payment to the Series 199_-_ Holders shall be deemed distributed in
full to the Series 199_-_ Holders on the date on which such funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.02 of the Agreement.
Section 8.02. Distribution of Proceeds of Sale, Disposition or
------------------------------------------------
Liquidation of the Receivables pursuant to Section 9.02 of the Agreement.
- ------------------------------------------------------------------------
(a) Not later than 12:00 noon, Richmond time, on the Distribution Date
following the date on which the Insolvency Proceeds are deposited into the
Collection Account pursuant to Section 8.02(b) of the Agreement, the Trustee
shall (in the following priority and, in each case, after giving effect to any
deposits and distributions otherwise to be made on such Distribution Date) (i)
deduct an amount equal to the Class A Invested Amount on such Distribution Date
from the portion of the Insolvency Proceeds allocated to Collections of
Principal Receivables and distribute such amount to the Paying Agent for payment
to the Class A Certificateholders, provided that the amount of such distribution
shall not exceed the product of (x) the portion of the Insolvency Proceeds
allocated to Collections of Principal Receivables and (y) the Principal
Allocation Percentage with respect to the related Monthly Period, (ii) deduct an
amount equal to the Class B Invested Amount on such Distribution Date from the
portion of the Insolvency Proceeds allocated to Collections of Principal
Receivables and distribute such amount to the Paying Agent for payment to the
Class B Certificateholders, provided that the amount of such distribution shall
not exceed (x) the product of (A) the portion of such Insolvency Proceeds
allocated to Collections of Principal Receivables and (B) the Principal
Allocation Percentage with respect to the related Monthly Period minus (y) the
-----
amount distributed to the Paying Agent pursuant to clause (i) of this sentence
and (iii) deduct an amount equal to the Class C Invested Amount, if any, on such
Distribution Date from the portion of the Insolvency Proceeds allocated to
Collections of Principal Receivables and distribute such amount to the Paying
Agent for payment to the Class C Interest Holders, provided that the amount of
such distribution shall not exceed (x) the product of (1) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (2)
the Principal Allocation Percentage with respect to such Monthly Period minus
-----
(y) the amounts distributed to the Paying Agent pursuant to clauses (i) and (ii)
of this sentence. To the extent that the product of (A) the portion of the
Insolvency Proceeds allocated to Collections of Principal Receivables and (B)
the Principal Allocation Percentage with respect to the related Monthly Period
exceeds the aggregate amounts distributed to the Paying Agent pursuant to the
preceding sentence, the excess shall be allocated to the Seller's Interest and
shall be released to the Seller on such Distribution Date.
43
<PAGE>
(b) Not later than 12:00 noon, Richmond time, on such Distribution
Date, the Trustee shall (in the following priority and, in each case, after
giving effect to any deposits and distributions otherwise to be made on such
Distribution Date) (i) deduct an amount equal to the sum of (w) Class A Monthly
Interest for such Distribution Date, (x) any Class A Outstanding Monthly
Interest and (y) the amount of Class A Additional Interest, if any, for such
Distribution Date and any Class A Outstanding Additional Interest, from the
portion of the Insolvency Proceeds allocated to Collections of Finance Charge
Receivables and distribute such amount to the Paying Agent for payment to the
Class A Certificateholders, provided that the amount of such distribution shall
not exceed the product of (A) the portion of the Insolvency Proceeds allocated
to Collections of Finance Charge Receivables, (B) the Floating Allocation
Percentage with respect to the related Monthly Period and (C) the Class A
Floating Percentage with respect to such Monthly Period, (ii) deduct an amount
equal to the sum of (w) Class B Monthly Interest for such Distribution Date, (x)
Class B Outstanding Monthly Interest and (y) the amount of Class B Additional
Interest, if any, for such Distribution Date and any Class B Outstanding
Additional Interest, from the portion of the Insolvency Proceeds allocated to
Collections of Finance Charge Receivables and distribute such amount to the
Paying Agent for payment to the Class B Certificateholders, provided that the
amount of such distribution shall not exceed the product of (A) the portion of
the Insolvency Proceeds allocated to Collections of Finance Charge Receivables,
(B) the Floating Allocation Percentage with respect to the related Monthly
Period and (C) the Class B Floating Percentage with respect to such Monthly
Period and (iii) deduct an amount equal to the sum of (w) Class C Monthly
Interest for such Distribution Date, (x) Class C Outstanding Monthly Interest
and (y) the amount of Class C Additional Interest, if any, for such Distribution
Date and any Class C Outstanding Additional Interest, from the portion of the
Insolvency Proceeds allocated to Collections of Finance Charge Receivables and
distribute such amount to the Paying Agent for payment to the Class C Interest
Holders, provided that the amount of such distribution shall not exceed the
product of (A) the portion of the Insolvency Proceeds allocated to Collections
of Finance Charge Receivables, (B) the Floating Allocation Percentage with
respect to the related Monthly Period and (C) the Class C Floating Percentage
with respect to such Monthly Period. To the extent that the product of (x) the
portion of the Insolvency Proceeds allocated to Collections of Finance Charge
Receivables and (y) the Floating Allocation Percentage with respect to the
related Monthly Period exceeds the aggregate amount distributed to the Paying
Agent pursuant to the preceding sentence, the excess shall be allocated to the
Seller's Interest and shall be released to the Seller on such Distribution Date.
(c) Notwithstanding anything to the contrary in this Supplement or the
Agreement, all amounts distributed to the Paying Agent pursuant to this Section
for payment to the Series 199_-_ Holders shall be distributed in full to the
Series 199_-_ Holders on the date on which funds are distributed to the
applicable Paying Agents pursuant to this Section and shall be deemed to be a
final distribution pursuant to Section 12.02 of the Agreement.
(d) Notwithstanding any provision of the Agreement or this Supplement,
for purposes of Section 9.02(a) of the Agreement, the Holders of the Series
199_-_ Certificates shall not be deemed to have disapproved a liquidation of the
Receivables following an Insolvency Event with respect to the Seller unless (i)
holders of more than 50% of the aggregate unpaid principal amount of each of the
Class A Certificates and the Class B Certificates and (ii)
44
<PAGE>
beneficial owners of more than 50% of the Class C Interests shall have
disapproved of such liquidation.
ARTICLE IX
New Issuances; Addition of Accounts; Additional Issuances
---------------------------------------------------------
Section 9.01. New Issuances. The obligation of the Trustee to
-------------
authenticate the Investor Certificates of a new Series and to execute and
deliver the related Supplement shall be subject to the conditions set forth in
Section 6.03(b) of the Agreement 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 equals or exceeds the Required Principal
Balance.
Section 9.02. Addition of Accounts.
--------------------
(i) If, as of the close of business on the last Business Day of any
Monthly Period, the aggregate amount of Principal Receivables is less than
the Required Principal Balance on such date, the Seller shall on or prior
to the close of business on the 10th Business Day following the last
Business Day of such Monthly Period (the "Required Designation Date"),
unless the aggregate amount of Principal Receivables 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 the Required Designation
Date, designate additional Eligible Accounts to be included as Accounts as
of the Required Designation Date or any earlier date in a sufficient amount
such that, after giving effect to such addition, the aggregate amount of
Principal Receivables equals or exceeds the Required Principal Balance on
such date. Each such addition shall be subject to the same conditions
applicable to any Addition required to be made pursuant to Section 2.08(a)
of the Agreement. The failure of any condition set forth in Section
2.08(c) or (d) of the Agreement, as the case may be, shall not relieve the
Seller of its obligation pursuant to this paragraph; provided, however,
-------- -------
that the failure of the Seller to transfer Receivables to the Trust as
provided in this paragraph solely as a result of the unavailability of a
sufficient amount of Eligible Receivables shall not constitute a breach of
this Supplement; provided further, that any such failure which has not been
-------- -------
timely cured will nevertheless result in the occurrence of a Pay Out Event
with respect to Series 199_-_.
(ii) In lieu of, or in addition to, designating Additional Accounts
pursuant to clause (i) above, the Seller may, subject to the conditions
specified in Section 2.03(d) of the Agreement, convey to the Trust
Participation Interests. The addition of Participation Interests in the
Trust pursuant to this paragraph shall be effected by an amendment to the
Agreement and this Supplement, dated the applicable Addition Date, pursuant
to Section 13.01(a) of the Agreement.
Section 9.03. Additional Issuances of Series 199_-_ Certificates.
--------------------------------------------------
(a) Subject to Sections 9.03(b) and (c), the Seller may at any time,
or from time to time, during the Revolving Period direct the Trustee, on
behalf of the Trust, to
45
<PAGE>
authenticate additional Class A Certificates (the "Additional Class A
Certificates") and additional Class B Certificates (the "Additional Class B
Certificates") on the first day of any Monthly Period (each such day, an
"Additional Issuance Date"). Any such issuance of Additional Investor
Certificates is referred to herein as an "Additional Issuance." The
outstanding Investor Certificates of each Class and the Additional Investor
Certificates of that Class shall be equally and ratably entitled as provided
herein to the benefits of the Agreement and this Supplement without
preference, priority or distinction, all in accordance with the terms and
provisions of the Agreement and this Supplement.
(b) The obligation of the Trustee to authenticate Additional Investor
Certificates is subject to the satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding the
Additional Issuance Date, the Seller shall have given the Trustee, the
Servicer and each Rating Agency written notice of such Additional Issuance
and the Additional Issuance Date;
(ii) the Seller shall have delivered to the Trustee an amended
Supplement, in form satisfactory to the Trustee, executed by each party
hereto other than the Trustee;
(iii) after giving effect to the Additional Issuance, the total
amount of Principal Receivables shall be equal to, or greater than, the
Required Principal Balance;
(iv) the Seller shall have obtained additional Series Enhancement for
the benefit of the Series 199_-_ Certificateholders; provided that the
ratio of the sum of the Class C Invested Amount and the amount of such
Series Enhancement to the Invested Amount (after giving effect to such
Additional Issuance) shall be greater than or equal to the ratio of the
Class C Invested Amount to the Invested Amount (before giving effect to
such Additional Issuance);
(v) the Seller shall have delivered to the Trustee and each Rating
Agency a Tax Opinion dated the Additional Issuance Date, with respect to
such Additional Issuance;
(vi) the Seller shall have delivered to each Rating Agency (a) an
Opinion of Counsel to the effect that such Additional Issuance will not
violate applicable Federal securities laws and (b) such other documents as
the Rating Agencies may request;
(vii) the Seller shall have received written notice from each Rating
Agency that such Additional Issuance will not have a Ratings Effect;
(viii) 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 the time, in the reasonable belief of the Seller, 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 199_-_;
46
<PAGE>
(ix) as of the Additional Issuance Date all amounts due and owing
to the Series 199_-_ Holders on or prior to such date shall have been paid
to such Holders and there shall not be any unreimbursed Investor Charge-
Offs;
(x) the excess of the principal amount of the Additional Investor
Certificates over the issue price of the Additional Investor Certificates
----
shall not exceed the maximum amount permitted under the Internal Revenue
Code without the creation of original issue discount;
(xi) the Seller's Interest shall not be less than 2% of the total
amount of Principal Receivables, in each case as of the Additional Issuance
Date, after giving effect to such Additional Issuance;
(xii) the ratio of the Controlled Accumulation Amount (after giving
effect to such Additional Issuance) to the Invested Amount (after giving
effect to such Additional Issuance) shall be equal to the ratio of the
Controlled Accumulation Amount (before giving effect to such Additional
Issuance) to the Invested Amount (before giving effect to such Additional
Issuance); and
(xiii) the Seller shall have delivered to the Trustee an Officer's
Certificate, dated the Additional Issuance Date, confirming that the
conditions referred to above have been satisfied.
Upon satisfaction of the above conditions, the Trustee shall
authenticate the Additional Investor Certificates upon execution thereof by
the Seller.
(c) Notwithstanding any provision of the Agreement or this Supplement,
this Supplement may be amended by the Servicer, the Seller and the Trustee,
without the consent of any of the Certificateholders, to provide for an
Additional Issuance, provided that the conditions set forth in Section 9.03(b)
have been satisfied.
ARTICLE X
Miscellaneous Provisions
------------------------
Section 10.01. Ratification of Agreement. As supplemented by this
-------------------------
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
Section 10.02. Counterparts. This Supplement may be executed in two
------------
or more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 10.03. Governing Law. THIS SUPPLEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
47
<PAGE>
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 10.04. Determination of Material Adverse Effect. Any
----------------------------------------
determination of material adverse effect on the Series 199_-_ Certificateholders
under the Agreement or this Supplement shall be made assuming the Class C
Invested Amount is zero and without regard to whether funds are available in the
Cash Collateral Account (including, without limitation, any determination of
whether a representation or warranty made therein is correct or whether a Seller
or the Servicer has duly performed a covenant contained therein or herein).
Section 10.05. Book-Entry Certificates; Private Placement of Class B
-----------------------------------------------------
Certificates.
- ------------
(a) The Class A Certificates and the Class B Certificates shall be
delivered as Book-Entry Certificates. The Clearing Agency for the Class A
Certificates and the Class B Certificates shall be The Depository Trust Company,
and the Class A Certificates and the Class B Certificates shall be initially
registered in the name of Cede & Co., its nominee. The Series 199_-_
Certificates are issuable only in minimum denominations of $1,000 and integral
multiples of $1,000.
(b) The Class B Certificates have not been registered under the Act or
any state securities law. No transfer of any Class B Certificate shall be made
except in accordance with Section 6.04 of the Agreement. The Class B
Certificates shall bear a legend to the effect set forth in Exhibit A-2 hereto.
Neither the Seller nor the Trustee is obligated to register the Class B
Certificates under the Act or to take any other action not otherwise required
under this Supplement or the Agreement to permit the transfer of Class B
Certificates without registration.
Section 10.06. Uncertificated Securities. The Class C Interests
-------------------------
shall be delivered in uncertificated form.
Section 10.07. Seller's Direction to the Trustee. The Seller hereby
---------------------------------
directs the Trustee to enter into the Loan Agreement pursuant to this Supplement
and the Agreement. The Trustee hereby agrees and covenants to perform its
obligations in accordance with such document.
48
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Supplement to be
duly executed and delivered by their respective duly authorized officers on the
day and year first above written.
CAPITAL ONE BANK,
Seller and Servicer
By: ________________________
Name:
Title:
THE BANK OF NEW YORK,
Trustee
By: ________________________
Name:
Title:
[Signature Page to Series 199_-_ Supplement]
<PAGE>
REGISTERED $___________
No. R-A-__ CUSIP No.____________
Unless this Class A Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
CAPITAL ONE MASTER TRUST
Series 199_-_
CLASS A FLOATING RATE ASSET BACKED CERTIFICATE
Class A Expected Final Payment Date:
The ___________ ____ Distribution Date
Each $1,000 minimum denomination represents a
1/________ undivided interest
in certain assets of the
CAPITAL ONE MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in the ordinary course of
business in a portfolio of consumer revolving credit card accounts by
CAPITAL ONE BANK
and, in certain circumstances, certain Additional Sellers (as defined in the
Pooling and Servicing Agreement referred to below).
(Not an interest in or obligation of Capital One Bank,
any Additional Seller or any affiliate thereof)
This certifies that CEDE & CO. (the "Class A Certificateholder") is
the registered owner of a fractional undivided interest in certain assets of a
trust (the "Trust") created pursuant to the Pooling and Servicing Agreement,
dated as of September 30, 1993 (as amended and supplemented, the "Agreement"),
as supplemented by the Series 199_-_ Supplement, dated as of
<PAGE>
____________ __, 199_ (as amended and supplemented, the "Series Supplement"),
among Capital One Bank, as Seller and Servicer, and The Bank of New York, a New
York banking corporation, as trustee (the "Trustee"). The corpus of the Trust
consists of (i) a portfolio of all receivables (the "Receivables") existing in
the consumer revolving credit card accounts and other consumer revolving credit
accounts identified under the Agreement from time to time (the "Accounts"), (ii)
all Receivables generated under the Accounts from time to time thereafter, (iii)
funds collected or to be collected from accountholders in respect of the
Receivables, (iv) all funds which are from time to time on deposit in the
Collection Account and in the Series Accounts, (v) an interest in any Funds
Collateral relating to secured accounts, (vi) the benefits of any Series
Enhancement and (vii) all other assets and interests constituting the Trust. The
Holder of this Class A Certificate is entitled to the benefit of funds on
deposit in a Cash Collateral Account and any Series Enhancement to the extent
provided in the Series Supplement. Although a summary of certain provisions of
the Agreement and the Series Supplement is set forth below and on the Summary of
Terms and Conditions attached hereto and made a part hereof, this Class A
Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at the
Corporate Trust Office. To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the Agreement or the Series
Supplement, as applicable.
This Class A Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class A Certificateholder by virtue of the acceptance hereof assents
and is bound.
It is the intent of the Seller and the Investor Certificateholders
that, for federal, state and local income and franchise tax purposes only, the
Investor Certificates will qualify as indebtedness of the Seller secured by the
Receivables. The Class A Certificateholder, by the acceptance of this Class A
Certificate, agrees to treat this Class A Certificate for federal, state and
local income and franchise tax purposes as indebtedness of the Seller.
In general, payments of principal with respect to the Class A
Certificates are limited to the Class A Invested Amount, which may be less than
the unpaid principal balance of the Class A Certificates. The Class A Expected
Final Payment Date is the ___________ ____ Distribution Date, but principal with
respect to the Class A Certificates may be paid earlier or later under certain
circumstances described in the Agreement and the Series Supplement. If for
2
<PAGE>
one or more months during the Class A Accumulation Period there are not
sufficient funds to pay the Controlled Deposit Amount, then to the extent that
excess funds are not available on subsequent Distribution Dates with respect to
the Class A Accumulation Period to make up for such shortfalls, the final
payment of principal of the Class A Certificates will occur later than the Class
A Expected Final Payment Date.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class A Certificate shall
not be entitled to any benefit under the Agreement or the Series Supplement or
be valid for any purpose.
IN WITNESS WHEREOF, the Seller has caused this Class A Certificate to
be duly executed.
CAPITAL ONE BANK
By: __________________________
Name:
Title:
Dated: ___________ __, 199_
3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-
mentioned Agreement and Series Supplement.
THE BANK OF NEW YORK,
as Trustee
By: _________________________
Authorized Officer
or
By: _________________________
as Authenticating Agent
for the Trustee
By: _________________________
Authorized Officer
<PAGE>
CAPITAL ONE MASTER TRUST
SERIES 199_-_
CLASS A FLOATING RATE ASSET BACKED CERTIFICATE
Summary of Terms and Conditions
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to accountholders
as cash advances and Finance Charge Receivables. This Class A Certificate is
one of a Series of Investor Certificates entitled "Capital One Master Trust,
Series 199_-_." The Series199_-_ Certificates are being issued in two Classes,
the first of which is known as the "Class A Floating Rate Asset Backed
Certificates, Series 199_-_" (the "Class A Certificates") and the second Class
is known as the "Class B Floating Rate Asset Backed Certificates, Series 199_-_"
(the "Class B Certificates"). In addition, as part of Series 199_-_, the Trust
is creating a third Class of uncertificated interests in the Trust which
uncertificated interests, except as expressly provided in the Series Supplement,
are deemed to be "Investor Certificates" and are known as the "Class C Floating
Rate Asset Backed Interests, Series 199_-_" (the "Class C Interests"). This
Class A Certificate represents a fractional undivided interest in certain assets
of the Trust. The Trust Assets are allocated in part to the certificateholders
of all outstanding Series (the "Certificateholders' Interest") with the
remainder allocated to the Seller's Interest. The aggregate interest
represented by the Class A Certificates at any time in the Principal
Receivables in the Trust shall not exceed an amount equal to the Class A
Invested Amount at such time. The Class A Initial Invested Amount is
$__________. The Class A Invested Amount on any date will be an amount equal to
(a) the Class A Initial Invested Amount, minus (b) the aggregate amount of
principal payments made to the Class A Certificateholders on or prior to such
date, minus (c) the excess, if any, of the aggregate amount of Class A Investor
Charge-Offs for all prior Distribution Dates over the aggregate amount of Class
A Investor Charge-Offs reimbursed pursuant to Section 4.06(a) of the Series
Supplement prior to such date. Also, a Seller's Certificate has been issued to
Capital One Bank pursuant to the Agreement which represents the Seller's
Interest on the date hereof.
Subject to the terms and conditions of the Agreement, the Seller may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of Investor Certificates, which will represent fractional
undivided interests in certain of the Trust Assets.
On each Payment Date, the Paying Agent shall distribute to each Class
A Certificateholder of record on the last day of the preceding calendar month
(each a "Record Date") such Class A Certificateholder's pro rata share of such
amounts (including amounts on deposit in the Collection Account and the
Principal Funding Account) as are payable to the Class A Certificateholders
pursuant to the Agreement and the Series Supplement. Distributions with respect
to this Class A Certificate will be made by the Paying Agent by check mailed to
the address of the Class A Certificateholder of record appearing in the
Certificate Register without the presentation or surrender of this Class A
Certificate or the making of any notation thereon
5
<PAGE>
(except for the final distribution in respect of this Class A Certificate),
except that with respect to Class A Certificates registered in the name of Cede
& Co., the nominee for The Depository Trust Company, distributions will be made
in the form of immediately available funds. Final payment of this Class A
Certificate will be made only upon presentation and surrender of this Class A
Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee to the Class A Certificateholders in
accordance with the Agreement and the Series Supplement.
On any day occurring on or after the day on which the Invested Amount
is reduced to 5% or less of the Initial Invested Amount, the Seller has the
option to repurchase the Certificateholders' Interest in the Trust. The
repurchase price will be equal to (a) if such day is a Distribution Date, the
Reassignment Amount for such Distribution Date or (b) if such day is not a
Distribution Date, the Reassignment Amount for the Distribution Date following
such day. Following the deposit of the Reassignment Amount in the Collection
Account, Class A Certificateholders, the Class B Certificateholders and the
Class C Interest Holders will not have any interest in the Receivables and the
Class A Certificates will represent only the right to receive such Reassignment
Amount.
This Class A Certificate does not represent an obligation of, or an
interest in, the Seller, the Servicer or any affiliate of any of them and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality. This Class A Certificate is limited in
right of payment to certain Collections with respect to the Receivables (and
certain other amounts), all as more specifically set forth hereinabove and in
the Agreement and the Series Supplement.
The Agreement or any Supplement may, subject to certain conditions, be
amended by the Seller, the Servicer and the Trustee without Certificateholder
consent. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's rights, duties or immunities under the
Agreement or otherwise.
The Agreement or any Supplement may also be amended from time to time
by the Servicer, the Seller and the Trustee, with the consent of the Holders of
Investor Certificates evidencing not less than 66-2/3% of the aggregate unpaid
principal amount of the Investor Certificates of all adversely affected Series,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or any Supplement or of
modifying in any manner the rights of the Investor Certificateholders; provided,
--------
however, that no such amendment shall (i) reduce in any manner the amount of or
- -------
delay the timing of any distributions to be made to Investor Certificateholders
or deposits of amounts to be so distributed or the amount available under any
Series Enhancement without the consent of each affected Investor
Certificateholder, (ii) change the definition of or the manner of calculating
the interest of any Investor Certificateholder without the consent of each
affected Investor Certificateholder, (iii) reduce the aforesaid percentage
required to consent to any such amendment without the consent of each Investor
Certificateholder or (iv) adversely affect the rating of any Series or Class by
each Rating Agency without the consent of the Holders of Investor Certificates
of such Series or Class evidencing not less than 66-2/3% of the aggregate
6
<PAGE>
unpaid principal amount of the Investor Certificates of such Series or Class.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's rights, duties or immunities under the Agreement or
otherwise.
The Class A Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class A
Certificate shall be registered in the Certificate Register upon surrender of
this Class A Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer, in a form satisfactory to the Trustee or the Transfer
Agent and Registrar, duly executed by the Class A Certificateholder or such
Class A Certificateholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class A Certificates of
authorized denominations and for the same aggregate fractional undivided
interest will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations
therein set forth, Class A Certificates are exchangeable for new Class A
Certificates evidencing like aggregate fractional undivided interests as
requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them, shall be affected by notice to the
contrary except in certain circumstances described in the Agreement.
THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee ________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _______________________*
Signature Guaranteed:
____________________________
____________________________
* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
8
<PAGE>
REGISTERED $__________
No. R-B-__ CUSIP No. ____________
THIS CLASS B CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF
PERSONS INVESTING ASSETS OF A BENEFIT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT
OTHER THAN AN INSURANCE COMPANY GENERAL ACCOUNT.
Unless this Class B Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
CAPITAL ONE MASTER TRUST
Series 199_-_
CLASS B FLOATING RATE ASSET BACKED CERTIFICATE
Class B Expected Final Date:
The ___________ ____ Distribution Date
Each $1,000 denomination represents a
1/_______ undivided interest
in certain assets of the
CAPITAL ONE MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in the ordinary course of
business in a portfolio of consumer revolving credit card accounts by CAPITAL
ONE BANK and, in certain circumstances, certain Additional Sellers (as defined
in the Pooling and Servicing Agreement referred to below).
(Not an interest in or obligation of Capital One Bank,
any Additional Seller or any affiliate thereof)
This certifies that CEDE & CO. (the "Class B Certificateholder") is
the registered owner of a fractional undivided interest in certain assets of a
trust (the "Trust") created pursuant to the Pooling and Servicing Agreement,
dated as of September 30, 1993 (as amended and
<PAGE>
supplemented, the "Agreement"), as supplemented by the Series 199_-_ Supplement,
dated as of ___________ __, 199_ (as amended and supplemented, the "Series
Supplement"), among Capital One Bank, as Seller and Servicer, and The Bank of
New York, a New York banking corporation, as trustee (the "Trustee"). The corpus
of the Trust consists of (i) a portfolio of all receivables (the "Receivables")
existing in the consumer revolving credit card accounts and other consumer
revolving credit accounts identified under the Agreement from time to time (the
"Accounts"), (ii) all Receivables generated under the Accounts from time to time
thereafter, (iii) funds collected or to be collected from accountholders in
respect of the Receivables, (iv) all funds which are from time to time on
deposit in the Collection Account and in the Series Accounts, (v) an interest in
any Funds Collateral relating to secured accounts, (vi) the benefits of any
Series Enhancement and (vii) all other assets and interests constituting the
Trust. The Holder of this Class B Certificate is entitled to the benefit of
funds on deposit in a Cash Collateral Account and any Series Enhancement to the
extent provided in the Series Supplement. Although a summary of certain
provisions of the Agreement and the Series Supplement is set forth below and on
the Summary of Terms and Conditions attached hereto and made a part hereof, this
Class B Certificate does not purport to summarize the Agreement and the Series
Supplement and reference is made to the Agreement and the Series Supplement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee. A copy of the Agreement and the Series Supplement (without
schedules) may be requested from the Trustee by writing to the Trustee at the
Corporate Trust Office. To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the Agreement or the Series
Supplement, as applicable.
This Class B Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class B Certificateholder by virtue of the acceptance hereof assents
and is bound.
It is the intent of the Seller and the Investor Certificateholders
that, for federal, state and local income and franchise tax purposes only, the
Investor Certificates will qualify as indebtedness of the Seller secured by the
Receivables. The Class B Certificateholder, by the acceptance of this Class B
Certificate, agrees to treat this Class B Certificate for federal, state and
local income and franchise tax purposes as indebtedness of the Seller.
In general, payments of principal with respect to the Class B
Certificates are limited to the Class B Invested Amount, which may be less than
the unpaid principal balance of the Class B Certificates. The Class B Expected
Final Payment Date is the __________ ____ Distribution Date, but principal with
respect to the Class B Certificates may be paid earlier or later under certain
circumstances described in the Agreement and the Series Supplement. Principal
payments with respect to the Class B Certificates will not commence until the
Class A Invested Amount is paid in full. In addition, the final payment of
principal of the Class B Certificates will occur later than the Class B Expected
Final Payment Date if Collections of Receivables allocable to pay principal of
the Class B Certificates are insufficient to pay the Class B Invested Amount on
or prior to such Distribution Date.
No Class B Certificate (or any interest therein) may be acquired or held by
any employee benefit or other plan (including an individual retirement account)
that is subject to the Employee
2
<PAGE>
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended (each, a "Plan"), any trustee or
other person acting on behalf of any Plan, or any other person using "Plan
Assets" to effect such acquisition or holding (each, a "Plan Investor") unless
(i) such acquirer or holder is an insurance company, (ii) the source of funds
used to acquire or hold such Certificate (or interest therein) is an "insurance
company general account" (as defined in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60), and (iii) the conditions set forth
in Sections I and III of PTCE 95-60 have been satisfied. By acquiring an
interest in this Class B Certificate, each Class B Certificateholder or
Certificate Owner shall be deemed to have represented, either (i) that it is not
a Plan Investor or (ii) that (1) it is an insurance company, (2) the source of
funds used to acquire or hold an interest in such Certificate is an "insurance
company general account" (as such term is defined in PTCE 95-60), and (3) the
conditions set forth in Sections I and III of PTCE 95-60 have been satisfied.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Class B Certificate shall
not be entitled to any benefit under the Agreement or the Series Supplement or
be valid for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Seller has caused this Class B Certificate to
be duly executed.
CAPITAL ONE BANK
By:
----------------------------
Name:
Title:
Dated: ___________ __, 199_
4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the within-
mentioned Agreement and Series Supplement.
THE BANK OF NEW YORK,
as Trustee
By:
----------------------------
Authorized Officer
or
By:
----------------------------
as Authenticating Agent
for the Trustee
By:
----------------------------
Authorized Officer
5
<PAGE>
CAPITAL ONE MASTER TRUST
SERIES 199_-_
CLASS B FLOATING RATE ASSET BACKED CERTIFICATE
Summary of Terms and Conditions
The Receivables consist of Principal Receivables which arise generally
from the purchase of goods and services and amounts advanced to accountholders
as cash advances and Finance Charge Receivables. This Class B Certificate is
one of a Series of Certificates entitled "Capital One Master Trust, Series 199_-
_." The Series 199_-_ Certificates are being issued in two Classes, the first
of which is known as the "Class A Floating Rate Asset Backed Certificates,
Series 199_-_" (the "Class A Certificates") and the second Class is known as the
"Class B Floating Rate Asset Backed Certificates, Series 199_-_" (the "Class B
Certificates"). In addition, as part of Series 199_-_, the Trust is creating a
third Class of uncertificated interests in the Trust which uncertificated
interests, except as expressly provided in the Series Supplement, are deemed to
be "Investor Certificates" and are known as the "Class C Floating Rate Asset
Backed Interests, Series 199_-_" (the "Class C Interests"). This Class B
Certificate represents a fractional undivided interest in certain assets of the
Trust. The Trust Assets are allocated in part to the certificateholders of all
outstanding Series (the "Certificateholders' Interest") with the remainder
allocated to the Seller's Interest. The aggregate interest represented by the
Class B Certificates at any time in the Principal Receivables in the Trust shall
not exceed an amount equal to the Class B Invested Amount at such time. The
Class B Initial Invested Amount is $___________. The Class B Invested Amount on
any date will be an amount equal to (a) the Class B Initial Invested Amount,
minus (b) the aggregate amount of principal payments made to the Class B
Certificateholders on or prior to such date, minus (c) 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 (d) the amount of
Reallocated Principal Collections allocated on all prior Distribution Dates
pursuant to Section 4.08(a) of the Series Supplement (excluding any Reallocated
Principal Collections that have resulted in a reduction in the Class C Invested
Amount pursuant to Section 4.06(c) of the Series Supplement), minus (e) an
amount equal to the amount by which the Class B Invested Amount has been reduced
on all prior Distribution Dates pursuant to Section 4.06(a) of the Series
Supplement and plus (f) the amount of Excess Spread and Excess Finance Charges
allocated and available on all prior Distribution Dates pursuant to Section
4.07(d) of the Series Supplement for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c), (d) and (e). Also, a Seller's
Certificate has been issued to Capital One Bank pursuant to the Agreement which
represents the Seller's Interest on the date hereof.
Subject to the terms and conditions of the Agreement, the Seller may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of Investor Certificates, which will represent fractional
undivided interests in certain of the Trust Assets.
6
<PAGE>
On each Payment Date, the Paying Agent shall distribute to each Class
B Certificateholder of record on the last day of the preceding calendar month
(each a "Record Date") such Class B Certificateholder's pro rata share of such
amounts (including amounts on deposit in the Collection Account and the
Principal Funding Account) as are payable to the Class B Certificateholders
pursuant to the Agreement and the Series Supplement. Distributions with respect
to this Class B Certificate will be made by check mailed to the address of the
Class B Certificateholder of record appearing in the Certificate Register
without the presentation or surrender of this Class B Certificate or the making
of any notation thereon (except for the final distribution in respect of this
Class B Certificate) except that with respect to Class B Certificates registered
in the name of Cede & Co., the nominee for The Depository Trust Company,
distributions will be made in the form of immediately available funds. Final
payment of this Class B Certificate will be made only upon presentation and
surrender of this Class B Certificate at the office or agency specified in the
notice of final distribution delivered by the Trustee to the Class B
Certificateholders in accordance with the Agreement and the Series Supplement.
On any day occurring on or after the day on which the Invested Amount
is reduced to 5% or less of the Initial Invested Amount, the Seller has the
option to repurchase the Certificateholders' Interest in the Trust. The
repurchase price will be equal to (a) if such day is a Distribution Date, the
Reassignment Amount for such Distribution Date or (b) if such day is not a
Distribution Date, the Reassignment Amount for the Distribution Date following
such day. Following the deposit of the Reassignment Amount in the Collection
Account, the Class A Certificateholders, the Class B Certificateholders and the
Class C Interest Holders will not have any interest in the Receivables and the
Class B Certificates will represent only the right to receive such Reassignment
Amount.
This Class B Certificate does not represent an obligation of, or an
interest in, the Seller, the Servicer or any affiliate of any of them and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality. This Class B Certificate is limited in
right of payment to certain Collections with respect to the Receivables (and
certain other amounts), all as more specifically set forth hereinabove and in
the Agreement and the Series Supplement.
The Agreement or any Supplement may, subject to certain conditions, be
amended by the Seller, the Servicer and the Trustee without Certificateholder
consent. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's rights, duties or immunities under the
Agreement or otherwise.
The Agreement or any Supplement may also be amended from time to time
by the Servicer, the Seller and the Trustee, with the consent of the Holders of
Investor Certificates evidencing not less than 66-2/3% of the aggregate unpaid
principal amount of the Investor Certificates of all adversely affected Series,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or any Supplement or of
modifying in any manner the rights of the Investor Certificateholders; provided,
--------
however, that no such amendment shall (i) reduce in any manner the amount of or
- -------
delay the timing of any distributions to be made to Investor Certificateholders
or deposits of amounts to be so distributed or the amount available under any
Series Enhancement without the consent of each affected Investor
Certificateholder, (ii) change the definition of or the manner of
7
<PAGE>
calculating the interest of any Investor Certificateholder without the consent
of each affected Investor Certificateholder, (iii) reduce the aforesaid
percentage required to consent to any such amendment without the consent of each
Investor Certificateholder or (iv) adversely affect the rating of any Series or
Class by each Rating Agency without the consent of the Holders of Investor
Certificates of such Series or Class evidencing not less than 66-2/3% of the
aggregate unpaid principal amount of the Investor Certificates of such Series or
Class. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's rights, duties or immunities under the
Agreement or otherwise.
The Class B Certificates are issuable in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class B
Certificate shall be registered in the Certificate Register upon surrender of
this Class B Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar accompanied by a written
instrument of transfer, in a form satisfactory to the Trustee or the Transfer
Agent and Registrar, duly executed by the Class B Certificateholder or such
Class B Certificateholder's attorney, and duly authorized in writing with such
signature guaranteed, and thereupon one or more new Class B Certificates of
authorized denominations and for the same aggregate fractional undivided
interest will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations
therein set forth, Class B Certificates are exchangeable for new Class B
Certificates evidencing like aggregate fractional undivided interests as
requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name this
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Servicer nor the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them, shall be affected by notice to the
contrary except in certain circumstances described in the Agreement.
THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
8
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee
------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
-----------------------------------------------------------------
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints , attorney, to transfer said
----------------------
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
---------------------
Signature Guaranteed:
*
- ----------------------
- ----------------------
- ----------------------
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
9
<PAGE>
EXHIBIT 5.1
January 28, 1999
Capital One Bank
11011 West Broad Street
Richmond, Virginia 23060
Re: Capital One Master Trust
Capital One Bank (Seller and Servicer)
Registration Statement on Form S-3 No. 333-66335
------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Capital One Bank, a Virginia banking
corporation (the "Bank"), in connection with the Registration Statement on Form
S-3 (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), for the
registration under the Act of Asset Backed Certificates (collectively, the
"Certificates") to be issued from time to time in series (each, a "Series") and
representing undivided interests in the Capital One Master Trust (the "Trust").
Such Certificates will be issued pursuant to the Pooling and Servicing Agreement
(as amended, the "Pooling and Servicing Agreement"), between the Bank, as Seller
and Servicer by assignment from the previous seller and servicer, and The Bank
of New York, as Trustee.
We have examined such instruments, documents and records as we
deemed relevant and necessary as a basis of our opinion hereinafter expressed.
In such examination, we have assumed the following: (a) the authenticity of
original documents and the genuineness of all signatures; (b) the conformity to
the originals of all documents submitted to us as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that when the
issuance of each Series of the Certificates has been duly authorized by the
appropriate corporate action and the
<PAGE>
Capital One Bank
January 28, 1999
Page 2
Certificates of such Series have been duly executed, authenticated and delivered
in accordance with the Pooling and Servicing Agreement, and sold in the manner
described in the Registration Statement, any amendment thereto and the
prospectus and prospectus supplement relating thereto, the Certificates will be
legally issued, fully paid, non-assessable and binding obligations of the Trust
and the holders of the Certificates of such Series will be entitled to the
benefits of such Pooling and Servicing Agreement, except as enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium, or other laws relating to or
affecting the rights of creditors generally and general principles of equity,
including without limitation concepts of materiality, reasonableness, good faith
and fair dealing, and the possible unavailability of specific performance or
injunctive relief, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever appearing in the
Registration Statement and the prospectus contained therein. In giving such
consent, we do not admit that we are "experts," within the meaning of the term
as used in the Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE>
EXHIBIT 8.1
January 28, 1999
Capital One Bank
11011 West Broad Street
Richmond, Virginia 23060
Re: Capital One Master Trust
Capital One Bank (Seller and Servicer)
Registration Statement on Form S-3 No. 333-66335
-----------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Capital One Bank, a Virginia
banking corporation (the "Bank"), in connection with the preparation of the
Registration Statement on Form S-3 (the "Registration Statement") filed on
October 29, 1998 with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of Asset Backed Certificates (collectively, the "Certificates") to be issued
from time to time in series (each, a "Series") and representing an undivided
interest in Capital One Master Trust (the "Trust"). Such Certificates will be
issued pursuant to a pooling and servicing agreement (as amended, the "Pooling
and Servicing Agreement"), between the Bank, as Seller and Servicer by
assignment from the previous seller and servicer, and The Bank of New York, as
Trustee.
We hereby confirm that the statements set forth in the
prospectus relating to the Certificates (the "Prospectus") forming a part of the
Registration Statement under the headings "Summary of Terms--Tax Status" and
"Federal Income Tax Consequences," and the statements set forth in the
representative form of prospectus supplement relating to the Certificates (the
"Prospectus Supplement") forming a part of the Registration Statement under the
headings "Summary of Terms--Tax Status" and "Series Provisions--Federal Income
Tax Consequences," which statements have been prepared by us, to the extent that
they constitute matters of law or legal conclusions with respect thereto, are
correct in all material respects, and we hereby confirm the opinions set forth
therein.
We note that the Prospectus and form of Prospectus Supplement
do not relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences and opinions may, under certain
circumstances, require modification in the context of an actual transaction.
<PAGE>
Capital One Bank
January 28, 1999
Page 2
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving such consent, we do not admit that we
are "experts" within the meaning of the term used in the Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
