<PAGE>
Prospectus Supplement to Prospectus Dated October 17, 2000
[LOGO OF CAPITAL ONE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
$975,000,000 Class A Floating Rate Asset Backed Certificates, Series 2000-4
<TABLE>
<CAPTION>
You should <S> <C>
consider Principal amount $975,000,000
carefully the Cerrtificate rate One-month LIBOR
risk factors plus 0.14% per year
beginning on Interest paid Monthly, beginning
page S-6 in this November 15, 2000
prospectus Expected final payment date October 17, 2005
supplement and Legal final maturity August 15, 2008
on page 6 in the Price to public per certificate 100.00%
prospectus. Underwriting discount
per certificate 0.25%
A certificate is Proceeds to seller per certificate 99.75%
not a deposit
and neither the The total price to public is $975,000,000, the total
certificates nor amount of the underwriting discount is $2,437,500 and
the underlying the total amount of proceeds plus accrued interest and
accounts or before deduction of expenses is $972,562,500.
receivables are
insured or Credit Enhancement--
guaranteed by
the Federal . The trust also is issuing Class B certificates that
Deposit are subordinated to the Class A certificates.
Insurance Subordination of the Class B certificates provides
Corporation or credit enhancement for the Class A certificates.
any other
government . The trust also is issuing a collateral interest that
agency. is subordinated to both the Class A certificates and
the Class B certificates. Subordination of the
The certificates collateral interest provides credit enhancement for
will represent both the Class A certificates and the Class B
interests in the certificates.
trust only, not
interests in or
obligations of
Capital One Bank
or any of its
affiliates.
This prospectus
supplement may
be used to offer
and sell the
certificates
only if
accompanied by
the prospectus.
</TABLE>
This prospectus supplement and the accompanying prospectus relate only to the
offering of the Class A 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 Class A certificates
J.P. Morgan & Co.
Banc of America Securities LLC
Barclays Capital
Deutsche Banc Alex. Brown
October 19, 2000
<PAGE>
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the certificates in two separate
documents: (a) the accompanying prospectus, which provides general information,
some of which may not apply to your certificates and (b) this prospectus
supplement, which describes the specific terms of your certificates.
If the terms of your 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 table of contents in this prospectus
supplement and the table of contents in the accompanying prospectus provide the
pages on which these captions are located.
Parts of this prospectus supplement and the accompanying prospectus use
defined terms. You can find these terms and their definitions under the caption
"Glossary of Defined Terms" beginning on page S-29 in this prospectus
supplement and on page 67 in the accompanying prospectus. To assist you in
understanding this prospectus supplement and the accompanying prospectus, the
terms that are defined in the "Glossary of Defined Terms" in this prospectus
supplement and in the accompanying prospectus appear in bold typeface the first
time they appear in each section and subsection, beginning on page S-7 in this
prospectus supplement and page 14 in the accompanying prospectus.
----------------
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Transaction Summary
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<C> <S>
Trust and Issuer: Capital One Master Trust
Seller: Capital One Bank
Servicer: Capital One Bank
Trustee: The Bank of New York
Series Issuance Date: October 26, 2000
Servicing Fee Rate: 2.0% per year
Clearance and Settlement: DTC/Clearstream/Euroclear
Receivables originated in MasterCard(R) and
Primary Trust Assets: VISA(R)* accounts
</TABLE>
<TABLE>
<CAPTION>
Class A
-------
<S> <C>
Principal Amount: $975,000,000
Percentage of Series:** 81.25%
Anticipated Ratings Aaa/AAA/AAA
(Moody's/Standard &
Poor's/Fitch):***
Credit Enhancement: subordination of Class B and collateral interest
Class A Certificate
Rate: one-month LIBOR plus 0.14% per year
Interest Accrual Method: actual/360
Distribution Dates: monthly (15th)
First Distribution Date: November 15, 2000
Certificate Rate Index 2 London business days before each distribution date
Reset Date:
Commencement of October 1, 2004
Accumulation Period
(subject to
adjustment):
Expected Final Payment October 17, 2005
Date:
Legal Final Maturity: August 15, 2008
ERISA eligibility Yes, subject to important considerations described
(investors should under "ERISA Considerations" in this prospectus
consult with their supplement and the accompanying prospectus.
counsel):
Debt for United States Yes, subject to important considerations described
Federal Income Tax under "Federal Income Tax Consequences" in the
Purposes accompanying prospectus.
(investors should
consult with their tax
counsel):
</TABLE>
--------
* MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Incorporated and VISA U.S.A., Inc., respectively.
** The percentage of Series 2000-4 comprised by the Class B certificates and
the collateral interest is 10.00% and 8.75%, respectively.
*** It is a condition to issuance of the Class A certificates that one of these
ratings be obtained.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
Summary of Terms.......................................................... S-1
The Trust................................................................ S-1
The Bank................................................................. S-1
Offered Securities....................................................... S-1
Class A Certificates.................................................... S-1
Distribution Dates...................................................... S-1
Interest................................................................ S-1
Principal............................................................... S-1
Class B Certificates..................................................... S-2
Collateral Interest...................................................... S-2
Credit Enhancement....................................................... S-2
Interest Rate Swap....................................................... S-2
Other Interests in the Trust............................................. S-3
Other Series of Certificates............................................ S-3
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-4
Finance Charge Receivables 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-5
Exchange Listing......................................................... S-5
Risk Factors.............................................................. S-6
The credit enhancement may be insufficient to ensure expected payments on
the Class A certificates................................................ S-6
The interest rate swap can affect the timing of payments on the Class A
certificates............................................................ S-6
Introduction.............................................................. S-7
Maturity Considerations................................................... S-7
Use of Proceeds........................................................... S-9
The Bank.................................................................. S-10
</TABLE>
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Page
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<S> <C>
Series Provisions.......................................................... S-10
Interest Payments......................................................... S-10
Principal Payments........................................................ S-11
Revolving Period......................................................... S-11
Accumulation Period...................................................... S-11
Early Amortization Period................................................ S-12
Postponement of the Accumulation Period................................... S-12
Interest Rate Swap........................................................ S-13
Swap Counterparty......................................................... S-14
Subordination............................................................. S-15
Allocation Percentages.................................................... S-15
Principal Funding Account................................................. S-15
Reserve Account........................................................... S-16
Reallocation of Cash Flows................................................ S-17
Class A Required Amount.................................................. S-17
Class B Required Amount.................................................. S-17
Application of Collections................................................ S-18
Payment of Interest, Fees and Other Items................................ S-18
Excess Spread; Excess Finance Charges.................................... S-19
Payments of Principal.................................................... S-20
Defaulted Receivables; Investor Charge-Offs............................... S-21
Class A Investor Charge-Offs............................................. S-21
Class B Investor Charge-Offs............................................. S-21
Shared Principal Collections.............................................. S-22
Paired Series............................................................. S-22
Required Principal Balance; Addition of Accounts.......................... S-22
Pay Out Events............................................................ S-23
Servicing Compensation and Payment of Expenses............................ S-24
Series Termination........................................................ S-25
Reports................................................................... S-25
Legal Matters............................................................. S-26
ERISA Considerations....................................................... S-26
Underwriting............................................................... S-27
Glossary of Defined Terms.................................................. S-29
Annex I: Previous Issuances of Certificates................................ I-1
Annex II: The Bank Portfolio and the Receivables........................... II-1
</TABLE>
i
<PAGE>
Summary of Terms
This summary highlights selected information and does not contain all of the
information that you need to make 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 accompanying prospectus.
Do not rely upon this summary for a full understanding of the matters you need
to consider for any potential investment in the Class A certificates.
To understand all of the terms of the offering of the Class A certificates,
read carefully 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, Glen Allen, Virginia 23060 and its
telephone number is (804) 967-1000.
Offered Securities
Class A Certificates
Capital One Master Trust is offering:
. $975,000,000 of Class A certificates.
In this document, references to certificates include both Class A and Class B.
Only the Class A certificates are offered by this prospectus supplement and the
accompanying prospectus.
Beneficial interests in the Class A certificates may be purchased in minimum
denominations of $1,000 and integral multiples of $1,000.
The series issuance date for the Class A certificates is expected to be October
26, 2000.
Distribution Dates
Distribution dates for the Class A certificates will be November 15, 2000 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 Class A certificates will be paid on each distribution date.
The Class A certificates will bear interest at one-month LIBOR as determined
each month plus 0.14% per year.
Interest for the Class A certificates will be calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Number of days in
Principal amount X interest period X Rate for
at end of prior month ----------------- interest period
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.
Principal
Principal of the Class A certificates is expected to be paid in full on the
October 2005 distribution date. We are scheduled to begin accumulating
collections of principal receivables for payment to the certificateholders
starting on October 1, 2004, but we may begin accumulating at a later date.
The Class A certificates are expected to be paid on the date 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, principal may be paid earlier
than
S-1
<PAGE>
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 Class A certificates are not paid on the expected final payment
date, collections of principal receivables will continue to be used to pay
principal on the certificates until the certificates are paid or until August
15, 2008, whichever occurs first. August 15, 2008 is the legal final maturity
date.
See "Maturity Considerations," "Series Provisions--Allocation Percentages" and
"--Principal Payments" in this prospectus supplement.
Class B Certificates
At the same time the Class A certificates are issued, the trust will issue
$120,000,000 of Class B floating rate asset-backed certificates as part of
Series 2000-4. The Class B certificates will be subordinated to the Class A
certificates and the interest rate swap.
The Class B certificates are not offered by this prospectus supplement and
accompanying prospectus.
Collateral Interest
At the same time the Class A certificates are issued, the trust will issue an
interest in the assets of the trust known as the collateral interest. The
initial amount of the collateral interest is $105,000,000, which represents
8.75% of the initial aggregate principal amount of the certificates plus the
collateral interest.
The holder of the collateral interest will have voting and certain other rights
as if the collateral interest were a subordinated class of certificates. The
collateral interest will be subordinated to the Class A certificates, the Class
B certificates and the interest rate swap.
The collateral interest is not offered by this prospectus supplement and the
accompanying prospectus.
Credit Enhancement
Credit enhancement for the Class A certificates and the interest rate swap is
provided by the subordination of the Class B certificates and the collateral
interest.
Credit enhancement for the Class B certificates is provided by the
subordination of the collateral interest.
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.
Interest Rate Swap
The trust and Morgan Guaranty Trust Company of New York, the swap counterparty,
will enter into the interest rate swap. Under the interest rate swap, for each
interest period:
. the swap counterparty will make a payment to the trust, based on the
outstanding principal amount of the Class A certificates, at an annual rate
equal to one-month LIBOR plus 0.14%; and
. the trust will make a payment to the swap counterparty, based on the
outstanding principal amount of the Class A certificates, at an annual rate
equal to 6.763% (or a lesser rate as specified in the interest rate swap).
Payments owed between the trust and the swap counterparty will be made on a net
basis. Amounts paid by the trust to the swap counterparty will be paid from
collections of finance charge receivables and certain other available amounts
allocated to the Class A certificates. Amounts paid by the swap counterparty to
the trust will be deposited in the collection account and allocated to the
Class A certificates.
For a more detailed discussion of the interest rate swap, see "Series
Provisions--Interest Rate Swap" and "--Application of Collections--Payment of
Interest, Fees and Other Items" in this prospectus supplement.
The swap counterparty currently has a long-term credit rating of AA from
Standard & Poor's and Aa3 from Moody's, and a short-term credit rating of A-1+
from Standard & Poor's. The rating agencies have not relied on the ratings of
the swap counterparty in rating the Class A certificates, but have relied on
the value of the receivables and the benefits of the applicable credit
enhancement. Neither a ratings downgrade or a default by the
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swap counterparty nor a termination of the interest rate swap will constitute a
pay out event with respect to the Class A certificates.
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: Previous
Issuances of Certificates" included in this prospectus supplement. Annex I is
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
or the obligations of the trust under the interest rate swap 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 October 6, 2000:
. Receivables in the trust: $14,369,495,102
. Accounts designated to the trust: 11,797,235
See "Annex II: The Bank Portfolio and 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.
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.
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 Class A
certificates, the invested amount for Series 2000-4 will be $1,200,000,000.
Among Classes
Amounts allocated to your series will be further allocated among the Class A
certificates, the Class B certificates and the collateral interest 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, plus
(b) the Class B invested amount, plus
(c) the collateral 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, the monthly servicing fee
and amounts that are written
--------
/1/ MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International Incorporated and VISA U.S.A., Inc., respectively.
S-3
<PAGE>
off as uncollectible, the allocations to the certificates will be based upon
the adjusted invested amount, which will be the invested amount less amounts
accumulated in the principal funding account for payment to the
certificateholders and the collateral interest holder on the 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.
Finance Charge Receivables 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
the amount, if any, due to the swap counterparty, 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 collateral
interest will be used to pay the collateral interest's 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 and net swap payments,
if any;
. then to make up deficiencies with respect to Class B;
. then to pay interest on the collateral interest and to make up deficiencies
with respect to the collateral interest;
. then, in limited circumstances, to fund a reserve account to cover interest
payment shortfalls during the accumulation period; and
. finally to make payments to the holder of the collateral interest.
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 collateral interest and the
Class B certificates may be reallocated, if necessary, to make required
payments on the Class A certificates, net swap payments, if any, and payments
on the Class B certificates not made from finance charge collections, excess
spread or funds in 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
be treated as shared principal collections and may be available to make
principal payments for other series.
. The accumulation period is scheduled to begin on October 1, 2004, but may
begin at a later date. During the accumulation period, principal collections
will be deposited in a trust account, up to a controlled deposit amount, for
payment to the holders of the Class A certificates, the Class B certificates
and the collateral interest on the expected final payment date.
. If a pay out event (described below) that applies to Series 2000-4 or to all
series occurs, the early amortization period will begin. During the early
amortization period, principal collections will be paid first to the Class A
certificateholders, then to the Class B certificateholders and then to the
collateral interest holder.
. Any remaining principal collections will be first made available to other
series and then paid to the seller or deposited in the excess funding
account.
S-4
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Pay Out Events
Upon the occurrence of certain adverse events called pay out events, each month
the trust will use collections of principal receivables allocated to Series
2000-4 to pay principal. See "Series Provisions--Pay Out Events" in this
prospectus supplement for a description of the pay out events that apply
specifically to Series 2000-4, and "Description of the Certificates--Pay Out
Events" in the accompanying prospectus for a description of the pay out events
that apply to all series.
Optional Repurchase
The bank has the option to repurchase your Class A certificates when the
invested amount for your series has been reduced to 5% or less of the initial
invested amount. See "Risk Factors" in the accompanying prospectus.
Registration
The Class A 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 Class A certificates through The Depository Trust
Company, in the United States, or Clearstream Banking, 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 Class A certificates will be
characterized as debt for federal income tax purposes. By your acceptance of a
Class A certificate, you will agree to treat your 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.
Certificate Ratings
The Class A certificates are required to be rated in the highest rating
category by at least one nationally recognized rating organization. See
"Prospectus Summary--Certificate Ratings" and "Risk Factors--The credit ratings
of your certificates are limited" in the accompanying prospectus.
Exchange Listing
We will apply to list the Class A certificates on the Luxembourg Stock
Exchange. We cannot guarantee that the application for the listing will be
accepted.
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Risk Factors
In the accompanying prospectus there is 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 "Risk Factors" in the accompanying prospectus and the
risk factors discussed below before deciding whether to purchase any of the
Class A certificates.
The credit enhancement may
be insufficient to ensure
expected payments on the
Class A certificates.
The credit enhancement for your Class A
certificates is limited. Credit enhancement is
provided through the subordination of the Class
B certificates and the collateral interest. The
only sources of payment for your Class A
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"
and "--Defaulted Receivables; Investor Charge-
Offs" in this prospectus supplement.
The interest rate swap can
affect the timing of
payments on the Class A
certificates.
Since the swap counterparty makes payments
under the interest rate swap based on a
floating rate for the related interest period
and the trust makes payments under the interest
rate swap based on a fixed rate for the related
interest period, it is possible that the amount
owing to the swap counterparty for any interest
period could exceed the amount owing to the
trust for the related interest period and that
a net swap payment will be owing by the trust
to the swap counterparty. If a net swap payment
is owing by the trust to the swap counterparty
for any distribution date, the swap
counterparty will be entitled to that payment
from collections of finance charge receivables
and certain other available amounts otherwise
allocated to the Class A certificates. If net
swap payments are made out of excess spread or
reallocated principal collections, the amount
of credit enhancement supporting the Class A
certificates may be reduced.
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Introduction
The following provisions of this prospectus supplement contain more detailed
information concerning the Class A certificates offered by this prospectus
supplement and the accompanying prospectus. The certificates will be issued by
the trust pursuant to a pooling and servicing agreement, dated as of September
30, 1993, originally between a predecessor in interest to the bank, as seller
and servicer, and The Bank of New York, as trustee. The pooling and servicing
agreement has been and may be amended from time to time and is referred to in
this prospectus supplement and the accompanying prospectus as the pooling
agreement.
Series 2000-4 is included in a group of series designated as group one.
"Annex I: Previous Issuances of Certificates" in this prospectus supplement
contains a list of each currently outstanding series in group one. Other series
in the future may be included in group one. Annex I is incorporated by
reference into this prospectus supplement.
The property of the trust includes receivables generated from time to time in
a portfolio of consumer revolving credit card accounts and other consumer
revolving accounts, collections thereon and certain other property. A
description of the bank portfolio and the trust portfolio is provided in Annex
II. Annex II is incorporated by reference into this prospectus supplement.
Pursuant to the pooling agreement as supplemented by the Series 2000-4
supplement, the trust is issuing $975,000,000 of Class A certificates as a part
of Series 2000-4. The $120,000,000 of Class B certificates and the $105,000,000
of collateral interest (neither of which is offered by this prospectus
supplement and the accompanying prospectus) are also a part of Series 2000-4.
The Class A certificates, the Class B certificates and the collateral interest
represent interests in the assets of the trust.
To assist you in understanding this prospectus supplement and the
accompanying prospectus, the terms that are defined in the "Glossary of Defined
Terms" appear in bold typeface the first time they appear in each section and
subsection.
Maturity Considerations
The Class A certificateholders, the Class B certificateholders and the
collateral interest holder are expected to receive payment of principal in full
on the expected final payment date or earlier if a pay out event occurs.
The likelihood that Class A certificateholders, Class B certificateholders
and the collateral interest holder will receive payments of principal on the
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 and
conditions of the account. See the "Accountholder Monthly Payment Rates for the
Bank Portfolio" table under "Annex II: The Bank Portfolio and the Receivables"
in this prospectus supplement.
During the revolving period, no payments of principal will be made to the
Class A certificateholders, the Class B certificateholders or the collateral
interest holder, and collections of principal receivables allocable to the
invested amount will generally be treated as shared principal collections,
subject to certain limitations described in "Description of Series Provisions--
Principal Payments--Revolving Period" in this prospectus supplement.
On each distribution date during the 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,
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(b) the applicable controlled deposit amount, and
(c) the adjusted invested amount
will be deposited in the principal funding account until the amount on deposit
in the principal funding account equals the invested amount or, if earlier, the
expected final payment date.
Unless a pay out event with respect to Series 2000-4 occurs, amounts on
deposit in the principal funding account will be used to make payments of
principal on the expected final payment date:
.first to the Class A certificateholders (until the Class A invested amount
is paid in full),
.then to the Class B certificateholders (until the Class B invested amount
is paid in full), and
.finally to the collateral interest holder (until the collateral invested
amount is paid in full).
See "Series Provisions--Postponement of the Accumulation Period" in this
prospectus supplement for a discussion of circumstances under which the start
of the accumulation period may be delayed.
The bank may, at or after the time at which the 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 2000-
4 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 2000-4.
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 2000-4), 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 Series 2000-4 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 2000-4 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
Series 2000-4, the principal allocation percentage could be reduced and the
final payment of principal to the Class A certificateholders, the Class B
certificateholders and the collateral interest holder could be delayed.
Should a pay out event occur with respect to Series 2000-4 (including the
failure to pay the invested amount on the expected final payment date), the
early amortization period will begin, and on the first special payment date
with respect to the early amortization period, any amount on deposit in the
principal funding account will be paid to the Class A certificateholders and,
after the Class A invested amount has been paid in full, the Class B
certificateholders and, after the Class B invested amount has been paid in
full, the collateral interest holder. In addition, to the extent that the Class
A invested amount has not been paid in full, available investor principal
collections will be paid to the Class A certificateholders on each special
payment date until the earliest of:
.the date on which the Class A invested amount has been paid in full,
.the Series 2000-4 termination date, or
.the trust termination date.
After the Class A invested amount has been paid in full, available investor
principal collections will be paid to the Class B certificateholders on each
special payment date until the earliest of:
.the date on which the Class B invested amount has been paid in full,
.the Series 2000-4 termination date, or
.the trust termination date.
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After the Class B invested amount has been paid in full, available investor
principal collections will be paid to the collateral interest holder on each
special payment date until the earliest of:
.the date on which the collateral invested amount has been paid in full,
.the Series 2000-4 termination date, or
.the trust termination date.
Additionally, should a pay out event occur with respect to Series 2000-4 and
the early amortization period begin, any amount on deposit 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" 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 Series 2000-4 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. 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. See "Risk Factors" and
"Description of the Certificates--Shared Principal Collections; Excess Shared
Principal Collections" in the accompanying prospectus.
There can be no assurance that collections of principal receivables with
respect to the trust portfolio, and thus the rate at which the Class A
certificateholders, the Class B certificateholders and the collateral interest
holder could expect to receive payments of principal during the early
amortization period or the rate at which the principal funding account could be
funded during the accumulation period, will be similar to the historical
experience set forth in the "Accountholder Monthly Payment Rates for the Bank
Portfolio" table under "Annex II: The Bank Portfolio and the Receivables" in
this prospectus supplement. As described under "Series Provisions--Principal
Payments" in this prospectus supplement, the bank may shorten the 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 invested amount
on the expected final payment date.
The trust, as a master trust, has issued nineteen series which are currently
outstanding, and may issue additional series from time to time. 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 the Class A certificateholders, the
Class B certificateholders and the collateral interest holder. Further, if a
pay out event occurs, the average life and maturity of the Class A
certificates, the Class B certificates and the collateral interest 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
"Annex II: The Bank Portfolio and the Receivables" 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 certificates, the Class B certificates and the collateral interest to their
final distribution date will equal the expected number of months. See "Risk
Factors" in the accompanying prospectus.
Use of Proceeds
The net proceeds from the sale of the Class A certificates and the Class B
certificates will be paid to the bank. The bank will use such proceeds for
general corporate purposes.
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The Bank
Capital One Bank is a limited purpose Virginia state-chartered credit card
bank and a subsidiary of Capital One Financial Corporation. Capital One Bank
(Europe) plc, a wholly-owned subsidiary of Capital One Bank, is a United
Kingdom-licensed depository institution, which offers deposit services, credit
cards and other financial products to customers in the United Kingdom. Capital
One Bank (Europe) plc, in turn, maintains a wholly-owned consumer finance
company subsidiary, Capital One, S.A., which issues credit cards and
installment loans to customers in France. Capital One, S.A. will be converted
to a branch of Capital One Bank (Europe) plc upon receipt of French regulatory
approval.
At September 30, 2000, the bank, Capital One Bank (Europe) plc and Capital
One, S.A. had combined assets of approximately $11.4 billion and stockholders'
equity of approximately $1.1 billion. For a more detailed description of the
bank, see "The Bank" in the accompanying prospectus.
Series Provisions
The Class A certificates, the Class B certificates and the collateral
interest will be issued pursuant to the pooling agreement and the Series 2000-4
supplement. The following summary describes certain terms applicable to the
Class A certificates and the Class B certificates. Reference should be made to
the accompanying prospectus for additional information concerning the Class A
certificates, the Class B certificates and the pooling agreement.
Interest Payments
The Class A certificates will accrue interest at a rate of 0.14% per year
above LIBOR prevailing on the related LIBOR determination date with respect to
the related interest period.
The Class B certificates will accrue interest at a rate not to exceed 0.50%
per year above LIBOR prevailing on the related LIBOR determination date with
respect to the related interest period.
Interest will be paid on each distribution date. 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.
Because the Class A certificate rate, the Class B certificate rate and the
collateral interest minimum rate are floating rates, interest for any
distribution date 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 first distribution date, from and including the series issuance date) to
but excluding such distribution date and a 360-day year.
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. However, interest on
the Class A certificates for the first distribution date will be calculated on
the initial Class A principal balance. 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. Interest payments to the Class A certificateholders on any
distribution date will be funded from Class A available funds for the related
monthly period. To the extent Class A available funds allocated to the Class A
certificates for such monthly period are insufficient to pay such interest,
excess spread and excess finance charges allocated to Series 2000-4 and
reallocated principal collections allocable first to the collateral invested
amount and then the Class B invested amount will be used to make such payments
or deposits.
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 close of business on the preceding record date. However, interest on
the Class B certificates for the first distribution date will be calculated on
the initial Class B principal balance. 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
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certificateholders. Interest 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 Class B
certificates for such monthly period are insufficient to pay such interest,
excess spread and excess finance charges allocated to Series 2000-4 not
required to pay the Class A required amount or reimburse Class A investor
charge-offs and reallocated principal collections allocable to the collateral
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.
Interest payments on the collateral interest for each distribution date will
be calculated on the outstanding principal balance of the collateral interest
as of the close of business on the preceding record date based upon the
collateral interest minimum rate. However, interest on the collateral interest
for the first distribution date will be calculated on the initial collateral
interest principal balance. On each distribution date, collateral minimum
monthly interest for the related monthly period and any collateral minimum
monthly interest previously due but not distributed to the collateral interest
holder will be paid to the collateral interest holder. Minimum interest
payments to the collateral interest holder on any distribution date will be
funded from excess spread and excess finance charges allocated to Series 2000-4
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.
Principal Payments
Revolving Period
Series 2000-4 will have a revolving period when the trust will not pay or
accumulate principal for the Class A certificates, the Class B certificates or
the collateral interest. The revolving period starts on the series issuance
date and ends on the earlier to begin of:
. the accumulation period, or
. the early amortization period.
During the revolving period, collections of principal receivables allocable
to the invested amount 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 back 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.
Accumulation Period
On each distribution date during the accumulation period, the trustee will
deposit in the principal funding account an amount equal to the least of:
(a) available investor principal collections for such distribution date,
(b) the applicable controlled deposit amount, and
(c) the adjusted invested amount prior to any deposits on that date,
until the aggregate amount on deposit in the principal funding account equals
the invested amount.
Unless a pay out event with respect to Series 2000-4 has occurred, amounts on
deposit in the principal funding account will be paid:
. first to Class A certificateholders (in an amount not to exceed the
Class A invested amount) on the expected final payment date,
. then to Class B certificateholders (to the extent such funds exceed the
Class A invested amount and in an amount not to exceed the Class B
invested amount) on the expected final payment date, and
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. lastly to the collateral interest holder (to the extent such funds
exceed the sum of the Class A invested amount and the Class B invested
amount and in an amount not to exceed the collateral invested amount)
on the expected final payment date.
During the accumulation period, the portion of available investor principal
collections not applied to Class A monthly principal, Class B monthly principal
and collateral monthly principal 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 back 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.
If funds on deposit in the principal funding account are insufficient to pay
in full the invested amount on the expected final payment date, the early
amortization period will begin.
Early Amortization Period
If a pay out event with respect to Series 2000-4 occurs, the early
amortization period will begin and any amount on deposit in the principal
funding account will be paid on the first special payment date:
. first to the Class A certificateholders (up to the Class A invested
amount),
. then to the Class B certificateholders (up to the Class B invested
amount), and
. lastly to the collateral interest holder (up to the collateral
invested amount).
On each special payment date with respect to the early amortization period,
the Class A certificateholders will be entitled to receive available investor
principal collections for such special payment date in an amount up to the
Class A invested amount until the earliest of:
. the date the Class A invested amount is paid in full,
. the Series 2000-4 termination date, and
. the trust termination date.
After payment in full of the Class A invested amount, the Class B
certificateholders will be entitled to receive, on each special payment date,
available investor principal collections for such special payment date in an
amount up to the Class B invested amount until the earliest of:
. the date the Class B invested amount is paid in full,
. the Series 2000-4 termination date, and
. the trust termination date.
After payment in full of the Class B invested amount, the collateral interest
holder will be entitled to receive, on each special payment date, available
investor principal collections for such special payment date in an amount up to
the collateral invested amount until the earliest of:
. the date the collateral invested amount is paid in full,
. the Series 2000-4 termination date, and
. the trust termination date.
Postponement of the Accumulation Period
The accumulation period is scheduled to begin at the close of business on the
last day of the September 2004 monthly period. However, the servicer may elect
to postpone the start of the accumulation period, and extend the length of the
revolving period subject to certain conditions, including those set forth
below. The servicer may make such election only if the accumulation period
length (determined as described below) is less than twelve months. On each
determination date until the accumulation period begins, the servicer will
determine the accumulation
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period length, which is the number of months expected to be required to fully
fund the principal funding account no later than the 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 accumulation period. If the
accumulation period length is less than twelve months, the servicer may, at its
option, postpone the start of the accumulation period such that the number of
months included in the accumulation period will be equal to or exceed the
accumulation period length.
The effect of the foregoing calculation is to permit the reduction of the
length of the accumulation period based on the invested amounts of certain
other series which are expected to be in their revolving periods during the
accumulation period or on increases in the principal payment rate occurring
after the series issuance date. Notwithstanding the above, the Series 2000-4
supplement may require that the number of months in the accumulation period
exceed the accumulation period length and that certain minimum deposits be made
to the
principal funding account during the accumulation period. The length of the
accumulation period will not be less than one month. If the start of the
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
accumulation period, then it is probable that the Class A certificateholders,
the Class B certificateholders and the collateral interest holder would receive
some of their principal later than if the accumulation period had not been
delayed.
Interest Rate Swap
On the series issuance date, the trustee, on behalf of the trust, will enter
into an interest rate swap agreement with Morgan Guaranty Trust Company of New
York, the swap counterparty. In accordance with the terms of the interest rate
swap, the amount payable by the swap counterparty to the trust will be, for
each distribution date, an amount equal to the product of:
(i) a fraction, the numerator of which is the actual number of days in
the interest period relating to such distribution date, and the denominator
of which is 360;
(ii) a rate of 0.14% per annum above LIBOR prevailing on the related
LIBOR determination date with respect to the related interest period; and
(iii) the notional amount.
In the case of the first distribution date, such amounts will include accrued
amounts for the period from and including the series issuance date to but
excluding November 15, 2000. Payments from the swap counterparty to the trust
will be calculated on the basis of the actual number of days in the period 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 and a 360-day year.
The amount payable by the trust to the swap counterparty will be, for each
distribution date, to the extent of Class A available funds and certain other
amounts available for such purposes, an amount equal to one-twelfth of the
product of (a) 6.763% (or such lesser rate as specified in the interest rate
swap) and (b) the notional amount of the interest rate swap.
With respect to each distribution date, the net swap receipt, if any, for
such distribution date will be deposited in the collection account by the
trustee and treated as part of Class A available funds. The net swap payment,
if any, will be paid to the swap counterparty for any distribution date out of
collections of finance charge receivables and certain other available amounts
allocated to the Class A certificates, including principal funding investment
proceeds, amounts on deposit in the reserve account, excess spread and
reallocated principal collections, based on the respective amounts due as
described under "--Application of Collections-- Payment of Interest, Fees and
Other Items." Net swap payments and net swap receipts do not include any
termination payments payable by the swap counterparty pursuant to the interest
rate swap.
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The interest rate swap will terminate by its terms, whether or not the Class
A certificates have been paid in full prior to such termination, upon the
earliest to occur of:
(i) the termination of the trust pursuant to the terms of the master
agreement;
(ii) the payment in full of the Class A invested amount;
(iii) the expected final payment date;
(iv) the insolvency, conservatorship or receivership of the swap
counterparty or the trust;
(v) the failure on the part of the trustee (on behalf of the trust) or the
swap counterparty to make any payment under the interest rate swap within
the applicable grace period, if any; and
(vi) illegality on the part of the trust or the swap counterparty to be a
party to, or perform an obligation under, the interest rate swap.
In the event that the interest rate swap terminates prior to the payment in
full of the Class A certificates, interest due on the Class A certificates will
be paid from Class A available funds, excess spread and reallocated principal
collections without the benefits of any net swap receipts that might have been
due for any future distribution dates, and excess spread available to be
distributed with respect to amounts due on the Class B certificates and the
collateral interest will not include the benefits of any net swap receipts that
might have been due for such future distribution dates.
In the event the long-term credit rating of the swap counterparty is reduced
below BBB- by Standard & Poor's or below Baa3 by Moody's, or is withdrawn by
either Standard & Poor's or Moody's, the trustee will direct the swap
counterparty to assign its rights and obligations under the interest rate swap
to a replacement swap counterparty. There can be no assurance that a
replacement swap counterparty will be found.
The rating agencies have not relied on the ratings of the swap counterparty
in rating the Class A certificates, but rather on the value of the receivables
in the trust and the terms of the applicable credit enhancement. Neither a
ratings downgrade or a default by the swap counterparty nor a termination of
the interest rate swap will constitute a pay out event with respect to the
Class A certificates.
Swap Counterparty
Morgan Guaranty Trust Company of New York, referred to in this prospectus
supplement as Morgan, is a wholly-owned subsidiary and the principal asset of
J.P. Morgan & Co. Incorporated, a Delaware corporation whose principal office
is located in New York, New York. Morgan is a commercial bank offering a wide
range of banking services to its customers both domestically and
internationally. Its business is subject to examination and regulation by
federal and New York State banking authorities. As of June 30, 2000, Morgan and
its subsidiaries had total assets of $173.6 billion, total net loans of $26.6
billion, total deposits of $49.5 billion and stockholders' equity of $10.7
billion. As of December 31, 1999, Morgan and its subsidiaries had total assets
of $167.7 billion, total net loans of $26.1 billion, total deposits of $47.7
billion and stockholders' equity of $10.6 billion.
The consolidated statement of condition of Morgan as of June 30, 2000 is set
forth on the Form 10-Q dated August 14, 2000, as filed by J.P. Morgan & Co.
Incorporated with the Securities and Exchange Commission. Morgan will provide
without charge to each person to whom this prospectus supplement is delivered,
on the request of any such person, a copy of the Form 10-Q referred to above.
Written requests should be directed to: Morgan Guaranty Trust Company of New
York, 60 Wall Street, New York, New York 10260-0060, Attention: Office of the
Secretary.
On September 13, 2000, J.P. Morgan & Co. Incorporated, the parent company of
Morgan, announced an agreement to merge with The Chase Manhattan Corporation.
The merged firm will be named J.P. Morgan Chase & Co. The transaction is
expected to be accounted for as a pooling of interests and to be tax-free to
J.P. Morgan and Chase stockholders. The deal is expected to close in the first
quarter of 2001 and is subject to approval by shareholders of both companies,
as well as by U.S. federal and state and foreign regulatory authorities.
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The information set forth in "Series Provisions--Swap Counterparty" and in
the first sentence of the last paragraph of "Summary of Terms--Interest Rate
Swap" in this prospectus supplement has been provided by the swap counterparty.
The seller makes no representations as to the accuracy or completeness of such
information.
Subordination
The Class B certificates and the collateral interest will be subordinated to
the extent necessary to fund certain payments with respect to the Class A
certificates and to fund net swap payments, if any. In addition, the collateral
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 cover amounts
in respect of the Class A certificates and the interest rate swap and the Class
B invested amount may be reduced. Similarly, certain principal payments
allocable to the collateral interest may be reallocated to cover amounts in
respect of the Class A certificates, the interest rate swap and the Class B
certificates and the collateral invested amount may 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 all collections
of finance charge receivables and principal receivables and the default amount
for such monthly period among the Class A certificates, the Class B
certificates, the collateral interest, the certificateholders' interest for all
other outstanding series of certificates and the seller's interest.
Collections of finance charge receivables and the defaulted amount for any
monthly period will be allocated to Series 2000-4 based on the floating
allocation percentage. Such amounts so allocated will be further allocated
among the Class A certificateholders, the Class B certificateholders and the
collateral interest holder in accordance with the Class A floating percentage,
the Class B floating percentage and the collateral floating percentage.
Collections of principal receivables will be allocated to Series 2000-4 based
on the principal allocation percentage. Such amounts so allocated to Series
2000-4 will be further allocated among the Class A certificateholders, the
Class B certificateholders and the collateral interest holder based on the
Class A principal percentage, the Class B principal percentage and the
collateral principal percentage.
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, the Class B
certificateholders and the collateral interest holder. During the accumulation
period, the servicer will transfer collections of principal receivables, shared
principal collections allocated to Series 2000-4, miscellaneous payments
allocated to Series 2000-4 and other amounts described herein to be treated in
the same manner as collections of principal receivables from the collection
account to the principal funding account as described under "--Application of
Collections" in this prospectus supplement.
Unless a pay out event has occurred with respect to Series 2000-4, all
amounts on deposit in the principal funding account 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
mature on or before the following distribution date by the trustee at the
direction of the servicer in eligible investments. On each distribution date
for the accumulation period (on or prior to the expected final payment date)
the interest and other investment income (net of losses and investment
expenses) earned on such investments will be withdrawn from the principal
funding account and will be treated as a portion of Class A available funds,
Class B available funds and collateral available funds. If, for any such
distribution date, these amounts are less than the covered amount for such
distribution date, the amount of any such shortfall will be withdrawn from the
reserve account, if available, as described under "--Reserve Account" in this
prospectus supplement. The
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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.
Reserve Account
The servicer will establish and maintain in the name of the trustee, on
behalf of the trust, the reserve account as an eligible deposit account for the
benefit of the Class A certificateholders, the swap counterparty, the Class B
certificateholders and the collateral interest holder. The reserve account will
be established to assist with the subsequent distribution of interest and net
swap payments, if any, during the accumulation period. On each distribution
date from and after the funding of the reserve account begins, 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 2000-4 (to the extent described under "--Application of
Collections--Payment of Interest, Fees and Other Items" in this prospectus
supplement) 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 will be funded no later than one month prior to the
commencement of the accumulation period, or such earlier date as the servicer
may designate.
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 collateral
interest holder.
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 mature on or before the
following distribution date by the trustee at the direction of the servicer in
eligible investments. The interest and other investment income (net of losses
and investment expenses) 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 during the accumulation period (on or
prior to the 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 or Class B available funds or distributed to the
collateral interest holder, as provided in the Series 2000-4 supplement, 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 amount, if any, by which the covered amount exceeds:
(i) the investment earnings (net of losses and investment expenses),
if any, in the principal funding account for the related
distribution date, and
(ii) excess spread and excess finance charges allocated to Series
2000-4 available for application towards the covered amount on
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 will equal the
available reserve account amount.
The reserve account will be terminated following the earliest to occur of:
(a) the termination of the trust pursuant to the pooling agreement,
(b) the date on which the invested amount is paid in full, and
(c) if the accumulation period has not begun, the occurrence of a pay out
event with respect to Series 2000-4 or, if the 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 distributed to the collateral interest holder. Any
amounts withdrawn from the reserve account and distributed to the collateral
interest
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holder as described above will not be available for distribution to the Class A
certificateholders, the swap counterparty and the Class B certificateholders.
Reallocation of Cash Flows
Class A Required Amount
On each determination date, the servicer will calculate the Class A required
amount. If the Class A required amount is greater than zero, the following
reallocations will occur:
. excess spread and excess finance charges allocated to Series 2000-4 and
available for such purpose will be used to fund the Class A required
amount for the related distribution date;
. if such excess spread and excess finance charges are insufficient to
fund the Class A required amount, reallocated principal collections
allocable first to the collateral interest and then to the Class B
certificates will be used to fund the remaining Class A required amount;
and
. if reallocated principal collections for the related monthly period,
together with excess spread and excess finance charges allocated to
Series 2000-4 are insufficient to fund the Class A required amount for
such related monthly period, then the collateral invested amount will be
reduced by the amount of such excess (but not by more than the Class A
investor default amount for such related distribution date).
In the event that such reduction would cause the collateral invested amount
to be a negative number, the collateral invested amount will be reduced to
zero, and the Class B invested amount will be reduced by the amount by which
the collateral 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 collateral
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 collateral 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" in this
prospectus supplement.
Reductions of the Class A invested amount or Class B invested amount shall
thereafter be reimbursed and the Class A invested amount or Class B invested
amount shall be increased on each distribution date by the amount, if any, of
excess spread and excess finance charges allocated to Series 2000-4 and
available to reimburse such reductions. See "--Application of Collections--
Excess Spread; Excess Finance Charges" in this prospectus supplement. When such
reductions of the Class A invested amount and Class B invested amount have been
fully reimbursed, reductions of the collateral invested amount will be
reimbursed and the collateral invested amount increased in a similar manner.
Class B Required Amount
On each determination date, the servicer will calculate the Class B required
amount. If the Class B required amount is greater than zero, the following
reallocations will occur:
. excess spread and excess finance charges allocated to Series 2000-4 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 the related distribution date;
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. if such excess spread and excess finance charges are insufficient to pay
the Class B required amount, reallocated principal collections allocable
to the collateral interest and not required to pay the Class A required
amount will then be used to fund the remaining Class B required amount;
and
. if such reallocated principal collections allocable to the collateral
interest for the related monthly period are insufficient to fund the
remaining Class B required amount, then the collateral invested amount
will be reduced by the amount of such insufficiency (but not by more
than the Class B investor default amount for such related distribution
date).
In the event that such reduction would cause the collateral invested amount
to be a negative number, the collateral invested amount will be reduced to
zero, and the Class B invested amount will be reduced by the amount by which
the collateral 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 collateral invested
amount). Any such reduction may have the effect of slowing or reducing the
return of principal and interest to the Class B certificateholders. In such
case, 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" in this prospectus supplement.
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
collateral available funds (see "--Interest Payments" in this prospectus
supplement) on deposit in the collection account in the following priority:
(a) An amount equal to the Class A available funds 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 net swap payment, if any, for such
distribution date, plus the amount of any net swap payments, if any,
previously due but not paid to the swap counterparty, will be paid to
the swap counterparty;
(iii) 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);
(iv) 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
(v) the balance, if any, shall constitute excess spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charges" in this prospectus supplement.
(b) An amount equal to the Class B available funds 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
distributed to the Class B certificateholders on a prior distribution
date will be distributed to the Class B certificateholders;
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(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" in this prospectus supplement.
(c) An amount equal to the collateral available funds will be distributed
in the following priority:
(i) an amount equal to the collateral servicing fee for such
distribution date, plus the amount of any collateral 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" in this prospectus supplement.
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 2000-4 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 the Class A required amount, and if
the Class A required amount for such distribution date exceeds the amount
of excess spread and excess finance charges allocated to Series 2000-4,
such excess spread and excess finance charges will be applied:
. first to pay shortfalls in the payment of amounts described in
clause (a)(i) under "--Payment of Interest, Fees and Other Items" in
this prospectus supplement,
. second to pay shortfalls in the payment of amounts described in
clause (a)(ii) under "--Payment of Interest, Fees and Other Items"
in this prospectus supplement,
. third to pay shortfalls in the payment of amounts described in
clause (a)(iii) under "--Payment of Interest, Fees and Other Items"
in this prospectus supplement, and
. fourth to pay shortfalls in the payment of amounts described in
clause (a)(iv) under "--Payment of Interest, Fees and Other Items"
in this prospectus supplement;
(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" in this prospectus supplement;
(c) an amount equal to the Class B required amount, if any, for such
distribution date will be (i) used to fund the Class B required amount 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 if the Class B required amount for such distribution date
exceeds the amount of excess spread and excess finance charges allocated to
Series 2000-4, such excess spread and excess finance charges will be
applied:
. first to pay amounts described in clause (b)(i) under "--Payment of
Interest, Fees and Other Items" in this prospectus supplement,
. second to pay amounts described in clause (b)(ii) above under "--
Payment of Interest, Fees and Other Items" in this prospectus
supplement, and
. third, up to the Class B investor default amount, as a portion of
available investor principal collections for such distribution date;
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(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 (but not in excess of the aggregate
amount of such reductions that have not been previously reimbursed) will be
treated as a portion of available investor principal collections for such
distribution date;
(e) an amount equal to the sum of the following will be distributed to
the collateral interest holder:
(i) collateral minimum monthly interest for such distribution date,
plus the amount of any collateral outstanding monthly interest, and
(ii) the amount of any collateral additional interest for such
distribution date and any collateral additional interest previously due
but not distributed to the collateral interest holder on a prior
distribution date;
(f) an amount equal to the collateral servicing fee due but not paid to
the servicer on such distribution date or a prior distribution date will be
paid to the servicer;
(g) an amount equal to the collateral investor default amount will 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 collateral
invested amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of collateral invested amount (but not in excess of the
aggregate amount of such reductions that have not been previously
reimbursed) shall be treated as a portion of available investor principal
collections for such distribution date;
(i) on each distribution date on and after the reserve account is funded,
but prior to the date on which the reserve account terminates as described
under "--Reserve Account" in this prospectus supplement, an amount up to
the excess, if any, of the required reserve account amount over the
available reserve account amount will be deposited into the reserve
account; and
(j) the balance, if any, will be distributed to the collateral interest
holder.
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" in this prospectus supplement) 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 accumulation 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 for such
distribution date, 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 aggregate amount on deposit in the
principal funding account is zero, will be distributed to the
Class A certificateholders;
(x) after giving effect to paragraph (w) above, an amount equal to
Class B monthly principal for such distribution date, up to the
Class B 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
aggregate amount on deposit in the principal funding account is
zero, will be distributed to the Class B certificateholders;
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(y) after giving effect to paragraphs (w) and (x) above, an amount
equal to collateral monthly principal for such distribution
date, up to the collateral 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 aggregate amount on deposit in the principal
funding account is zero, will be distributed to the collateral
interest holder; 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.
Defaulted Receivables; Investor Charge-Offs
On each determination date, the servicer will calculate the investor default
amount for the preceding monthly period. On each distribution date, portions of
the investor default amount will be allocated to the Class A certificates and
the Class B certificates in amounts equaling the Class A investor default
amount and the Class B investor default amount, respectively. 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
2000-4 or from reallocated principal collections and applied as described in
"--Application of Collections--Payment of Interest, Fees and Other Items" and
"--Reallocation of Cash Flows" in this prospectus supplement. The Class B
investor default amount for each monthly period will be paid from excess spread
and excess finance charges allocated to Series 2000-4 or from reallocated
principal collections allocable to the collateral interest and applied as
described in "--Application of Collections--Excess Spread; Excess Finance
Charges" and "--Reallocation of Cash Flows" in this prospectus supplement.
Class A Investor Charge-Offs
On each distribution date, if the Class A required amount for such
distribution date exceeds the sum of excess spread and excess finance charges
allocated to Series 2000-4 and reallocated principal collections, the
collateral 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 collateral invested amount
to be a negative number, the collateral invested amount will be reduced to
zero, and the Class B invested amount will be reduced by the amount by which
the collateral 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 collateral
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, called a Class A
investor charge-off, 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 collateral invested amount and the Class B invested
amount for such distribution date as described above. Such Class A investor
charge-off 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 2000-4 and available for such
purpose as described under "--Application of Collections--Excess Spread; Excess
Finance Charges" in this prospectus supplement.
Class B Investor Charge-Offs
On each distribution date, if the Class B required amount for such
distribution date exceeds the sum of excess spread and excess finance charges
allocated to Series 2000-4 and not required to pay the Class A
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required amount, and reallocated principal collections allocable to the
collateral interest and not required to pay the Class A required amount, then
the collateral invested amount will be reduced by the amount of such excess.
In the event that such reduction would cause the collateral invested amount
to be a negative number, the collateral invested amount will be reduced to
zero, and the Class B invested amount will be reduced by the amount, called a
Class B investor charge-off, by which the collateral 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 collateral invested amount with respect to such
distribution date. If the Class B invested amount has been reduced by the
amount of any Class B investor charge-offs, it will thereafter be increased on
any distribution date (but not by an amount in excess of the aggregate Class B
investor charge-offs) by the amount of excess spread and excess finance charges
allocated to Series 2000-4 and available for such purpose as described under
"--Application of Collections--Excess Spread; Excess Finance Charges" in this
prospectus supplement.
Shared Principal Collections
Series 2000-4 is a principal sharing series. See "Description of the
Certificates--Shared Principal Collections; Excess Shared Principal
Collections" in the accompanying prospectus.
Paired Series
Series 2000-4 may be paired with one or more other series (each called 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
the Class A certificateholders, the Class B certificateholders and the
collateral interest holder. 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 2000-4, 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 Class A certificateholders, the Class B certificateholders and the
collateral interest holder.
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 the Class A
certificateholders, the Class B certificateholders
and the collateral interest holder. The full extent by which the timing or
amount of payments received by the Class A certificateholders, the Class B
certificateholders and the collateral interest holder 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" 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 supplement shall be subject to the
conditions described under "Description of the Certificates--New
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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.
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 of accounts 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 2000-4 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 2000-4 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 2000-4
supplement, which failure has a material adverse effect on the Class A
certificateholders, the Class B certificateholders and the collateral
interest holder 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 2000-4 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 Class A
certificateholders, the Class B certificateholders and the collateral
interest holder 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 of accounts 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 2000-4
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 2000-4
for such three monthly periods;
(f) the failure to pay in full the invested amount on the 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 2000-4
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 Class A certificateholders, the Class B
certificateholders and the collateral interest holder evidencing more than 50%
of the aggregate unpaid principal amount of Series 2000-4 by notice then given
in writing to the seller and the servicer (and to the trustee if given by the
Class A certificateholders and the Class B certificateholders) may declare that
a pay out event has occurred with respect to Series 2000-4 as of the date of
such notice. In the case of any event described in subparagraph (c), (e), (f)
or (g), a pay out event shall occur with respect to Series 2000-4 immediately
upon the occurrence of such event, without any notice or other action on the
part of the trustee.
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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 certificates do not constitute
indebtedness for federal income tax purposes, such determination will not
constitute a pay out event with respect to Series 2000-4.
If the proceeds of any sale of the receivables following the occurrence of an
insolvency event with respect to the seller (including any additional 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
Conservatorship and 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 2000-4 for any
distribution date, called the monthly servicing fee, will be equal to one-
twelfth of the product of:
(a) the servicing fee rate, and
(b) the servicing base amount.
However, the monthly servicing fee for the first distribution date will be
equal to the servicing fee accrued on the initial invested amount at the
servicing fee rate for the period from the series issuance date through the
last day of the first monthly period. 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 will 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 2000-4 for such monthly period that is attributed to interchange.
However, the 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 Class A
certificateholders, the Class B certificateholders or the collateral interest
holder 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, called 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.
However, the Class A servicing fee for the first distribution date will be
equal to $169,270.83.
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The share of the monthly servicing fee allocable to the Class B
certificateholders (after giving effect to the distribution of any servicer
interchange to the servicer) for any distribution date, called 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.
However, the Class B servicing fee for the first distribution date will be
equal to $20,833.33.
The share of the monthly servicing fee allocable to the collateral interest
holder (after giving effect to the distribution of any servicer interchange to
the servicer) for any distribution date, called the collateral servicing fee,
shall be equal to one-twelfth of the product of:
(a) the collateral floating percentage,
(b) the net servicing fee rate, and
(c) the servicing base amount.
However, the collateral interest servicing fee for the first distribution date
will be equal to $18,229.17.
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 Class A
certificateholders, the Class B certificateholders or the collateral interest
holder 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
collateral 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" in
this prospectus supplement.
Series Termination
If on the distribution date that is two months prior to the Series 2000-4
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
Series 2000-4
termination date (after giving effect to all distributions required to be made
on the Series 2000-4 termination date). Upon the expiration of such 40-day
period, the trustee will determine (a) which bid is the highest cash purchase
offer and (b) the amount which otherwise would be available in the collection
account on the Series 2000-4 termination date for distribution to the Class A
certificateholders, the Class B certificateholders and the collateral interest
holder. The servicer, on behalf of the trustee, will sell such receivables on
the Series 2000-4 termination date to the bidder who provided the highest cash
purchase offer and will deposit the proceeds of such sale in the collection
account for allocation (together with the amount which otherwise would be
available in the collection account on the Series 2000-4 termination date for
distribution to the Class A certificateholders, the Class B certificateholders
and the collateral interest holder) to Series 2000-4.
Reports
No later than the third business day prior to each distribution date, the
servicer will forward to the trustee, the paying agent and each rating agency a
monthly report prepared by the servicer setting forth certain information about
the trust, the Class A certificates, the Class B certificates and the
collateral interest, including:
(a) the aggregate amount of principal receivables and finance charge
receivables in the trust as of the end of the preceding monthly period;
S-25
<PAGE>
(b) the Class A invested amount, the Class B invested amount and the
collateral invested amount at the close of business on the last day of such
monthly period;
(c) the floating allocation percentage and, during the accumulation
period or early amortization period, the principal allocation percentage
for the Class A certificates, the Class B certificates and the collateral
interest;
(d) the amount of collections of principal receivables and finance charge
receivables processed during such monthly period and the portion thereof
allocated to Series 2000-4;
(e) the aggregate outstanding balance of accounts in the trust portfolio
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 Series 2000-4;
(g) the amount, if any, of Class A investor charge-offs, Class B investor
charge-offs and the amounts by which the collateral invested amount has
been reduced pursuant to clauses (iii), (iv) and (v) of the definition of
collateral invested amount;
(h) the monthly servicing fee;
(i) the portfolio yield for such monthly period; and
(j) reallocated principal collections.
Legal Matters
Certain legal matters relating to the Class A certificates will be passed
upon for the underwriters by Cravath, Swaine & Moore, New York, New York.
ERISA Considerations
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. 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 Internal Revenue Code of the plan's acquisition and ownership of such
Class A certificates. See "ERISA Considerations" in the accompanying
prospectus.
It is anticipated that the Class A certificates will meet the criteria for
treatment as "publicly-offered securities" as described in the accompanying
prospectus. No restrictions will be imposed on the transfer of the Class A
certificates. It is expected the Class A certificates will be held by at least
100 independent investors at the conclusion of the initial public offering made
hereby, although no assurance can be given, and no monitoring or other measures
will be taken to ensure that such condition is met. The Class A certificates
will be sold as part of an offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and then will be timely
registered under the Securities Exchange Act of 1934, as amended.
If the foregoing exception under the plan asset regulation were not
satisfied, transactions involving the trust and parties in interest with
respect to a plan that purchases or holds the Class A certificates might be
prohibited under Section 406 of ERISA and/or Section 4975 of the Internal
Revenue Code and result in excise tax and other liabilities under ERISA and
Section 4975 of the Internal Revenue Code unless an exemption were available.
The five Department of Labor class exemptions described in the accompanying
prospectus may not
S-26
<PAGE>
provide relief for all transactions involving the assets of the trust even if
they would otherwise apply to the purchase of Class A certificates by a plan.
The Class A certificates will not be eligible for the exemptive relief provided
by Department of Labor Prohibited Transaction Exemption 96-62. See "ERISA
Considerations" in the accompanying prospectus.
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 Internal Revenue 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 any prohibited transaction exemptions.
Underwriting
Subject to the terms and conditions set forth in the underwriting agreement
for the Class A certificates between the bank and the underwriters named below,
the bank has agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, the amount of certificates set forth opposite its
name below.
<TABLE>
<CAPTION>
Principal
Underwriters Amount
------------ ------------
<S> <C>
J.P. Morgan Securities Inc. ...................................... $243,750,000
Banc of America Securities LLC.................................... $243,750,000
Barclays Capital Inc. ............................................ $243,750,000
Deutsche Bank Securities Inc. .................................... $243,750,000
------------
Total........................................................... $975,000,000
============
</TABLE>
The underwriting agreement provides that the obligation of the underwriters
to pay for and accept delivery of the certificates is subject to the approval
of certain legal matters by their counsel and to certain other conditions. All
of the Class A certificates offered hereby will be issued if any are issued.
Under the terms and conditions of the underwriting agreement, the underwriters
are committed to take and pay for all the Class A certificates, if any are
taken.
The underwriters propose initially to offer the Class A certificates to the
public at 100% of their principal amount and to certain dealers at such price
less concessions not in excess of 0.15% of the principal amount of the Class A
certificates. The underwriters may allow, and such dealers may reallow,
concessions not in excess of 0.10% 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 price to public, the underwriters' discounts and commissions and the
proceeds to the seller are as follows:
<TABLE>
<CAPTION>
Per Class A
Certificate Total
----------- ------------
<S> <C> <C>
Public Offering Price................................. 100.00% $975,000,000
Underwriting Discounts and Commissions................ 0.25% $ 2,437,500
Proceeds to Seller.................................... 99.75% $972,562,500
</TABLE>
Additional offering expenses are estimated to be $1,100,000.
S-27
<PAGE>
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 with respect to anything done by it in relation to the certificates
in, from or otherwise involving the United Kingdom;
(b) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the certificates to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 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
accompanying 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 certificates in accordance with Regulation M under the Securities and
Exchange Act of 1934, as amended. 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 certificates so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the certificates in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the 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 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 of 1933, as amended, or
contribute to payments the underwriters may be required to make in respect
thereof.
The closing of the sale of each class of certificates is conditional upon the
closing of the sale of the other class.
S-28
<PAGE>
Glossary of Defined Terms
Many of the defined terms below contain terms that are defined elsewhere in
this glossary and in the "Glossary of Defined Terms" in the accompanying
prospectus.
"accumulation period" means the period of time described under "Series
Provisions--Principal Payments--Accumulation Period" in this prospectus
supplement.
"adjusted invested amount" for any date of determination means an amount
equal to the sum of the Class A adjusted invested amount, the Class B adjusted
invested amount and the collateral adjusted invested amount.
"available investor principal collections" means, for any monthly period, an
amount equal to the sum of:
(i) (a) an amount equal to the product of the principal allocation
percentage of all collections of principal receivables received
during such monthly period, minus
(b) 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
(ii) the amount of miscellaneous payments, if any, for such monthly
period allocated to Series 2000-4, plus
(iii) any shared principal collections from other series that are
allocated to Series 2000-4, plus
(iv) 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
(v) any other amounts which pursuant to the Series 2000-4 supplement are
to be treated as available investor principal collections for the related
distribution date.
"available reserve account amount" means, on each distribution date and the
first special payment date, the amount available to be withdrawn from the
reserve account 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 or such special payment date) and the required
reserve account amount for such distribution date or such special payment date.
"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, collateral minimum monthly interest, the
monthly servicing fee and the net swap payment, if any, less the net swap
receipt, if any, deposited in the collection account, each for the
related distribution date, and
. the denominator of which is the 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.
"business day" means, for purposes of this prospectus supplement and the
accompanying prospectus (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.
"Class A account percentage" means, with respect to any date of
determination, the percentage equivalent of a fraction:
. the numerator of which is the aggregate amount on deposit in the
principal funding account with respect to Class A monthly principal as of
the record date preceding the related distribution date; and
. the denominator of which is the aggregate amount on deposit in the
principal funding account with respect to Series 2000-4 on such date
(before giving effect to any deposits therein on such date).
S-29
<PAGE>
"Class A additional interest" means an amount paid on each distribution date,
if applicable, 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 certificate rate for the related interest period plus
2.0% per annum, and
(iii) the amount payable on interest amounts that were due but not
distributed to the Class A certificateholders on a prior distribution date.
"Class A adjusted invested amount" for any date of determination means an
amount equal to the then current Class A invested amount, minus the amount on
deposit in the principal funding account (in an amount not to exceed the Class
A invested amount) on such date.
"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 Series 2000-4 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 2000-4 supplement, but excluding the portion of
collections of finance charge receivables attributable to interchange that
is allocable to servicer interchange);
(ii) the net swap receipt, if any, deposited in the collection account
with respect to such monthly period, and previously due but not paid net
swap receipts, if any, deposited in the collection account with respect to
such monthly period;
(iii) if such monthly period relates to a distribution date for the
accumulation period, an amount equal to the product of:
(a) the Class A account percentage, and
(b) the net investment earnings, if any, in the principal funding
account for the related distribution date; 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
2000-4 supplement for the related distribution date.
"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 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).
"Class A initial invested amount" means $975,000,000.
"Class A invested amount" for any date of determination means an amount equal
to:
(i) the Class A initial invested amount, minus
(ii) the amount of principal payments made to the Class A
certificateholders on or prior to such date, 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;
S-30
<PAGE>
provided, however, that the Class A invested amount may not be reduced below
zero.
"Class A investor charge-off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Class A Investor
Charge-Offs" in this prospectus supplement.
"Class A investor default amount" means, for any distribution date, the
portion of the investor default amount allocated to the Class A certificates 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.
"Class A monthly interest" means, for any distribution date, 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 to but
excluding such distribution date and the denominator of which is 360,
(ii) the Class A certificate rate in effect for that period, and
(iii) the outstanding principal amount 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 initial principal amount of the
Class A certificates at the Class A certificate rate for the period from and
including the series issuance date to but excluding the first distribution
date.
"Class A monthly principal" for any distribution date relating to the
accumulation 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 accumulation period, and on or
prior to the expected final payment date, the controlled deposit amount for
such distribution date, and
(iii) the Class A adjusted invested amount on such distribution date.
"Class 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 principal percentage" means, for any monthly period:
(i) 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
(ii) during the accumulation period or the early amortization period, the
percentage equivalent (which shall never exceed 100%) of a fraction:
. the numerator of which is the Class A invested amount as of the last
day of the revolving period, and
. the denominator of which is the invested amount as of such last day.
"Class A required amount" means, for any determination date, the amount equal
to:
(i)Class A monthly interest for the related distribution date, plus
(ii)any Class A outstanding monthly interest, plus
S-31
<PAGE>
(iii)any Class A additional interest, plus
(iv)the net swap payment, if any, for the related distribution date and
overdue net swap payments, if any, due to the swap counterparty, plus
(v)the Class A servicing fee for the related distribution date and any
unpaid Class A servicing fee, plus
(vi)the Class A investor default amount, if any, for the related
distribution date, minus
(vii)the Class A available funds for the related distribution date.
"Class A servicing fee" has the meaning described in "Series Provisions--
Servicing Compensation and Payment of Expenses" in this prospectus supplement.
"Class B account percentage" means, with respect to any date of
determination, the percentage equivalent of a fraction:
. the numerator of which is the aggregate amount on deposit in the
principal funding account with respect to Class B monthly principal as of
the record date preceding the related distribution date; and
. the denominator of which is the aggregate amount on deposit in the
principal funding account with respect to Series 2000-4 on such date
(before giving effect to any deposits therein on such date).
"Class B additional interest" means an amount paid on each distribution date,
if applicable, 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 certificate rate for the related interest period plus
2.0% per annum, and
(iii) the amount payable on interest amounts that were due but not
distributed to the Class B certificateholders on a prior distribution date.
"Class B adjusted invested amount" for any date of determination means an
amount equal to the then current Class B invested amount, minus the amount on
deposit in the principal funding account in excess of the Class A invested
amount (in an amount not to exceed the Class B invested amount) on such date.
"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 Series 2000-4 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 2000-4 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
accumulation period, an amount equal to the product of:
(a) the Class B account percentage; and
(b) the net investment earnings, if any, in the principal funding
account for the related distribution date; and
(iii) amounts, if any, to be withdrawn from the reserve account which are
required to be included in the Class B available funds pursuant to the
Series 2000-4 supplement for such distribution date.
"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 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 issuance date),
and
S-32
<PAGE>
. 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).
"Class B initial invested amount" means $120,000,000.
"Class B invested amount" for any date of determination means an amount equal
to:
(i) the Class B initial invested amount, minus
(ii) the amount of principal payments made to Class B certificateholders
on or prior to such date, 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 Class A required
amount for such distribution dates (excluding any reallocated principal
collections that have resulted in a reduction of the collateral invested
amount), minus
(v) an amount equal to the amount by which the Class B invested amount
has been reduced to fund the Class A investor default amount on all prior
distribution dates as described under "Series Provisions--Defaulted
Receivables; Investor Charge-Offs" in this prospectus supplement, plus
(vi) the aggregate amount of excess spread and excess finance charges
allocated and available to Series 2000-4 and applied on all prior
distribution dates for the purpose of reimbursing amounts deducted as
described in clauses (iii), (iv) and (v) above;
provided, however, that the Class B invested amount may not be reduced below
zero.
"Class B investor charge-off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Class B Investor
Charge-Offs" in this prospectus supplement.
"Class B investor default amount" means, for any distribution date, the
portion of the investor default amount allocated to the Class B certificates 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.
"Class B monthly interest" means, for any distribution date, 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 to but
excluding such distribution date and the denominator of which is 360,
(ii) the Class B certificate rate in effect for that period, and
(iii) the outstanding principal amount 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 initial principal amount of the
Class B certificates at the Class B certificate rate for the period from and
including the series issuance date to but excluding the first distribution
date.
"Class B monthly principal" for any distribution date relating to (a) the
accumulation period, beginning with the first distribution date on which the
aggregate amount on deposit in the principal funding account is equal to the
Class A invested amount, or (b) the early amortization period, beginning with
the first special payment date on which the Class A invested amount is paid in
full, will equal the least of:
(i) the available investor principal collections not applied to Class A
monthly principal on such distribution date,
S-33
<PAGE>
(ii) for each distribution date for the accumulation period, the
controlled deposit amount for such distribution date (minus the Class A
monthly principal for such distribution date), and
(iii) the Class B adjusted invested amount on such distribution date.
"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 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 accumulation 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.
"Class B required amount" means, for any determination date, the sum of:
(i) the amount, if any, equal to:
(a) Class B monthly interest for the related distribution date, plus
(b) any Class B outstanding monthly interest, plus
(c) any Class B additional interest, plus
(d) the Class B servicing fee for such distribution date and any
unpaid Class B servicing fee, minus
(e) the Class B available funds for such distribution date, plus
(ii) the Class B investor default amount for the related monthly period.
"Class B servicing fee" has the meaning described in "Series Provisions--
Servicing Compensation and Payment of Expenses" in this prospectus supplement.
"collateral account percentage" means, with respect to any date of
determination, the percentage equivalent of a fraction:
. the numerator of which is the amount on deposit in the principal funding
account with respect to collateral monthly principal as of the record
date preceding the related distribution date, and
. the denominator of which is the aggregate amount on deposit in the
principal funding account on such date (before giving effect to any
deposits therein on such date).
"collateral additional interest," for any distribution date, means additional
interest on collateral minimum monthly interest due but not paid to the
collateral interest holder on a prior distribution date at a rate equal to the
collateral interest minimum rate.
"collateral available funds" means, for any monthly period, an amount equal
to the sum of:
(i) the collateral floating percentage of the collections of finance
charge receivables allocated to Series 2000-4 for such monthly period
(including any investment earnings and certain other amounts that
S-34
<PAGE>
are to be treated as collections of finance charge receivables in
accordance with the pooling agreement or the Series 2000-4 supplement, but
excluding finance charge receivables allocated to servicer interchange with
respect to such monthly period), and
(ii) if such monthly period relates to a distribution date for the
accumulation period, an amount equal to the product of:
(a) the collateral account percentage, and
(b) the net investment earnings, if any, in the principal funding
account for the related distribution date.
"collateral adjusted invested amount" for any date of determination means an
amount equal to the collateral invested amount, minus the amount on deposit in
the principal funding account in excess of the sum of the Class A invested
amount and the Class B invested amount (in an amount not to exceed the
collateral invested amount) on such date.
"collateral 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 collateral 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 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).
"collateral initial invested amount" means $105,000,000.
"collateral invested amount" for any date of determination means an amount
equal to:
(i) the collateral initial invested amount, minus
(ii) the aggregate amount of principal payments made to the collateral
interest holder prior to such date, minus
(iii) the aggregate amount of reallocated principal collections allocable
to the collateral 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 collateral
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 "Series Provisions--Defaulted Receivables;
Investor Charge-Offs" in this prospectus supplement, minus
(v) an amount equal to the collateral investor default amount for any
distribution date that is not funded out of excess spread and excess
finance charges allocated to Series 2000-4 and available for such purpose
on such distribution date, plus
(vi) the aggregate amount of excess spread and excess finance charges
allocated and available on all prior distribution dates to reimburse
amounts deducted as described in clauses (iii), (iv) and (v) above;
provided, however, that the collateral invested amount may not be reduced below
zero.
"collateral investor default amount" means for any distribution date the
product of (i) the collateral floating percentage for the related monthly
period and (ii) the investor default amount for such monthly period.
"collateral interest minimum rate" means a rate per annum specified in the
agreement between the bank and the collateral interest holder relating to the
transfer of the collateral interest to the collateral interest holder, which
rate will not exceed LIBOR for one-month United States dollar deposits,
determined as of the related LIBOR determination date, plus 1.00%.
S-35
<PAGE>
"collateral minimum monthly interest" means, for any distribution date, an
amount equal to the product of:
(i) the collateral interest minimum rate in effect for the related
interest period,
(ii) a fraction, the numerator of which is the actual number of days from
and including the immediately preceding distribution date to but excluding
such distribution date and the denominator of which is 360, and
(iii) the outstanding principal balance of the collateral interest as of
the preceding record date;
provided, however, that, for the first distribution date, collateral minimum
monthly interest shall be equal to the interest accrued on the collateral
initial invested amount at the collateral interest minimum rate for the period
from the series issuance date to but excluding the initial distribution date.
"collateral monthly principal" for any distribution date relating to the
accumulation period, beginning with the first distribution date on which the
aggregate amount on deposit in the principal funding account is equal to the
sum of the Class A invested amount and the Class B invested amount, or the
early amortization period, beginning with the first special payment date on
which the Class B invested amount is paid in full, will equal the least of:
(i) the available investor principal collections not applied to Class A
monthly principal or Class B monthly principal on such distribution date,
(ii) for each distribution date for the accumulation period, the
controlled deposit amount for such distribution date (minus the Class A
monthly principal and Class B monthly principal for such distribution
date), and
(iii) the collateral adjusted invested amount on such distribution date.
"collateral outstanding monthly interest" means, for any distribution date,
the amount of collateral minimum monthly interest previously due but not paid
to the collateral interest holder.
"collateral 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 collateral invested amount as of the last
day of the immediately preceeding monthly period (or in the case of the
first monthly period, the collateral 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 accumulation period or the early amortization period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction:
. the numerator of which is the collateral 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.
"collateral servicing fee" has the meaning described in "Series Provisions--
Servicing Compensation and Payment of Expenses" in this prospectus supplement.
"controlled accumulation amount" means $100,000,000; provided, however, that
if the start of the accumulation period is delayed as described under "Series
Provisions--Postponement of the Accumulation Period" in this prospectus
supplement, the controlled accumulation amount may be different for each
distribution date for the accumulation period and will be determined by the
servicer in accordance with the Series 2000-4 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
accumulation period.
S-36
<PAGE>
"controlled deposit amount" means, for any distribution date relating to the
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" means, for any distribution date, an amount equal to the sum
of:
(i) the product of:
(a) a fraction, the numerator of which is 30 (or, in the event the
interest rate swap has terminated, the numerator of which is the actual
number of days from and including the immediately preceding
distribution date to but excluding such distribution date) and the
denominator of which is 360,
(b) a rate equal to 6.763% per annum (or, in the event the interest
rate swap has terminated, the Class A certificate rate in effect for
the related interest period), and
(c) the aggregate amount on deposit in the principal funding account
for the Class A monthly principal, if any, as of the preceding
distribution date, plus
(ii) the product of:
(a) a fraction, the numerator of which is the actual number of days
from and including the immediately preceding distribution date to but
excluding such distribution date and the denominator of which is 360,
(b) the Class B certificate rate in effect for the related interest
period, and
(c) the aggregate amount on deposit in the principal funding account
for the Class B monthly principal, if any, as of the preceding
distribution date, plus
(iii) the product of:
(a) a fraction, the numerator of which is the actual number of days
from and including the immediately preceding distribution date to but
excluding such distribution date and the denominator of which is 360,
(b) the collateral interest minimum rate in effect for the related
interest period, and
(c) the aggregate amount on deposit in the principal funding account
for the collateral monthly principal, if any, as of the preceding
distribution date.
"deficit controlled accumulation amount" means (a) on the first distribution
date for the 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, Class B monthly principal
and collateral monthly principal for such distribution date, and (b) on each
subsequent distribution date for the 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,
Class B monthly principal and collateral monthly principal for such subsequent
distribution date.
"distribution date" means November 15, 2000 and the 15th day of each month
thereafter (or, if any such day is not a business day, the next succeeding
business day).
"early amortization period" means the period of time described under "Series
Provisions--Principal Payments--Early Amortization Period" in this prospectus
supplement.
"excess spread" means, for any distribution date, an amount equal to the sum
of the amounts described in clause (a)(iv), clause (b)(iii) and clause (c)(ii)
in "Series Provisions--Application of Collections--Payment of Interest, Fees
and Other Items" in this prospectus supplement.
"excluded series" means each series which is designated in the relevant
prospectus supplement as then being an excluded series.
S-37
<PAGE>
"expected final payment date" means the October 2005 distribution date.
"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:
(i) 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 2000-4 cut-off date),
plus
(ii) the principal amount on deposit in the excess funding account as
of such day.
However, if the seller so designates, the amount calculated above pursuant to
clause (i) of the denominator shall be increased by the aggregate amount of
principal receivables in additional accounts added to the trust during such
monthly period as though such receivables had been added to the trust as of the
first day of such monthly period.
"group one" means the group of series issued by the trust designated as group
one and which includes Series 2000-4 and the series listed in Annex I.
"initial invested amount" means $1,200,000,000.
"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 be the period
from and including the series issuance date to but excluding the November 2000
distribution date.
"invested amount" for any date of determination means an amount equal to the
sum of the Class A invested amount, the Class B invested amount and the
collateral invested amount.
"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.
"LIBOR" means, as of any LIBOR determination date, the rate for deposits in
United States dollars for a one-month 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 LIBOR determination date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by four reference banks selected by the servicer at approximately
11:00 a.m., London time, on that day to prime banks in the London interbank
market for a one-month period. The servicer will request the principal London
office of each such bank to provide a quotation of its rate. If at least two
such quotations are provided as requested, the rate for that 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 United
States dollars to leading European banks for a one-month period.
"LIBOR determination date" means, for each of the Class A certificate rate,
the Class B certificate rate and the collateral interest minimum rate, (i) for
the initial interest period, the second London business day prior
S-38
<PAGE>
to the series issuance date and (ii) for each interest period following the
initial interest period, the second London business day prior to the first day
of such interest period. For purposes of the LIBOR determination date, a London
business day is any day on which dealings in deposits in United States dollars
are transacted in the London interbank market.
"monthly servicing fee" has the meaning described in "Series Provisions--
Servicing Compensation and Payment of Expenses" in this prospectus supplement.
"net servicing fee rate" means:
(i) so long as the bank or The Bank of New York is the servicer, 1.25%
per annum, and
(ii) if the bank or The Bank of New York is not the servicer, 2.00% per
annum.
"net swap payment" means, for any distribution date, the amount by which the
fixed amount payable by the trust to the swap counterparty for such date
exceeds the floating amount payable by the swap counterparty to the trust for
such date.
"net swap receipt" means, for any distribution date, the amount by which the
floating amount payable by the swap counterparty to the trust for such date
exceeds the fixed amount payable by the trust to the swap counterparty for such
date.
"notional amount" means the outstanding principal balance of the Class A
certificates as of the preceding record date (or, in the case of the first
distribution date, as of the series issuance date).
"pay out events" with respect to Series 2000-4 are the events described in
"Series Provisions--Pay Out Events" in this prospectus supplement and
"Description of the Certificates--Pay Out Events" in the accompanying
prospectus.
"portfolio yield" means, for any monthly period, the annualized percentage
equivalent of a fraction:
. the numerator of which is equal to:
(i) the floating allocation percentage times the amount 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
(ii) the amount of net investment earnings, if any, in the principal
funding account for the related distribution date, plus
(iii) any excess finance charges that are allocated to Series 2000-4,
plus
(iv) the amount of funds withdrawn from the reserve account and which
are required to be included as Class A available funds or Class B
available funds or paid to the collateral interest holder for the
distribution date for such monthly period, minus
(v) the investor default amount for the distribution date for 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" means, for any monthly period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction:
. the numerator of which is:
(i) 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
S-39
<PAGE>
(ii) during the accumulation 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 2000-
4 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;
However, if the seller so designates, the amount calculated above pursuant to
clause (i) of the denominator shall be increased by the aggregate amount of
principal receivables in additional accounts added to the trust during such
monthly period as though such receivables had been added to the trust as of the
first day of such monthly period.
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 accumulation period or the early amortization period for Series 2000-4, 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 shall have delivered copies of each such written notice to
the servicer and the trustee, 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 2000-4.
"principal funding account" means the account established as described under
"Series Provisions--Principal Funding Account" in this prospectus supplement.
"principal shortfall" for Series 2000-4 means:
(i) for any distribution date for the revolving period, zero,
(ii) for any distribution date for the accumulation period, the excess,
if any, of the controlled deposit amount for such distribution date 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), and
(iii) 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).
"reallocated principal collections" means, for any distribution date, the
collections of principal receivables allocable first to the collateral interest
and then, in the case of the Class A required amount, to the Class B
certificates that are used to fund the excess, if any, of the Class A required
amount and the Class B required amount remaining after excess spread and excess
finance charges allocated to Series 2000-4 and available for such purpose have
been used to fund the Class A required amount and the Class B required amount.
"required principal balance" means, as of any date of determination, the sum
of:
(i) 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 excluded series or portion thereof), minus
(ii) 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
S-40
<PAGE>
"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.
"required reserve account amount" for any distribution date on or after the
reserve account must be funded will be equal to:
(i) 0.50% of the invested amount as of the preceding distribution date
(after giving effect to all changes therein on such date), or
(ii) such other amount designated by the seller, provided that if such
designation is of a lesser amount, such reduction will not result in a
ratings effect.
"reserve account" means the account established as described under "Series
Provisions--Reserve Account" in this prospectus supplement.
"revolving period" means the period of time described under "Series
Provisions--Principal Payments--Revolving Period" in this prospectus
supplement.
"Series 2000-4 cut-off date" means October 1, 2000.
"Series 2000-4 termination date" means the August 2008 distribution date.
"servicer interchange" has the meaning described in "Series Provisions--
Servicing Compensation and Payment of Expenses" in this prospectus supplement.
"servicing base amount" means, for any distribution date, the adjusted
invested amount as of the last day of the monthly period preceding such
distribution date.
"servicing fee rate" means 2.0%.
"special payment date" means each distribution date following the monthly
period in which a pay out event occurs.
"Telerate page 3750" means the display page currently so designated on the
Bridge Telerate Market Report (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or pries).
"trust portfolio" means certain accounts selected from the bank portfolio and
included in the trust as of the trust cut-off date and subsequent additional
cut-off dates, based on the eligibility criteria specified in the pooling
agreement.
S-41
<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 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) 875-
1315. The servicer will provide, without charge, to any prospective purchaser
of the Class A certificates or Class B certificates, a copy of the prospectus
supplement for any previously publicly-issued series.
1. Series 1994-A Certificates
<TABLE>
<S> <C>
Initial Series 1994-A Invested Amount........................$550,000,000
Maximum Invested Amount......................................$257,000,000
Certificate Rate............................................Floating Rate
Group.................................................................One
Servicing Fee Rate..................................................2.00%
Series Termination Date.....................................December 2003
</TABLE>
2.Series 1996-1 Certificates
<TABLE>
<S> <C>
Initial Series 1996-1 Invested Amount...........................$845,000,000
Initial Class A Invested Amount.................................$676,000,000
Initial Class B Invested Amount.................................$109,850,000
Class A Certificate Rate.................Three-month LIBOR + 0.12% per annum
Class B Certificate Rate.......................................Floating Rate
Class A Expected Final Payment Date..............................August 2001
Class B Expected Final Payment Date.............................October 2001
Class A Controlled Accumulation Amount........................$33,800,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2004
</TABLE>
The Series 1996-1 certificates are supported by a collateral indebtedness
interest in the receivables which on the respective series issuance date had an
initial invested amount of $59,150,000.
3.Series 1996-2 Certificates
<TABLE>
<S> <C>
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
</TABLE>
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.
--------
/1/Subject to change if the commencement of the accumulation period is delayed.
I-1
<PAGE>
4.Series 1996-3 Certificates
<TABLE>
<S> <C>
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
</TABLE>
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.
5.Series 1997-1 Certificates
<TABLE>
<S> <C>
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 2005
</TABLE>
The Series 1997-1 certificates are supported by a collateral indebtedness
interest in the receivables which on the respective series issuance date had an
initial invested amount of $54,744,750.
6.Series 1997-2 Certificates
<TABLE>
<S> <C>
Initial Series 1997-2 Invested Amount...........................$502,212,500
Initial Class A Invested Amount.................................$401,770,000
Initial Class B Invested Amount..................................$55,243,375
Initial Class C Invested Amount..................................$45,199,125
Class A Certificate Rate................Three-month LIBOR + 0.049% per annum
Class B Certificate Rate.......................................Floating Rate
Class A Expected Final Payment Date..............................August 2002
Class B Expected Final Payment Date.............................October 2002
Class A Controlled Accumulation Amount........................$20,088,500/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2005
</TABLE>
--------
/1/Subject to change if the commencement of the accumulation period is delayed.
I-2
<PAGE>
7.Series 1998-1 Certificates
<TABLE>
<S> <C>
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
</TABLE>
8.Series 1998-3 Certificates
<TABLE>
<S> <C>
Initial Series 1998-3 Invested Amount........................$486,472,629
Initial Class A Invested Amount..............................$410,000,000
Initial Class A Sterling Invested Amount..............(Pounds)250,000,000
Initial Class B Invested Amount...............................$38,771,000
Initial Class C Invested Amount...............................$37,701,629
Class A Fixed Dollar Rate........................................5.94507%
Class A Certificate Rate/2......................................./..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
</TABLE>
9. Series 1998-4 Certificates
<TABLE>
<S> <C>
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
</TABLE>
--------
/1/Subject to change if the commencement of the accumulation period is delayed.
/2/ Rate applicable to the Class A Sterling Invested Amount.
I-3
<PAGE>
10. Series 1998-5 Certificates
<TABLE>
<S> <C>
Initial Series 1998-5 Invested Amount..................................$0
Maximum Invested Amount......................................$531,000,000
Certificate Rate............................................Floating Rate
Group.................................................................One
Series Termination Date.....................................February 2005
</TABLE>
11. Series 1998-6 Certificates
<TABLE>
<S> <C>
Initial Series 1998-6 Invested Amount..................................$0
Maximum Invested Amount......................................$500,000,000
Certificate Rate............................................Floating Rate
Group.................................................................One
Series Termination Date........................................March 2007
</TABLE>
12.Series 1999-1 Certificates
<TABLE>
<S> <C>
Initial Series 1999-1 Invested Amount...........................$625,000,000
Initial Class A Invested Amount..................................500,000,000
Initial Class B Invested Amount...................................62,500,000
Initial Collateral Invested Amount................................62,500,000
Class A Certificate Rate...................One-month LIBOR + 0.14% per annum
Class B Certificate Rate...................One-month LIBOR + 0.34% per annum
Expected Final Payment Date.........................................May 2004
Controlled Accumulation Amount................................$31,250,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date............................................July 2007
</TABLE>
13.Series 1999-2 Certificates
<TABLE>
<S> <C>
Initial Series 1999-2 Invested Amount...........................$625,000,000
Initial Class A Invested Amount..................................500,000,000
Initial Class B Invested Amount...................................62,500,000
Initial Collateral Invested Amount................................62,500,000
Class A Certificate Rate..................One-month LIBOR + 0.125% per annum
Class B Certificate Rate..................One-month LIBOR + 0.305% per annum
Expected Final Payment Date.........................................May 2002
Controlled Accumulation Amount................................$31,250,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date............................................July 2005
</TABLE>
14.Series 1999-3 Certificates
<TABLE>
<S> <C>
Initial Series 1999-3 Invested Amount...........................$500,000,000
Initial Class A Invested Amount..................................400,000,000
Initial Class B Invested Amount...................................50,000,000
Initial Collateral Invested Amount................................50,000,000
Class A Certificate Rate...................One-month LIBOR + 0.25% per annum
Class B Certificate Rate...................One-month LIBOR + 0.48% per annum
Expected Final Payment Date........................................July 2006
Controlled Accumulation Amount................................$25,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.......................................September 2009
</TABLE>
--------
/1/Subject to change if the commencement of the accumulation period is delayed.
I-4
<PAGE>
15.Series 1999-A Certificates
<TABLE>
<S> <C>
Initial Series 1999-A Invested Amount.....................................$0
Maximum Invested Amount.........................................$450,000,000
Certificate Rate...............................................Floating Rate
Group....................................................................One
Series Termination Date.........................................January 2008
</TABLE>
16.Series 1999-4 Certificates
<TABLE>
<S> <C>
Initial Series 1999-4 Invested Amount...........................$600,000,000
Initial Class A Invested Amount..................................480,000,000
Initial Class B Invested Amount...................................60,000,000
Initial Collateral Invested Amount................................60,000,000
Class A Certificate Rate.......................................Floating Rate
Class B Certificate Rate.......................................Floating Rate
Expected Final Payment Date......................................August 2004
Controlled Accumulation Amount................................$30,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2007
</TABLE>
17.Series 2000-1 Certificates
<TABLE>
<S> <C>
Initial Series 2000-1 Invested Amount...........................$600,000,000
Initial Class A Invested Amount..................................498,000,000
Initial Class B Invested Amount...................................51,000,000
Initial Collateral Invested Amount................................51,000,000
Class A Certificate Rate...............................................7.10%
Class B Certificate Rate...............................................7.30%
Expected Final Payment Date....................................February 2003
Controlled Accumulation Amount................................$30,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date...........................................April 2006
</TABLE>
18.Series 2000-2 Certificates
<TABLE>
<S> <C>
Initial Series 2000-2 Invested Amount...........................$750,000,000
Initial Class A Invested Amount..................................622,500,000
Initial Class B Invested Amount...................................63,750,000
Initial Collateral Invested Amount................................63,750,000
Class A Certificate Rate...............................................7.20%
Class B Certificate Rate...............................................7.35%
Expected Final Payment Date........................................June 2005
Controlled Accumulation Amount................................$37,500,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date..........................................August 2008
</TABLE>
--------
/1/ Subject to change if the commencement of the accumulation period is
delayed.
I-5
<PAGE>
19.Series 2000-3 Certificates
<TABLE>
<S> <C>
Initial Series 2000-3 Invested Amount.........................$1,000,000,000
Initial Class A Invested Amount..................................807,500,000
Initial Class B Invested Amount...................................92,500,000
Initial Collateral Invested Amount...............................100,000,000
Class A Certificate Rate.................One-month LIBOR plus 0.19% per year
Class B Certificate Rate.................One-month LIBOR plus 0.51% per year
Expected Final Payment Date......................................August 2007
Controlled Accumulation Amount................................$50,000,000/1/
Group....................................................................One
Servicing Fee Rate.....................................................2.00%
Series Termination Date.........................................October 2010
</TABLE>
--------
/1/ Subject to change if the commencement of the accumulation period is
delayed.
I-6
<PAGE>
Annex II
The Bank Portfolio and the Receivables
General
The accounts included in the trust as of the trust cut-off date and
subsequent additional cut-off dates 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 receivables in the bank
portfolio as of the Series 2000-4 cut-off date. The following tables and the
data provided in this Annex II relating to the bank portfolio include
receivables originated by Capital One Bank (Europe) plc; as of June 30, 2000
those receivables represented approximately 10% of the aggregate bank portfolio
and Capital One Bank (Europe) plc portfolio. 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
since 1992, 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:
Fixed Rate or Variable Rate
An annual percentage rate is either a fixed rate or a variable rate that
adjusts periodically according to an index. Some accounts have a low fixed
rate.
Introductory Period or Non-introductory Period
An account may have an introductory period during which a relatively low
annual percentage rate is charged. The annual percentage rate is converted to a
higher rate at the end of the introductory period. Non-introductory rate
products (excluding certain low fixed rate products) are more customized
products and generally include secured cards, low fixed-rate 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, 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 series issuance date constitute, and at any given time thereafter may
constitute, a material portion of the trust portfolio. See "Risk Factors,""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.
II-1
<PAGE>
Delinquency and Loss Experience
Because new accounts usually initially exhibit lower delinquency rates and
credit losses, the growth of the bank portfolio from approximately $13.155
billion at year end 1997, to approximately $20.052 billion as of the end of
September 2000 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, the bank expects 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 October 6, 2000, the
trust portfolio represented approximately 42% and 70% of the bank portfolio by
accounts 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.
Delinquencies as a Percentage of the Bank Portfolio(1)(2)
(Dollars in Thousands)
<TABLE>
<CAPTION>
At Year End At Year End At Year End
--------------------- --------------------- ---------------------
At September 30, 2000 1999 1998 1997(3)
--------------------- --------------------- --------------------- ---------------------
Delinquent Delinquent Delinquent Delinquent
Number of Days Delinquent Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 - 59 days............. $ 384,824 1.92% $328,161 1.96% $276,021 1.83% $309,440 2.35%
60 - 89 days............. 250,990 1.25 211,372 1.26 164,696 1.09 202,735 1.54
90 + days................ 465,593 2.32 373,072 2.23 286,135 1.89 323,803 2.46
---------- ---- -------- ---- -------- ---- -------- ----
TOTAL.................. $1,101,407 5.49% $912,605 5.45% $726,852 4.81% $835,978 6.35%
========== ==== ======== ==== ======== ==== ======== ====
</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
1999, 1998 and 1997 were $16,759,833, $15,108,050 and $13,155,103,
respectively. The end of period receivables outstanding at September 30,
2000 were $20,051,766.
(2) Figures and percentages in this table are reported on a processing month
basis.
(3) The total delinquencies greater than or equal to 30 days as a percentage
of the bank portfolio would have been 7.13% without the adjustments
discussed above under "--General."
II-2
<PAGE>
Loss Experience for the Bank Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
----------- -------------------------------------
September
30, 2000 1999 1998 1997(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average Receivables
Outstanding.............. $17,716,712 $15,150,906 $13,618,769 $12,103,362
Gross Losses.............. $ 763,756 $ 820,310 $ 930,334 $ 895,434
Gross Losses as a
Percentage of Average
Receivables
Outstanding(2)........... 5.75% 5.41% 6.83% 7.40%
Recoveries................ $ 267,424 $ 253,933 $ 174,713 $ 74,902
Net Losses................ $ 496,332 $ 566,377 $ 755,621 $ 820,532
Net Losses as a Percentage
of Average Receivables
Outstanding(2)........... 3.74% 3.74% 5.55% 6.78%
</TABLE>
--------
(1) Net Losses as a percentage of Average Receivables Outstanding would have
been 6.40% without the change in charge-off methodology discussed above
under "--General."
(2) The percentages reflected for the nine months ended September 30, 2000 are
annualized figures. Annualized figures are not necessarily indicative of
results for the entire year.
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>
Nine Months
Ended Year Ended
----------- -------------------------------------
September
30, 2000 1999 1998 1997(2)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average Receivables
Outstanding.............. $17,716,712 $15,150,906 $13,618,769 $12,103,362
Finance Charges and
Fees(1).................. $ 3,643,981 $ 3,908,913 $ 3,165,960 $ 2,434,650
Yield from Finance Charges
and Fees(3).............. 27.42% 25.80% 23.25% 20.12%
Interchange............... $ 333,335 $ 293,378 $ 165,115 $ 109,394
Yield from
Interchange(3)........... 2.51% 1.94% 1.21% 0.90%
</TABLE>
--------
(1) Finance Charges and Fees does not include interest on subsequent
collections on accounts previously charged off. Finance Charges and Fees
includes monthly periodic rate finance charges, the portion of the annual
membership fees amortized on a monthly basis, cash advance fees, late
charges, overlimit charges and other miscellaneous fees.
(2) Yield from Finance Charges and Fees would have been 20.66% without the
adjustments discussed above under "--General."
(3) The percentages reflected for the nine months ended September 30, 2000 are
annualized figures. Annualized figures are not necessarily indicative of
results for the entire year.
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" in the accompanying prospectus.
The revenue from finance charges and fees 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
II-3
<PAGE>
annual membership fees and other service charges, such as cash advance fees,
late charges, overlimit fees and other miscellaneous fees. If payment rates
decline, the balances subject to monthly periodic rate finance charges tend to
grow, assuming no change in the level of purchasing activity. Accordingly,
under these circumstances, the yield related to monthly periodic rate finance
charges normally increases. Conversely, if payment rates increase, the balances
subject to monthly periodic rate finance charges tend to fall, assuming no
change in the level of purchasing activity. Accordingly, under these
circumstances, the yield related to monthly periodic rate finance charges
normally decreases.
Furthermore, as the bank portfolio experiences growth in receivables through
account origination and account management balance transfer programs which are
assessed low introductory periodic rate finance charges and to the extent the
bank chooses to waive all or part of the rate increase for selected accounts in
an effort to profitably retain balances, the yield related to monthly periodic
rate finance charges would be adversely affected. The yield related to service
charges varies with the type and volume of activity in and the amount of each
account, as well as with the number of delinquent accounts. As account balances
increase, annual membership fees, which remain constant, represent a smaller
percentage of the aggregate account balances.
Payment Rates
The following table sets forth the highest and lowest accountholder monthly
payment rates for the bank portfolio during any single month in the periods
shown and the average accountholder monthly payment rates 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>
Nine Months
Ended Year Ended
------------------ --------------------
September 30, 2000 1999 1998 1997
------------------ ------ ------ ------
<S> <C> <C> <C> <C>
Lowest Month(2)........................ 15.84% 12.09% 10.86% 9.66%
Highest Month(2)....................... 17.36% 14.97% 12.64% 10.74%
Average Payment Rate for the Period.... 16.60% 14.23% 11.71% 10.20%
</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
As of October 6, 2000:
. the trust portfolio included $13,943,012,418 of principal receivables
and $426,482,684 of finance charge receivables;
. the accounts had an average principal receivable balance of $1,218 and
an average credit limit of $4,103;
. the percentage of the aggregate total receivable balance to the
aggregate total credit limit was 29.69%;
II-4
<PAGE>
. the average age of the accounts was approximately 37 months;
. all of the accounts in the trust portfolio were VISA or MasterCard
credit card accounts, of which 60% were standard accounts and 40% were
premium accounts; and
. approximately 47% of the accounts in the trust portfolio were assessed a
variable rate periodic finance charge and approximately 53% were
assessed a fixed rate periodic finance charge.
The following tables summarize the trust portfolio by various criteria as of
October 6, 2000. References to "Receivables Outstanding" in the following
tables include both principal receivables and finance charge 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)....... 152,814 1.30% $ (15,267,303.43) (0.11)%
No Balance(2)........... 2,264,637 19.20 0.00 0.00
More than $0 and less
than or equal to
$1,500.00.............. 7,029,790 59.59 3,525,776,253.69 24.54
$1,500.01-$5,000.00..... 1,546,701 13.11 4,436,549,972.54 30.87
$5,000.01-$10,000.00.... 657,973 5.58 4,508,177,940.50 31.37
Over $10,000.00......... 145,320 1.22 1,914,258,238.96 13.33
---------- ------ ------------------ ------
TOTAL................. 11,797,235 100.00% $14,369,495,102.26 100.00%
========== ====== ================== ======
</TABLE>
--------
(1) Credit balances are a result of cardholder payments and credit adjustments
applied in excess of the unpaid balance on an account. Accounts which
currently have a credit balance are included because receivables may be
generated with respect thereto in the future.
(2) Accounts which currently have no balance are included because receivables
may be generated with respect thereto in the future. Zero balance accounts
are not included in these figures.
Composition by Credit Limit(1)
Trust Portfolio
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Credit Limit Range Accounts Accounts Outstanding Outstanding
------------------ ---------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Less than or equal to
$1,500.00............... 6,406,240 54.30% $ 2,701,589,951.27 18.80%
$1,500.01-$5,000.00...... 1,543,676 13.09 1,813,588,186.80 12.62
$5,000.01-$10,000.00..... 2,731,673 23.16 5,404,058,990.00 37.61
Over $10,000.00.......... 1,115,646 9.45 4,450,257,974.19 30.97
---------- ------ ------------------ ------
TOTAL.................. 11,797,235 100.00% $14,369,495,102.26 100.00%
========== ====== ================== ======
</TABLE>
--------
(1) References to "Credit Limit" herein include both the line of credit
established for purchases, cash advances and balance transfers as well as
receivables originated under temporary extensions of credit through
account management programs. Credit limits relating to these temporary
extensions decrease as cardholder payments are applied to these
receivables.
II-5
<PAGE>
Composition by Payment Status(1)
Trust Portfolio
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Payment Status Accounts Accounts Outstanding Outstanding
-------------- ---------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Current to 29 days(2).... 11,148,345 94.50% $13,685,973,491.24 95.24%
Past due 30 - 59 days.... 282,067 2.39 284,255,739.55 1.98
Past due 60 - 89 days.... 146,188 1.24 145,190,711.24 1.01
Past due 90+ days........ 220,635 1.87 254,075,160.23 1.77
---------- ------ ------------------ ------
TOTAL.................. 11,797,235 100.00% $14,369,495,102.26 100.00%
========== ====== ================== ======
--------
(1) Payment Status is determined as of the prior statement cycle date.
(2) 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
<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... 570,182 4.83% $ 1,655,676,935.71 11.52%
Over 6 Months to 12
Months.................. 2,748,593 23.30 2,973,410,310.45 20.69
Over 12 Months to 24
Months.................. 2,961,541 25.10 3,318,354,895.98 23.09
Over 24 Months to 36
Months.................. 1,805,148 15.30 1,346,405,629.74 9.37
Over 36 Months to 48
Months.................. 1,340,766 11.37 1,155,002,030.65 8.04
Over 48 Months to 60
Months.................. 672,603 5.70 1,453,181,774.27 10.11
Over 60 Months........... 1,698,402 14.40 2,467,463,525.46 17.18
---------- ------ ------------------ ------
TOTAL.................. 11,797,235 100.00% $14,369,495,102.26 100.00%
========== ====== ================== ======
Composition of Accounts by Accountholder Billing Address
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
State or Territory Accounts Accounts Outstanding Outstanding
------------------ ---------- ---------- ------------------ -----------
<S> <C> <C> <C> <C>
California............... 1,597,362 13.54% $ 1,823,948,398.38 12.69%
Texas.................... 862,550 7.31 969,565,085.44 6.75
Florida.................. 836,544 7.09 923,528,565.52 6.43
New York................. 815,205 6.91 896,182,158.61 6.24
Illinois................. 499,824 4.24 627,284,952.45 4.37
Ohio..................... 450,595 3.82 570,676,219.77 3.97
Pennsylvania............. 463,396 3.93 569,853,493.06 3.97
Virginia................. 367,137 3.11 520,154,964.74 3.62
Michigan................. 370,656 3.14 497,451,028.99 3.46
New Jersey............... 400,883 3.40 476,397,352.27 3.32
Others(1)................ 5,133,083 43.51 6,494,452,882.97 45.18
---------- ------ ------------------ ------
TOTAL.................. 11,797,235 100.00% $14,369,495,102.26 100.00%
========== ====== ================== ======
</TABLE>
--------
(1) No other state individually accounts for more than 3.32% of the Percentage
of Total Receivables Outstanding.
Since the largest number of accountholders (based on billing addresses) whose
accounts were included in the trust as of October 6, 2000 were in California,
Texas, Florida and New York, adverse economic conditions affecting
accountholders residing in these areas 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" in the accompanying prospectus.
II-6
<PAGE>
Prospectus
[LOGO OF CAPITAL ONE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
Asset Backed Certificates
------------
The Trust--
Consider
carefully the . may periodically issue asset backed certificates
risk factors in one or more series with one or more classes;
beginning on page and
6 in this
prospectus.
. will own--
A certificate is . receivables in a portfolio of revolving credit
not a deposit and card accounts;
neither the
certificates nor . payments due on those receivables; and
the underlying
accounts or . other property described in this prospectus and
receivables are in the accompanying prospectus supplement.
insured or
guaranteed by the The Certificates--
Federal Deposit
Insurance . will represent interests in the trust and will be
Corporation or paid only from the trust assets;
any other
government . offered with this prospectus will be rated in one
agency. of the four highest rating categories by at least
one nationally recognized rating organization;
The certificates . may have one or more forms of credit enhancement;
represent and
interests in the
trust only and do . will be issued as part of a designated series
not represent which may include one or more classes of
interests in or certificates and credit enhancement.
obligations of
Capital One Bank The Certificateholders--
or any of its
affiliates.
. will receive interest and principal payments from
a varying percentage of credit card account
collections.
This prospectus
may be used to
offer and sell
certificates of a
series only if
accompanied by
the prospectus
supplement for
that series.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the certificates or determined that this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
------------
October 17, 2000
<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; 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.
Parts of this prospectus use defined terms. You can find these terms and
their definitions under the caption "Glossary of Defined Terms" beginning on
page 67 in this prospectus. To assist you in understanding this document, the
terms that are defined in the "Glossary of Defined Terms" appear in bold
typeface the first time they appear in each section and subsection, beginning
on page 14.
----------------
<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......................................................... 2
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
Series Enhancement....................................................... 4
Tax Status............................................................... 5
Certificate Ratings...................................................... 5
Optional Repurchase...................................................... 5
Risk Factors.............................................................. 6
It may not be possible to find an investor to purchase your
certificates............................................................ 6
Social, economic and geographic factors can affect credit card payments
and may cause a delay in or default on payments......................... 6
The credit ratings of your certificates are
limited................................................................. 6
Issuances of additional series by the trust may adversely affect your
certificates............................................................ 7
The discount option may slow the payment on your certificates............ 7
The credit quality of the trust assets may be eroded by the addition of
new assets.............................................................. 7
Recharacterization of the transfer from the bank to the trust, or the
conservatorship or receivership of the bank, could delay or reduce
payments to you......................................................... 8
If a conservator or receiver were appointed for the bank, payments to you
could be delayed or reduced............................................. 9
Consumer protection laws may impede collection efforts or reduce
collections............................................................. 10
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
The trust is dependent on the generation of new receivables.............. 11
The timing of principal payments is not
certain................................................................. 12
The seller's ability to change terms of the receivables could affect
payment patterns........................................................ 12
Certificateholders of other series or classes may take actions which are
opposed to your interests............................................... 13
Optional repurchase of your certificates by the seller 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
The Accounts.............................................................. 18
The Bank.................................................................. 19
Assumption of the Bank's Obligations...................................... 20
Use of Proceeds........................................................... 21
The Trust................................................................. 21
Description of the Certificates........................................... 22
General.................................................................. 22
Interest................................................................. 22
Principal................................................................ 22
Addition of Trust Assets................................................. 24
Removal of Accounts...................................................... 26
New Issuances............................................................ 27
Collection Account....................................................... 28
Allocation Percentages................................................... 28
Deposits in Collection Account........................................... 29
Shared Principal Collections; Excess Shared Principal Collections........ 30
Excess Funding Account................................................... 31
Sharing of Excess Finance Charges........................................ 31
Funding Period........................................................... 31
Paired Series............................................................ 32
Defaulted Receivables; Rebates and Fraudulent Charges; Recoveries........ 32
Credit Enhancement....................................................... 33
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pay Out Events............................................................ 37
Servicing Compensation and Payment of Expenses............................ 37
Record Date............................................................... 38
Optional Termination; Final Payment of Principal.......................... 38
Reports................................................................... 39
The Pooling Agreement Generally............................................ 40
Book-Entry Registration................................................... 40
Definitive Certificates................................................... 42
The Bank Certificate; Additional Sellers.................................. 43
Defeasance................................................................ 44
Termination of Trust...................................................... 44
Conveyance of Receivables................................................. 44
Representations and Warranties............................................ 45
Indemnification........................................................... 47
Collection and Other Servicing Procedures................................. 47
Servicer Covenants........................................................ 48
Certain Matters Regarding the Servicer.................................... 49
Servicer Default.......................................................... 49
Evidence as to Compliance................................................. 50
Amendments................................................................ 50
Trustee................................................................... 51
Certain Legal Aspects of the Receivables................................... 51
Transfer of Receivables................................................... 51
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Certain Matters Relating to Conservatorship and Receivership............. 53
Consumer Protection Laws................................................. 54
Federal Income Tax Consequences........................................... 55
General.................................................................. 55
Treatment of the Certificates as Debt.................................... 55
Treatment of the Trust................................................... 56
Taxation of Interest Income of U.S. Certificate Owners................... 58
Sale or Exchange of Certificates......................................... 58
Foreign Certificate Owners............................................... 59
Backup Withholding and Information Reporting ............................ 60
State and Local Taxation................................................. 60
ERISA Considerations...................................................... 60
Plan of Distribution...................................................... 64
Legal Matters............................................................. 65
Reports to Certificateholders............................................. 65
Where You Can Find More
Information.............................................................. 65
Glossary of Defined Terms................................................. 67
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
Capital One 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 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 pooling 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 an accountholder'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.
--------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Incorporated and Visa U.S.A., Inc., respectively.
1
<PAGE>
The Certificates
The trust has issued, and in the future expects to issue, asset backed
certificates, each evidencing an undivided interest in the trust. The
certificates are 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 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 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. During the revolving period, the trust will pay available principal to
certificateholders of other series as shared principal collections or to the
bank as holder of the seller's
2
<PAGE>
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.
3
<PAGE>
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 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 period or early
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, 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.
Series Enhancement
Each class of a series may be entitled to series enhancement. Series
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 . reserve
collateral account
guaranty or
account
. swap arrangements
The type, characteristics and amount of any series enhancement 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.
4
<PAGE>
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" 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.
5
<PAGE>
Risk Factors
You should consider the following risk factors before you decide whether or
not to purchase the certificates.
It may not be possible
to find an investor to
purchase your
certificates. 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 can
affect credit card
payments and may cause a
delay in or default on
payments.
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.
The credit ratings of
your certificates are The credit rating assigned to your certificates
limited. reflects only the rating agencies' assessment of
the likelihood that interest and principal will be
paid when required under the pooling 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 certificates 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
assigned to your certificates is reduced or
withdrawn, the market value of your certificates
could be reduced.
6
<PAGE>
Issuances of additional
series by the trust may
adversely affect your
certificates. 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 agreement
and directing a reassignment of the entire
portfolio of accounts.
The discount option may
slow the payment on your The bank has the option, from time to time and
certificates. 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.
The credit quality of
the 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 accountholders 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.
7
<PAGE>
In addition, the pooling agreement allows the bank
to add participation interests in other
receivables 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."
Recharacterization of
the transfer from the
bank to the trust, or
the conservatorship or
receivership of the
bank, could delay or
reduce payments to you.
The bank has represented in the pooling 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 actions so that, if a court
determines the transfer to be a grant of a
security interest and not a sale of the
receivables to the trust, the trust will have a
"first priority perfected security interest" in
the receivables under the Uniform Commerical Code.
However, there are circumstances where, regardless
of these actions, other creditors may take
priority over your interests, for example:
. a tax, governmental 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; 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 insolvency or
similar proceedings were commenced by or
against the bank, 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:
. 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.
8
<PAGE>
. 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 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.
If a conservator or
receiver were appointed
for the bank, payments
to you could be delayed
or reduced.
If the transfer of the receivables by the bank to
the trust constitutes a sale under general
applicable law, and if no fraud or other
misconduct has occurred and the pooling agreement
satisfies the regulatory requirements of the
Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and
Enforcement Act of 1989, the FDIC as conservator
or receiver for the bank could not reclaim the
receivables or limit the trust's exercise of its
rights with respect to the receivables.
If the transfer of the receivables by the bank to
the trust constitutes the grant of a security
interest under general applicable law rather than
a sale, however, then certain FDIC regulations may
apply. The FDIC has issued regulations
surrendering certain rights under the FDIA to
reclaim, recover, or recharacterize a financial
institution's transfer of financial assets such as
the receivables if (i) the transfer involved a
securitization of the financial assets and meets
specified conditions for treatment as a sale under
relevant accounting principles, (ii) the financial
institution received adequate consideration for
the transfer, (iii) the parties intended that the
transfer constitute a sale for accounting
purposes, and (iv) the financial assets were not
transferred fraudulently, in contemplation of the
financial institution's insolvency, or with the
intent to hinder, delay, or defraud the financial
institution or its creditors. The pooling
agreement and the transfer of the receivables by
the bank to the trust have been structured to
satisfy all of these conditions.
If a condition required under the FDIC's
regulations were found not to have been met,
however, the FDIC could reclaim, recover, or
recharacterize the bank's transfer of the
receivables. The FDIA would limit the trust's
damages in this event to its "actual direct
compensatory damages" determined as of the date
that the FDIC was appointed as conservator or
receiver for the bank. The FDIC, moreover, could
delay its decision whether to reclaim, recover, or
recharacterize the bank's transfer of the
receivables for a reasonable period following its
appointment as conservator or receiver for the
bank. Therefore, if the FDIC were to reclaim,
recover, or recharacterize the bank's transfer of
the receivables, payments to certificateholders
could be delayed or reduced.
9
<PAGE>
Even if the conditions set forth in the regulations
were satisfied and the FDIC did not reclaim,
recover, or recharacterize the bank's transfer of
the receivables, certificateholders could suffer a
loss on their investment if (i) the pooling
agreement or the bank's transfer of the
receivables were found to violate the regulatory
requirements of the FDIA, (ii) the trustee were
required to comply with the claims process
established under the FDIA in order to collect
payments on the receivables, (iii) the FDIC were
to request a stay of any action by the trust or
the trustee to enforce the pooling agreement or
the certificates, or (iv) the FDIC were to
repudiate other parts of the pooling agreement,
such as any obligation to collect payments on or
otherwise service the receivables.
In addition, regardless of the terms of the pooling
agreement or the instructions of those authorized
to direct the trustee's actions, the FDIC may have
the power (i) to prevent or require the
commencement of an early amortization period, (ii)
to prevent, limit, or require the early
liquidation of the receivables and termination of
the trust, or (iii) to require, prohibit, or limit
the continued transfer of receivables to the
trust. The FDIC, moreover, could prevent the
trustee or the certificateholders from appointing
a successor servicer under the pooling agreement.
If any of these events were to occur, payments to
certificateholders could be delayed or reduced.
See "Certain Legal Aspects of the Receivables--
Transfer of Receivables" and "--Certain Matters
Relating to Conservatorship and Receivership" in
this prospectus.
Consumer protection laws
may impede collection
efforts or reduce
collections. 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 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.
10
<PAGE>
The trust is dependent
on the generation of The continuation of the trust will depend upon the
new receivables. generation, on an ongoing basis, of new receivables
for the trust. As accountholders make payments on
their accounts, receivables in the trust decline.
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
accountholders 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 rates
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.
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The pooling 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 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.
The 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 accountholder 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. The seller's ability to compete in the
current industry environment will affect its
ability to generate new receivables and might also
affect payment patterns on the receivables. In
addition to other factors discussed above in this
"Risk Factors" section, changes in finance charges
can alter the monthly payment rates of
accountholders. A significant decrease in monthly
payment rates could slow the return or
accumulation of principal during a controlled
amortization period or accumulation period.
The seller's ability to
change terms of the
receivables could affect
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
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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 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 other credit card
issuers lowering interest rates, or prudent
business practices could impel the bank to change
account terms.
Certificateholders 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 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 of
your certificates by the
seller 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 5% 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
The bank is engaged in secured and unsecured consumer lending
internationally. 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 Bank for
all periods after November 22, 1994.
The receivables conveyed initially and to be conveyed by the bank to the
trust pursuant to the pooling agreement between the bank, as seller and
servicer, and The Bank of New York, as 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. Generally, both
premium and standard accounts undergo a similar credit analysis, but premium
accounts have higher initial credit limits. In addition, premium accounts offer
a wider variety of services to accountholders.
The growth achieved by the bank has been largely due to general industry
dynamics that have existed over the past several years and the success of the
information-based strategy ("IBS") adopted by the bank in 1988. IBS is designed
to allow the bank to differentiate among customers based on credit risk, usage,
customer preference and other characteristics and to capture profitable
opportunities by effectively matching client characteristics with attractive
product offerings. Through IBS, the bank is able to test many products, design
and target customized solicitations at various customer segments, thereby
enhancing customer response levels and the returns on solicitation expenditures
within given underwriting parameters. The bank has applied IBS to other areas
of its business, including account management, credit line management, pricing
strategies, usage stimulation, collections, recoveries and account and balance
retention. Management believes that IBS has allowed the bank to gain market
share in a highly competitive environment.
The bank has been an innovator of strategies designed to attract customers.
The bank's initial strategy was to offer credit card products with low
introductory rates and a balance transfer option. Faced with increased
competition for these products, the bank expanded its product offerings to
include secured card and low fixed-rate products and other customized credit
cards, including affinity and co-branded, college student and other accounts.
These strategies, combined with the segmenting and targeting capabilities of
IBS, have contributed to the growth in recent periods of the bank's account
originations and account balances.
The bank and its affiliates currently service the bank portfolio through
facilities in Richmond, Virginia, Fredericksburg, Virginia, Tampa, Florida,
Dallas, Texas, Seattle, Washington and Boise, Idaho. 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:
. applications mailed directly to prospective accountholders,
. direct mail and telemarketing solicitations for accounts from
individuals whose creditworthiness was prescreened,
. arrangements with affinity groups,
. conversion of existing non-premium accounts to premium accounts,
. applications taken over the telephone or through the internet from
prospective accountholders,
. newspaper, magazine, radio and television advertisements, and
. 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
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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.
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.
The bank's prescreened account solicitation process generally uses
information from credit reporting agencies to identify consumers who are likely
to respond and be approved for a credit card account. In the prescreening
process, credit reporting agencies provide anonymous credit report information
on potential customers 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 lending guidelines relating to
the operation of its consumer revolving lending business, as such guidelines
may be changed from time to time, and include various models, including risk
models, designed to predict the credit risk of potential cardholders.
In order to confirm approval and 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.
For non-prescreened solicitations, the bank acquires names from a variety of
sources, including list vendors, "take one" applications, internet advertising
and other media venues. Using internal and external sources to ensure quality
and accuracy, prospective customers are mailed solicitations. The bank approves
or declines respondents based on both the characteristics drawn from the
application and a credit reporting agency check.
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
and federal law. Credit limits are adjusted periodically based upon the bank's
continuing evaluation of an accountholder's credit behavior.
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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 as security for
such accountholder's payment obligations arising under the secured credit card.
Such funds securing payment equal all, or a portion, of the credit limit
available to the accountholder. The bank deposits the funds, on behalf of the
accountholder, in a deposit account. 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 such 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" in this prospectus.
Customer Service
The bank began providing its customers access to on-line account servicing
via the internet in 1999. In addition, voice response units and customer
service representatives are currently available 24 hours a day, seven days a
week through the bank's toll free telephone number dedicated to customer
service. Such representatives have access to the customer's account history in
order to resolve immediately the majority of questions. When a customer
initiates a payment inquiry or disputes a charge, the bank's current policy is
to credit the accountholder's monthly billing statement in the amount of such
claim or dispute. If the claim or 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 such balances. Multiple tracking
and reporting systems are employed to ensure that service standards are
achieved and maintained.
Most customers are eligible for on-line account servicing. An increasing
number of customers have been signing up for on-line account servicing
including bill presentment, bill payment and customer service support in the
form of help screens.
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 and to accountholders who made
a payment during the billing period. Generally, with some exceptions, each
month an accountholder must make a minimum payment equal to the greater of (a)
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 or (b) the amount that
the account is overlimit. 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 most of the accounts in
the bank portfolio. Accounts may have a different periodic rate finance charge
for purchases, cash advances and balance transfers. 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.
The bank assesses annual membership fees on certain accounts although under
various marketing programs these fees may be waived or rebated. For most credit
card accounts, the bank also assesses late, overlimit and returned check
charges. The bank generally assesses a fee on cash advances and certain
purchase transactions. There can be no assurance that periodic rate finance
charges, fees and other charges on accounts in the trust will remain at current
levels. See "Risk Factors" in this prospectus.
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Currently, payments by accountholders to the bank are processed at the bank's
credit card operations center and other offices in Richmond, Virginia and
Seattle, Washington. Payments generally are applied first to finance charges
assessed with respect to the preceding billing period, then to any fees billed
to the account and 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 accountholders 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 by the end of the
next full billing cycle 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 two full billing cycles 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 and MasterCard associations receive certain
fees called 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
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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 related 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 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 the certificateholders the percentage of the interchange
allocable to the certificates. 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 series supplement.
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 these selected accounts and any funds collateral on the date of
transfer to the trust, and all receivables and any funds collateral generated
in these accounts after such date. All monthly calculations for such accounts
are computed based on activity occurring during the related monthly period.
Some receivables have been charged off as uncollectible prior to their
addition to the trust in accordance with the bank's normal servicing policies
and 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 transfer to the trust all
receivables in such additional accounts, whether such receivables are then
existing or thereafter created. These additional accounts must be eligible
accounts as of the date the bank designates their receivables and funds
collateral to be included in the trust.
Accounts in the trust also include certain charged-off accounts with zero
balances, the recoveries on which will be treated as collections of finance
charge receivables. The bank may add such zero balance accounts to the trust
from time to time.
Since the trust cut-off date, the bank has transferred 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 in the trust portfolio) 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 in the trust portfolio or additional
account which is transferred 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 transfer participations
in receivables to the trust, which may have different eligibility requirements,
characteristics and risks than the accounts designated by the bank. See
"Description of the Certificates--Addition of Trust Assets" in this prospectus.
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Accounts designated by the bank may also include any related account or
accounts having the following characteristics:
(i) such related accounts were established in compliance with the bank's
lending guidelines pursuant to a lending agreement;
(ii) the accountholder or accountholders with respect to such related
accounts are the same person or persons as the accountholder or
accountholders of the designated account;
(iii) such related account is originated:
(a) as a result of the credit card for the designated account being
lost or stolen;
(b) as a result of the accountholder requesting a change in his or
her billing cycle;
(c) as a result of the accountholder requesting the discontinuance
of responsibility for a designated account;
(d) as a result of the accountholder requesting a product change; or
(e) for any other reasons permitted by the bank's lending
guidelines; and
(iv) such related accounts 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 the receivables and funds collateral in which will be removed
from the trust. In such case, the receivables and funds collateral in such
accounts, together with any related funds collateral, will be reassigned to the
bank. Throughout the term of the trust, the accounts designated by the bank
will consist of the initial accounts designated by the bank, and any additional
accounts and participations in receivables added to the trust, less any removed
accounts.
Additional accounts designated by the bank might not be accounts of the same
type or with the same characteristics as those the receivables in which were
previously transferred to 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
transferred previously to the trust. Moreover, such 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 designated
by the bank 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 in receivables 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 SEC
pursuant to the Securities Exchange Act of 1934, as amended, 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 portfolio of accounts in the trust or any addition of participations in
receivables.
The Bank
Capital One Bank 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 FDIC. The bank (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 other than as permitted 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.
The bank (through its predecessor) is one of the oldest continually operating
bank card
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issuers in the United States, having commenced operations in 1953, the same
year as the formation of what is now MasterCard. Prior to November 24, 1994,
the bank conducted its operations as a division of Signet Bank, a wholly-owned
subsidiary of Signet Banking Corporation. Its main office is currently located
at 11011 West Broad Street, Glen Allen, Virginia 23060. The bank's telephone
number is (804) 967-1000.
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 portfolio of accounts in the trust and the bank's remaining interest in
the receivables arising thereunder, its interest in participations in
receivables and its interest in the trust, together with all servicing
functions and other obligations under the pooling agreement or relating to the
transactions contemplated thereby, to another 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 these assets and obligations
to such other entity, without the consent or approval of any
certificateholders, if the following conditions, among others, are satisfied:
(i) the entity, the bank and the trustee have entered into an assumption
agreement providing for the entity's assumption of the bank's obligations
under the pooling agreement, including the assumption of the obligation to
transfer the receivables arising under the portfolio of accounts in the
trust and the receivables arising under any additional accounts to the
trust,
(ii) each provider of series enhancement, if any, has consented to the
transfer and assumption,
(iii) all filings required to perfect the interest of the trustee in the
receivables arising under such accounts have been duly made and copies
thereof will 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, the bank has 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 any of those entities, the bank has received
written notice from each rating agency that such transfer and assumption
will not have a ratings effect,
(v) the trustee has received an opinion of counsel about clause (iii)
above and as to certain other matters specified in the pooling agreement,
and
(vi) the trustee has received 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
Bank assumed the roles of seller and servicer under the trust. See "Prospectus
Summary--The Bank" in this prospectus.
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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 of asset
backed 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 proceeds therefrom, issuing
series of certificates and the seller 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 portfolio of accounts in the trust. The
receivables consist of all amounts charged by accountholders for goods and
services and cash advances, called 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, collectively called finance
charge receivables.
The trust assets consist of such receivables, all monies due or to become due
thereunder, the proceeds of such 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 such receivables, the right to receive certain interchange
attributed to accountholder charges for merchandise and services in the
portfolio of accounts in the trust, 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 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 in receivables. 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 in receivables. 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 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 described in "The Bank" in this prospectus, and
as permitted by the pooling agreement:
(i) Signet Bank transferred to Capital One Bank, and Capital One Bank
accepted and assumed, all of Signet Bank's rights and obligations under the
pooling agreement,
(ii) Capital One Bank 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 Bank filed with the appropriate
governmental authorities Uniform Commercial Code financing statements and
amendments to financing statements reflecting the transfer to and
assumption by Capital One Bank.
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Description of the Certificates
General
The certificates of a series will be issued pursuant to the pooling agreement
and a series supplement to the pooling agreement relating to such certificates,
each 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. The trustee will provide a copy of the
pooling agreement (without exhibits or schedules), including any series
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, the certificates of
each series offered by this prospectus will initially be represented by one or
more certificates registered in the name of the nominee of The Depository Trust
Company, or Clearstream or Euroclear, except as set forth below. DTC has
informed the bank that DTC's nominee will be Cede & Co. Unless otherwise
specified in the related prospectus supplement, the certificates of each series
offered by this prospectus will be available for purchase in minimum
denominations of $1,000 and in integral multiples thereof in book-entry form.
See "The Pooling Agreement Generally--Book-Entry Registration" and "--
Definitive Certificates" in this prospectus.
Each series of certificates offered hereby will represent an undivided
interest in the trust assets, including the right to receive from such trust
assets funds up to (but not in excess of) amounts required to make payments of
interest and principal with respect to such series, as set forth in the related
prospectus supplement. Each series of certificates represents an interest in
the trust assets other than the interests represented by other series of
certificates issued by the trust and the seller's interest.
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 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 interest funding
accounts 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 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 the principal commencement date, in which case such series
will have a controlled amortization period as described below. If a series has
more
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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" 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. During the
revolving period, collections of principal receivables and certain other
amounts otherwise allocable to the series, including miscellaneous payments so
allocated, will not be paid to the certificateholders, but instead will be
treated as shared principal collections and will be distributed to, or for the
benefit of, the certificateholders of other series, if the series 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 or a
controlled amortization period.
The certificates of any series or class may have an accumulation period.
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 series supplement so
provides, shared principal collections, if any, allocable to such series or
such class) will be deposited on each distribution date in a principal funding
account established for the benefit of the certificateholders of such series or
such class 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 a controlled accumulation amount specified in the related prospectus
supplement. 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 such
distributions.
The certificates of any series or class may have a controlled amortization
period. 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 series
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 of certificates offered by this prospectus on any distribution
date may, but will not necessarily, be limited to a controlled amortization
amount specified in the related prospectus supplement. 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 that 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.
Upon the occurrence of a principal payment event, the revolving period, the
controlled amortization period or the accumulation period, as applicable, will
end and the principal payment period will begin. During the 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 such series (including
miscellaneous payments and, if the series supplement so provides, shared
principal collections,
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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 accumulation
amount or controlled amortization 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 early amortization period, collections of principal receivables
and certain other amounts allocable to the applicable series (including
miscellaneous payments and, if the series supplement so provides, shared
principal collections, if any, allocable to such series) will be distributed as
principal payments to the applicable certificateholders monthly 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 accumulation amount or controlled amortization
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 required seller's interest on the last business day of any monthly period,
in each case if so specified in the related prospectus supplement. 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.
Addition of Trust Assets
The bank will have the right to designate for the trust, from time to time,
additional accounts to be included as accounts transferred to the trust,
subject to certain conditions described below. In addition, the bank will be
required to designate additional accounts if, as of the last business day of
any monthly period, the seller's interest is less than the required seller's
interest. In such event, the bank will, on or before the required designation
date (unless the seller's interest exceeds the required seller's interest as of
the end of any business day during the period between the last business day of
the prior monthly period and such designation date), make an addition to the
trust in a sufficient amount so that the seller's interest will at least equal
the required seller's interest.
The bank may also from time to time, at its sole discretion, designate
certain types of eligible accounts approved by the rating agencies to be
included as automatic additional accounts, subject to the limitations
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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, will not exceed 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 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 in receivables must also comply with such conditions.
In addition to or in lieu of additional accounts, the bank is permitted to
add to the trust participations representing interests in a pool of assets
primarily consisting receivables arising under consumer revolving credit card
accounts owned by the bank or any of its affiliates and collections thereon.
Participations may be evidenced by one or more certificates of ownership issued
under a separate pooling and servicing or similar 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 such
participation (and therefore the certificateholders) will be subject to all the
terms and provisions of the participation agreement.
In connection with an addition, the bank will convey to the trust the
receivables arising in additional accounts and participations in receivables
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) 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 in receivables will be included as
trust assets;
(b) 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 in receivables 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 in receivables 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 during any of the three
consecutive monthly periods beginning in January, April, July and October
of each calendar year, if applicable, the bank shall have received, to the
extent not previously received, not later than twenty days following the
last business day of the relevant three consecutive monthly periods,
written notice from each rating agency that such addition will not have a
ratings effect and shall have delivered copies of each such written notice
to the servicer and the trustee; provided, however, that in the case of a
required addition that exceeds the aggregate addition limit,
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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 in
receivables 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
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 in
receivables 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) 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;
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(b) 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 series
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.
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" in this prospectus.
New Issuances
The pooling agreement provides that, pursuant to one or more series
supplements, the bank may cause the trustee to issue one or more new series of
certificates and may define all principal terms of such series. Each series may
have different terms and enhancements than any other series. None of the
seller, the servicer, the trustee or the trust is required or intends to obtain
the consent of any certificateholder of any other series issued prior to the
issuance of a new 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, or exempt from
registration thereunder directly, through one or more underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or otherwise.
The bank intends to offer, from time to time, additional series.
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Under the pooling agreement, the obligation of the trustee to issue the
certificates of a new series and to execute and deliver the related series
supplement is subject to the following conditions, among others:
(i) on or before the fifth business day immediately preceding the date
upon which the new issuance is to occur, the bank will give to 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;
(ii) the bank will deliver to the trustee a series supplement, specifying
the terms of the series;
(iii) the bank will deliver to the trustee any related series enhancement
agreement;
(iv) the bank will receive written notice from each rating agency that
such new issuance will not have a ratings effect;
(v) the bank will deliver to the trustee and certain providers of series
enhancement an officer's certificate of the bank to the effect that such
issuance will not cause a pay out event to occur with respect to any
series;
(vi) the bank will deliver to the trustee, each rating agency and certain
providers of series enhancement a tax opinion; and
(vii) the bank's remaining interest in principal receivables will not be
less than 2% (unless the bank has 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, as of the date upon which the new issuance is to occur after
giving effect to such new issuance.
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 called the collection 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 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 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 series 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 series 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 a subsidiary of The Bank
of New York.
Allocation Percentages
Pursuant to the pooling agreement, the servicer will allocate among each
series and 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 each series all 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 a series based on the floating allocation
percentage for such series;
(b) collections of principal receivables will at all times be allocated
to a series based on the principal allocation percentage for such series;
and
(c) miscellaneous payments will at all times be allocated among each
series based on their respective invested amounts.
Amounts not allocated to any series as described above will be allocated to the
seller's interest.
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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 the bank remains the servicer under the pooling agreement and
either:
(i) 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
(ii) 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 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.
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 series
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. 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 as described in the sentence above, 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.
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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:
(a) 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
(b) the portion of collections on finance charge receivables
allocated to the seller's interest.
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 any series offered by this
prospectus 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 called 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.
If such 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 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 (as
defined in the series supplement and described in the prospectus supplement
for such series), and
(ii) the product of (x) the excess shared principal collections and (y) a
fraction, the numerator of which is the 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.
Any such reallocation of collections of 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.
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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, called the
excess funding 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. 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
called 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 any series that are 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, called 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 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
funding period, the aggregate amount of principal receivables in the trust
allocable to such series may be less than the aggregate principal
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amount of the certificates of such series. If so specified in the related
prospectus supplement, the amount of such deficiency, called 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, called
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
invested amount of such series 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. 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
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.
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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" in this prospectus.
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 make an adjustment payment in an amount equal to such deficiency
into the collection account on 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 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. 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.
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Additionally, in certain cases, the related prospectus supplement may set
forth certain information about the provider of any credit enhancement,
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 event and in certain other instances
described in the related prospectus supplement, the credit enhancement provider
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, called the enhancement invested amount.
Subordination
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.
Letter of Credit
A letter of credit for a series or class of certificates offered by this
prospectus may be issued by a bank or financial institution specified in the
related prospectus supplement. Subject to the terms and conditions specified in
the related prospectus supplement, the issuer of the letter of credit will be
obligated to honor drawings under such 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
Support for the certificates of any class or series offered by this
prospectus will be provided by:
(i) a cash collateral guaranty issued by a cash collateral trust or
similar entity and secured by the deposit of cash or certain eligible
investments in a cash collateral guaranty account owned by the
beneficiaries of the cash collateral trust, or
(ii) a cash collateral account of the trust.
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
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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
Insurance for 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
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 a 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
Support for a series or one or more classes thereof will be provided by the
establishment of a 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.
Swap Agreement
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 designate a fixed or variable percentage of the amount of principal
receivables arising in the accounts on and after the date such designation
becomes effective to be treated as finance charge receivables, which will be
called 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 series 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
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time, if any, at which the bank delivers to the trustee an officer's
certificate to the effect that 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 enhancement provider 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 an officer's certificate to the effect that 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:
(i) 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) plus the discount
option receivables in each case (for both numerator and denominator) at the
end of the prior monthly period, and
(ii) collections of principal receivables that arise in the accounts on
such day 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 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; provided, however, that
the bank may not make such designation unless:
(i) the bank has received written notice from each rating agency that
such designation will not have a ratings effect and has delivered copies of
each such written notice to the servicer and the trustee, and
(ii) the bank has delivered to the trustee and certain providers of
series enhancement an officer's certificate of the bank, to the effect that
such designation will not 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 will deliver to the trustee a certificate setting forth:
(a) the amount of additional discount receivables 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 additional discount receivables which have not
been treated as collections of finance charge receivables for the preceding
monthly period.
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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 certain events of bankruptcy, insolvency or
receivership 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 special payment date
in the monthly period following the monthly period in which such pay out event
occurs. 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 occur,
pursuant to the pooling agreement, on the day of such event, the bank will
immediately cease to transfer principal receivables to the trust and promptly
give notice to the trustee of such event. Within 15 days the trustee will
publish a notice of the occurrence of such 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 interest, 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 series supplement, any credit enhancement
provider for such series) instruct the trustee not to dispose of or liquidate
the receivables and to continue transferring principal receivables as before
such 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 series supplement. If the sum of
(a) the portion of such proceeds allocated to any series and (b) the proceeds
of any collections on the receivables in the collection account allocated to
such series is not sufficient to pay the invested amount of the certificates of
such series in full, the related 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 payable monthly
in an amount equal to one-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, each series
and the interest represented by the enhancement invested amount, if any, for
such series. The share of the servicing fee allocable to a particular series
for any monthly period, called 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
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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 related 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 equal the sum of:
(i) the invested amount of such series, plus
(ii) the enhancement invested amount, if any, for such series, plus
(iii) 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), each at the applicable certificate rate, 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 such repurchase occurs is not a distribution
date, the day preceding the distribution date following such day, minus
(iv) the amount, if any, on deposit in any principal funding account for
such series.
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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 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
series 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 related series
supplement.
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 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 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
make available for inspection upon request to each certificate owner 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 Internal Revenue 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.
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The Pooling Agreement Generally
Book-Entry Registration
Certificateholders may hold their certificates through DTC (in the United
States) or Clearstream 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.
Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream customers and Euroclear participants, respectively, through
customers' securities accounts in Clearstream'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.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between its participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(who may include the underwriters of any series), banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream customers 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 Clearstream customers
or Euroclear participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing system
by its depositary; however, such cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for same-
day funds settlement applicable to DTC. Clearstream customers and Euroclear
participants may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities received in
Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing, dated the
business day following the DTC settlement date, and such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Clearstream customer or Euroclear participant on such business
day. Cash received in Clearstream or Euroclear as a result of sales of
securities by or through a Clearstream customer 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 Clearstream 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--Foreign
Certificate Owners" in this prospectus.
Certificate owners who are not DTC participants or indirect DTC participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, certificates may do so only through DTC participants
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and indirect DTC participants. In addition, certificate owners will receive all
distributions of principal of and interest on the certificates from the paying
agent or the trustee through DTC participants who in turn will receive them
from DTC. Under a book-entry format, certificate owners may experience some
delay in their receipt of payments, since such payments will be forwarded by
the trustee to Cede, as nominee for DTC. DTC will forward such payments to its
participants which thereafter will forward them to indirect participants or
certificate owners. It is anticipated that the only "certificateholder" will be
Cede, as nominee of DTC. Certificate owners will not be recognized by the
trustee as "certificateholders," as such term is used in the pooling agreement
and the series supplements. Certificate owners will only be permitted to
exercise the rights of certificateholders under the pooling agreement and the
series supplements indirectly through the DTC participants who in turn will
exercise their rights of certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among participants
on whose behalf it acts with respect to the certificates and is required to
receive and transmit distributions of principal and interest on the
certificates. Participants and indirect participants with which certificate
owners have accounts with respect to the certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective certificate owners. Accordingly, although certificate owners
will not possess certificates, certificate owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of its participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a certificate
owner to pledge certificates to persons or entities that do not participate in
the DTC system, or otherwise take action in respect of such certificates, may
be limited due to the 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 series 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 interests that satisfy such specified
percentages. DTC may take conflicting actions with respect to other interests
to the extent that such actions are taken on behalf of participants whose
holdings include such interests.
Clearstream is incorporated under the laws of Luxembourg. Clearstream holds
securities for its customers and facilitates the clearance and settlement of
securities transactions between Clearstream customers through electronic book-
entry changes in accounts of Clearstream customers, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
Clearstream in any of 36 currencies, including United States dollars.
Clearstream provides to its Clearstream customers, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream also deals
with domestic securities markets in over 30 countries through established
depository and custodial relationships. Clearstream is registered as a bank in
Luxembourg, and as such is subject to regulation by the Commission de
Surveillance du Secteur Financier, which supervises Luxembourg banks.
Clearstream's customers are world-wide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the underwriters
of any series of certificates. Clearstream's U.S. customers are limited to
securities brokers and dealers and banks. Currently, Clearstream has
approximately 2,000 customers located in over 80 countries, including all major
European countries, Canada and the United States. Indirect access to
Clearstream is also available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream.
Clearstream has established an electronic bridge with Morgan Guaranty Trust
Company of New York as the operator of the Euroclear System in Brussels to
facilitate settlement of trades between Clearstream and Euroclear.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
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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.
The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office as the Euroclear operator, under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation. 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 the
underwriters of any series of certificates. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law. These rules and laws 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 these rules and laws only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to certificates held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream customers or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream 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 series supplement on behalf of a Clearstream customer 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, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of certificates among participants
of DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
Definitive Certificates
The certificates of a series offered by this prospectus will be issued as
definitive certificates to certificateholders, 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.
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Upon the occurrence of any of these events, 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 holders of
certificates under the pooling agreement and the relevant series supplement.
Distribution of principal and interest on the certificates will be made by
the paying agent or the trustee directly to the holders of definitive
certificates in accordance with the procedures set forth in this prospectus and
in the pooling agreement and the relevant series supplement. Distributions will
be made by check mailed to the address of each holder as it appears on the
register maintained by the trustee. The final payment on any certificate
(whether definitive certificates or the certificates registered in the name of
Cede representing the certificates) will be made only upon presentation and
surrender of such certificate on the date for such final payment at such office
or agency as is specified in the notice of final distribution to
certificateholders. The trustee will provide such notice to registered
certificateholders not later than the fifth day of the month of the final
distribution.
Definitive certificates will be transferable and exchangeable at the offices
of the transfer agent and registrar, which is a subsidiary of The Bank of New
York. 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 or the uncertified interest in the seller's interest, if any,
for 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" in this prospectus), 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 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 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). In connection with such designation, the Bank
will 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 in
receivables 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.
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Defeasance
Pursuant to the pooling agreement, the bank may terminate its substantive
obligations in respect of a series or the pooling agreement 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 such series and available to purchase additional
receivables) monies or eligible investments sufficient to make all remaining
scheduled interest and principal payments on such 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 an officer's certificate
stating that 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 of 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 such 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 termination date
will occur on the earliest 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 event of bankruptcy, insolvency or receivership of the
bank as described under "Description of the Certificates--Pay Out
Events" in this prospectus, immediately following such sale,
disposition or liquidation.
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.
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 outstanding as of 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 in receivables 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.
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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 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), the certificateholders'
interest in such ineligible receivables will be reassigned to the seller on the
terms and conditions set forth below and the related account shall no longer be
included as an account in the trust portfolio.
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 account,
respectively, in connection with the reassignment of an ineligible receivable,
called 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.
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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 series supplement and each of the
pooling agreement and the related series supplement constitutes a
valid, binding and enforceable agreement of the bank, and
(b) the pooling agreement constitutes:
(i) a valid sale, transfer and assignment to the trust (subject to
Section 9-306 of the UCC, as such transfer pertains to proceeds,
and subject to certain tax liens) 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
(ii) 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 applicable 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 an officer's
certificate 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 series 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.
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
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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. If a
successor servicer is appointed, 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 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 bank's lending
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guidelines. The bank has contracted with Capital One Services, Inc., an
affiliate of the bank, to act as sub-servicer and to perform its servicing
activities. Notwithstanding any such delegation to Capital One Services, Inc.
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 bank's 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 bank's 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 an officer's
certificate 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 will be deemed a transfer deposit amount
under the pooling agreement. 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 other 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
termination notice to the servicer (and to the trustee and certain providers of
series enhancement, if given by the certificateholders), 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 such 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 such 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 plus 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 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 plus 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, 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 appointment of a successor servicer, 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 servicing fee. The
rights and interest of the bank under the pooling agreement and any series
supplement in the seller's interest will not be affected by any termination
notice or appointment of a successor servicer.
Upon the occurrence of any servicer default 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 series
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 will immediately notify the trustee in writing of any servicer
default.
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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
series 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
material discrepancies 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 series supplement may be amended from time to
time, including in connection with:
. the assumption of the bank's obligations under the pooling agreement by
another party,
. the provision of additional series enhancement for the benefit of
certificateholders of any series,
. the issuance of a supplemental certificate,
. the addition of participations in receivables to the trust, or
. the designation of an additional seller.
Amendments to the pooling agreement and any series supplement may be made 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 bank has 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 an officer's certificate to the effect that such amendment will
not have a material adverse effect on the interests of the
certificateholders, and
(iii) in the case of an amendment relating to the assumption of the
bank's obligations under the pooling agreement by another party, all other
conditions to such assumption specified in the pooling agreement have been
satisfied (see "Assumption of the Bank's Obligations" in this prospectus).
The pooling agreement and any series 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 series
supplement or of modifying in any manner the rights of such certificateholders.
No such amendment, however, may:
. 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;
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. change the definition or the manner of calculating the interest of any
certificateholder without the consent of each affected
certificateholder;
. reduce the percentage required to consent to any such amendment, without
the consent of each certificateholder; or
. 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 clauses (i), (ii) and (iii) above), 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 seller's
interest (or the interests of transferees, if any, of a portion of the seller
certificate), or a grant to the trust of a security interest in such
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 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 that 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
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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 a depositary and will not be
transferred to the trustee, the trust will not have a direct claim to the funds
collateral. The bank represents and warrants in the pooling agreement that the
transfer of the bank's interest in the funds collateral, if any, to the trust
is either a valid sale and assignment of the bank's interest in such funds
collateral to the trust or the grant to the trust of a security interest in the
bank's interest in such funds collateral. The bank also represents and warrants
in the pooling agreement that in the event the transfer of the bank's interest
in the funds collateral, if any, by the bank to the trust is deemed to create a
security interest, there will exist a first priority perfected security
interest in the bank's interest in the funds collateral, if any, created
thereafter in favor of the trust on and after their creation, except for
certain governmental liens. 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 matters 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 either does or 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 the
related funds collateral, 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 sale of accounts and
the transfer of accounts as security for an obligation are treated under
Article 9 of the UCC as subject to its provisions, and the filing of
appropriate financing 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 the filing of appropriate financing
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
authorities 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 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. Nonetheless, a
court could conclude that some other action under applicable law is required to
perfect such a sale against the interest of third parties.
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.
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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
transfer 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, a 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. Nonetheless, a tax or governmental 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 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 insolvency or similar
proceedings being commenced by or against 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 Conservatorship and Receivership
The bank is chartered under the laws of Virginia. In Virginia, the Virginia
State Corporation Commission, which supervises and examines the bank, may apply
to any Virginia court having jurisdiction over the appointment of receivers to
appoint a receiver upon determination that certain events relating to the
bank's financial condition have occurred. The Virginia State Corporation
Commission 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 Virginia State Corporation
Commission 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 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 if certain events occur relating to the
bank's financial condition or the propriety of its actions.
If the transfer of the receivables by the bank to the trust constitutes a
sale under general applicable law, and if no fraud or other misconduct has
occurred and the pooling agreement satisfies the regulatory requirements of the
FDIA, the FDIC as conservator or receiver for the bank could not reclaim the
receivables or limit the trust's exercise of its rights with respect to the
receivables.
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If the transfer of the receivables by the bank to the trust constitutes the
grant of a security interest under general applicable law rather than a sale,
however, then certain FDIC regulations may apply. The FDIC has issued
regulations surrendering certain rights under the FDIA to reclaim, recover, or
recharacterize a financial institution's transfer of financial assets such as
the receivables if (i) the transfer involved a securitization of the financial
assets and meets specified conditions for treatment as a sale under relevant
accounting principles, (ii) the financial institution received adequate
consideration for the transfer, (iii) the parties intended that the transfer
constitute a sale for accounting purposes, and (iv) the financial assets were
not transferred fraudulently, in contemplation of the financial institution's
insolvency, or with the intent to hinder, delay, or defraud the financial
institution or its creditors. The pooling agreement and the transfer of the
receivables by the bank to the trust have been structured to satisfy all of
these conditions.
If a condition required under the FDIC's regulations were found not to have
been met, however, the FDIC could reclaim, recover, or recharacterize the
bank's transfer of the receivables. The FDIA would limit the trust's damages in
this event to its "actual direct compensatory damages" determined as of the
date that the FDIC was appointed as conservator or receiver for the bank. The
FDIC, moreover, could delay its decision whether to reclaim, recover, or
recharacterize the bank's transfer of the receivables for a reasonable period
following its appointment as conservator or receiver for the bank. Therefore,
if the FDIC were to reclaim, recover, or recharacterize the bank's transfer of
the receivables, payments to certificateholders could be delayed or reduced.
Even if the conditions set forth in the regulations were satisfied and the
FDIC did not reclaim, recover, or recharacterize the bank's transfer of the
receivables, certificateholders could suffer a loss on their investment if (i)
the pooling agreement or the bank's transfer of the receivables were found to
violate the regulatory requirements of the FDIA, (ii) the trustee were required
to comply with the claims process established under the FDIA in order to
collect payments on the receivables, (iii) the FDIC were to request a stay of
any action by the trust or the trustee to enforce the pooling agreement or the
certificates, or (iv) the FDIC were to repudiate other parts of the pooling
agreement, such as any obligation to collect payments on or otherwise service
the receivables.
In addition, regardless of the terms of the pooling agreement or the
instructions of those authorized to direct the trustee's actions, the FDIC may
have the power (i) to prevent or require the commencement of an early
amortization period, (ii) to prevent, limit, or require the early liquidation
of the receivables and termination of the trust, or (iii) to require, prohibit,
or limit the continued transfer of receivables to the trust. The FDIC,
moreover, could prevent the trustee or the certificateholders from appointing a
successor servicer under the pooling agreement. If any of these events were to
occur, payments to certificateholders could be delayed or reduced.
The bank will establish a deposit account and maintain records regarding each
accountholder's beneficial interest in the funds deposited as security for such
accountholders' payment obligations arising under secured credit cards
sufficient to afford each accountholder federal deposit insurance up to
applicable limits. In the event that a conservator or receiver is appointed for
the depositary with which such deposit accounts are held, however, a delay or
reduction in the payment of such funds to the accountholder or to the trust
could result.
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
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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" 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.
Federal Income Tax Consequences
General
The following is a general discussion of 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 certificate owner
in light of that certificate owner's circumstances, and some certificate owners
may be subject to special tax rules and limitations not discussed below. Each
prospective certificate owner 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. certificate owner" 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
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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 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 Internal Revenue Service 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, 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.
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 described
in the related prospectus 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 in the trust (other than the seller
certificate) 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 certificate). Under such a
view, the trust would be disregarded for federal income tax purposes.
Alternatively, if some of the certificates or other interests in the trust
(other than the seller certificate) 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
certificate) and the other holders of equity interests in the trust. However,
special counsel is of the opinion 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, special counsel will deliver its opinion that
the certificates offered by this prospectus 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 Internal Revenue Service and thus no assurance can be
given that such treatment will prevail. If the Internal Revenue Service were to
contend successfully that some or all of the certificates or any other interest
in the trust (other than the seller certificate) 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 special 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 any other interest in the trust
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(other than the seller certificate) generally 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 under the publicly traded partnership provisions of the
Internal Revenue Code 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 publicly traded partnership regulations
generally apply to taxable years beginning after December 31, 1995, and thus
could affect the classification of then-existing entities and the ongoing tax
treatment of already completed transactions. Although the publicly traded
partnership 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 provision. 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
publicly traded partnership 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 Internal Revenue Code and the publicly traded partnership
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 publicly traded partnership regulations may
not conform to their requirements. 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.
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 certificate) and any certificate owners
treated as partners in accordance with their respective partnership interests
therein. The amounts and timing of income reportable by any certificate owners
treated as partners would likely differ from that reportable by such
certificate owners 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 certificate
owner 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 certificate
owner. 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 certificate owners. 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 certificate owners were treated as payments of
interest thereon. In addition,
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distributions to certificate owners not treated as holding debt would be
dividend income to the extent of the current and accumulated earnings and
profits of the corporation (and certificate owners may not be entitled to any
dividends received deduction in respect of such income).
Taxation of Interest Income of U.S. Certificate Owners
General
Stated interest on a beneficial interest in a certificate will be includible
in gross income in accordance with a U.S. certificate owner's method of
accounting.
Original Issue Discount
It is not expected that the certificates will be issued with original issue
discount. If the certificates are issued with original issue discount, the
provisions of Sections 1271 through 1273 and 1275 of the Internal Revenue Code
will apply to the certificates. Under those provisions, a U.S. certificate
owner (including a cash basis holder) generally would be required to accrue the
original issue discount on its interest in a certificate in income for federal
income tax purposes on a constant yield basis, resulting in the inclusion of
original issue discount in income in advance of the receipt of cash
attributable to that income. In general, a certificate will be treated as
having original issue discount to the extent that its "stated redemption price"
exceeds its "issue price," if such excess equals or exceeds 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 Internal Revenue 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 Internal Revenue
Service could take the position based on Treasury Department 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 certificate owners, but
prospective U.S. certificate owners 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."
Market Discount
A U.S. certificate owner who purchases an interest in a certificate at a
discount that exceeds any unamortized original issue discount may be subject to
the "market discount" rules of Sections 1276 through 1278 of the Internal
Revenue 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. certificate owner 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 Internal Revenue Code.
Sale or Exchange of Certificates
Upon a disposition of an interest in a certificate, a U.S. certificate owner
generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. certificate owner's adjusted
basis in its interest in the certificate. The adjusted basis in the interest in
the certificate will equal its
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cost, increased by any original issue discount 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.
Foreign Certificate Owners
In general, a non-U.S. certificate owner who, for United States federal
income tax purposes, is a nonresident alien individual or a foreign corporation
(a "foreign person"), will not be subject to U.S. federal income tax on
interest (including original issue discount) on a beneficial interest in a
certificate unless:
(i) the foreign person 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 in the trust if
characterized as a partnership),
(ii) the foreign person is a controlled foreign corporation that is
related to the bank (or the trust if treated as a partnership) through
stock ownership,
(iii) the foreign person is a bank receiving interest described in
Internal Revenue Code Section 881(c)(3)(A),
(iv) such interest is described in the applicable prospectus supplement
as contingent interest described in Internal Revenue Code Section
871(h)(4), or
(v) the foreign person bears certain relationships to any holder of
either (x) the seller certificate (other than the bank) or (y) any other
interest in the trust not properly characterized as debt.
To qualify for the exemption from taxation, the withholding agent, who
generally is the last U.S. person in the chain of payment prior to payment to a
foreign person, 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 foreign person under penalties of perjury,
(ii) certifies that the foreign person is not a U.S. person, and
(iii) provides the name and address of, and certain additional
information concerning, the foreign person.
The statement may be made on a Form W-8BEN or substantially similar
substitute form, and the foreign person 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-8BEN or substitute form provided by the
foreign person to the organization or institution holding the certificate on
behalf of the foreign person. The Treasury Department recently issued final
regulations which will revise some of the foregoing procedures, whereby a non-
U.S. certificate owner may establish an exemption from withholding beginning
January 1, 2001. Non-U.S. certificate owners should consult their tax advisers
concerning the impact to them, if any, of such procedures.
Generally, any gain or income realized by a foreign person 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 certificate owner that is an individual, such
certificate owner 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
for exemption from withholding described above are satisfied.
Certain exceptions may be applicable, and an individual foreign person should
consult a tax adviser.
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If the certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. certificate owner to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. certificate owner 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. certificate owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
Backup Withholding and Information Reporting
Payments of principal and interest, as well as payments of proceeds from the
sale, retirement or other disposition of a certificate, may be subject to
"backup withholding" tax under the Internal Revenue Code at a rate of 31
percent if a recipient of such payments fails to furnish to the payor certain
identifying information. Any amounts deducted and withheld would be allowed as
a credit against such recipient's United States federal income tax, provided
appropriate proof is provided under rules established by the Internal Revenue
Service. Furthermore, certain penalties may be imposed by the Internal Revenue
Service on a recipient of payments that is required to supply information but
that does not do so in the proper manner. Backup withholding will not apply
with respect to payments made to certain exempt recipients, such as
corporations and financial institutions. Information may also be required to be
provided to the Internal Revenue Service concerning payments, unless an
exemption applies. Certificate owners should consult their tax advisors
regarding their qualification for exemption from backup withholding and
information reporting and the procedure for obtaining such an exemption.
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, and Section 4975 of the Internal Revenue Code prohibit plans from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Internal
Revenue 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 Internal Revenue 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 plan asset regulation issued by the Department of Labor. 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
Department of Labor has issued five class exemptions that may apply to
otherwise prohibited transactions arising from the purchase or holding of the
certificates: Department of Labor Prohibited Transaction Class Exemptions 96-23
(Class
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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 Department of Labor 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 Department of Labor 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 Internal Revenue
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, and
(c) either is:
(i) part of a class of securities registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, or
(ii) sold to the plan as part of an offering of securities to the
public pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and the class of securities of
which such security is a part is registered under the Securities
Exchange Act of 1934, as amended, within 120 days (or such later time
as may be allowed by the SEC) 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 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.
If so specified in the related prospectus supplement, a third exception may
also be available. On October 28, 1998, the Department of Labor authorized
Capital One Bank to rely upon the exemptive relief from certain of the
prohibited transaction provisions of ERISA and Section 4975 of the Internal
Revenue Code available under Department of Labor Prohibited Transaction Class
Exemption 96-62 relating to (1) the initial purchase, the holding and the
subsequent resale by plans of classes of senior certificates representing an
undivided interest in a credit card trust with respect to which Capital One
Bank is the sponsor; and (2) the servicing, operation and management of such
trust, provided that the general conditions and certain other conditions set
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forth in the bank's 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 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
pooling 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 SEC 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
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
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(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 senior 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;
(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 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 "restricted group"
which consists of 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 Department of Labor has designated the bank's 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 Department of Labor Prohibited Transaction Class
Exemption 95-60.
If none of the foregoing exceptions under the Department of Labor 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 Internal
Revenue Code and result in excise tax and other liabilities
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under ERISA and Section 4975 of the Internal Revenue Code unless an exemption
were available. The five Department of Labor 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 Department of Labor Prohibited Transaction Class Exemption 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 bank's
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.
If underwriters are used in a sale of any certificates of a series offered by
this prospectus, 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
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or repayment pursuant to their terms, by one or more 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 of 1933, as
amended. 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 of 1933, as
amended, 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 McGuireWoods 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 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 SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we file at
the SEC'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 SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov).
The SEC 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 SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information
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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 SEC 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., 8000 Jones Branch
Drive, McLean, Virginia 22102, attention: Treasury Department or calling us at
(703) 875-1315.
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Glossary of Defined Terms
Many of the terms defined below contain terms defined elsewhere in this
glossary.
"accumulation period," for any applicable series or class of such series,
begins on a date certain or on a date determined in the manner described in the
related prospectus supplement and will continue until the earliest of:
(i) the start of an early amortization period or principal payment period
for such series,
(ii) the payment in full of the certificates of such series or class, or
(iii) the series termination date for such series.
"additional accounts" are automatic additional accounts and any accounts in
the bank portfolio that are designated to the trust pursuant to an addition.
"additions" 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 of its affiliates and collections thereon.
"adjustment payment" means a payment by the bank into the collection account
on any applicable distribution date in an amount equal to the amount by which
the seller's interest has been reduced below zero as a result of the exclusion
of receivables (other than ineligible receivables which have been or will be
reassigned to the bank) from the trust that have been adjusted downward by the
bank.
"aggregate addition limit" means the number of accounts included in the trust
which would either:
(i) for any three consecutive monthly periods, equal 15% of the number of
accounts designated to the trust at the end of the ninth monthly period
before the start of such three monthly periods, or
(ii) for any twelve monthly periods, equal 20% of the number of accounts
designated to the trust as of the first day of such twelve monthly periods.
"bank certificate" means an exchangeable certificate evidencing all or part
of the seller's interest, if the seller elects to evidence the seller's
interest in a certificated form.
"bank portfolio" is the bank's consumer revolving receivables portfolio,
consisting primarily of unsecured consumer loans for which the principal credit
extension vehicle is a check or credit card.
"certificate owner" is an owner of a beneficial interest in a certificate.
"collateral interest" means, for any applicable series, an uncertificated
interest in the trust assets that is subordinated to, and serves as credit
enhancement for, the certificates of such series.
"controlled amortization period," for any applicable series or class of such
series, begins on a date certain or on a date determined in the manner
described in the related prospectus supplement and will continue until the
earliest of:
(i) the start of an early amortization period or principal payment period
for such series,
(ii) the payment in full of the certificates of such series or class, or
(iii) the series termination date for such series.
"date of processing," for any transaction, is the day a record of such
transaction is first recorded on the servicer's computer file of consumer
revolving accounts (without regard to the effective date of such recordation).
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"defaulted amount" for any monthly period means 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 event of bankruptcy, insolvency or
receivership of the bank or the servicer has occurred, 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.
"defaulted receivables" for any monthly period are principal receivables that
were charged off as uncollectible in such monthly period in accordance with the
bank's 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.
"deposit account" means the applicable FDIC-insured deposit account at an
FDIC-insured depositary institution, which may be the bank, an affiliate of the
bank or an unaffiliated depository, as selected by the bank, where funds are
deposited as security for an accountholder's payment obligations arising under
a secured credit card issued by the bank.
"depositary" means, with respect to Clearstream and Euroclear, the respective
depositaries with whom Clearstream and Euroclear hold omnibus positions on
behalf of Clearstream customers and Euroclear participants, respectively.
"determination date" occurs 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 for
the related distribution date.
"discount option receivables" has the meaning described in "Description of
the Certificates--Credit Enhancement--Discount Options" in this prospectus.
"discount option receivables collections" has the meaning described in
"Description of the Certificates--Credit Enhancement--Discount Options" in this
prospectus.
"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).
"early amortization period," for an applicable series, begins at the close of
business on the business day immediately preceding the day on which a pay out
event occurs with respect to such series and ends 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 such series.
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"eligible account" means 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:
(i) 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;
(ii) is payable in United States dollars;
(iii) 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;
(iv) 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);
(v) 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);
(vi) except as provided below, does not have any receivables which are
defaulted receivables;
(vii) 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;
(viii) 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
(ix) 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:
(i) 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
(ii) charging privileges with respect to all such accounts have been
canceled in accordance with the bank's lending guidelines and will not be
reinstated by the bank or the servicer.
"eligible deposit account" means either:
(i) a segregated account with an eligible institution, or
(ii) 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 either:
(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 Service, Inc. or (y) 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 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.
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"eligible investments" means:
(i) 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 and other short-term investments 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.
"eligible receivable" means each receivable:
(i) which has arisen under an eligible account;
(ii) which was created in compliance in all material respects with the
bank's 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;
(iii) 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;
(iv) 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);
(v) which has been the subject of either:
(a) 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
(b) the grant of a first priority perfected security interest therein
(and in the proceeds thereof), effective until the termination of the
trust;
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(vi) 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);
(vii) which constitutes either an "account" or a "general intangible"
under Article 9 of the UCC as then 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;
(viii) which, at the time of its transfer to the trust, has not been
waived or modified except as permitted by the pooling agreement;
(ix) 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;
(x) 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
(xi) 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.
"excess finance charges" has the meaning described in "Description of the
Certificates--Sharing of Excess Finance Charges" in this prospectus.
"excess funding account" means the account established as described under
"Description of the Certificates--Reserve Account" in this prospectus.
"excess shared principal collections" means the excess of the shared
principal collections over the principal shortfalls for all principal sharing
series.
"floating allocation percentage" for any series will be determined as set
forth in the related prospectus supplement.
"funding period" means, for the applicable series, 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.
"funds collateral" means, under the bank's secured credit card program, the
funds accountholders deposit as security for such accountholders' payment
obligations arising under secured credit cards, and the deposit accounts.
"group" means a series each offered by this prospectus and a related
prospectus supplement.
"ineligible receivables" means all receivables with respect to an affected
account that has been reassigned to the seller as a result of the seller's
breach of certain representations and warranties described in "The Pooling
Agreement Generally--Representations and Warranties" in this prospectus.
"invested amount" for any series means such series invested amount in the
trust.
"miscellaneous payments" means all adjustment payments and transfer deposit
amounts for any monthly period.
"monthly period" is a period of approximately 30 days, that:
(a) contains a full set of processing cycles with respect to the related
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 determination date,
provided that the initial monthly period for any series will commence on the
series cut-off date for such series.
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"monthly servicing fee" has the meaning described in "Description of the
Certificates--Servicing Compensation and Payment of Expenses" in this
prospectus.
"pay out events" with respect to a series are the events described in
"Description of the Certificates--Pay Out Events" in this prospectus and any
other events specified as such in the related prospectus supplement.
"payment date" means each interest payment date or special payment date.
"plans" means certain pension, profit sharing or other employee benefit
plans, individual retirement accounts or annuities and employee annuity plans
and Keogh plans regulated under Section 406 of ERISA and Section 4975 of the
Internal Revenue Code.
"prefunded amount" has the meaning described in "Description of the
Certificates--Funding Period" in this prospectus.
"principal allocation percentage" for any series means the percentage
determined as set forth in the related prospectus supplement.
"principal payment event" occurs if the servicer elects to stop the automatic
extensions of the initial principal payment date.
"principal payment period" has the meaning described in "Description of the
Certificates--Principal" in this prospectus.
"rating agency" is a nationally recognized statistical rating organization
selected by the bank to rate a series.
"ratings effect" is the reduction or withdrawal of the rating of the
certificates of any outstanding series by a rating agency.
"record date" means, for any date of payment interest on or principal of a
certificate, the last day of the calendar month preceding such date.
"recoveries" 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.
"removal notice date" means the fifth business day immediately preceding the
date upon which removed accounts are to be removed from the trust.
"required designation date" means the tenth business day following the last
business day of the prior monthly period.
"required principal balance" means an amount, as of any date of
determination, equal to:
(a) the sum of the initial invested amount (as defined in the relevant
series 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 which is designated in the relevant series supplement as
being an excluded series), minus
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(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.
"required seller's interest" means an amount equal the product of the
required seller's percentage and the aggregate amount of principal receivables
in the trust.
"required seller's percentage" is equal to 5%. However, 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:
(i) the bank has received written notice from each rating agency that
such reduction will not result in a ratings effect, and
(ii) the bank has 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 will never be less than
2%.
"revolving period," for any series of certificates, begins on the series cut-
off date described in the related prospectus supplement and continues until 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.
"seller certificate" means the bank certificate and any supplemental
certificate.
"seller's interest" means the interest in the trust assets not allocated to
any series.
"series enhancement" means any credit enhancement for the benefit of the
particular certificateholders of a particular series or class.
"servicer default" means any of the following events:
(i) 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 series supplement, which is not cured
within a ten business day grace period;
(ii) 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 series 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 days after written notice, or the
servicer assigns or delegates its duties under the pooling agreement,
except as specifically permitted thereunder;
(iii) any representation, warranty or certification made by the servicer
in the pooling agreement or any series supplement or in any certificate
delivered pursuant to the pooling agreement or any series 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
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(iv) 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 (i) above for an additional period of five business days or
referred to under clause (ii) or (iii) above 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.
"servicing fee" has the meaning described in "Description of the
Certificates--Servicing Compensation and Payment of Expenses" in this
prospectus.
"shared principal collections" has the meaning described in "Description of
the Certificates--Shared Principal Collections; Excess Shared Principal
Collections" in this prospectus.
"special payment date" means any distribution date in a monthly period
following a monthly period in which a pay out event occurs, including any
distribution date following a principal payment event.
"subordinated excess principal collections" for any subordinated excess
principal series will be defined in the related series supplement and described
in the related prospectus supplement for such series.
"supplemental certificate" means any certificate that is received by the bank
in exchange for a portion of the bank certificate as described in "Description
of the Certificates--The Bank Certificate; Additional Sellers" in this
prospectus.
"tax opinion" means, with respect to any action taken by the trust, an
opinion of counsel acceptable to the trustee that for federal income tax
purposes and Virginia income and franchise tax purposes (and, for any
transaction described in "Assumption of the Bank's Obligations" in the
prospectus, 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 such action the trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation and (y)
such action 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.
"transfer deposit amount" means any amount deposited into the excess funding
account or the collection account in the connection with the reassignment of an
ineligible receivable.
"trust cut-off date" means June 30, 1993.
"trust termination date" has the meaning described in "The Pooling Agreement
Generally--Termination of Trust" in this prospectus.
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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,
Clearstream 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
Clearstream 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 Clearstream or Euroclear and DTC
participants holding global securities will be effected on a delivery-against-
payment basis through the respective depositaries of Clearstream and Euroclear
(in such capacity) and DTC participants.
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, Clearstream 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 DTC participants.
Investors electing to hold their global securities through DTC (other than
through accounts in Clearstream or Euroclear) will follow the settlement
practices applicable to U.S. corporate debt obligations. 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 Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global securities will be credited
to the securities custody accounts on the settlement date against payment for
value on the settlement date.
Secondary Market Trading
Because 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 (other than Citibank N.A. ("Citibank") and Morgan Guaranty Trust
Company of New York ("Morgan") as depositaries for Clearstream and Euroclear,
respectively) will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream Customers and/or Euroclear
Participants. Secondary market trading between Clearstream customers or
Euroclear participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
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Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant
(other than Citibank and Morgan as depositaries for Clearstream and Euroclear,
respectively) to the account of a Clearstream customer or a Euroclear
participant, the purchaser must send instructions to Clearstream or Euroclear,
as the case may be, prior to settlement date 12:30. Clearstream or Euroclear,
as the case may be, will instruct Citibank or Morgan, respectively, to receive
the global securities for payment. Payment will then be made by Citibank or
Morgan, as the case may be, 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 Clearstream
customer's or Euroclear participant's account. Credit for the global securities
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 Clearstream or Euroclear cash debit will be valued instead as of the actual
settlement date.
Clearstream customers 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 Clearstream or Euroclear. Under this
approach, they may take on credit exposure to Clearstream or Euroclear until
the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of credit
to them, Clearstream customers or Euroclear participants can elect not to
preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream customers 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 Clearstream customer's or Euroclear participant's
particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
Citibank or Morgan for the benefit of Clearstream customers 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 Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers 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 another DTC participant. The seller will send
instructions to Clearstream or Euroclear, as the case may be, prior to
settlement date 12:30. In these cases, Clearstream or Euroclear will instruct
Citibank or Morgan, as appropriate, to credit the global securities to the DTC
participant's account against payment. The payment will then be reflected in
the account of the Clearstream customer or Euroclear participant the following
day, and receipt of the cash proceeds in the Clearstream customer's or
Euroclear participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). If the
Clearstream customer or Euroclear participant has a line of credit with its
respective clearing system and elects to draw on such line of credit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
may substantially reduce or offset 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 Clearstream
customer's or Euroclear participant's account would instead be valued as of the
actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream or Euroclear (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that
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generally applies to payments of interest (including original issue discount)
on registered debt issued by U.S. persons, unless (i) each clearing system,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business in the chain of intermediaries between
such beneficial owner and the U.S. entity required to withhold tax complies
with applicable certification requirements and (ii) such beneficial owner takes
appropriate steps to obtain an exemption or reduced tax rate. See "Federal
Income Tax Consequences" in this prospectus.
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[LOGO OF CAPITAL ONE]
Capital One Master Trust
Issuer
Capital One Bank
Seller and Servicer
$975,000,000 Class A Floating Rate Asset Backed Certificates
SERIES 2000-4
----------------
PROSPECTUS SUPPLEMENT
----------------
Underwriters of the Class A certificates
J.P. Morgan & Co.
Banc of America Securities LLC
Barclays Capital
Deutsche Banc Alex. Brown
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 offering the Class A certificates only in states where
the offer is permitted.
We claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of the dates
stated on their respective covers only.
Dealers will deliver a prospectus supplement and prospectus
when acting as underwriters of the Class A certificates and
with respect to their unsold allotments or subscriptions. In
addition, until the date which is 90 days after the date of
this prospectus supplement, all dealers selling the Class A
certificates will deliver a prospectus supplement and
prospectus.
