<PAGE>
SUBJECT TO COMPLETION, DATED MAY 10, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 19, 1996)
$693,750,000
MBNA MASTER CREDIT CARD TRUST II
$637,500,000 Class A Floating Rate Asset Backed Certificates, Series 1996-E
$56,250,000 Class B Floating Rate Asset Backed Certificates, Series 1996-E
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
Each Class A Floating Rate Asset Backed Certificate, Series 1996-E
(collectively, the "Class A Certificates") and each Class B Floating Rate Asset
Backed Certificate, Series 1996-E (collectively, the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates") will represent the
right to receive certain payments from the MBNA Master Credit Card Trust II
("Trust II"), created pursuant to a Pooling and Servicing Agreement between MBNA
America Bank, National Association ("MBNA"), as seller and servicer, and The
Bank of New York, as trustee. The property of Trust II includes receivables (the
"Receivables") generated from time to time in a portfolio of MasterCard(R) and
VISA(R) revolving credit card accounts (the "Accounts"), all monies due or to
become due in payment of the Receivables and the right to receive Interchange
allocable to the Certificates, as described herein. In addition, the Collateral
Interest (as defined herein) will be issued in the initial amount of $56,250,000
and will be subordinated to the Certificates as described herein. MBNA initially
will own the remaining undivided interest in Trust II not represented by the
Certificates, the Collateral Interest and the other interests issued by Trust II
and will service the Receivables. MBNA has offered and may from time to time
offer other Series of certificates that evidence undivided interests in certain
assets of Trust II, which may have terms significantly different from the
Certificates. (continued
on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 19
IN THE PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN TRUST II ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF MBNA AMERICA BANK, NATIONAL ASSOCIATION OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount Seller(1)(2)
<S> <C> <C> <C>
Per Class A Certificate % % %
Per Class B Certificate % % %
Total $ $ $
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the Class
B Certificate Rate, as applicable, from May , 1996.
(2) Before deduction of expenses estimated to be $800,000.
The Certificates are offered by the Underwriters when, as and if issued by Trust
II and accepted by the Underwriters and subject to the Underwriters' right to
reject orders in whole or in part. It is expected that the Certificates will be
delivered in book-entry form on or about May , 1996, through the facilities of
The Depository Trust Company, Cedel Bank, societe anonyme, and the Euroclear
System.
UNDERWRITERS OF THE CLASS A CERTIFICATES
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
J.P. MORGAN & CO. LEHMAN
BROTHERS
The date of this Prospectus Supplement is May , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
(continued from previous page)
Interest will accrue on the Class A Certificates from May , 1996 (the "Closing
Date") through June 16, 1996 and from June 17, 1996 through July 14, 1996 and
with respect to each Interest Period (as defined herein) thereafter, at the rate
of % per annum above the London interbank offered rate for one-month United
States dollar deposits ("LIBOR"), determined as described herein, prevailing on
the related LIBOR Determination Date (as defined herein) with respect to such
period (the "Class A Certificate Rate"). Interest will accrue on the Class B
Certificates from the Closing Date through June 16, 1996 and from June 17, 1996
through July 14, 1996 and with respect to each Interest Period thereafter, at
the rate of % per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period (the "Class B Certificate
Rate"). The initial LIBOR Determination Date is May , 1996. Interest with
respect to the Certificates will be distributed on July 15, 1996 and on the 15th
day of each month thereafter (or, if such 15th day is not a business day, the
next succeeding business day) (each, a "Distribution Date"). Principal on the
Class A Certificates is scheduled to be distributed on the May 2003 Distribution
Date (the "Class A Scheduled Payment Date"), but may be paid earlier or later
under certain limited circumstances described herein. Principal on the Class B
Certificates is scheduled to be distributed on the June 2003 Distribution Date
(the "Class B Scheduled Payment Date"), but may be paid earlier or later under
certain limited circumstances described herein. See "Maturity Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates as
described herein. The Collateral Interest will be subordinated to the Class A
Certificates and the Class B Certificates as described herein.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Certificates offered hereby constitute a separate Series of certificates
being offered by the Seller from time to time pursuant to its Prospectus dated
April 19, 1996. This Prospectus Supplement does not contain complete information
about the offering of the Certificates. Additional information is contained in
the Prospectus and purchasers are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
S-2
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" herein and the "Index of Terms for
Prospectus" in the Prospectus.
<TABLE>
<S> <C>
TYPE OF SECURITIES............. Class A Floating Rate Asset Backed Certificates, Series
1996-E (the "Class A Certificates") and Class B Floating
Rate Asset Backed Certificates, Series 1996-E (the
"Class B Certificates," and together with the Class A
Certificates, the "Certificates").
TRUST II....................... The MBNA Master Credit Card Trust II ("Trust II") was
formed pursuant to a pooling and servicing agreement
("Agreement II"), between MBNA America Bank, National
Association, as seller (the "Seller") and as servicer of
the Receivables, and The Bank of New York, as trustee
(the "Trustee"), as supplemented by the supplement
relating to the Certificates (the "Series 1996-E
Supplement") (the term "Agreement II," unless the
context requires otherwise, refers to Agreement II as
supplemented by the Series 1996-E Supplement). As used
in this Prospectus Supplement, the term "Cer-
tificateholders" refers to holders of the Certificates,
the term "Class A Certificateholders" refers to holders
of the Class A Certificates and the term "Class B
Certificateholders" refers to holders of the Class B
Certificates.
Trust II previously has issued nineteen other Series, each
of which are in Group One. See "Annex I: Other Series
Issued" for a summary of such other Series.
TRUST II ASSETS................ The property of Trust II includes receivables (the
"Receivables") arising under certain MasterCard(R) and
VISA(R)* revolving credit card accounts (the "Accounts")
selected from the portfolio of MasterCard and VISA
accounts owned by the Seller (the "Bank Portfolio"), all
monies due or to become due in payment of the
Receivables (other than recoveries on charged-off
Receivables), all proceeds of the Receivables and
proceeds of credit insurance policies relating to the
Receivables, the right to receive Interchange allocable
to the Certificates (which right may not be afforded to
other Series issued by Trust II) and all monies on
deposit in certain bank accounts of Trust II (other than
investment earnings on such amounts), and any
Enhancement issued with respect to any Series. The
Certificateholders will not be entitled to the benefits
of any Enhancement issued with respect to any Series
other than Series 1996-E, and the holders of
certificates of other Series will not be entitled to the
benefits of any Enhancement issued with
</TABLE>
- ------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
S-3
<PAGE>
<TABLE>
<S> <C>
respect to Series 1996-E. "Series 1996-E" shall mean the
Series of Trust II represented by the Certificates and
the Collateral Interest.
The Seller has conveyed to the Trustee for the benefit of
Trust II all Receivables existing under certain Accounts
that were selected from the Bank Portfolio based on
criteria provided in Agreement II as applied on June 22,
1994 (the "Cut-Off Date") and, with respect to certain
Additional Accounts, as applied on September 19, 1994,
November 15, 1994, March 30, 1995, July 6, 1995, October
3, 1995 and March 8, 1996 and has conveyed and will
convey all Receivables arising under the Accounts from
time to time thereafter until the termination of Trust
II. In addition, pursuant to Agreement II, MBNA may
(subject to certain limitations and conditions)
designate other Additional Accounts for inclusion in
Trust II. Also, Agreement II provides that in lieu of
Additional Accounts or in addition thereto, MBNA may,
subject to certain conditions, include Participations in
Trust II. See "The Receivables" herein and "Description
of the Certificates--Addition of Trust Assets" in the
Prospectus.
CERTIFICATE INTEREST
AND PRINCIPAL................ Each of the Certificates offered hereby represents the
right to receive certain payments from the assets of Trust
II. Trust II's assets will be allocated among the Class
A Certificateholders (the "Class A Investor Interest"),
the Class B Certificateholders (the "Class B Investor
Interest"), the Collateral Interest Holder (the
"Collateral Interest," and together with the Class A
Investor Interest and the Class B Investor Interest, the
"Investor Interest"), the interest of the holders of
other undivided interests in Trust II issued pursuant to
Agreement II and applicable Series Supplements and the
Seller (the "Seller Interest"), as described below. The
Collateral Interest in the initial amount of $56,250,000
(which amount represents 7.5% of the sum of the initial
Class A Investor Interest, the initial Class B Investor
Interest and the initial Collateral Interest)
constitutes Credit Enhancement for the Certificates. The
provider of such Credit Enhancement is referred to
herein as the "Collateral Interest Holder." Allocations
will be made to the Collateral Interest, and the
Collateral Interest Holder will have voting and certain
other rights, as if the Collateral Interest were a
subordinated class of Certificates. The Seller Interest
will represent the right to the assets of Trust II not
allocated to the Class A Investor Interest, the Class B
Investor Interest, the Collateral Interest or the
holders of other undivided interests in Trust II. The
principal amount of the Seller Interest will fluctuate
as the amount of Receivables in Trust II changes from
time to time.
The Class A Certificates will represent the right to
receive, from the assets of Trust II allocated to the
Class A Certificates,
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
funds up to (but not in excess of) the amounts required
to make (a) payments of interest accruing from May ,
1996 (the "Closing Date") through June 16, 1996, and
from June 17, 1996 through July 14, 1996 and with
respect to each Interest Period thereafter, at the rate
of % per annum above the London interbank offered rate
for one-month United States dollar deposits ("LIBOR"),
determined as described herein, prevailing on the
related LIBOR Determination Date (such rate, the "Class
A Certificate Rate"), and (b) payments of principal on
the Class A Scheduled Payment Date or, under certain
limited circumstances, during the Rapid Amortization
Period, to the extent of the Class A Investor Interest,
which may be less than the unpaid principal balance of
the Class A Certificates in certain circumstances
described herein.
The Class B Certificates will represent the right to
receive, from the assets of Trust II allocated to the
Class B Certificates, funds up to (but not in excess of)
the amounts required to make (a) payments of interest
accruing from the Closing Date through June 16, 1996,
and from June 17, 1996 through July 14, 1996 and with
respect to each Interest Period thereafter, at the rate
of % per annum above LIBOR, determined as described
herein, prevailing on the related LIBOR Determination
Date (such rate, the "Class B Certificate Rate") and (b)
payments of principal on the Class B Scheduled Payment
Date or, under certain limited circumstances, during the
Rapid Amortization Period, to the extent of the Class B
Investor Interest, which may be less than the unpaid
principal balance of the Class B Certificates in certain
circumstances described herein. No principal will be
paid to the Class B Certificateholders until the Class A
Investor Interest is paid in full.
The aggregate principal amount of the Class A Investor
Interest and the Class B Investor Interest will, except
as otherwise provided herein, remain fixed at
$637,500,000 and $56,250,000, respectively. The Class A
Investor Interest will decline in certain circumstances
if the Default Amounts allocated to the Class A
Certificates exceed funds allocable thereto as described
herein and the Class B Investor Interest and the
Collateral Interest are zero. The Class B Investor
Interest will decline in certain circumstances as a
result of (a) the reallocation of collections of
Principal Receivables otherwise allocable to the Class B
Investor Interest to fund certain payments in respect of
the Class A Certificates and (b) the allocation to the
Class B Investor Interest of certain Default Amounts,
including such amounts otherwise allocable to the Class
A Investor Interest when the Collateral Interest is
zero. During the Controlled Accumulation Period, for the
sole purpose of allocating collections of Finance Charge
Receivables and Default Amounts with respect to each
Monthly Period, the Class A Investor Interest will be
further reduced by the Principal Funding Account Balance
from time to time (as so reduced, the
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
"Class A Adjusted Investor Interest" and together with
the Class B Investor Interest and the Collateral
Interest, the "Adjusted Investor Interest").
The Class A Certificates, the Class B Certificates and the
Collateral Interest will each include the right to
receive (but only to the extent needed to make required
payments under Agreement II) varying percentages of
collections of Finance Charge Receivables and Principal
Receivables and will be allocated varying percentages of
Default Amounts, during each Monthly Period. The
"Monthly Period," with respect to any Distribution Date,
will be the period from and including the first day of
the preceding calendar month to and including the last
day of such calendar month (other than the initial
Monthly Period, which will commence on the Closing Date
and end on June 30, 1996).
Collections of Finance Charge Receivables and Default
Amounts at all times, and collections of Principal
Receivables during the Revolving Period, will be
allocated to the Investor Interest based on the Floating
Investor Percentage and will be further allocated among
the Class A Investor Interest, the Class B Investor
Interest and the Collateral Interest based on the Class
A Floating Allocation, the Class B Floating Allocation
and the Collateral Floating Allocation, respectively,
applicable during the related Monthly Period.
Collections of Principal Receivables during the
Controlled Accumulation Period and the Rapid
Amortization Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage and will
be further allocated among the Class A Investor
Interest, the Class B Investor Interest and the
Collateral Interest based on the Class A Fixed
Allocation, the Class B Fixed Allocation and the
Collateral Fixed Allocation, respectively. See
"Description of the Certificates--Allocation
Percentages" and "--Pay Out Events" herein and
"Description of the Certificates--Pay Out Events" in the
Prospectus.
The Seller initially will own the Seller Interest. The
Seller may tender the certificate that represents the
Seller Interest (the "Seller Certificate") or, if
provided in the relevant Series Supplement, certificates
of any Series and the Seller Certificate, to the Trustee
and, upon satisfying certain conditions, cause the
Trustee to issue one or more new Series, as described in
"Description of the Certificates-- Exchanges" in the
Prospectus. The certificates of any new Series will be
issued pursuant to Agreement II and a related Series
Supplement. See "Description of the Certificates" herein
and in the Prospectus.
The final distribution of principal and interest on the
Certificates will be made no later than the October 2005
Distribution Date in the manner provided in "Description
of the Certificates-- Final Payment of Principal;
Termination" in the Prospectus.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Series 1996-E will terminate on the earliest to occur of
(a) the Distribution Date on which the Investor Interest
is paid in full, (b) the October 2005 Distribution Date
or (c) the Trust Termination Date (such earliest to
occur, the "Series 1996-E Termination Date"). After the
Series 1996-E Termination Date, Trust II will have no
further obligation to pay principal or interest on the
Certificates.
RECEIVABLES.................... The Receivables arise in Accounts that have been selected
from the Bank Portfolio based on criteria provided in
Agreement II as applied on the Cut-Off Date and, with
respect to certain Additional Accounts, as applied on
September 19, 1994, November 15, 1994, March 30, 1995,
July 6, 1995, October 3, 1995 and March 8, 1996. The
Receivables consist of Principal Receivables and Finance
Charge Receivables. In addition, certain amounts of
Interchange attributed to cardholder charges for goods
and services in the Accounts will be allocated to the
Certificates and treated as Finance Charge Receivables.
See "MBNA's Credit Card Portfolio--Interchange" herein
and "MBNA's Credit Card Activities--Interchange" in the
Prospectus. With respect to the characterization of
annual credit card membership fees as Finance Charge
Receivables, see "Description of the
Certificates--Transfer of Annual Membership Fees" in the
Prospectus.
The aggregate amount of Receivables in the Accounts as of
the beginning of the day on April 10, 1996 was
$14,611,119,328 comprised of $14,396,164,659 of
Principal Receivables and $214,954,669 of Finance Charge
Receivables. The amount of Finance Charge Receivables
will not affect the amount of the Investor Interest
represented by the Certificates and the Collateral
Interest or the amount of the Seller Interest, all of
which are determined on the basis of the amount of
Principal Receivables in Trust II. The aggregate
interest in the Principal Receivables in Trust II
evidenced by the Certificates and the Collateral
Interest will never exceed the amount of the Investor
Interest regardless of the total amount of Principal
Receivables in Trust II at any time.
DENOMINATIONS.................. Beneficial interests in the Certificates will be offered
for purchase in denominations of $1,000 and integral
multiples thereof.
REGISTRATION OF CERTIFICATES... The Certificates initially will be represented by
Certificates registered in the name of Cede, as the
nominee of DTC. No Certificate Owner will be entitled to
receive a Definitive Certificate, except under the
limited circumstances described herein.
Certificateholders may elect to hold their Certificates
through DTC (in the United States) or CEDEL or Euroclear
(in Europe). Transfers will be made in accordance with
the rules and operating procedures described herein. See
"Description of the Certificates--Definitive
Certificates" in the Prospectus.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
SERVICING FEE.................. The Servicer will receive a monthly fee as servicing
compensation from Trust II on each Transfer Date. On each
Transfer Date, Servicer Interchange with respect to the
related Monthly Period that is on deposit in the Finance
Charge Account will be withdrawn from the Finance Charge
Account and paid to the Servicer in respect of the
Investor Servicing Fee. In addition, the Class A
Servicing Fee, the Class B Servicing Fee and the
Collateral Interest Servicing Fee will be paid on each
Transfer Date as described under "Description of the
Certificates-- Servicing Compensation and Payment of
Expenses." See also "Description of the
Certificates--Servicing Compensation and Payment of
Expenses" in the Prospectus.
INTEREST....................... Interest on the Certificates for each Interest Period will
be distributed on July 15, 1996, and on the 15th day of
each month thereafter, or if such day is not a business
day, on the next succeeding business day (each, a
"Distribution Date"), in an amount equal to (a) with
respect to the Class A Certificates, the product of (i)
the actual number of days in the related Interest Period
divided by 360 and (ii) the Class A Certificate Rate and
(iii) 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 Closing
Date) and (b) with respect to the Class B Certificates,
the product of (i) the actual number of days in the
related Interest Period divided by 360 and (ii) the
Class B Certificate Rate and (iii) the outstanding
principal balance of the Class B Certificates as of the
preceding Record Date (or in the case of the first
Distribution Date, as of the Closing Date). Interest for
any Distribution Date due but not paid on such
Distribution Date will be payable on the next succeeding
Distribution Date, together with additional interest on
such amount at the applicable Certificate Rate plus 2%
per annum (such amount, as applicable, "Additional
Interest").
The "Interest Period," with respect to any Distribution
Date, will be the period from and including the previous
Distribution Date through the day preceding such
Distribution Date, except the initial Interest Period
will be the period from and including the Closing Date
through the day preceding the initial Distribution Date.
Interest payments on each Distribution Date will be
funded from the portion of Finance Charge Receivables
collected during the preceding Monthly Period and
certain other available amounts (a) with respect to the
Class A Certificates, allocated to the Class A Investor
Interest, and, if necessary, from Excess Spread and
Reallocated Principal Collections (to the extent
available), (b) with respect to the Class B
Certificates, allocated to the Class B Investor Interest
and, if necessary, from Excess Spread and Reallocated
Collateral Principal Collections (to the extent
available) and (c) with respect to the Collateral
Interest, from Excess Spread. See "Description of the
Certificates --Reallocation of Cash Flows"
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
and "Application of Collections--Payment of Interest,
Fees and Other Items" herein and "Risk Factors--Credit
Enhancement" in the Prospectus.
REVOLVING PERIOD............... The "Revolving Period" with respect to the Certificates
means the period from and including the Closing Date to,
but not including, the earlier of (a) the commencement
of the Controlled Accumulation Period and (b) the
commencement of the Rapid Amortization Period. The
controlled accumulation period with respect to the
Certificates (the "Controlled Accumulation Period") is
scheduled to begin at the close of business on April 30,
2002. Subject to the conditions set forth under
"Description of the Certificates--Postponement of Con-
trolled Accumulation Period," the day on which the
Revolving Period ends and the Controlled Accumulation
Period begins may be delayed to no later than the close
of business on March 31, 2003. During the Revolving
Period, Available Investor Principal Collections
otherwise allocable to the Investor Interest will,
subject to certain limitations and unless a reduction in
the Required Collateral Interest has occurred, be
treated as Shared Principal Collections and allocated to
the holders of other Series of certificates within Group
One issued and outstanding or, subject to certain
limitations, paid to the holder of the Seller
Certificate. See "Description of the Certifi-
cates--Principal Payments." See "Description of the
Certificates--Pay Out Events" for a discussion of the
events which might lead to the termination of the
Revolving Period prior to the commencement of the
Controlled Accumulation Period.
CONTROLLED ACCUMULATION
PERIOD......................... Unless a Pay Out Event has occurred, the Controlled
Accumulation Period will begin at the close of business on
the last day of the Revolving Period and will end on the
earliest of (i) the commencement of the Rapid
Amortization Period, (ii) the payment of the Investor
Interest in full and (iii) the Series 1996-E Termination
Date. During the Controlled Accumulation Period, prior
to the payment of the Class A Investor Interest in full,
amounts equal to the least of (a) Available Investor
Principal Collections for the related Monthly Period,
(b) the sum of the applicable Controlled Accumulation
Amount for such Monthly Period and the applicable
Accumulation Shortfall, if any (such applicable sum, the
"Controlled Deposit Amount") and (c) the Class A
Adjusted Investor Interest on such Transfer Date will be
deposited monthly in a trust account established by the
Trustee (the "Principal Funding Account") on each
Transfer Date beginning with the Transfer Date in the
month following the commencement of the Controlled
Accumulation Period until the Principal Funding Account
Balance is equal to the Class A Investor Interest. On
each Transfer Date during the Controlled Accumulation
Period after the Distribution Date on which the Class A
Investor Interest has been paid in full, an amount equal
to the lesser of (a) the Available Investor Principal
Collections for the
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
related Monthly Period and (b) the Class B Investor
Interest will be deposited into the Distribution Account
for distribution to the Class B Certificateholders until
the Class B Investor Interest has been paid in full. If,
for any Monthly Period, the Available Investor Principal
Collections for such Monthly Period exceed the
applicable Controlled Deposit Amount, any such excess
will be first paid to the Collateral Interest Holder to
the extent that the Collateral Interest exceeds the
Required Collateral Interest and then treated as Shared
Principal Collections and allocated to the holders of
other Series of certificates within Group One issued and
outstanding or, subject to certain limitations, paid to
the holder of the Seller Certificate. If, for any
Monthly Period, the Available Investor Principal
Collections for such Monthly Period are less than the
applicable Controlled Deposit Amount, the amount of such
deficiency will be the applicable "Accumulation
Shortfall" for the succeeding Monthly Period. See
"Description of the Certificates-- Application of
Collections."
Unless a Pay Out Event shall have occurred, prior to the
payment of the Class A Investor Interest in full, all
funds on deposit in the Principal Funding Account will
be invested at the direction of the Servicer by the
Trustee in certain Permitted Investments. Investment
earnings (net of investment losses and expenses) on
funds on deposit in the Principal Funding Account (the
"Principal Funding Investment Proceeds") during the
Controlled Accumulation Period will be used to pay
interest on the Class A Certificates in an amount up to,
for each Transfer Date, the product of (a) a fraction,
the numerator of which is the actual number of days in
the related Interest Period and the denominator of which
is 360, (b) the Class A Certificate Rate in effect with
respect to the related Interest Period and (c) the
Principal Funding Account Balance as of the Record Date
preceding such Transfer Date (the "Class A Covered
Amount"). If, for any Transfer Date, the Principal
Funding Investment Proceeds are less than the Class A
Covered Amount, the amount of such deficiency (the
"Class A Principal Funding Investment Shortfall") shall
be paid, to the extent available, from the Reserve
Account and, if necessary, from Excess Spread and
Reallocated Principal Collections.
Funds on deposit in the Principal Funding Account will be
available to pay the Class A Certificateholders in
respect of the Class A Investor Interest on the Class A
Scheduled Payment Date. If the aggregate principal
amount of deposits made to the Principal Funding Account
is insufficient to pay the Class A Investor Interest in
full on the Class A Scheduled Payment Date, the Rapid
Amortization Period will commence as described below.
Although it is anticipated that during the Controlled
Accumulation Period prior to the payment of the Class A
Investor Interest in full, funds will be deposited in
the
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Principal Funding Account in an amount equal to the
applicable Controlled Deposit Amount on each Transfer
Date and that scheduled principal will be available for
distribution to the Class A Certificateholders on the
Class A Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity Assumptions" in the
Prospectus and "Maturity Assumptions" herein.
On the Class B Scheduled Payment Date, provided that the
Class A Investor Interest is paid in full on the Class A
Scheduled Payment Date and the Rapid Amortization Period
has not commenced, Available Investor Principal
Collections will be used to pay the Class B
Certificateholders in respect of the Class B Investor
Interest as described herein. If the Available Investor
Principal Collections are insufficient to pay the Class
B Investor Interest in full on the Class B Scheduled
Payment Date, the Rapid Amortization Period will
commence as described below. Although it is anticipated
that scheduled principal will be available for
distribution to the Class B Certificateholders on the
Class B Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity Assumptions" in the
Prospectus and "Maturity Assumptions" herein.
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization Period will
commence and any amounts on deposit in the Principal
Funding Account will be paid to the Class A
Certificateholders on the Distribution Date in the month
following the commencement of the Rapid Amortization
Period.
Other Series offered by Trust II may or may not have
amortization or accumulation periods like the Controlled
Accumulation Period for the Certificates, and such
periods may have different lengths and begin on
different dates than such Controlled Accumulation
Period. Thus, certain Series may be in their revolving
periods while others are in periods during which
collections of Principal Receivables are distributed to
or held for the benefit of certificateholders of such
other Series. In addition, other Series may allocate
Principal Receivables based upon different investor
percentages. See "Description of the
Certificates--Exchanges" in the Prospectus for a
discussion of the potential terms of any other Series.
RAPID AMORTIZATION PERIOD...... During the period from the day on which a Pay Out Event
has occurred and ending on the earlier of (a) the payment
of the Investor Interest in full and (b) the Series
1996-E Termination Date (the "Rapid Amortization
Period"), Available Investor Principal Collections will
be distributed monthly on each Distribution Date to the
Class A Certificateholders and, following payment of the
Class A Investor Interest in full, to the Class B
Certificateholders and, following payment of the Class B
Investor Interest in full, to the Collateral Interest
Holder beginning
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with the Distribution Date in the month following the
commencement of the Rapid Amortization Period. See
"Description of the Certificates --Pay Out Events" for a
discussion of the events which might lead to the
commencement of the Rapid Amortization Period.
SUBORDINATION OF THE CLASS B
CERTIFICATES AND THE
COLLATERAL
INTEREST..................... The Class B Certificates and the Collateral Interest will
be subordinated, as described herein, to the extent
necessary to fund payments with respect to the Class A
Certificates as described herein. In addition, the
Collateral Interest will be subordinated to the extent
necessary to fund certain payments with respect to the
Class A Certificates and the Class B Certificates. If
the Collateral Interest is reduced to zero, the Class B
Certificateholders will bear directly the credit and
other risks associated with their interest in Trust II.
To the extent the Class B Investor Interest is reduced,
the percentage of collections of Finance Charge
Receivables allocable to the Class B Certificateholders
in subsequent Monthly Periods will be reduced. Moreover,
to the extent the amount of such reduction in the Class
B Investor Interest is not reimbursed, the amount of
principal and interest distributable to the Class B
Certificateholders will be reduced. Such reductions of
the Class B Investor Interest will thereafter be
reimbursed and the Class B Investor Interest increased
on each Transfer Date by the amount, if any, of Excess
Spread for such Transfer Date available for that
purpose. See "Description of the Certifi-
cates--Subordination."
ADDITIONAL AMOUNTS AVAILABLE TO
CERTIFICATEHOLDERS............. With respect to any Transfer Date, Excess Spread will be
applied to fund the Class A Required Amount and the Class
B Required Amount, if any. The "Class A Required Amount"
means the amount, if any, by which the sum of (a) the
Class A Monthly Interest due on the related Distribution
Date and any overdue Class A Monthly Interest and Class
A Additional Interest thereon and (b) the Class A
Servicing Fee for the related Monthly Period and any
overdue Class A Servicing Fee and (c) the Class A
Investor Default Amount, if any, for the related Monthly
Period exceeds the Class A Available Funds for the
related Monthly Period. The "Class B Required Amount"
means the amount, if any, equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly
Interest due on the related Distribution Date and any
overdue Class B Monthly Interest and Class B Additional
Interest thereon, and (ii) the Class B Servicing Fee for
the related Monthly Period and any overdue Class B
Servicing Fee, exceeds the Class B Available Funds for
the related Monthly Period and (b) the Class B Investor
Default Amount, if any, for the related Monthly Period.
The "Required Amount" for any Monthly Period shall mean
the sum of (a) the Class A
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Required Amount and (b) the Class B Required Amount,
each for such Monthly Period. "Excess Spread" for any
Transfer Date will equal the sum of (a) the excess of
(i) Class A Available Funds for the related Monthly
Period over (ii) the sum of the amounts referred to in
clauses (a), (b) and (c) in the definition of "Class A
Required Amount" above, (b) the excess of (i) Class B
Available Funds for the related Monthly Period over (ii)
the sum of the amounts referred to in clauses (a)(i) and
(a)(ii) in the definition of "Class B Required Amount"
above and (c) Collateral Available Funds for the related
Monthly Period not used under certain circumstances to
pay the Collateral Interest Servicing Fee, as described
herein.
If, on any Transfer Date, Excess Spread is less than the
Class A Required Amount, Reallocated Principal
Collections allocable first to the Collateral Interest
and then to the Class B Investor Interest with respect
to the related Monthly Period will be used to fund the
remaining Class A Required Amount. If Reallocated
Principal Collections with respect to such Monthly
Period are insufficient to fund the remaining Class A
Required Amount for the related Transfer Date, then the
Collateral Interest (after giving effect to reductions
for any Collateral Charge-Offs and Reallocated Principal
Collections on such Transfer Date) will be reduced by
the amount of such deficiency (but not by more than the
Class A Investor Default Amount for such Monthly
Period). In the event that such reduction would cause
the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the
Class B Investor Interest (after giving effect to
reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections on such
Transfer Date) will be reduced by the amount by which
the Collateral Interest would have been reduced below
zero (but not by more than the excess of the Class A
Investor Default Amount, if any, for such Monthly Period
over the amount of such reduction, if any, of the
Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause
the Class B Investor Interest to be a negative number,
the Class B Investor Interest will be reduced to zero
and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have
been reduced below zero (but not by more than the
excess, if any, of the Class A Investor Default Amount
for such Monthly Period over such reductions in the
Collateral Interest and the Class B Investor Interest
with respect to such Monthly Period) (such reduction, a
"Class A Investor Charge-Off"). If the Collateral
Interest and the Class B Investor Interest are reduced
to zero, the Class A Certificateholders will bear
directly the credit and other risks associated with
their undivided interest in Trust II. See "Description
of the Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."
</TABLE>
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If, on any Transfer Date, Excess Spread not required to
pay the Class A Required Amount and to reimburse Class A
Investor Charge-Offs is less than the Class B Required
Amount, Reallocated Principal Collections allocable to
the Collateral Interest for the related Monthly Period
not required to pay the Class A Required Amount will be
used to fund the remaining Class B Required Amount. If
such remaining Reallocated Principal Collections
allocable to the Collateral Interest with respect to
such Monthly Period are insufficient to fund the
remaining Class B Required Amount for the related
Transfer Date, then the Collateral Interest (after
giving effect to reductions for any Collateral
Charge-Offs, Reallocated Principal Collections and any
adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount of
such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period). In the
event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral
Interest will be reduced to zero, and the Class B
Investor Interest will be reduced by the amount by which
the Collateral Interest would have been reduced below
zero (but not by more than the excess, if any, of the
Class B Investor Default Amount for such Monthly Period
over such reduction in the Collateral Interest with
respect to such Monthly Period) (such reduction, a
"Class B Investor Charge-Off"). In the event of a
reduction of the Class A Investor Interest, the Class B
Investor Interest or the Collateral Interest, the amount
of principal and interest available to fund payments
with respect to the Class A Certificates and the Class B
Certificates will be decreased. See "Description of the
Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."
REQUIRED COLLATERAL INTEREST... The "Required Collateral Interest" means (a) initially,
$56,250,000 (the "Initial Collateral Interest") and (b)
with respect to any Transfer Date thereafter, an amount
equal to 7.5% of the sum of the Class A Adjusted
Investor Interest and the Class B Investor Interest on
such Transfer Date, after taking into account deposits
into the Principal Funding Account on such Transfer Date
and payments to be made on the related Distribution
Date, and the Collateral Interest on the prior Transfer
Date after any adjustments made on such Transfer Date,
but not less than $22,500,000; provided, however, that
(i) if certain reductions in the Collateral Interest
occur or if a Pay Out Event occurs, the Required
Collateral Interest for such Transfer Date shall equal
the Required Collateral Interest for the Transfer Date
immediately preceding the occurrence of such reduction
or Pay Out Event; (ii) in no event shall the Required
Collateral Interest exceed the unpaid principal amount
of the Certificates as of the last day of the Monthly
Period preceding such Transfer Date after taking into
account payments to be made on the related Distribution
Date;
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<S> <C>
and (iii) the Required Collateral Interest may be
reduced at any time to a lesser amount if the Rating
Agency Condition is satisfied. See "Description of the
Certificates--Required Collateral Interest."
If on any Transfer Date, the Collateral Interest is less
than the Required Collateral Interest, certain Excess
Spread amounts, if available, will be used to increase
the Collateral Interest to the extent of such shortfall.
If on any Transfer Date the Collateral Interest equals
or exceeds the Required Collateral Interest, any such
Excess Spread amounts will first, be deposited into the
Reserve Account as described herein and second, to the
extent available, be applied in accordance with the Loan
Agreement among the Seller, the Trustee, the Servicer
and the Collateral Interest Holder (the "Loan
Agreement") and will not be available to the
Certificateholders.
SHARED PRINCIPAL COLLECTIONS... The Series 1996-E Certificates are included in a group of
Series ("Group One"). Series 1994-A, 1994-B, 1994-C,
1994-D, 1994-E, 1995-A, 1995-B, 1995-C, 1995-D, 1995-E,
1995-F, 1995-G, 1995-H, 1995-I, 1995-J, 1996-A, 1996-B,
1996-C and 1996-D are, and other Series may in the
future be, included in Group One. To the extent that
collections of Principal Receivables allocated to the
Investor Interest with respect to the Certificates are
not needed to make payments with respect to the Investor
Interest or to be deposited in the Principal Funding
Account, such collections ("Shared Principal
Collections") will be allocated to cover principal
payments due to or for the benefit of certificateholders
of other Series within Group One. Any such reallocation
will not result in a reduction in the Investor Interest
with respect to Series 1996-E. In addition, collections
of Principal Receivables and certain other amounts
otherwise allocable to other Series in Group One, to the
extent such collections are not needed to make payments
to or deposits for the benefit of the certificateholders
of such other Series, may be applied to cover principal
payments due to or for the benefit of the holders of the
Class A Certificates and the Class B Certificates or the
Collateral Interest Holder. See "Description of the
Certificates--Shared Principal Collections."
APPLICATION OF COLLECTIONS OF
FINANCE CHARGE RECEIVABLES..... With respect to each Monthly Period during the Revolving
Period, the Servicer is required to withdraw from the
Collection Account and deposit in the Finance Charge
Account collections of Finance Charge Receivables
allocable to the Certificates and the Collateral
Interest in an amount equal to the amount of current
interest, past due interest, if any, and additional
interest, if any, distributable to the Certificate-
holders and the holder of the Collateral Interest on the
related Distribution Date (plus, if the Seller is not
the Servicer, the Certificateholder Servicing Fee for
the related Transfer Date plus the amount of any
Certificateholder Servicing Fee due but
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not paid to the Servicer on any prior Transfer Date). On
each Transfer Date with respect to the Revolving Period,
the Servicer is required to withdraw from the Collection
Account and deposit in the Finance Charge Account all of
the collections of Finance Charge Receivables allocated
to the Certificates and the Collateral Interest but not
previously deposited in the Finance Charge Account
during the related Monthly Period. With respect to each
Monthly Period during either the Controlled Accumulation
Period or the Rapid Amortization Period, the Servicer is
required to withdraw from the Collection Account and
deposit in the Finance Charge Account collections of
Finance Charge Receivables allocable to the Certificates
and the Collateral Interest as described in the
Prospectus under "Description of the
Certificates--Application of Collections."
OPTIONAL REPURCHASE............ The Investor Interest will be subject to optional
repurchase by the Seller on any Distribution Date on or
after the Distribution Date on which the Investor
Interest is reduced to an amount less than or equal to
$37,500,000 (5% of the initial Investor Interest), if
certain conditions set forth in Agreement II are met.
The repurchase price will be equal to the sum of the
Investor Interest and all accrued and unpaid interest on
the Certificates and the Collateral Interest through the
day preceding the Distribution Date on which the
repurchase occurs. See "Description of the
Certificates--Final Payment of Principal; Termination"
in the Prospectus.
TRUSTEE........................ The Bank of New York.
TAX STATUS..................... Special Counsel to the Seller will deliver its opinion on
the Closing Date that under existing law the Certificates
will be characterized as debt for federal income tax
purposes. Under Agreement II, the Seller and the
Certificate Owners will agree to treat the Certificates
as debt for federal income tax purposes. See "Certain
Federal Income Tax Consequences" in the Prospectus for
additional information concerning the application of
federal income tax laws.
ERISA CONSIDERATIONS........... Subject to the considerations described below, the Class A
Certificates are eligible for purchase by employee benefit
plan investors. Under a regulation issued by the
Department of Labor, Trust II's assets would not be
deemed "plan assets" of an employee benefit plan holding
the Class A Certificates if certain conditions are met,
including that the Class A Certificates must be held,
upon completion of the public offering made hereby, by
at least 100 investors who are independent of the Seller
and of one another. The Underwriters expect that the
Class A Certificates will be held by at least 100
independent investors at the conclusion of the offering,
although no assurance can be given, and no monitoring or
other measures will be taken to ensure, that such
condition will be met with respect to the Class A
Certificates. The Seller anticipates that the other
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<S> <C>
conditions of the regulation will be met. If Trust II's
assets were deemed to be "plan assets" of an employee
benefit plan investor (e.g., if the 100 independent
investor criterion is not satisfied), violations of the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax and
other liabilities under ERISA and section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"),
unless a statutory, regulatory or administrative
exemption is available. It is uncertain whether existing
exemptions from the "prohibited transaction" rules of
ERISA would apply to all transactions involving Trust
II's assets if such assets were treated for ERISA
purposes as "plan assets" of employee benefit plan
investors. Accordingly, fiduciaries or other persons
contemplating purchasing the Certificates on behalf or
with "plan assets" of any employee benefit plan should
consult their counsel before making a purchase. See
"ERISA Considerations" in the Prospectus.
The Underwriters currently do not expect that the Class B
Certificates will be held by at least 100 such persons
and, therefore, do not expect that such Class B
Certificates will qualify as publicly-offered securities
under the regulation referred to in the preceding
paragraph. Accordingly, the Class B Certificates may not
be acquired by (a) any employee benefit plan that is
subject to ERISA, (b) any plan or other arrangement
(including an individual retirement account or Keogh
plan) that is subject to section 4975 of the Code, or
(c) any entity whose underlying assets include "plan
assets" under the regulation by reason of any such
plan's investment in the entity. By its acceptance of a
Class B Certificate, each Class B Certificateholder will
be deemed to have represented and warranted that it is
not subject to the foregoing limitation.
CLASS A CERTIFICATE RATING..... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest rating
category by at least one nationally recognized Rating
Agency. The rating of the Class A Certificates is based
primarily on the value of the Receivables and the terms
of the Class B Certificates and the Collateral Interest.
CLASS B CERTIFICATE RATING..... It is a condition to the issuance of the Class B
Certificates that they be rated in one of the three
highest rating categories by at least one nationally
recognized Rating Agency. The rating of the Class B
Certificates is based primarily on the value of the
Receivables and the terms of the Collateral Interest.
LISTING........................ Application will be made to list the Certificates on the
Luxembourg Stock Exchange.
</TABLE>
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<PAGE>
MBNA'S CREDIT CARD PORTFOLIO
GENERAL
The Receivables conveyed or to be conveyed to Trust II by MBNA pursuant to
Agreement II have been or will be generated from transactions made by holders of
selected MasterCard and VISA credit card accounts, including premium accounts
and standard accounts, from the Bank Portfolio.
BILLING AND PAYMENTS
MBNA, using MBNA Information Services, Inc. ("MBNA I.S.") as its service
bureau, generates and mails to cardholders monthly statements summarizing
account activity and processes cardholder monthly payments. Currently,
cardholders must make a monthly minimum payment at least equal to the greater of
(i) 2% of the statement balance plus past due amounts and (ii) a stated minimum
payment (generally $15) plus past due amounts. Certain eligible cardholders are
given the option periodically to take a payment deferral.
The finance charges on purchases assessed monthly are calculated by
multiplying the account's average daily purchase balance by the applicable daily
periodic rate, and multiplying the result by the number of days in the billing
cycle. Finance charges are calculated on purchases from the date of the purchase
or the first day of the billing cycle in which the purchase is posted to the
account, whichever is later. Monthly periodic finance charges are not assessed
in most circumstances on purchases if all balances shown in the billing
statement are paid by the due date, which is generally 27 days after the billing
date. The finance charges assessed monthly on cash advances are calculated by
multiplying the account's average cash advance balance by the applicable daily
periodic rate, and multiplying the result by the number of days in the billing
cycle. Finance charges are calculated on cash advances (including balance
transfers) from the date of the transaction. Currently, MBNA generally treats
the day (excluding Sundays and bank holidays) before the day on which a cash
advance check is presented to MBNA for payment as the transaction date for such
check.
MBNA offers fixed rate and variable rate credit card accounts. Generally,
fixed annual percentage rates range from 13.9% to 20.9%, and variable rates
range from 7.6% to 10.9% above the prime rate. MBNA also offers temporary
promotional rates and, under certain circumstances, the periodic finance charges
on a limited number of accounts may be either greater than or less than those
assessed by MBNA generally.
MBNA assesses annual membership fees (generally ranging from $18 to $40) on
certain accounts although under various marketing programs these fees may be
waived or rebated. For most credit card accounts, MBNA also assesses late and
overlimit charges (generally $18) and returned check charges (generally $18).
MBNA generally assesses a fee on cash advances and certain purchase transactions
typically ranging from 1% to 2% of the cash advance or purchase amount with a $2
minimum fee. In some cases, the fee is capped at $10 or $25. Generally, a cash
advance fee is not assessed on balance transfers.
DELINQUENCY AND GROSS CHARGE-OFF EXPERIENCE
An account is contractually delinquent if the minimum payment is not
received by the due date indicated on the customer's statement. Efforts to
collect contractually delinquent credit card receivables currently are made by
MBNA's Customer Assistance personnel. Collection activities include statement
messages, telephone calls and formal collection letters. MBNA employs two
principal computerized systems for collecting past due accounts. The Predictive
Management System analyzes each cardholder's purchase and repayment habits and
selects accounts for initial contact with the objective of contacting the
highest risk accounts first. The accounts selected are queued to MBNA's
proprietary Outbound Call Management System ("OCMS"). OCMS sorts accounts by a
number of factors, including time zone, degree of delinquency and dollar amount
due. OCMS automatically dials delinquent accounts in order of priority.
Representatives are automatically linked to the cardholder's account information
and voice line when a contact is established.
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Accounts are worked continually at each stage of delinquency through the 180
day past due level. As an account enters the 180 day delinquency level, it is
classified as a potential charge-off. Accounts failing to make a payment during
the 180 day cycle are written off. Managers may defer a charge-off of an account
for another month, pending continued payment activity or other special
circumstances. Senior manager approval is required on all exceptions to
charge-off. Accounts of cardholders in bankruptcy are currently charged-off no
later than is consistent with this policy.
The following tables set forth the delinquency and gross charge-off
experience for each of the periods shown for the Bank Portfolio of credit card
accounts. The Bank Portfolio's delinquency and gross charge-off experience is
comprised of segments which may, when taken individually, have delinquency and
gross charge-off characteristics different from those of the overall Bank
Portfolio of credit card accounts. As of the beginning of the day on April 10,
1996, the Receivables in the Trust II Portfolio represented approximately 58% of
the Bank Portfolio. Because the Trust II Portfolio is only a portion of the Bank
Portfolio, actual delinquency and gross charge-off experience with respect to
the Receivables may be different from that set forth below for the Bank
Portfolio. There can be no assurance that the delinquency and gross charge-off
experience for the Receivables in the future will be similar to the historical
experience of the Bank Portfolio set forth below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------
MARCH 31, 1996 1995 1994 1993
------------------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Receivables
Outstanding(1).... $25,212,326 $24,269,670 $17,162,700 $11,483,205
Receivables
Delinquent:
35 - 64
Days........... $ 410,914 1.63% $ 393,142 1.62% $ 234,686 1.37% $ 140,512 1.22%
65 - 94
Days........... 188,783 0.75 178,038 0.73 106,309 0.62 70,988 0.62
95 or More
Days........... 401,834 1.59 352,813 1.46 187,764 1.09 160,305 1.40
----------- --- ----------- --- ----------- --- ----------- ---
Total.... $ 1,001,531 3.97% $ 923,993 3.81% $ 528,759 3.08% $ 371,805 3.24%
----------- --- ----------- --- ----------- --- ----------- ---
----------- --- ----------- --- ----------- --- ----------- ---
</TABLE>
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(1) The Receivables Outstanding on the accounts consist of all amounts due from
cardholders as posted to the accounts as of the date shown.
GROSS CHARGE-OFF EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1996 1995 1994 1993
------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)........ $ 24,476,653 $20,562,315 $13,594,814 $9,905,037
Total Gross Charge-Offs(2)................ 246,831 686,687 423,551 344,956
Total Gross Charge-Offs as a percentage of
Average Receivables Outstanding(3)....... 4.03% 3.34% 3.12% 3.48%
</TABLE>
- ------------
(1) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(2) Total Gross Charge-Offs are total principal and interest charge-offs before
recoveries and do not include the amount of any reductions in Average
Receivables Outstanding due to fraud, returned goods, customer disputes or
other miscellaneous credit adjustments.
(3) The percentage reflected for the three months ended March 31, 1996 is an
annualized figure.
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<PAGE>
INTERCHANGE
The Seller will be required, pursuant to the terms of Agreement II, to
transfer to Trust II a percentage of the Interchange attributed to cardholder
charges for goods and services in the Accounts. Interchange arising under the
Accounts will be allocated to the Certificates on the basis of the percentage
equivalent of the ratio which the amount of the Investor Percentage, with regard
to Finance Charge Receivables, of cardholder charges for goods and services in
the Accounts bears to the total amount of cardholder charges for goods and
services in the MasterCard and VISA credit card accounts owned by MBNA, as
reasonably estimated by the Seller. MasterCard and VISA may from time to time
change the amount of Interchange reimbursed to banks issuing their credit cards.
Interchange will be treated as collections of Finance Charge Receivables for the
purposes of determining the amount of Finance Charge Receivables, allocating
collections of Finance Charge Receivables, making required monthly payments, and
calculating the Portfolio Yield. Under the circumstances described herein,
Interchange will be used to pay a portion of the Investor Servicing Fee required
to be paid on each Transfer Date. See "Description of the
Certificates -- Servicing Compensation and Payment of Expenses" herein and
"MBNA's Credit Card Activities -- Interchange" in the Prospectus.
THE RECEIVABLES
The Receivables conveyed to Trust II arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in Agreement II as applied on
the Cut-Off Date and, with respect to Additional Accounts, as of the related
date of their designation (the "Trust II Portfolio"). Pursuant to Agreement II,
the Seller has the right, subject to certain limitations and conditions set
forth therein, to designate from time to time Additional Accounts and to
transfer to Trust II all Receivables of such Additional Accounts, whether such
Receivables are then existing or thereafter created. Any Additional Accounts
designated pursuant to Agreement II must be Eligible Accounts as of the date the
Seller designates such accounts as Additional Accounts. On September 19, 1994,
November 15, 1994, March 30, 1995, July 6, 1995, October 3, 1995 and March 8,
1996, the Seller designated Additional Accounts and conveyed the Receivables
arising therein to Trust II, which included approximately $1.487 billion, $1.087
billion, $1.288 billion, $1.094 billion, $1.193 billion and $1.981 billion of
Principal Receivables, respectively. In addition, the Seller will be required to
designate Additional Accounts, to the extent available, (a) to maintain the
Seller Interest so that, during any period of 30 consecutive days, the Seller
Interest averaged over that period equals or exceeds the Minimum Seller Interest
for the same period and (b) to maintain, for so long as certificates of any
Series (including the Certificates) remain outstanding, an aggregate amount of
Principal Receivables equal to or greater than the Minimum Aggregate Principal
Receivables. "Minimum Seller Interest" for any period means 7% of the average
Principal Receivables for such period; provided, however, that the Seller may
reduce the Minimum Seller Interest to not less than 2% of the average Principal
Receivables for such period upon satisfaction of the Rating Agency Condition and
certain other conditions to be set forth in Agreement II. "Minimum Aggregate
Principal Receivables" means, with respect to all Series then outstanding,
unless otherwise provided in the related Series Supplement, an amount equal to
the sum of the numerators used in the calculation of the Investor Percentages
with respect to Principal Receivables for all outstanding Series on such date;
provided, that with respect to any Series in its Rapid Accumulation Period, or
such other period as designated in the related Series Supplement, with an
investor interest as of such date of determination equal to the principal
funding account balance relating to such Series, taking into account any deposit
to be made to the principal funding account relating to such Series on the
Transfer Date following such date of determination, the numerator used in the
calculation of the Investor Percentage with respect to Principal Receivables
relating to such Series shall, solely for the purpose of the definition of
Minimum Aggregate Principal Receivables, be deemed to equal zero; provided
further, that the Minimum Aggregate Principal Receivables may be reduced to a
lesser amount at any time if the Rating Agency Condition is satisfied. The
Seller will convey the Receivables then existing or thereafter created under
such Additional Accounts to Trust II. Further, pursuant to Agreement II, the
Seller will have the right
S-20
<PAGE>
(subject to certain limitations and conditions) to designate certain Removed
Accounts and to require the Trustee to reconvey all Receivables in such Removed
Accounts to the Seller, whether such Receivables are then existing or thereafter
created. Throughout the term of Trust II, the Accounts from which the
Receivables arise will be the Accounts designated by the Seller on the Cut-Off
Date plus any Additional Accounts minus any Removed Accounts. As of the Cut-Off
Date and, with respect to Receivables in Additional Accounts, as of the related
date of their conveyance to Trust II, and on the date any new Receivables are
created, the Seller will represent and warrant to Trust II that the Receivables
meet the eligibility requirements specified in Agreement II. See "Description of
the Certificates -- Representations and Warranties" in the Prospectus.
The Receivables in the Trust II Portfolio, as of the beginning of the day on
April 10, 1996, included $14,396,164,659 of Principal Receivables and
$214,954,669 of Finance Charge Receivables. The Accounts had an average
Principal Receivable balance of $1,231 and an average credit limit of $6,707.
The percentage of the aggregate total Receivable balance to the aggregate total
credit limit was 18.6%. The average age of the Accounts was approximately 25
months. As of the beginning of the day on April 10, 1996, cardholders whose
Accounts are included in the Trust II Portfolio had billing addresses in all 50
States and the District of Columbia. As of the beginning of the day on April 10,
1996, 64.0% of the Accounts were standard accounts and 36.0% were premium
accounts, and the aggregate Principal Receivable balances of standard accounts
and premium accounts, as a percentage of the total aggregate Principal
Receivables, were 52% and 48%, respectively.
The following tables summarize the Trust II Portfolio by various criteria as
of the beginning of the day on April 10, 1996. Because the future composition of
the Trust II Portfolio may change over time, these tables are not necessarily
indicative of the composition of the Trust II Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST II PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Credit Balance.......................... 141,596 1.2% $ (11,288,126) (0.1)%
No Balance.............................. 6,354,261 54.3 0 0.0
$.01-$5,000.00.......................... 4,161,045 35.6 6,324,898,793 43.3
$5,000.01-$10,000.00.................... 858,801 7.3 5,767,652,590 39.5
$10,000.01-$15,000.00................... 134,229 1.1 1,593,470,196 10.9
$15,000.01-$20,000.00................... 30,429 0.3 518,213,907 3.5
$20,000.01-$25,000.00................... 9,651 0.1 213,693,472 1.5
$25,000.01 or More...................... 6,501 0.1 204,478,496 1.4
---------- ----- --------------- -----
TOTAL............................... 11,696,513 100.0% $14,611,119,328 100.0%
---------- ----- --------------- -----
---------- ----- --------------- -----
</TABLE>
S-21
<PAGE>
COMPOSITION BY CREDIT LIMIT
TRUST II PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Less than or equal to $5,000.00......... 5,156,452 44.1% $ 3,427,543,170 23.5%
$5,000.01-$10,000.00.................... 4,502,775 38.5 6,567,158,852 45.0
$10,000.01-$15,000.00................... 1,395,113 12.0 2,661,062,024 18.2
$15,000.01-$20,000.00................... 356,661 3.0 985,260,146 6.7
$20,000.01-$25,000.00................... 151,676 1.3 451,955,611 3.1
$25,000.01 or More...................... 133,836 1.1 518,139,525 3.5
---------- ----- --------------- -----
TOTAL............................... 11,696,513 100.0% $14,611,119,328 100.0%
---------- ----- --------------- -----
---------- ----- --------------- -----
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST II PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent.......................... 11,252,371 96.2% $13,019,532,787 89.1%
Up to 34 Days........................... 280,288 2.4 993,086,693 6.8
35 to 64 Days........................... 72,404 0.6 253,561,807 1.7
65 to 94 Days........................... 32,249 0.3 112,097,403 0.8
95 or More Days......................... 59,201 0.5 232,840,638 1.6
---------- ----- --------------- -----
TOTAL............................... 11,696,513 100.0% $14,611,119,328 100.0%
---------- ----- --------------- -----
---------- ----- --------------- -----
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST II PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ---------------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Not More than 6 Months.................. 1,616,126 13.8% $ 1,304,039,290 8.9%
Over 6 Months to 12 Months.............. 2,828,475 24.2 2,617,258,761 17.9
Over 12 Months to 24 Months............. 4,707,631 40.2 6,242,202,309 42.7
Over 24 Months to 36 Months............. 1,166,949 10.0 1,516,036,361 10.4
Over 36 Months to 48 Months............. 21,868 0.2 26,822,327 0.2
Over 48 Months to 60 Months............. 53,277 0.5 72,216,675 0.5
Over 60 Months to 72 Months............. 134,945 1.1 322,694,936 2.2
Over 72 Months.......................... 1,167,242 10.0 2,509,848,669 17.2
---------- ----- --------------- -----
TOTAL............................... 11,696,513 100.0% $14,611,119,328 100.0%
---------- ----- --------------- -----
---------- ----- --------------- -----
</TABLE>
S-22
<PAGE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST II PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF TOTAL
STATE ACCOUNTS OF ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Alabama................................ 108,427 0.9% $ 143,270,723 1.0%
Alaska................................. 22,640 0.2 41,316,066 0.3
Arizona................................ 188,930 1.6 253,861,387 1.7
Arkansas............................... 86,848 0.7 115,831,861 0.8
California............................. 1,227,465 10.5 2,028,589,828 13.9
Colorado............................... 188,367 1.6 236,211,746 1.6
Connecticut............................ 200,157 1.7 234,188,197 1.6
Delaware............................... 47,951 0.4 57,933,252 0.4
Florida................................ 607,650 5.2 809,683,294 5.5
Georgia................................ 239,851 2.1 317,085,348 2.2
Hawaii................................. 40,501 0.3 66,799,114 0.4
Idaho.................................. 51,869 0.4 62,387,552 0.4
Illinois............................... 423,186 3.6 475,950,757 3.3
Indiana................................ 258,468 2.2 261,473,371 1.8
Iowa................................... 121,807 1.1 97,021,282 0.7
Kansas................................. 106,164 0.9 118,337,357 0.8
Kentucky............................... 132,925 1.1 143,554,611 1.0
Louisiana.............................. 159,945 1.4 187,449,715 1.3
Maine.................................. 84,720 0.7 90,230,361 0.6
Maryland............................... 438,117 3.7 639,239,577 4.4
Massachusetts.......................... 383,310 3.3 407,076,504 2.8
Michigan............................... 389,854 3.3 413,541,098 2.8
Minnesota.............................. 227,619 2.0 230,033,587 1.5
Mississippi............................ 68,300 0.6 85,893,345 0.6
Missouri............................... 195,648 1.7 221,589,263 1.5
Montana................................ 40,642 0.4 38,719,381 0.3
Nebraska............................... 83,401 0.7 75,931,445 0.5
Nevada................................. 75,040 0.6 126,886,689 0.9
New Hampshire.......................... 70,491 0.6 81,139,977 0.6
New Jersey............................. 437,783 3.7 585,133,503 4.0
New Mexico............................. 68,398 0.6 92,651,781 0.6
New York............................... 844,108 7.2 1,050,341,731 7.2
North Carolina......................... 298,621 2.6 365,042,028 2.5
North Dakota........................... 28,632 0.2 25,801,142 0.2
Ohio................................... 473,544 4.1 493,549,323 3.4
Oklahoma............................... 120,823 1.0 164,549,876 1.1
Oregon................................. 92,481 0.8 128,114,017 0.9
Pennsylvania........................... 619,373 5.3 578,055,288 4.0
Rhode Island........................... 58,706 0.5 62,229,624 0.4
South Carolina......................... 149,503 1.3 173,852,252 1.2
South Dakota........................... 33,820 0.3 33,754,030 0.2
Tennessee.............................. 265,652 2.3 371,009,829 2.5
Texas.................................. 832,381 7.1 1,103,534,474 7.6
Utah................................... 83,776 0.7 85,825,949 0.6
Vermont................................ 33,774 0.3 37,724,888 0.3
Virginia............................... 349,174 3.0 468,958,520 3.2
Washington............................. 233,421 2.0 332,693,914 2.2
West Virginia.......................... 65,644 0.6 73,408,243 0.5
Wisconsin.............................. 262,879 2.3 217,594,707 1.5
Wyoming................................ 26,277 0.2 28,739,155 0.2
District of Columbia................... 32,698 0.3 52,309,697 0.3
Other.................................. 14,752 0.1 25,018,669 0.2
---------- ----- --------------- -----
TOTAL.......................... 11,696,513 100.0% $14,611,119,328 100.0%
---------- ----- --------------- -----
---------- ----- --------------- -----
</TABLE>
S-23
<PAGE>
MATURITY ASSUMPTIONS
Agreement II provides that Class A Certificateholders will not receive
payments of principal until the Class A Scheduled Payment Date, or earlier in
the event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period. The Class B Certificateholders will not begin to receive
principal until the final principal payment on the Class A Certificates has been
made.
Controlled Accumulation Period. On each Transfer Date during the Controlled
Accumulation Period prior to the payment of the Class A Investor Interest in
full, an amount equal to, for each Monthly Period, the least of (a) the
Available Investor Principal Collections, (b) the applicable "Controlled Deposit
Amount," which is equal to the sum of the applicable Controlled Accumulation
Amount for such Monthly Period and the applicable Accumulation Shortfall, if
any, and (c) the Class A Adjusted Investor Interest prior to any deposits on
such day, will be deposited in the Principal Funding Account established by the
Trustee until the amount on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") equals the Class A Investor Interest. After
the Class A Investor Interest has been paid in full, Available Investor
Principal Collections, to the extent required, will be distributed to the Class
B Certificateholders on each related Distribution Date until the earlier of the
date the Class B Investor Interest has been paid in full and the Series 1996-E
Termination Date. After the Class A Investor Interest and the Class B Investor
Interest have each been paid in full, Available Investor Principal Collections,
to the extent required, will be distributed to the Collateral Interest Holder on
each related Transfer Date until the earlier of the date the Collateral Interest
has been paid in full and the Series 1996-E Termination Date. Amounts in the
Principal Funding Account are expected to be available to pay the Class A
Investor Interest in full on the Class A Scheduled Payment Date. Also, after the
payment of the Class A Investor Interest in full, Available Investor Principal
Collections are expected to be available to pay the Class B Investor Interest in
full on the Class B Scheduled Payment Date. Although it is anticipated that
collections of Principal Receivables will be available on each Transfer Date
during the Controlled Accumulation Period to make a deposit of the applicable
Controlled Deposit Amount and that the Class A Investor Interest will be paid to
the Class A Certificateholders on the Class A Scheduled Payment Date and the
Class B Investor Interest will be paid to the Class B Certificateholders on the
Class B Scheduled Payment Date, respectively, no assurance can be given in this
regard. If the amount required to pay the Class A Investor Interest or the Class
B Investor Interest in full is not available on the Class A Scheduled Payment
Date or the Class B Scheduled Payment Date, respectively, a Pay Out Event will
occur and the Rapid Amortization Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization Period will commence and any amount
on deposit in the Principal Funding Account will be paid to the Class A
Certificateholders on the Distribution Date in the month following the
commencement of the Rapid Amortization Period. In addition, to the extent that
the Class A Investor Interest has not been paid in full, the Class A
Certificateholders will be entitled to monthly payments of principal equal to
the Available Investor Principal Collections until the earlier of the date on
which the Class A Certificates have been paid in full and the Series 1996-E
Termination Date. After the Class A Certificates have been paid in full and if
the Series 1996-E Termination Date has not occurred, Available Investor
Principal Collections will be paid to the Class B Certificateholders on each
Distribution Date until the earlier of the date on which the Class B
Certificates have been paid in full and the Series 1996-E Termination Date.
Pay Out Events. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of the Seller to make certain payments or
transfers of funds for the benefit of the Certificateholders within the time
periods stated in Agreement II, (b) certain material breaches of certain
representations, warranties or covenants of the Seller, (c) certain insolvency
events involving the Seller, (d) the average of the Portfolio Yields for any
three consecutive Monthly Periods being less than the average of the Base Rates
for such period, (e) Trust II becoming an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, (f) the failure of
the Seller to convey
S-24
<PAGE>
Receivables arising under Additional Accounts or Participations to Trust II when
required by Agreement II, (g) the occurrence of a Servicer Default which would
have a material adverse effect on the Certificateholders, (h) insufficient
monies in the Distribution Account to pay the Class A Investor Interest or the
Class B Investor Interest in full on the Class A Scheduled Payment Date or the
Class B Scheduled Payment Date, respectively, or (i) the Seller becomes unable
for any reason to transfer Receivables to Trust II in accordance with the
provisions of Agreement II. See "Description of the Certificates -- Pay Out
Events." The term "Base Rate" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of the Class A Monthly Interest, the Class B Monthly Interest and the
Collateral Monthly Interest, each for the related Interest Period and the
Certificateholder Servicing Fee and the Servicer Interchange, each for such
Monthly Period, and the denominator of which is the Investor Interest as of the
close of business on the last day of such Monthly Period. The term "Portfolio
Yield" means, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction, the numerator of which is the sum of collections of
Finance Charge Receivables, annual membership fees, Principal Funding Investment
Proceeds and amounts withdrawn from the Reserve Account deposited into the
Finance Charge Account and allocable to the Certificates and the Collateral
Interest for such Monthly Period, calculated on a cash basis after subtracting
the Investor Default Amount for such Monthly Period, and the denominator of
which is the Investor Interest as of the close of business on the last day of
such Monthly Period.
Payment Rates. The following table sets forth the highest and lowest
cardholder monthly payment rates for the Bank Portfolio during any month in the
period shown and the average cardholder monthly payment rates for all months
during the periods shown, in each case calculated as a percentage of total
opening monthly account balances during the periods shown. Payment rates shown
in the table are based on amounts which would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ---------------------------
MARCH 31, 1996 1995 1994 1993
------------------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Lowest Month....................... 10.93% 10.22% 10.46% 12.55%
Highest Month...................... 11.56% 11.34% 12.93% 14.10%
Monthly Average.................... 11.21% 10.79% 11.79% 13.24%
</TABLE>
Prior to May 1, 1991, the Seller required each cardholder to make monthly
minimum payments of 3.0% of the statement balance plus past due amounts,
insurance payments and other fees. Between May 1, 1991 and September 20, 1993,
the Seller required each cardholder to make monthly minimum payments of 2.5% of
the statement balance plus past due amounts. Currently, cardholders must make a
monthly minimum payment equal to 2.0% of the statement balance plus past due
amounts. However, the cardholder was and is generally required to make a monthly
minimum payment (generally $15) plus past due amounts. There can be no assurance
that the cardholder monthly payment rates in the future will be similar to the
historical experience set forth above. In addition, the amount of collections of
Receivables may vary from month to month due to seasonal variations, general
economic conditions and payment habits of individual cardholders. There can be
no assurance that collections of Principal Receivables with respect to the Trust
II Portfolio will be similar to the historical experience set forth above or
that deposits into the Principal Funding Account or the Distribution Account, as
applicable, will be made in accordance with the applicable Controlled
Accumulation Amount. If a Pay Out Event occurs, the average life of the
Certificates could be significantly reduced.
Because there may be a slowdown in the payment rate below the payment rates
used to determine
the Controlled Accumulation Amounts, or a Pay Out Event may occur which would
initiate the Rapid Amortization Period, there can be no assurance that the
actual number of months elapsed from the date of issuance of the Class A
Certificates and the Class B Certificates to their respective final Distribution
S-25
<PAGE>
Dates will equal the expected number of months. As described under "Description
of the Certificates -- Postponement of Controlled Accumulation Period," the
Servicer may shorten the Controlled Accumulation Period and, in such event,
there can be no assurance that there will be sufficient time to accumulate all
amounts necessary to pay the Class A Investor Interest and the Class B Investor
Interest on the Class A Scheduled Payment Date and the Class B Scheduled Payment
Date, respectively. See "Maturity Assumptions" and "Risk Factors -- Payments and
Maturity" in the Prospectus.
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Bank Portfolio for each of the three calendar years contained in the period
ended December 31, 1995 and the three calendar months contained in the period
ended March 31, 1996 are set forth in the following table.
The historical yield figures in the following table are calculated on an
accrual basis. Collections of Receivables included in Trust II will be on a cash
basis and may not reflect the historical yield experience in the table. During
periods of increasing delinquencies or periodic payment deferral programs,
accrual yields may exceed cash amounts accrued and billed to cardholders.
Conversely, cash yields may exceed accrual yields as amounts collected in a
current period may include amounts accrued during prior periods. However, the
Seller believes that during the three calendar years contained in the period
ended December 31, 1995 and the three calendar months contained in the period
ended March 31, 1996, the yield on an accrual basis closely approximated the
yield on a cash basis. The yield on both an accrual and a cash basis will be
affected by numerous factors, including the monthly periodic finance charges on
the Receivables, the amount of the annual membership fees and other fees,
changes in the delinquency rate on the Receivables and the percentage of
cardholders who pay their balances in full each month and do not incur monthly
periodic finance charges. See "Risk Factors" in the Prospectus.
BANK PORTFOLIO YIELD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------------
MARCH 31, 1996 1995 1994 1993
------------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average Account Monthly Accrued
Finance Charges and Fees(1)(2)...... $ 24.14 $ 23.70 $ 22.27 $ 23.11
Average Account Balance(3).......... $1,715.65 $1,718.08 $1,624.11 $1,593.64
Yield from Finance Charges and
Fees(4)............................. 16.89% 16.55% 16.45% 17.40%
Yield from Interchange(5)........... 0.96% 1.20% 1.58% 1.84%
Yield from Finance Charges, Fees and
Interchange(6)...................... 17.85% 17.75% 18.03% 19.24%
</TABLE>
- ------------
(1) Finance Charges and Fees are comprised of monthly periodic finance charges
and other credit card fees.
(2) Average Account Monthly Accrued Finance Charges and Fees are presented net
of adjustments made pursuant to MBNA's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance charges.
(3) Average Account Balances include purchases, cash advances and accrued and
unpaid monthly periodic finance and other charges and are calculated based
on the average of the account balances during the periods shown for accounts
with charging privileges.
(4) Yield from Finance Charges and Fees is the result of dividing the annualized
Average Account Monthly Accrued Finance Charges and Fees by the Average
Account Balance for the period.
(5) Yield from Interchange is the result of dividing annualized revenue
attributable to Interchange received during the period by the Average
Account Balance for the period. The amount of Interchange for each of the
periods indicated above has been estimated.
(6) The percentage reflected for the three months ended March 31, 1996 is an
annualized figure.
These revenues vary for each account based on the type and volume of
activity for each account. Because the Trust II Portfolio is only a portion of
the Bank Portfolio, actual yield with respect to Receivables may be different
from that set forth above for the Bank Portfolio. See "MBNA's Credit Card
Portfolio" herein and "MBNA Credit Card Activities" in the Prospectus.
S-26
<PAGE>
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking association
located in Newark, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. Based on statistics
compiled by MasterCard and VISA from member institutions as of December 31,
1995, MBNA was the nation's leading lender through premium MasterCard credit
cards and the fifth largest lender through VISA credit cards based on managed
loans. As of December 31, 1995, MBNA was the second largest MasterCard and VISA
lender based on managed loans according to a January 1996 issue of The Nilson
Report, a bi-weekly industry publication. On a managed basis, MBNA maintained
loan accounts with aggregate outstanding balances of $26.7 billion as of March
31, 1996. Of this amount, $25.4 billion were MasterCard and VISA credit card
loans outstanding. As of March 31, 1996, the premium credit card portfolio
accounted for 44% of MBNA's MasterCard and VISA credit card accounts with
outstanding balances and 59% of MBNA's MasterCard and VISA credit card loans
outstanding.
MBNA conducts all direct customer contact processes with respect to the
cardholder. This involves a 24 hour, 365 day per year Customer Service telephone
staff, Credit Decisions, Correspondence Resolution, Security and Collection
Operations. As of March 31, 1996, MBNA had assets of $12.6 billion, deposits of
$9.1 billion and capital and surplus accounts of $1.1 billion.
MBNA is a wholly-owned subsidiary of the Corporation. MBNA was established
in January 1991 in connection with a restructuring of the former MBNA America
Bank, N.A., a wholly-owned subsidiary of MNC Financial, Inc. The Corporation is
a bank holding company organized under the laws of Maryland in 1990 and
registered under the Bank Holding Company Act of 1956, as amended. As of March
31, 1996, the Corporation had consolidated assets of $13.5 billion, consolidated
deposits of $9.0 billion and capital and surplus accounts of $1.3 billion. The
principal asset of the Corporation is the capital stock of MBNA.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to Agreement II and the Series
1996-E Supplement. Pursuant to Agreement II, the Seller and the Trustee may
execute further series supplements in order to issue additional Series. The
following summary of the Certificates does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of Agreement II and the Series 1996-E Supplement. See "Description of
the Certificates" in the Prospectus for additional information concerning the
Certificates and Agreement II.
GENERAL
The Certificates will represent the right to receive certain payments from
the assets of Trust II, including the right to the applicable allocation
percentage of all cardholder payments on the Receivables in Trust II. Each Class
A Certificate represents the right to receive payments of interest at the Class
A Certificate Rate for the related Interest Period and payments of principal on
the Class A Scheduled Payment Date or, to the extent of the Class A Investor
Interest, on each Distribution Date with respect to the Rapid Amortization
Period, funded from collections of Finance Charge Receivables and annual
membership fees and Principal Receivables, respectively, allocated to the Class
A Investor Interest and certain other available amounts. Each Class B
Certificate represents the right to receive payments of interest at the
applicable Class B Certificate Rate for the related Interest Period, and
payments of principal on the Class B Scheduled Payment Date or, to the extent of
the Class B Investor Interest, on each Distribution Date with respect to the
Rapid Amortization Period after the Class A Certificates have been paid in full,
funded from collections of Finance Charge Receivables and annual membership fees
and Principal Receivables, respectively, allocated to the Class B Investor
Interest and
S-27
<PAGE>
certain other available amounts. In addition to representing the right to
payment from collections of Finance Charge Receivables, annual membership fees
and Principal Receivables, each Class A Certificate also represents the right to
receive payments from Excess Spread, funds on deposit in the Principal Funding
Account and the Reserve Account and certain investment earnings thereon,
Reallocated Principal Collections and Shared Principal Collections and certain
other available amounts. In addition to representing the right to payment from
collections of Finance Charge Receivables, annual membership fees and Principal
Receivables, each Class B Certificate also represents the right to receive
payments from Excess Spread, Reallocated Collateral Principal Collections and
Shared Principal Collections and certain other available amounts. Payments of
interest and principal will be made on each Distribution Date on which such
amounts are due to Certificateholders in whose names the Certificates were
registered on the last business day of the calendar month preceding such
Distribution Date (each, a "Record Date").
The Seller initially will own the Seller Certificate. The Seller Certificate
will represent the right to receive certain payments from the assets of Trust
II, including the right to a percentage (the "Seller Percentage") of all
cardholder payments on the Receivables in Trust II equal to 100% minus the sum
of the applicable Investor Percentages for all Series of certificates then
outstanding. The Seller Certificate may be transferred in whole or in part
subject to certain limitations and conditions set forth in Agreement II. See
"Description of the Certificates -- Certain Matters Regarding the Seller and the
Servicer" in the Prospectus.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as nominee of DTC.
Unless and until Definitive Certificates are issued, all references herein to
actions by Class A Certificateholders and/or Class B Certificateholders shall
refer to actions taken by DTC upon instructions from its Participants and all
references herein to distributions, notices, reports and statements to Class A
Certificateholders and/or Class B Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Class A Certificates and the Class B Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
Certificateholders may hold their Certificates through DTC (in the United
States) or CEDEL or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems. Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in CEDEL's and Euroclear's names on the books of their respective Depositaries
which in turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC. See "Description of the
Certificates -- General," "-- Book-Entry Registration" and "-- Definitive
Certificates" in the Prospectus.
EXCHANGES
The Seller Certificate is transferable only as provided in Agreement II.
Agreement II also provides that the holder of the Seller Certificate may tender
the Seller Certificate to the Trustee in exchange for one or more new Series and
a reissued Seller Certificate as described under "Description of the
Certificates -- Exchanges" in the Prospectus.
INTEREST PAYMENTS
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest will be distributed on July 15, 1996 and on each
Distribution Date thereafter to Certificateholders. Interest payments on the
Class A Certificates and the Class B Certificates on any Distribution Date will
be calculated on the
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outstanding principal balance of the Class A Certificates and the outstanding
principal balance of the Class B Certificates, as applicable, as of the
preceding Record Date, except that interest for the first Distribution Date will
accrue at the applicable Certificate Rate on the initial outstanding principal
balance of the Class A Certificates and the initial outstanding principal
balance of the Class B Certificates, as applicable, from the Closing Date.
Interest due on the Certificates but not paid on any Distribution Date will be
payable on the next succeeding Distribution Date together with additional
interest on such amount at the applicable Certificate Rate plus 2% per annum
(such amount with respect to the Class A Certificates, the "Class A Additional
Interest," and such amount with respect to the Class B Certificates, the "Class
B Additional Interest"). Such Additional Interest shall accrue on the same basis
as interest on the Certificates, and shall accrue from the Distribution Date
such overdue interest became due, to but excluding the Distribution Date on
which such Additional Interest is paid. Interest payments on the Class A
Certificates on any Distribution Date will be paid from Class A Available Funds
for the related Monthly Period and, to the extent such Class A Available Funds
are insufficient to pay such interest, from Excess Spread and Reallocated
Principal Collections (to the extent available) for such Monthly Period.
Interest payments on the Class B Certificates on any Distribution Date will be
paid from Class B Available Funds for the related Monthly Period and, to the
extent such Class B Available Funds are insufficient to pay such interest, from
Excess Spread and Reallocated Collateral Principal Collections (to the extent
available) remaining after certain other payments have been made with respect to
the Class A Certificates.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections of
Finance Charge Receivables and annual membership fees allocated to the Investor
Interest and deposited in the Finance Charge Account with respect to such
Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) Principal Funding Investment Proceeds, if any, with respect to
the related Transfer Date and (c) amounts, if any, to be withdrawn from the
Reserve Account which are required to be included in Class A Available Funds
pursuant to the Series 1996-E Supplement with respect to such Transfer Date.
"Class B Available Funds" means, with respect to any Monthly Period, an amount
equal to the Class B Floating Allocation of collections of Finance Charge
Receivables and annual membership fees allocated to the Investor Interest and
deposited in the Finance Charge Account with respect to such Monthly Period
(excluding the portion of collections of Finance Charge Receivables attributable
to Interchange that is allocable to Servicer Interchange).
The Class A Certificates will bear interest from the Closing Date through
June 16, 1996, and from June 17, 1996 through July 14, 1996 and with respect to
each Interest Period thereafter, at a rate of % per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period (the "Class A Certificate Rate"). The Class B Certificates will bear
interest from the Closing Date through June 16, 1996, and from June 17, 1996
through July 14, 1996 and with respect to each Interest Period thereafter, at a
rate of % per annum above LIBOR prevailing on the related LIBOR Determination
Date with respect to each such period (the "Class B Certificate Rate").
The Trustee will determine LIBOR on May , 1996 for the period from the
Closing Date through June 16, 1996, on June 13, 1996 for the period from June
17, 1996 through July 14, 1996, and for each Interest Period thereafter, on the
second business day prior to the Distribution Date on which such Interest Period
commences (each, a "LIBOR Determination Date"). For purposes of calculating
LIBOR, a business day is any business day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
"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
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by the Reference Banks at approximately 11:00 a.m., London time, on that day to
prime banks in the London interbank market for a one-month period. The Trustee
will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that LIBOR Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, the rate for that LIBOR
Determination Date 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.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 815-5368.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the related Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on the
Closing Date and ends at the commencement of the Controlled Accumulation Period
or, if earlier, the Rapid Amortization Period), unless a reduction in the
Required Collateral Interest has occurred, collections of Principal Receivables
allocable to the Investor Interest will, subject to certain limitations,
including the allocation of any Reallocated Principal Collections with respect
to the related Monthly Period to pay the Class A Required Amount and the Class B
Required Amount, be treated as Shared Principal Collections.
On each Transfer Date relating to the Controlled Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to such
Transfer Date, (b) the applicable Controlled Deposit Amount and (c) the Class A
Adjusted Investor Interest prior to any deposits on such date. Amounts in the
Principal Funding Account will be paid to the Class A Certificateholders on the
Class A Scheduled Payment Date. After the Class A Investor Interest has been
paid in full, on each Transfer Date during the Controlled Accumulation Period,
amounts equal to the lesser of (a) Available Investor Principal Collections with
respect to such Transfer Date and (b) the Class B Investor Interest will be
deposited in the Distribution Account for distribution to the Class B
Certificateholders until the Class B Investor Interest has been paid in full.
Such amounts in the Distribution Account will be paid to the Class B
Certificateholders on the Class B Scheduled Payment Date. On each Transfer Date,
if a reduction in the Required Collateral Interest has occurred, a portion of
collections of Principal Receivables allocable to the Investor Interest will be
applied in accordance with the Loan Agreement to reduce the Collateral Interest
to the Required Collateral Interest. During the Controlled Accumulation Period
until the final principal payment to the Class B Certificateholders, the portion
of Available Investor Principal Collections not applied to Class A Monthly
Principal, Class B Monthly Principal or Collateral Monthly Principal on a
Transfer Date will generally be treated as Shared Principal Collections.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) collections of Principal
Receivables received during such Monthly Period and certain other amounts
allocable to the Investor Interest, minus (ii) the amount of Reallocated
Principal Collections with respect to such Monthly Period used to fund the
Required Amount, plus (b) any
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Shared Principal Collections with respect to other Series in Group One that are
allocated to Series 1996-E.
On each Distribution Date with respect to the Rapid Amortization Period, the
Class A Certificateholders will be entitled to receive Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class A Investor Interest until the earlier of the date the Class A Certificates
are paid in full and the Series 1996-E Termination Date. After payment in full
of the Class A Investor Interest, the Class B Certificateholders will be
entitled to receive on each Distribution Date with respect to the Rapid
Amortization Period Available Investor Principal Collections until the earlier
of the date the Class B Certificates are paid in full and the Series 1996-E
Termination Date. After payment in full of the Class B Investor Interest, the
Collateral Interest Holder will be entitled to receive on each Transfer Date
(other than the Transfer Date prior to the Series 1996-E Termination Date) and
on the Series 1996-E Termination Date, Available Investor Principal Collections
until the earlier of the date the Collateral Interest is paid in full and the
Series 1996-E Termination Date. See "-- Pay Out Events" below for a discussion
of events which might lead to the commencement of the Rapid Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Controlled Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On the Determination
Date immediately preceding the April 2002 Distribution Date, and each
Determination Date thereafter, until the Controlled Accumulation Period begins,
the Servicer will determine the "Accumulation Period Length," which is the
number of whole months expected to be required to fully fund the Principal
Funding Account no later than the Class A Scheduled Payment Date, based on (a)
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
(b) the amount of principal expected to be distributable to Certificateholders
of all Series (excluding certain other Series) which are not expected to be in
their revolving periods during the Controlled Accumulation Period. If the
Accumulation Period Length is less than twelve months, the Servicer may, at its
option, postpone the commencement of the Controlled Accumulation Period such
that the number of months included in the Controlled Accumulation Period will be
equal to or exceed the Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Controlled
Accumulation Period based on the investor interest of certain other Series which
are scheduled to be in their revolving periods during the Controlled
Accumulation Period and on increases in the principal payment rate occurring
after the Closing Date. The length of the Controlled Accumulation Period will
not be determined to be less than one month.
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. 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 Class B Investor Interest may be reduced if the Collateral
Interest is equal to zero. Similarly, certain principal payments allocable to
the Collateral Interest may be reallocated to cover amounts in respect of the
Class A Certificates and the Class B Certificates and the Collateral Interest
may be reduced. To the extent the Class B Investor Interest is reduced, the
percentage of collections of Finance Charge Receivables allocated to the Class B
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Certificates in subsequent Monthly Periods will be reduced. Moreover, to the
extent the amount of such reduction in the Class B Investor Interest is not
reimbursed, the amount of principal distributable to, and the amounts available
to be distributed with respect to interest on, the Class B Certificateholders
will be reduced. See "-- Allocation Percentages," "-- Reallocation of Cash
Flows" and "-- Application of Collections -- Excess Spread."
ALLOCATION PERCENTAGES
Pursuant to Agreement II, with respect to each Monthly Period the Servicer
will allocate among the Investor Interest, the investor interest for all other
Series issued and outstanding and the Seller Interest, all amounts collected on
Finance Charge Receivables, all amounts collected on Principal Receivables and
all Default Amounts with respect to such Monthly Period.
Collections of Finance Charge Receivables and Default Amounts at any time
and collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the Adjusted
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the initial
Investor Interest) and the denominator of which is the greater of (x) the
aggregate amount of Principal Receivables as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first calendar
month in the first Monthly Period, the aggregate amount of Principal Receivables
as of the close of business on the day immediately preceding the Closing Date,
and with respect to the second calendar month in the first Monthly Period, the
aggregate amount of Principal Receivables as of the close of business on the
last day of the first calendar month in the first Monthly Period) and (y) the
sum of the numerators used to calculate the Investor Percentages for allocations
with respect to Finance Charge Receivables, Default Amounts or Principal
Receivables, as applicable, for all outstanding Series on such date of
determination; provided, however, that with respect to any Monthly Period in
which an Addition Date occurs or in which a Removal Date occurs on which, if any
Series has been paid in full, Principal Receivables in an aggregate amount
approximately equal to the initial investor interest of such Series are removed
from Trust II, the amount in clause (x) above shall be (i) the aggregate amount
of Principal Receivables in Trust II as of the close of business on the last day
of the prior Monthly Period for the period from and including the first day of
such Monthly Period to but excluding the related Addition Date or Removal Date
and (ii) the aggregate amount of Principal Receivables in Trust II as of the
beginning of the day on the related Addition Date or Removal Date after
adjusting for the aggregate amount of Principal Receivables added to or removed
from Trust II on the related Addition Date or Removal Date, as the case may be,
for the period from and including the related Addition Date or Removal Date to
and including the last day of such Monthly Period. Such amounts so allocated
will be further allocated between the Class A Certificateholders, Class B
Certificateholders and the Collateral Interest Holder based on the Class A
Floating Allocation, the Class B Floating Allocation and the Collateral Floating
Allocation, respectively. The "Class A Floating Allocation" means, with respect
to any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Adjusted Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, as of the
Closing Date) and the denominator of which is equal to the Adjusted Investor
Interest as of the close of business on such day. The "Class B Floating
Allocation" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Class B Investor Interest as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to the
Adjusted Investor Interest as of the close of business on such day. The
"Collateral Floating Allocation" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Collateral Interest as of the close of
business on the
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last day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to the
Adjusted Investor Interest as of the close of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage. The "Fixed Investor Percentage" means,
with respect to any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Investor Interest as of the close of business on the
last day of the Revolving Period and the denominator of which is the greater of
(x) the aggregate amount of Principal Receivables as of the close of business on
the last day of the prior Monthly Period and (y) the sum of the numerators used
to calculate the Investor Percentages for allocations with respect to Principal
Receivables for all outstanding Series for such Monthly Period; provided,
however, that with respect to any Monthly Period in which an Addition Date
occurs or in which a Removal Date occurs on which, if any Series has been paid
in full, Principal Receivables in an aggregate amount approximately equal to the
initial investor interest of such Series are removed from Trust II, the amount
in clause (x) above shall be (i) the aggregate amount of Principal Receivables
in Trust II as of the close of business on the last day of the prior Monthly
Period for the period from and including the first day of such Monthly Period to
but excluding the related Addition Date or Removal Date and (ii) the aggregate
amount of Principal Receivables in Trust II at the beginning of the day on the
related Addition Date or Removal Date after adjusting for the aggregate amount
of Principal Receivables added to or removed from Trust II on the related
Addition Date or Removal Date, as the case may be, for the period from and
including the related Addition Date or Removal Date to and including the last
day of such Monthly Period. Such amounts so allocated will be further allocated
between the Class A Certificateholders, the Class B Certificateholders and the
Collateral Interest Holder based on the Class A Fixed Allocation, the Class B
Fixed Allocation and the Collateral Fixed Allocation, respectively. The "Class A
Fixed Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class A Investor Interest as of the close of
business on the last day of the Revolving Period, and the denominator of which
is equal to the Investor Interest as of the close of business on the last day of
the Revolving Period. The "Class B Fixed Allocation" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is equal to the Class B Investor
Interest as of the close of business on the last day of the Revolving Period,
and the denominator of which is equal to the Investor Interest as of the close
of business on the last day of the Revolving Period. The "Collateral Fixed
Allocation" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Collateral Interest as of the close of business on the last day
of the Revolving Period, and the denominator of which is equal to the Investor
Interest as of the close of business on the last day of the Revolving Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all Transfer Dates preceding such date over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for all
Transfer Dates preceding such date; provided, however, that the Class A Investor
Interest may not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Certificateholders prior
to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
all prior Transfer Dates, minus (d) the aggregate amount of Reallocated Class B
Principal Collections for all prior Transfer Dates for which the Collateral
Interest has not been reduced, minus (e) an amount equal to the aggregate amount
by which the Class B Investor Interest has been reduced to fund the Class A
Investor Default Amount on all prior Transfer Dates as described
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under "-- Defaulted Receivables; Investor Charge-Offs," and plus (f) the
aggregate amount of Excess Spread allocated and available on all prior Transfer
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c), (d) and (e); provided, however, that the Class B Investor Interest
may not be reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the Initial
Collateral Interest, minus (b) the aggregate amount of principal payments made
to the Collateral Interest Holder prior to such date, minus (c) the aggregate
amount of Collateral Charge-Offs for all prior Transfer Dates, minus (d) the
aggregate amount of Reallocated Principal Collections for all prior Transfer
Dates, minus (e) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced to fund the Class A Investor Default Amount and the
Class B Investor Default Amount on all prior Transfer Dates as described under
"-- Defaulted Receivables; Investor Charge-Offs," and plus (f) the aggregate
amount of Excess Spread allocated and available on all prior Transfer Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided, however, that the Collateral Interest may not be
reduced below zero.
"Class A Adjusted Investor Interest," for any date of determination, means
an amount equal to the then current Class A Investor Interest, minus the
Principal Funding Account Balance on such date.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Distribution
Date and overdue Class A Monthly Interest and Class A Additional Interest
thereon, if any, (b) the Class A Servicing Fee for the related Monthly Period
and overdue Class A Servicing Fee, if any, and (c) the Class A Investor Default
Amount, if any, for the related Monthly Period exceeds the Class A Available
Funds for the related Monthly Period. If the Class A Required Amount is greater
than zero, Excess Spread allocated to Series 1996-E and available for such
purpose will be used to fund the Class A Required Amount with respect to such
Transfer Date. If such Excess Spread is insufficient to fund the Class A
Required Amount, first, Reallocated Collateral Principal Collections and, then,
Reallocated Class B Principal Collections will be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread, are insufficient to
fund the remaining Class A Required Amount for such related Monthly Period, then
the Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date) will be
reduced by the amount of such excess (but not by more than the Class A Investor
Default Amount for such Monthly Period). In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections for which the Collateral Interest was not reduced on such
Transfer Date) will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess of the Class
A Investor Default Amount, if any, for such Monthly Period over the amount of
such reduction, if any, of the Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be reduced
to zero and the Class A Investor Interest will be reduced by the amount by which
the Class B Investor Interest would have been reduced below zero (but not by
more than the excess, if any, of the Class A Investor Default Amount for such
Monthly Period over the amount of the reductions, if any, of the Collateral
Interest and the Class B Investor Interest with respect to such Monthly Period).
Any such reduction in the Class A Investor Interest will have the effect of
slowing or reducing the return of principal and interest to the Class A
Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with their interests in Trust II.
See "-- Defaulted Receivables; Investor Charge-Offs."
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With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest thereon, if any, and (ii) the Class B Servicing Fee for the
related Monthly Period and overdue Class B Servicing Fee, if any, exceeds the
Class B Available Funds for the related Monthly Period and (b) the Class B
Investor Default Amount, if any, for the related Monthly Period. If the Class B
Required Amount is greater than zero, Excess Spread allocated to Series 1996-E
not required to pay the Class A Required Amount or reimburse Class A Investor
Charge-Offs will be used to fund the Class B Required Amount with respect to
such Transfer Date. If such Excess Spread is insufficient to fund the Class B
Required Amount, Reallocated Collateral Principal Collections not required to
fund the Class A Required Amount for the related Monthly Period will be used to
fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date and after any
adjustments made thereto for the benefit of the Class A Certificateholders) will
be reduced by the amount of such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period). In the event that such a
reduction would cause the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the Class B Investor Interest
will be reduced by the amount by which the Collateral Interest would have been
reduced below zero (but not by more than the excess of the Class B Investor
Default Amount for such Monthly Period over the amount of such reduction of the
Collateral Interest), and the Class B Certificateholders will bear directly the
credit and other risks associated with their interests in Trust II. See
"-- Defaulted Receivables; Investor Charge-Offs."
Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread available
for such purposes on each Transfer Date. See "-- Application of Collections --
Excess Spread." When such reductions of the Class A Investor Interest and Class
B Investor Interest have been fully reimbursed, reductions of the Collateral
Interest shall be reimbursed until reimbursed in full in a similar manner.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount, if any; provided, however, that such amount
will not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount and the Class B Required Amount, if any; provided,
however, that such amount will not exceed the Collateral Interest after giving
effect to any Collateral Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections for such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following the
date of processing, any payment collected by the Servicer on the Receivables. On
the same day as any such deposit is made, the Servicer will make the deposits
and payments to the accounts and parties as indicated below; provided, however,
that for as long as MBNA remains the Servicer under Agreement II and (a)(i) the
Servicer provides to the Trustee
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a letter of credit covering the risk of collection of the Servicer and (ii) the
Seller shall not have received a notice from the Rating Agency that such letter
of credit would result in the lowering of such Rating Agency's then-existing
rating of any Series then outstanding or (b) the Servicer has and maintains a
certificate of deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's
and deposit insurance provided by either BIF or SAIF, then the Servicer may make
such deposits and payments on the business day immediately prior to the
Distribution Date (the "Transfer Date") in an amount equal to the net amount of
such deposits and payments which would have been made had the conditions of this
proviso not applied.
With respect to the Certificates, and notwithstanding anything in Agreement
II to the contrary, whether the Servicer is required to make monthly or daily
deposits from the Collection Account into the Finance Charge Account or the
Principal Account, with respect to any Monthly Period, (i) the Servicer will
only be required to deposit Collections from the Collection Account into the
Finance Charge Account or the Principal Account up to the required amount to be
deposited into any such deposit account or, without duplication, distributed on
or prior to the related Distribution Date to Certificateholders or to the
Collateral Interest Holder and (ii) if at any time prior to such Distribution
Date the amount of Collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will
be permitted to withdraw the excess from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
Finance Charge Account in the following priority:
(a) On each Transfer Date, 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 the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if any,
for the related Monthly Period will be treated as a portion of Available
Investor Principal Collections and deposited into the Principal Account
for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "-- Excess
Spread."
(b) On each Transfer Date, 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 the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "-- Excess
Spread."
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(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) if MBNA or The Bank of New York is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee, plus the amount of
any overdue Collateral Interest Servicing Fee, for the related Monthly
Period will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "-- Excess
Spread."
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the outstanding principal balance of the Class A Certificates as of the related
Record Date; provided, however, with respect to the first Distribution Date,
Class A Monthly Interest will be equal to the interest accrued on the initial
outstanding principal balance of the Class A Certificates at the applicable
Class A Certificate Rate for the period from the Closing Date through July 14,
1996.
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the outstanding principal balance of the Class B Certificates as of the related
Record Date; provided, however, with respect to the first Distribution Date,
Class B Monthly Interest will be equal to the interest accrued on the initial
outstanding principal balance of the Class B Certificates at the applicable
Class B Certificate Rate for the period from the Closing Date through July 14,
1996.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables and annual membership fees allocated to the Investor Interest
with respect to such Monthly Period (excluding the portion of collections of
Finance Charge Receivables attributable to Interchange that is allocable to
Servicer Interchange).
"Excess Spread" means, with respect to any Transfer Date, an amount equal to
the sum of the amounts described in clause (a)(iv), clause (b)(iii) and clause
(c)(ii) above.
Excess Spread. On each Transfer Date, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread with respect to the related
Monthly Period, to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class A Required Amount;
provided, that in the event the Class A Required Amount for such Transfer
Date exceeds the amount of Excess Spread, such Excess Spread shall be
applied first to pay amounts due with respect to such Transfer Date pursuant
to clause (a)(i) above under "-- Payment of Interest, Fees and Other Items,"
second to pay amounts due with respect to such Transfer Date pursuant to
clause (a)(ii) above under "-- Payment of Interest, Fees and Other Items"
and third to pay amounts due with respect to such Transfer Date pursuant to
clause (a)(iii) above under "-- Payment of Interest, Fees and Other Items";
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed (after giving effect
to the allocation on such Transfer Date of certain other amounts applied for
that purpose) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "-- Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class B Required Amount and
will be applied first to pay amounts
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due with respect to such Transfer Date pursuant to clause (b)(i) above under
"-- Payment of Interest, Fees and Other Items," second to pay amounts due
with respect to such Transfer Date pursuant to clause (b)(ii) above under
"-- Payment of Interest, Fees and Other Items" and third, the amount
remaining, up to the Class B Investor Default Amount, will be deposited into
the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under "-- Payments
of Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited into
the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under "-- Payments
of Principal" below;
(e) an amount equal to the Collateral Monthly Interest for such Transfer
Date, plus the amount of any Collateral Monthly Interest previously due but
not distributed to the Collateral Interest Holder on a prior Transfer Date,
will be distributed to the Collateral Interest Holder for distribution in
accordance with the Loan Agreement;
(f) if MBNA or The Bank of New York is the Servicer, an amount equal to
the Collateral Interest Servicing Fee, plus the amount of any overdue
Collateral Interest Servicing Fee, for the related Monthly Period will be
paid to the Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if any,
for such Transfer Date will be deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "-- Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for reasons
other than the payment of principal to the Collateral Interest Holder (but
not in excess of the aggregate amount of such reductions which have not been
previously reimbursed) will be deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "-- Payments of Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "-- Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount shall be deposited into the Reserve Account; and
(j) the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (i) above shall be applied in
accordance with the provisions of the Loan Agreement.
"Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus 1.0% per annum, or such lesser
amount as may be designated in the Loan Agreement (the "Collateral Rate"), (b)
the actual number of days in the related Interest Period divided by 360 and (c)
the Collateral Interest as of the related Record Date or, with respect to the
first Transfer Date, the initial Collateral Interest.
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Payments of Principal. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections (see "-- Principal Payments" above) on deposit in the Principal
Account in the following priority:
(a) on each Transfer Date with respect to the Revolving Period, all such
Available Investor Principal Collections will be distributed or deposited in
the following priority:
(i) an amount equal to the Collateral Monthly Principal will be paid
to the Collateral Interest Holder in accordance with the Loan Agreement;
and
(ii) the balance will be treated as Shared Principal Collections and
applied as described under "Description of the Certificates -- Shared
Principal Collections" herein and in the Prospectus;
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be deposited in
the Principal Funding Account (during the Controlled Accumulation Period)
or distributed to the Class A Certificateholders (during the Rapid
Amortization Period); and
(ii) for each Transfer Date after the Class A Investor Interest has
been paid in full (after taking into account payments to be made on the
related Distribution Date with respect to the Rapid Amortization Period),
an amount equal to the Class B Monthly Principal for such Transfer Date
will be distributed to the Class B Certificateholders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period in which a reduction in the
Required Collateral Interest has occurred, Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal will be applied to reduce the Collateral Interest to the Required
Collateral Interest; and
(d) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) and (c) above, if any,
will be treated as Shared Principal Collections and applied as described
under "Description of the Certificates -- Shared Principal Collections"
herein and in the Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, prior to
the payment in full of the Class A Investor Interest, will equal the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date, (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, prior to the Class A Scheduled
Payment Date, the applicable Controlled Deposit Amount for such Transfer Date
and (iii) the Class A Adjusted Investor Interest prior to any deposits on such
Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period, beginning with the Transfer Date following
the Monthly Period in which the Class A Investor Interest has been paid in full,
or with respect to any Transfer Date relating to the Rapid Amortization Period,
beginning with the Transfer Date immediately preceding the Distribution Date on
which the Class A Certificates have been paid in full (after taking into account
payments to be made on the related Distribution Date), will equal the lesser of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date (minus the portion of such Available
Investor Principal Collections applied to Class A Monthly Principal on such
Transfer Date) and (ii) the Class B Investor Interest for such Transfer Date.
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"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest pursuant to clause (3) of the proviso in the definition
thereof an amount equal to the lesser of (i) the excess, if any, of the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments thereto for the benefit of the Class A
Certificateholders and the Class B Certificateholders on such Transfer Date)
over the Required Collateral Interest on such Transfer Date, and (ii) the
Available Investor Principal Collections on such Transfer Date or (b) with
respect to any Transfer Date relating to the Controlled Accumulation Period or
Rapid Amortization Period an amount equal to the lesser of (i) the excess, if
any, of the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal Collections on such Transfer
Date and after giving effect to any adjustments thereto for the benefit of the
Class A Certificateholders and the Class B Certificateholders on such Transfer
Date) over the Required Collateral Interest on such Transfer Date, and (ii) the
excess, if any, of (A) the Available Investor Principal Collections on such
Transfer Date over (B) the sum of the Class A Monthly Principal and the Class B
Monthly Principal for such Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $53,125,000; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described above
under "-- Postponement of Controlled Accumulation Period," the Controlled
Accumulation Amount may be higher than the amount stated above for each Transfer
Date with respect to the Controlled Accumulation Period and will be determined
by the Servicer in accordance with Agreement II based on the principal payment
rates for the Accounts and on the investor interests of other Series (other than
certain excluded Series) which are scheduled to be in their revolving periods
and then scheduled to create Shared Principal Collections during the Controlled
Accumulation Period and (b) for any Transfer Date with respect to the
Accumulation Period after the payment in full of the Class A Investor Interest,
an amount equal to the Class B Investor Interest on such Transfer Date.
"Accumulation Shortfall" means (a) on the first Transfer Date with respect
to the Controlled Accumulation Period, the excess, if any, of the Controlled
Accumulation Amount for such Transfer Date over the amount distributed from the
Principal Account as Class A Monthly Principal for such Transfer Date and (b) on
each subsequent Transfer Date with respect to the Controlled Accumulation
Period, the excess, if any, of the applicable Controlled Accumulation Amount for
such subsequent Transfer Date plus any Accumulation Shortfall for the prior
Transfer Date over the amount distributed from the Principal Account as Class A
Monthly Principal for such subsequent Transfer Date.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the
Certificateholders and then under certain circumstances payments to the
Collateral Interest Holder. The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest remaining after covering required payments to the
Certificateholders and any similar amount remaining for any other Series in
Group One ("Shared Principal Collections"). The Servicer will allocate the
Shared Principal Collections to cover any scheduled or permitted principal
distributions to certificateholders and deposits to principal funding accounts,
if any, for any Series in Group One which have not been covered out of the
collections of Principal Receivables allocable to such Series and certain other
amounts for such Series ("Principal Shortfalls"). Shared Principal Collections
will not be used to cover investor charge-offs for any Series. If Principal
Shortfalls exceed Shared Principal Collections for any Monthly Period, Shared
Principal Collections will be allocated pro rata among the applicable Series in
Group One based on the relative amounts of Principal Shortfalls. To the extent
that
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Shared Principal Collections exceed Principal Shortfalls, the balance will,
subject to certain limitations, be paid to the holder of the Seller Certificate.
REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $56,250,000 and (ii) thereafter on each Transfer Date an amount
equal to 7.5% of the sum of the Class A Adjusted Investor Interest and the Class
B Investor Interest on such Transfer Date, after taking into account deposits
into the Principal Funding Account on such Transfer Date and payments to be made
on the related Distribution Date, and the Collateral Interest on the prior
Transfer Date after any adjustments made on such Transfer Date, but not less
than $22,500,000; provided, however, (1) that if certain reductions in the
Collateral Interest are made or if a Pay Out Event occurs, the Required
Collateral Interest for such Transfer Date shall equal the Required Collateral
Interest for the Transfer Date immediately preceding the occurrence of such
reduction or Pay Out Event, (2) in no event shall the Required Collateral
Interest exceed the unpaid principal amount of the Certificates as of the last
day of the Monthly Period preceding such Transfer Date after taking into account
payments to be made on the related Distribution Date and (3) the Required
Collateral Interest may be reduced to a lesser amount at any time if the Rating
Agency Condition is satisfied.
"Rating Agency Condition" means the notification in writing by each Rating
Agency to the Seller, the Servicer and the Trustee that a proposed action will
not result in any Rating Agency reducing or withdrawing its then existing rating
of the investor certificates of any outstanding Series or class of a Series with
respect to which it is a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less than
the Required Collateral Interest, certain Excess Spread, if available, will be
allocated to increase the Collateral Interest to the extent of such shortfall.
Any of such Excess Spread not required to be so allocated or deposited into the
Reserve Account with respect to any Transfer Date will be applied in accordance
with the Loan Agreement. See "-- Application of Collections -- Excess Spread."
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (a) the Floating Investor
Percentage on the day the applicable Account became a Defaulted Account and (b)
the aggregate amount of Receivables in Defaulted Accounts (the "Default Amount")
for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class A Certificateholders (the "Class A Investor Default
Amount") on each Transfer Date in an amount equal to the product of the Class A
Floating Allocation applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class B Certificateholders (the "Class B
Investor Default Amount") on each Transfer Date in an amount equal to the
product of the Class B Floating Allocation applicable during the related Monthly
Period and the Investor Default Amount for such Monthly Period. A portion of the
Investor Default Amount will be allocated to the Collateral Interest Holder (the
"Collateral Default Amount") on each Transfer Date in an amount equal to the
product of the Collateral Floating Allocation applicable during the related
Monthly Period and the Investor Default Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Principal
Collections available to fund such amount with respect to the Monthly Period
immediately preceding such Transfer Date as described under "-- Application of
Collections -- Excess Spread," the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date) will be reduced by the amount of such excess,
but not more than the lesser of the Class A Investor Default
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Amount and the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) for such Transfer Date. In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections on such Transfer Date for which the Collateral Interest is
not reduced) will be reduced by the amount by which the Collateral Interest
would have been reduced below zero. In the event that such reduction would cause
the Class B Investor Interest to be a negative number, the Class B Investor
Interest will be reduced to zero, and the Class A Investor Interest will be
reduced by the amount by which the Class B Investor Interest would have been
reduced below zero, but not more than the Class A Investor Default Amount for
such Transfer Date (a "Class A Investor Charge-Off"), which will have the effect
of slowing or reducing the return of principal and interest to the Class A
Certificateholders. If the Class A Investor Interest has been reduced by the
amount of any Class A Investor Charge-Offs, it will be reimbursed on any
Transfer Date (but not by an amount in excess of the aggregate Class A Investor
Charge-Offs) by the amount of Excess Spread allocated and available for such
purpose as described under "-- Application of Collections -- Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Collateral
Principal Collections which are allocated and available to fund such amount with
respect to the Monthly Period preceding such Transfer Date as described under
"-- Application of Collections -- Excess Spread," the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date and after giving effect to any
adjustments with respect thereto as described in the preceding paragraph) will
be reduced by the amount of such excess but not more than the lesser of the
Class B Investor Default Amount and the Collateral Interest (after giving effect
to reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and after giving effect to any adjustments
with respect thereto as described in the preceding paragraph) for such Transfer
Date. In the event that such reduction would cause the Collateral Interest to be
a negative number, the Collateral Interest will be reduced to zero and the Class
B Investor Interest will be reduced by the amount by which the Collateral
Interest would have been reduced below zero, but not more than the Class B
Investor Default Amount for such Transfer Date (a "Class B Investor
Charge-Off"). The Class B Investor Interest will also be reduced by the amount
of Reallocated Class B Principal Collections in excess of the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Collateral Principal Collections on such Transfer Date) and the
amount of any portion of the Class B Investor Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest. The Class B
Investor Interest will thereafter be reimbursed (but not in excess of the unpaid
principal balance of the Class B Certificates) on any Transfer Date by the
amount of Excess Spread allocated and available for that purpose as described
under "-- Application of Collections -- Excess Spread."
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread which is allocated and available to
fund such amount as described under "-- Application of Collections -- Excess
Spread," the Collateral Interest will be reduced by the amount of such excess
but not more than the lesser of the Collateral Default Amount and the Collateral
Interest for such Transfer Date (a "Collateral Charge-Off"). The Collateral
Interest will also be reduced by the amount of Reallocated Principal Collections
and the amount of any portion of the Collateral Interest allocated to the Class
A Certificates to avoid a reduction in the Class A Investor Interest or to the
Class B Certificates to avoid a reduction in the Class B Investor Interest. The
Collateral Interest will thereafter be reimbursed on any Transfer Date by the
amount of Excess Spread allocated and available for that purpose as described
under "-- Application of Collections -- Excess Spread."
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PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1996-E Supplement, the Trustee will establish and
maintain with a Qualified Institution the principal funding account as a
segregated trust account held for the benefit of the Certificateholders (the
"Principal Funding Account"). During the Controlled Accumulation Period, the
Trustee at the direction of the Servicer shall transfer collections in respect
of Principal Receivables (other than Reallocated Principal Collections) and
Shared Principal Collections from other Series, if any, allocated to the Series
1996-E Certificates from the Principal Account to the Principal Funding Account
as described under "-- Application of Collections."
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be used to pay interest on the Class A
Certificates in an amount up to, for each Transfer Date, the product of (a) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, (b) the Class A Certificate
Rate in effect with respect to the related Interest Period and (c) the Principal
Funding Account Balance allocable to the Class A Investor Interest as of the
Record Date preceding such Transfer Date (the "Class A Covered Amount"). If, for
any Transfer Date, the Principal Funding Investment Proceeds are less than the
Class A Covered Amount, the amount of such deficiency (the "Class A Principal
Funding Investment Shortfall") shall be withdrawn, to the extent available, from
the Reserve Account and deposited in the Finance Charge Account and included as
Class A Available Funds for such Transfer Date.
RESERVE ACCOUNT
Pursuant to the Series 1996-E Supplement, the Trustee will establish and
maintain with a Qualified Institution the reserve account as a segregated trust
account held for the benefit of the Certificateholders (the "Reserve Account").
The Reserve Account is established to assist with the subsequent distribution of
interest on the Certificates during the Controlled Accumulation Period. On each
Transfer Date from and after the Reserve Account Funding Date, but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread allocated to the Certificates
(to the extent described above under "-- Application of Collections -- Excess
Spread") to increase the amount on deposit in the Reserve Account (to the extent
such amount is less than the Required Reserve Account Amount). The "Reserve
Account Funding Date" will be the Transfer Date with respect to the Monthly
Period which commences no later than three months prior to the commencement of
the Controlled Accumulation Period, or such earlier date as the Servicer may
determine. The "Required Reserve Account Amount" for any Transfer Date on or
after the Reserve Account Funding Date will be equal to (a) 0.5% of the
outstanding principal balance of the Class A Certificates or (b) any other
amount designated by the Seller; provided, that if such designation is of a
lesser amount, the Seller shall have provided the Servicer, the Collateral
Interest Holder and the Trustee with evidence that the Rating Agency Condition
has been satisfied and the Seller shall have delivered to the Trustee a
certificate of an authorized officer of the Seller to the effect that, based on
the facts known to such officer at such time, in the reasonable belief of the
Seller, such designation will not cause a Pay Out Event or an event that, after
the giving of notice or the lapse of time, would cause a Pay Out Event to occur
with respect to Series 1996-E. On each Transfer Date, after giving effect to any
deposit to be made to, and any withdrawal to be made from, the Reserve Account
on such Transfer Date, the Trustee will withdraw from the Reserve Account an
amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and shall distribute such
excess to the Collateral Interest Holder for application in accordance with the
terms of the Loan Agreement.
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Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or deposited
in the Finance Charge Account and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included as
Class A Available Funds for such Transfer Date in an amount equal to the lesser
of (a) the Available Reserve Account Amount with respect to such Transfer Date
and (b) the Class A Principal Funding Investment Shortfall with respect to such
Transfer Date; provided, that the amount of such withdrawal shall be reduced to
the extent that funds otherwise would be available to be deposited in the
Reserve Account on such Transfer Date. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Reserve
Account Amount") will be equal to the lesser of the amount on deposit in the
Reserve Account (before giving effect to any deposit to be made to the Reserve
Account on such Transfer Date) and the Required Reserve Account Amount for such
Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of Trust II pursuant to the Pooling and Servicing Agreement and (b)
if the Controlled Accumulation Period has not commenced, the first Transfer Date
with respect to the Rapid Amortization Period or, if the Controlled Accumulation
Period has commenced, the earlier to occur of (i) the first Transfer Date with
respect to the Rapid Amortization Period and (ii) the Transfer Date immediately
preceding the Class A Scheduled Payment Date. Upon the termination of the
Reserve Account, all amounts on deposit therein (after giving effect to any
withdrawal from the Reserve Account on such date as described above) will be
distributed to the Collateral Interest Holder for application in accordance with
the terms of the Loan Agreement. Any amounts withdrawn from the Reserve Account
and distributed to the Collateral Interest Holder as described above will not be
available for distribution to the Certificateholders.
PAY OUT EVENTS
As described above, the Revolving Period will continue through April 30,
2002 (unless such date is postponed as described under "-- Postponement of
Controlled Accumulation Period"), unless a Pay Out Event occurs prior to such
date. A "Pay Out Event" refers to any of the following events:
(a) failure on the part of the Seller (i) to make any payment or deposit
on the date required under Agreement II or the Series 1996-E Supplement (or
within the applicable grace period which shall not exceed five days) or (ii)
to observe or perform in any material respect any other covenants or
agreements of the Seller set forth in Agreement II or the Series 1996-E
Supplement, which failure has a material adverse effect on the
Certificateholders (which determination shall be made without reference to
whether any funds are available under the Collateral Interest) and which
continues unremedied for a period of 60 days after written notice of such
failure, requiring the same to be remedied, and continues to materially and
adversely affect the interests of the Certificateholders (which
determination shall be made without reference to whether any funds are
available under the Collateral Interest) for such period;
(b) any representation or warranty made by the Seller in Agreement II or
the Series 1996-E 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 or delivered and which continues to be
incorrect in any material respect for a period of 60 days after written
notice of such
S-44
<PAGE>
failure, requiring the same to be remedied, and as a result of which the
interests of the Certificateholders are materially and adversely affected
(which determination shall be made without reference to whether any funds
are available under the Collateral Interest) and continue to be materially
and adversely affected for such period; provided, however, that a Pay Out
Event pursuant to this subparagraph (b) shall not be deemed to occur
thereunder if the Seller has accepted reassignment of the related Receivable
or all such Receivables, if applicable, during such period (or such longer
period as the Trustee may specify) in accordance with the provisions of
Agreement II;
(c) the Portfolio Yields for any three consecutive Monthly Periods is
less than the average of the Base Rates for such period;
(d) a failure by the Seller to convey Receivables arising under
Additional Accounts, or Participations, to Trust II when required by
Agreement II;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) insufficient moneys in the Distribution Account to pay the Class A
Investor Interest on the Class A Scheduled Payment Date or the Class B
Investor Interest on the Class B Scheduled Payment Date;
(g) certain events of insolvency, conservatorship or receivership
relating to the Seller;
(h) the Seller becomes unable for any reason to transfer Receivables to
Trust II in accordance with the provisions of Agreement II; or
(i) Trust II becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a Pay
Out Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period, either the Trustee or Certificateholders
and the Collateral Interest Holder evidencing undivided interests aggregating
not less than 50% of the Investor Interest, by written notice to the Seller and
the Servicer (and to the Trustee if given by the Certificateholders) declare
that a Pay Out Event has occurred with respect to the Certificates as of the
date of such notice. In the case of any event described in clause (g), (h) or
(i), a Pay Out Event with respect to all Series then outstanding, and in the
case of any event described in clause (c), (d) or (f), a Pay Out Event with
respect to only the Certificates, will be deemed to have occurred without any
notice or other action on the part of the Trustee or the Certificateholders or
all certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which a Pay Out Event is deemed to have occurred, the
Rapid Amortization Period will commence. In such event, distributions of
principal to the Certificateholders will begin on the first Distribution Date
following the month in which such Pay Out Event occurred. If, because of the
occurrence of a Pay Out Event, the Rapid Amortization Period begins on or prior
to March 31, 2003, Certificateholders may begin receiving distributions of
principal earlier than they otherwise would have, which may shorten the average
life of the Certificates.
See "Description of the Certificates -- Pay Out Events" in the Prospectus
for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the Seller.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) 2.0% and (b) the Adjusted Investor Interest as
of the last day of the Monthly Period preceding such Transfer Date;
S-45
<PAGE>
provided, however, with respect to the first Transfer Date, the Investor
Servicing Fee shall be equal to $ . On each Transfer Date, but only if
MBNA or The Bank of New York is the Servicer, Servicer Interchange with respect
to the related Monthly Period that is on deposit in the Finance Charge Account
shall be withdrawn from the Finance Charge Account and paid to the Servicer in
payment of a portion of the Investor Servicing Fee with respect to such Monthly
Period. The "Servicer Interchange" for any Monthly Period for which MBNA or The
Bank of New York is the Servicer will be an amount equal to the portion of
collections of Finance Charge Receivables allocated to the Investor Interest
with respect to such Monthly Period that is attributable to Interchange;
provided, however, that Servicer Interchange for a Monthly Period shall not
exceed one-twelfth of the product of (i) the Adjusted Investor Interest, as of
the last day of such Monthly Period and (ii) 0.75%; provided further, however,
that with respect to the first Transfer Date, the Servicer Interchange may equal
but shall not exceed $ . In the case of any insufficiency of Servicer
Interchange on deposit in the Finance Charge Account, a portion of the Investor
Servicing Fee with respect to such Monthly Period will not be paid to the extent
of such insufficiency and in no event shall Trust II, the Trustee, the
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 Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.25%, or if MBNA or The Bank of New York is not the Servicer,
2.0% (the "Net Servicing Fee Rate") and (c) the Adjusted Investor Interest as of
the last day of the Monthly Period preceding such Transfer Date; provided,
however, that with respect to the first Transfer Date, the Class A Servicing Fee
shall be equal to $ . The share of the Investor Servicing Fee allocable
to the Class B Certificateholders with respect to any Transfer Date (the "Class
B Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class
B Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided, however, that with respect to the first Transfer Date,
the Class B Servicing Fee shall be equal to $ . The share of the Investor
Servicing Fee allocable to the Collateral Interest Holder with respect to any
Transfer Date (the "Collateral Interest Servicing Fee", together with the Class
A Servicing Fee and the Class B Servicing Fee, the "Certificateholder Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Collateral
Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided, however, that with respect to the first Transfer Date,
the Collateral Interest Servicing Fee shall be equal to $ . The remainder of
the Servicing Fee shall be paid by the holder of the Seller Certificate or other
Series (as provided in the related Series Supplements) or, to the extent of any
insufficiency of Servicer Interchange as described above, not be paid. In no
event shall Trust II, the Trustee, the Certificateholders or the Collateral
Interest Holder be liable for the share of the Servicing Fee to be paid out of
Servicer Interchange. The Class A Servicing Fee and the Class B 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."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
Agreement II to be payable by Trust II or the Certificateholders other than
federal, state and local income and franchise taxes, if any, of Trust II.
REPORTS TO CERTIFICATEHOLDERS
On each Transfer Date, the Trustee will forward to each Certificateholder of
record, a statement prepared by the Servicer setting forth the items described
in "Description of the Certificates -- Reports
S-46
<PAGE>
to Certificateholders" in the Prospectus. In addition, such statement will
include certain information regarding the Principal Funding Account and the
Collateral Interest, if any, for such Transfer Date.
AMENDMENTS
In addition to being subject to amendment pursuant to any other provisions
relating to amendments in either Agreement II or the Series 1996-E Supplement,
the Series 1996-E Supplement may be amended by the Seller without the consent of
the Servicer, the Trustee or any Certificateholder if the Seller provides the
Trustee with (a) an opinion of counsel to the effect that such amendment or
modification would reduce the risk that Trust II would be treated as taxable as
a publicly traded partnership pursuant to Code section 7704 and (b) a
certificate that such amendment or modification would not materially and
adversely affect any Certificateholder, provided that no such amendment shall be
deemed effective without the Trustee's consent, if the Trustee's rights, duties
and obligations under the Series 1996-E Supplement are thereby modified.
Promptly after the effectiveness of any such amendment, the Seller shall deliver
a copy of such amendment to each of the Servicer, the Trustee and each Rating
Agency described in the Series 1996-E Supplement.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
as supplemented by a terms agreement relating to the Class A Certificates
(together, the "Class A Underwriting Agreement") between the Seller and the
Class A Underwriters named below (the "Class A Underwriters"), and the terms and
conditions set forth in an underwriting agreement as supplemented by a terms
agreement relating to the Class B Certificates (together, the "Class B
Underwriting Agreement," and together with the Class A Underwriting Agreement,
the "Underwriting Agreement") between the Seller and the Class B Underwriters
named below (the "Class B Underwriters," and together with the Class A
Underwriters, the "Underwriters"), the Seller has agreed to sell to the
Underwriters, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Certificates set forth opposite its name:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A
CLASS A UNDERWRITERS CERTIFICATES
- ------------------------------------------------------------------ -------------------
<S> <C>
J.P. Morgan Securities Inc. ...................................... $ 127,500,000
Goldman, Sachs & Co. ............................................. 127,500,000
Lehman Brothers Inc. ............................................. 127,500,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................... 127,500,000
Salomon Brothers Inc.............................................. 127,500,000
-------------------
Total......................................................... $ 637,500,000
-------------------
-------------------
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B
CLASS B UNDERWRITERS CERTIFICATES
- ------------------------------------------------------------------ -------------------
<S> <C>
J.P. Morgan Securities Inc. ...................................... $ 28,125,000
Lehman Brothers Inc. ............................................. 28,125,000
-------------------
Total......................................................... $ 56,250,000
-------------------
-------------------
</TABLE>
In the Class A Underwriting Agreement, the Class A Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Class A Certificates offered hereby if any of the Class A Certificates are
purchased. In the Class B Underwriting Agreement, the Class B Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Class B
S-47
<PAGE>
Certificates offered hereby if any of the Class B Certificates are purchased.
The Underwriters have agreed to reimburse the Seller for certain expenses of the
issuance and distribution of the Certificates.
The Class A Underwriters propose initially to offer the Class A Certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of % of the principal
amount of the Class A Certificates. The Class A Underwriters may allow, and such
dealers may reallow, concessions not in excess of % of the principal amount
of the Class A Certificates to certain brokers and dealers. After the initial
public offering, the public offering price and other selling terms may be
changed by the Class A Underwriters.
The Class B Underwriters propose initially to offer the Class B Certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of % of the principal
amount of the Class B Certificates. The Class B Underwriters may allow, and such
dealers may reallow, concessions not in excess of % of the principal amount
of the Class B Certificates to certain brokers and dealers. After the initial
public offering, the public offering price and other selling terms may be
changed by the Class B Underwriters.
Each Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Certificates to a person who is
of a kind described in Article 8 of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) (No. 2) Order 1995 of Great Britain or is a person
to whom the document may otherwise lawfully be issued or passed on.
The Seller will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial transactions
with MBNA, its affiliates and Trust II.
S-48
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
Accounts............................................................................. S-1
Accumulation Period Length........................................................... S-31
Accumulation Shortfall............................................................... S-10
Additional Interest.................................................................. S-8
Adjusted Investor Interest........................................................... S-6
Agreement II......................................................................... S-3
Available Investor Principal Collections............................................. S-30
Available Reserve Account Amount..................................................... S-44
Bank Portfolio....................................................................... S-3
Base Rate............................................................................ S-25
Certificateholder Servicing Fee...................................................... S-46
Certificateholders................................................................... S-3
Certificates......................................................................... S-1
Class A Additional Interest.......................................................... S-29
Class A Adjusted Investor Interest................................................... S-6
Class A Available Funds.............................................................. S-29
Class A Certificate Rate............................................................. S-2
Class A Certificateholders........................................................... S-3
Class A Certificates................................................................. S-1
Class A Covered Amount............................................................... S-10
Class A Fixed Allocation............................................................. S-33
Class A Floating Allocation.......................................................... S-32
Class A Investor Charge-Off.......................................................... S-13
Class A Investor Default Amount...................................................... S-41
Class A Investor Interest............................................................ S-4
Class A Monthly Interest............................................................. S-37
Class A Monthly Principal............................................................ S-39
Class A Principal Funding Investment Shortfall....................................... S-10
Class A Required Amount.............................................................. S-12
Class A Scheduled Payment Date....................................................... S-2
Class A Servicing Fee................................................................ S-46
Class A Underwriters................................................................. S-47
Class A Underwriting Agreement....................................................... S-47
Class B Additional Interest.......................................................... S-29
Class B Available Funds.............................................................. S-29
Class B Certificate Rate............................................................. S-2
Class B Certificateholders........................................................... S-3
Class B Certificates................................................................. S-1
Class B Fixed Allocation............................................................. S-33
Class B Floating Allocation.......................................................... S-32
Class B Investor Charge-Off.......................................................... S-14
Class B Investor Default Amount...................................................... S-41
Class B Investor Interest............................................................ S-4
Class B Monthly Interest............................................................. S-37
Class B Monthly Principal............................................................ S-39
Class B Required Amount.............................................................. S-12
Class B Scheduled Payment Date....................................................... S-2
Class B Servicing Fee................................................................ S-46
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
Class B Underwriters................................................................. S-47
Class B Underwriting Agreement....................................................... S-47
Closing Date......................................................................... S-2
Code................................................................................. S-17
Collateral Available Funds........................................................... S-37
Collateral Charge-Off................................................................ S-42
Collateral Default Amount............................................................ S-41
Collateral Fixed Allocation.......................................................... S-33
Collateral Floating Allocation....................................................... S-32
Collateral Interest.................................................................. S-4
Collateral Interest Holder........................................................... S-4
Collateral Interest Servicing Fee.................................................... S-46
Collateral Monthly Interest.......................................................... S-38
Collateral Monthly Principal......................................................... S-40
Collateral Rate...................................................................... S-38
Controlled Accumulation Amount....................................................... S-40
Controlled Accumulation Period....................................................... S-9
Controlled Deposit Amount............................................................ S-9
Cut-Off Date......................................................................... S-4
Default Amount....................................................................... S-41
Distribution Date.................................................................... S-2
ERISA................................................................................ S-17
Excess Spread........................................................................ S-13
Fixed Investor Percentage............................................................ S-33
Floating Investor Percentage......................................................... S-32
Group One............................................................................ S-15
Initial Collateral Interest.......................................................... S-14
Interest Period...................................................................... S-8
Investor Default Amount.............................................................. S-41
Investor Interest.................................................................... S-4
Investor Servicing Fee............................................................... S-45
LIBOR................................................................................ S-2
LIBOR Determination Date............................................................. S-29
Loan Agreement....................................................................... S-15
MBNA................................................................................. S-1
MBNA I.S............................................................................. S-18
Minimum Aggregate Principal Receivables.............................................. S-20
Minimum Seller Interest.............................................................. S-20
Monthly Period....................................................................... S-6
Net Servicing Fee Rate............................................................... S-46
OCMS................................................................................. S-18
Pay Out Event........................................................................ S-44
Portfolio Yield...................................................................... S-25
Principal Funding Account............................................................ S-9
Principal Funding Account Balance.................................................... S-24
Principal Funding Investment Proceeds................................................ S-10
Principal Shortfalls................................................................. S-40
Rapid Amortization Period............................................................ S-11
Rating Agency Condition.............................................................. S-41
Reallocated Class B Principal Collections............................................ S-35
Reallocated Collateral Principal Collections......................................... S-35
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------- ----
<S> <C>
Reallocated Principal Collections.................................................... S-35
Receivables.......................................................................... S-1
Record Date.......................................................................... S-28
Reference Banks...................................................................... S-30
Required Amount...................................................................... S-12
Required Collateral Interest......................................................... S-14
Required Reserve Account Amount...................................................... S-43
Reserve Account...................................................................... S-43
Reserve Account Funding Date......................................................... S-43
Revolving Period..................................................................... S-9
Seller............................................................................... S-3
Seller Certificate................................................................... S-6
Seller Interest...................................................................... S-4
Seller Percentage.................................................................... S-28
Series 1996-E........................................................................ S-4
Series 1996-E Supplement............................................................. S-3
Series 1996-E Termination Date....................................................... S-7
Servicer Interchange................................................................. S-46
Shared Principal Collections......................................................... S-15
Telerate Page 3750................................................................... S-30
Transfer Date........................................................................ S-36
Trust II............................................................................. S-1
Trust II Portfolio................................................................... S-20
Trustee.............................................................................. S-3
Underwriters......................................................................... S-47
Underwriting Agreement............................................................... S-47
</TABLE>
S-51
<PAGE>
ANNEX I
OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the nineteen
other Series previously issued by Trust II, all of which are in Group One. For
more specific information with respect to any Series, any prospective investor
should contact MBNA at (800) 362-6255 or (302) 456-8588. MBNA will provide,
without charge, to any prospective purchaser of the Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.
1. Series 1994-A
<TABLE>
<S> <C>
Class A Certificates
Initial Investor Interest...............................................$661,200,000
Certificate Rate................................One-Month LIBOR plus 0.17% per annum
Controlled Accumulation Amount (subject to adjustment)...................$55,100,000
Commencement of Accumulation Period....................................July 31, 1998
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$64,600,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1994-A Termination Date........................January 2002 Distribution Date
Series Issuance Date..................................................August 4, 1994
Class B Certificates
Initial Investor Interest................................................$34,200,000
Certificate Rate................................One-Month LIBOR plus 0.37% per annum
Controlled Accumulation Amount...........................................$34,200,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1994-A Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
2. Series 1994-B
Class A Certificates
Initial Investor Interest...............................................$870,000,000
Certificate Rate....................Thirteen-week Treasury Bill plus 0.45% per annum
Controlled Accumulation Amount (subject to adjustment)...................$72,500,000
Commencement of Accumulation Period....................................July 31, 1998
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$85,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1994-B Termination Date........................January 2002 Distribution Date
Series Issuance Date.................................................August 18, 1994
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Class B Certificates
Initial Investor Interest................................................$45,000,000
Certificate Rate................................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount...........................................$45,000,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1994-B Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
3. Series 1994-C
Class A Certificates
Initial Investor Interest...............................................$870,000,000
Certificate Rate.................................One-Month LIBOR plus .25% per annum
Controlled Accumulation Amount (subject to adjustment)...................$72,500,000
Commencement of Accumulation Period...............................September 30, 2000
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$85,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1994-C Termination Date..........................March 2004 Distribution Date
Series Issuance Date................................................October 26, 1994
Class B Certificates
Initial Investor Interest................................................$45,000,000
Certificate Rate.................................One-Month LIBOR plus .45% per annum
Controlled Accumulation Amount...........................................$45,000,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1994-C Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
4. Series 1994-D
Class A Certificates
Initial Investor Interest...............................................$870,000,000
Certificate Rate........................Daily Federal Funds Rate plus .33% per annum
Controlled Accumulation Amount (subject to adjustment)...................$72,500,000
Commencement of Accumulation Period...............................September 30, 1996
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$85,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1994-D Termination Date..........................March 2000 Distribution Date
Series Issuance Date................................................October 26, 1994
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
Class B Certificates
Initial Investor Interest................................................$45,000,000
Certificate Rate.................................One-Month LIBOR plus .35% per annum
Controlled Accumulation Amount...........................................$45,000,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1994-D Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
5. Series 1994-E
Initial Investor Interest...............................................$500,000,000
Current Investor Interest as of April 30, 1996..........................$500,000,000
Maximum Investor Interest...............................................$700,000,000
Certificate Rate..............................................Commercial Paper Index
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Cash Collateral Amount...........................................$20,000,000
Series Issuance Date...............................................December 15, 1994
6. Series 1995-A
Class A Certificates
Initial Investor Interest...............................................$500,250,000
Certificate Rate.................................One-Month LIBOR plus .27% per annum
Controlled Accumulation Amount (subject to adjustment)...................$41,687,500
Commencement of Accumulation Period....................................July 31, 2003
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$48,875,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-A Termination Date........................January 2007 Distribution Date
Series Issuance Date..................................................March 22, 1995
Class B Certificates
Initial Investor Interest................................................$25,875,000
Certificate Rate.................................One-Month LIBOR plus .45% per annum
Controlled Accumulation Amount...........................................$25,875,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-A Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
A-3
<PAGE>
<TABLE>
<S> <C>
7. Series 1995-B
Class A Certificates
Initial Investor Interest...............................................$652,500,000
Certificate Rate.................................One-Month LIBOR plus .16% per annum
Controlled Accumulation Amount (subject to adjustment)...................$54,375,000
Commencement of Accumulation Period...................................April 30, 1999
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$63,750,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-B Termination Date........................October 2002 Distribution Date
Series Issuance Date....................................................May 23, 1995
Class B Certificates
Initial Investor Interest................................................$33,750,000
Certificate Rate.................................One-Month LIBOR plus .32% per annum
Controlled Accumulation Amount...........................................$33,750,000
Commencement of Accumulation Period...........Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-B Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
8. Series 1995-C
Class A Certificates
Initial Investor Interest...............................................$500,250,000
Certificate Rate.....................................................6.45% per annum
Controlled Accumulation Amount (subject to adjustment)...................$41,687,500
Commencement of Controlled Accumulation Period..........................May 31, 2004
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$48,875,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-C Termination Date.......................February 2008 Distribution Date
Series Issuance Date...................................................June 29, 1995
Class B Certificates
Initial Investor Interest................................................$25,875,000
Certificate Rate.................................One-Month LIBOR plus .42% per annum
Controlled Accumulation Amount...........................................$25,875,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-C Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
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9. Series 1995-D
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate.....................................................6.05% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period..........................May 31, 1999
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-D Termination Date.......................November 2002 Distribution Date
Series Issuance Date...................................................June 29, 1995
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate.................................One-Month LIBOR plus .29% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-D Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
10. Series 1995-E
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate................................One-Month LIBOR plus 0.22% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period.........................July 31, 2001
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-E Termination Date........................January 2005 Distribution Date
Series Issuance Date..................................................August 2, 1995
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate................................One-Month LIBOR plus 0.32% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-E Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
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11. Series 1995-F
Class A Certificates
Initial Investor Interest...............................................$455,000,000
Certificate Rate.....................................................6.60% per annum
Controlled Accumulation Amount (subject to adjustment)................$37,916,666.67
Commencement of Controlled Accumulation Period.........................July 31, 1999
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$26,250,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-F Termination Date........................January 2003 Distribution Date
Series Issuance Date.................................................August 30, 1995
Class B Certificates
Initial Investor Interest................................................$18,750,000
Certificate Rate.....................................................6.75% per annum
Controlled Accumulation Amount...........................................$18,750,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-F Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
12. Series 1995-G
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate................................One-Month LIBOR plus 0.21% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period....................September 30, 2001
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-G Termination Date..........................March 2005 Distribution Date
Series Issuance Date..............................................September 27, 1995
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate................................One-Month LIBOR plus 0.33% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-G Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
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13. Series 1995-H
Class A Certificates
Initial Investor Interest...............................................$285,245,000
Certificate Rate................................One-Month LIBOR plus 0.07% per annum
Controlled Accumulation Amount (subject to adjustment)................$23,770,416.67
Commencement of Controlled Accumulation Period....................September 30, 1997
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$27,875,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-H Termination Date..........................March 2001 Distribution Date
Series Issuance Date..............................................September 28, 1995
Class B Certificates
Initial Investor Interest................................................$14,755,000
Certificate Rate................................One-Month LIBOR plus 0.19% per annum
Controlled Accumulation Amount...........................................$14,755,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-H Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
14. Series 1995-I
Class A Certificates
Initial Investor Interest...............................................$652,500,000
Certificate Rate................................One-Month LIBOR plus 0.17% per annum
Controlled Accumulation Amount (subject to adjustment)...................$54,375,000
Commencement of Controlled Accumulation Period....................September 30, 1999
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$63,750,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-I Termination Date..........................March 2003 Distribution Date
Series Issuance Date................................................October 26, 1995
Class B Certificates
Initial Investor Interest................................................$33,750,000
Certificate Rate................................One-Month LIBOR plus 0.27% per annum
Controlled Accumulation Amount...........................................$33,750,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-I Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
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15. Series 1995-J
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate................................One-Month LIBOR plus 0.23% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period......................October 31, 2001
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1995-J Termination Date..........................April 2005 Distribution Date
Series Issuance Date...............................................November 21, 1995
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate................................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1995-J Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
16. Series 1996-A
Class A Certificates
Initial Investor Interest...............................................$609,000,000
Certificate Rate................................One-Month LIBOR plus 0.21% per annum
Controlled Accumulation Amount (subject to adjustment)...................$50,750,000
Commencement of Controlled Accumulation Period......................January 31, 2002
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$59,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1996-A Termination Date...........................July 2005 Distribution Date
Series Issuance Date...............................................February 28, 1996
Class B Certificates
Initial Investor Interest................................................$31,500,000
Certificate Rate................................One-Month LIBOR plus 0.34% per annum
Controlled Accumulation Amount...........................................$31,500,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1996-A Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
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17. Series 1996-B
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate................................One-Month LIBOR plus 0.26% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period.....................February 28, 2005
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1996-B Termination Date.........................August 2008 Distribution Date
Series Issuance Date..................................................March 26, 1996
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate................................One-Month LIBOR plus 0.37% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period.......................................Same as above for Class A Certificate
Annual Servicing Fee Percentage................Same as above for Class A Certificate
Initial Collateral Interest....................Same as above for Class A Certificate
Series 1996-B Termination Date.................Same as above for Class A Certificate
Series Issuance Date...........................Same as above for Class A Certificate
18. Series 1996-C
Class A Certificates
Initial Investor Interest...............................................$435,000,000
Certificate Rate................................One-Month LIBOR plus 0.14% per annum
Controlled Accumulation Amount (subject to adjustment)...................$36,250,000
Commencement of Controlled Accumulation Period.....................February 29, 2000
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$42,500,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1996-C Termination Date.........................August 2003 Distribution Date
Series Issuance Date..................................................March 27, 1996
Class B Certificates
Initial Investor Interest................................................$22,500,000
Certificate Rate................................One-Month LIBOR plus 0.28% per annum
Controlled Accumulation Amount...........................................$22,500,000
Commencement of Controlled Accumulation
Period.......................................Same as above for Class A Certificate
Annual Servicing Fee Percentage................Same as above for Class A Certificate
Initial Collateral Interest....................Same as above for Class A Certificate
Series 1996-C Termination Date.................Same as above for Class A Certificate
Series Issuance Date...........................Same as above for Class A Certificate
</TABLE>
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19. Series 1996-D
Class A Certificates
Initial Investor Interest...............................................$850,000,000
Certificate Rate................................One-Month LIBOR plus 0.15% per annum
Controlled Accumulation Amount (subject to adjustment)................$70,833,333.33
Commencement of Controlled Accumulation Period........................March 31, 2000
Annual Servicing Fee Percentage.......................................2.0% per annum
Initial Collateral Interest..............................................$75,000,000
Other Enhancement..............................Subordination of Class B Certificates
Series 1996-D Termination Date......................September 2003 Distribution Date
Series Issuance Date.....................................................May 1, 1996
Class B Certificates
Initial Investor Interest................................................$75,000,000
Certificate Rate................................One-Month LIBOR plus 0.29% per annum
Controlled Accumulation Amount...........................................$75,000,000
Commencement of Controlled Accumulation
Period......................................Same as above for Class A Certificates
Annual Servicing Fee Percentage...............Same as above for Class A Certificates
Initial Collateral Interest...................Same as above for Class A Certificates
Series 1996-D Termination Date................Same as above for Class A Certificates
Series Issuance Date..........................Same as above for Class A Certificates
</TABLE>
A-10
<PAGE>
PROSPECTUS
MBNA MASTER CREDIT CARD TRUSTS
ASSET BACKED CERTIFICATES
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
-------------------
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The
Certificates of each Series will represent an undivided interest in a specified
MBNA Master Credit Card Trust (each, a "Trust"). A Trust has been formed
pursuant to a pooling and servicing agreement between MBNA America Bank,
National Association ("MBNA"), as seller and servicer, and Bankers Trust
Company, as trustee. An additional Trust has been formed pursuant to a pooling
and servicing agreement between MBNA, as seller and servicer, and The Bank of
New York, as trustee. Additional Trusts may be formed from time to time, each
pursuant to a pooling and servicing agreement to be entered into between MBNA,
as seller and servicer, and a trustee identified in the Prospectus Supplement
relating to the Series of Certificates representing interests in such Trust. The
property of each Trust will include receivables (the "Receivables") generated
from time to time in a portfolio of consumer revolving credit card accounts (the
"Accounts"), all monies due in payment of the Receivables and certain other
property, as more fully described herein and, with respect to any Series, in the
related Prospectus Supplement. MBNA initially will own the remaining undivided
interest in each Trust not represented by the Certificates issued by such Trust
and will service the related Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest in
the related Trust and the interest of the Certificateholders of each Class or
Series will include the right to receive a varying percentage of each month's
collections with respect to the Receivables of such Trust at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and principal
payments with respect to each Series offered hereby will be made as specified in
the related Prospectus Supplement. One or more Classes of a Series offered
hereby may be entitled to the benefits of a cash collateral account or guaranty,
a collateral interest, a letter of credit, a surety bond, an insurance policy or
other form of enhancement as specified in the Prospectus Supplement relating to
such Series. In addition, any Series offered hereby may include one or more
Classes which are subordinated in right and priority to payment of principal of,
and/or interest on, one or more other Classes of such Series or another Series,
in each case to the extent described in the related Prospectus Supplement. Each
Series of Certificates or Class thereof offered hereby will be rated in one of
the four highest rating categories by at least one nationally recognized rating
organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
Certificateholders of any previously issued Series.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 19 HEREIN.
-------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUSTS ONLY AND WILL
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF MBNA AMERICA BANK, NATIONAL
ASSOCIATION OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER
THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
Certificates may be sold by MBNA directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to MBNA from such offering
will be the public offering price of such Certificates less such discount in the
case of an underwriter, the purchase price of such Certificates less such
commission in the case of an agent or the purchase price of such Certificates in
the case of a dealer, and less, in each case, the other expenses of MBNA
associated with the issuance and distribution of such Certificates. See "Plan of
Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
-------------------
The date of this Prospectus is April 19, 1996.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate Certificates
included in such Series, if any, or such other type of Class of Certificates;
(g) the Distribution Dates for the respective Classes; (h) relevant financial
information with respect to the Receivables; (i) additional information with
respect to any Enhancement relating to such Series; and (j) the plan of
distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning each Trust and prepared by the
Servicer, will be sent on behalf of such Trust to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
related Certificates, pursuant to the related Agreement. See "Description of the
Certificates -- Book-Entry Registration," " -- Reports to Certificateholders"
and "-- Evidence as to Compliance." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The Seller does not intend to send any of its financial reports to
Certificateholders or to the owners of beneficial interests in the Certificates
("Certificate Owners"). The Servicer will file with the Securities and Exchange
Commission (the "Commission") such periodic reports with respect to each Trust
as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of each
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Investor Relations, MBNA America Bank, National
Association, 400 Christiana Road, Newark, Delaware 19713. Telephone requests for
such copies should be directed to MBNA America Bank, National Association at
(800) 362-6255.
2
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in any accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus." Unless the context requires
otherwise, capitalized terms used in this Prospectus and in any accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
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TYPE OF SECURITIES........... Asset Backed Certificates (the "Certificates") evidencing an
undivided ownership interest in the assets of a MBNA Master
Credit Card Trust (each, a "Trust") may be issued from
time to time in one or more series (each, a "Series")
which will consist of one or more classes of Certificates
(each, a "Class").
TRUSTS....................... A Trust ("Trust I") was formed pursuant to a pooling and
servicing agreement dated as of September 25, 1991
("Agreement I") between MBNA America Bank, National
Association ("MBNA"), as seller and servicer, and Bankers
Trust Company, as trustee. An additional Trust ("Trust
II") was formed pursuant to a pooling and servicing
agreement dated as of August 4, 1994 ("Agreement II")
between MBNA, as seller and servicer, and The Bank of New
York, as trustee. Additional Trusts (each such Trust, a
"New Trust") may be formed from time to time, each
pursuant to a pooling and servicing agreement (each such
agreement, a "New Agreement," and each New Agreement,
Agreement I and Agreement II, an "Agreement") to be
entered into between MBNA, as seller and servicer, and a
trustee to be identified in the Prospectus Supplement
relating to the Series of Certificates representing
interests in such Trust (each trustee under an Agreement,
a "Trustee"). Trust I and Trust II were, and each New
Trust will be, created as a master trust under which one
or more Series will be issued pursuant to a series
supplement to the related Agreement (a "Series
Supplement"). Any Series issued by a Trust may or may not
be a Series offered pursuant to this Prospectus. Each
Prospectus Supplement will identify the related Trust and
all Series previously issued by such Trust.
TRUST ASSETS................. The assets of Trust I and Trust II include, and the assets
of each New Trust will include, receivables (the
"Receivables") arising under certain MasterCard(R) and
VISA(R)* revolving credit card accounts (the "Accounts")
selected from the portfolio of MasterCard and VISA
accounts owned by MBNA (the "Bank Portfolio") and all
monies due or to become due in payment of the Receivables
(other than recoveries on charged-off Receivables), all
proceeds of the Receivables and proceeds of credit
insurance policies relating to the Receivables, and may
include the right to
</TABLE>
*MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
3
<PAGE>
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receive Interchange, if any,
allocable to the Certificates and all monies on deposit in
certain bank accounts of the Trust (including any
permitted investments in which any such monies are
invested, but excluding investment earnings on such
amounts unless otherwise specified in the related
Prospectus Supplement), and any Enhancement with respect
to any particular Series or Class, as described in the
related Prospectus Supplement. "Interchange" consists of
certain fees received by MBNA from VISA and MasterCard as
partial compensation for taking credit risk, absorbing
fraud losses and funding receivables for a limited period
prior to initial billing. The term "Enhancement" means,
with respect to any Series or Class thereof, any Credit
Enhancement, guaranteed rate agreement, maturity liquidity
facility, interest rate cap agreement, interest rate swap
agreement or other similar arrangement for the benefit of
the Certificateholders of such Series or Class. The term
"Credit Enhancement" means, with respect to any Series or
Class thereof, any letter of credit, cash collateral
guaranty or account, collateral interest, surety bond,
insurance policy, spread account, reserve account or other
similar arrangement for the benefit of the
Certificateholders of such Series or Class. Credit
Enhancement may also take the form of subordination of one
or more Classes of a Series to any other Class or Classes
of a Series or a cross-support feature which requires
collections on Receivables of one Series to be paid as
principal and/or interest with respect to another Series.
At the time of formation of Trust I, at certain other times
subsequent thereto, and at the time of formation of Trust
II and at certain other times subsequent thereto, MBNA, as
seller (in such capacity, the "Seller"), conveyed, and at
the time of formation of each New Trust the Seller will
convey, to the related Trustee all Receivables existing
under certain Accounts selected from the Bank Portfolio
based on criteria provided in the related Agreement and
all Receivables arising under such Accounts from time to
time thereafter until termination of the related Trust. In
addition, each of Agreement I and Agreement II provides,
and each New Agreement will provide, that MBNA may from
time to time (subject to certain limitations and
conditions), and in some circumstances will be obligated
to, designate additional eligible revolving credit card
accounts to be included as Accounts (the "Additional
Accounts"), the Receivables of which will be included in
the related Trust. Agreement II provides, and each New
Agreement will provide, that in lieu of Additional
Accounts or in addition thereto, MBNA may include in the
related Trust, participations representing undivided
interests in a pool of assets primarily consisting of
receivables arising under consumer revolving credit card
accounts owned by the Seller and collections thereon
("Participations"). See "The Receivables" and "Descrip-
tion of the Certificates -- Addition of Trust Assets."
CERTIFICATE INTEREST
AND PRINCIPAL.............. Each Series of Certificates will represent an undivided
interest in the assets of the related Trust. Each
Certificate of a Series will
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represent the right to receive payments of (i) interest at
the specified rate or rates per annum (each, a
"Certificate Rate"), which may be fixed, floating or other
type of rate and (ii) unless otherwise provided in the
related Prospectus Supplement, payments of principal
during the Controlled Amortization Period, the Principal
Amortization Period, or, under certain limited circum-
stances, the Rapid Amortization Period (each, an
"Amortization Period"), or on Scheduled Payment Dates, in
which case such Series will have a Controlled Accumulation
Period and, under certain limited circumstances if so
specified in the related Prospectus Supplement, a Rapid
Accumulation Period (each, an "Accumulation Period"), as
well as, under certain limited circumstances, a Rapid
Amortization Period, all as specified in the related
Prospectus Supplement.
Each Series of Certificates will consist of one or more
Classes, one or more of which may be Senior Certificates
("Senior Certificates") and one or more of which may be
Subordinated Certificates ("Subordinated Certificates").
Each Class of a Series may evidence the right to receive a
specified portion of each distribution of principal or
interest or both. The Certificates of a Class may also
differ from Certificates of other Classes of the same
Series in, among other things, the amounts allocated to
principal payments, priority of payments, payment dates,
maturity, interest rates, interest rate computation, and
availability and form of Enhancement.
The assets of each Trust will be allocated among the
Certificateholders of each Series of such Trust and the
holder of the Seller Certificate of such Trust and, in
certain circumstances, the related Credit Enhancement
Provider. With respect to a Trust, the aggregate principal
amount of the interest of the Certificateholders of a
Series in such Trust is referred to herein as the
"Investor Interest" and is based on the aggregate amount
of the Principal Receivables in such Trust allocated to
such Series. If specified in any Prospectus Supplement,
the term "Investor Interest" with respect to the related
Series will include the Collateral Interest with respect
to such Series. The aggregate principal amount of the
interest of the holder of the Seller Certificate in a
Trust is referred to herein as the "Seller Interest," and
is based on the aggregate amount of Principal Receivables
in such Trust not allocated to the Certificateholders or
any Credit Enhancement Provider with respect to such
Trust. See "Description of the Certificates -- General."
The Certificateholders of each Series will have the right to
receive (but only to the extent needed to make required
payments under the related Agreement and the related
Series Supplement and subject to any reallocation of such
amounts if the related Series Supplement so provides)
varying percentages of the collections of Finance Charge
Receivables and Principal Receivables for each month and
will be allocated a varying percentage of the amount of
Receivables in Accounts which were written off as
uncollectible
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by the Servicer ("Defaulted Accounts") for such month
(each such percentage, an "Investor Percentage"). The
related Prospectus Supplement will specify the Investor
Percentages with respect to the allocation of collections
of Principal Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts during the Revolving
Period, any Amortization Period and any Accumulation
Period, as applicable. If the Certificates of a Series
offered hereby include more than one Class of
Certificates, the assets of the related Trust allocable to
the Certificates of such Series may be further allocated
among each Class in such Series as described in the
related Prospectus Supplement. See "Description of the
Certificates -- Investor Percentage and Seller Percent-
age."
The Certificates of each Series will represent interests in
the related Trust only and will not represent interests in
or obligations of the Seller or any affiliate thereof. A
Certificate is not a deposit and neither the Certificates
nor the underlying Accounts or Receivables are insured or
guaranteed by the Federal Deposit Insurance Corporation
(the "FDIC") or any other governmental agency.
RECEIVABLES.................. The Receivables held in each Trust will arise in Accounts
that have been selected from the Bank Portfolio based on
criteria provided in the related Agreement and described
in the related Prospectus Supplement as applied initially
on the date (the "Cut-Off Date") specified in the related
Prospectus Supplement and, with respect to certain
Additional Accounts, if any, on the subsequent dates
specified in the related Prospectus Supplement.
The Receivables will consist of amounts charged by
cardholders for goods and services and cash advances (the
"Principal Receivables"), plus the related periodic
finance charges and amounts charged to the Accounts in
respect of certain credit card fees (the "Finance Charge
Receivables"); provided, however, that if the Seller
exercises the Discount Option with respect to a Trust, an
amount equal to the product of the Discount Percentage and
the amount of Receivables arising in the related Accounts
on and after the date such option is exercised that
otherwise would be Principal Receivables will be treated
as Finance Charge Receivables. See "Description of the
Certificates -- Discount Option." With respect to the
characterization of annual credit card membership fees as
Finance Charge Receivables, see "Description of the
Certificates -- Transfer of Annual Membership Fees." In
addition, if so specified in the related Prospectus
Supplement, certain amounts of Interchange attributed to
cardholder charges for goods and services in the Accounts
may be allocated to the Certificates of a Series or any
Class thereof and treated as collections of Finance Charge
Receivables for purposes of such Series or Class thereof
or may be applied in some other manner as described in the
related Prospectus Supplement. See "MBNA's Credit Card
Activities -- Interchange."
During the term of each Trust, all new Receivables arising
in the Accounts relating to such Trust will be transferred
automatically
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to such Trust by the Seller. The total amount of
Receivables in any Trust will fluctuate from day to day
because the amount of new Receivables arising in the
Accounts and the amount of payments collected on existing
Receivables usually differ each day.
Pursuant to each Agreement, the Seller will have the right
(subject to certain limitations and conditions), and in
some circumstances, such as the maintenance of the Seller
Interest at a specified minimum level (the "Minimum Seller
Interest"), will be obligated, to designate additional
eligible revolving credit card accounts to be included as
Additional Accounts and to convey to the related Trust all
of the Receivables in the Additional Accounts, whether
such Receivables are then existing or thereafter created
or, if so specified in the Prospectus Supplement relating
to a Series, designate Participations to be included in
the related Trust in lieu thereof or in addition thereto.
See "Description of the Certificates -- Addition of Trust
Assets."
Pursuant to each Agreement, the Seller will have the right
(subject to certain limitations and conditions) to
designate certain Accounts and to accept the reconveyance
of all the Receivables in such Accounts (the "Removed
Accounts"), whether such Receivables are then existing or
thereafter created. See "Description of the
Certificates -- Removal of Accounts."
EXCHANGES.................... Each of Agreement I and Agreement II authorizes, and each
New Agreement will authorize, the related Trustee to issue
two types of certificates: (i) one or more Series of
Certificates that will be transferable and have the
characteristics described below and (ii) a certificate
that evidences the Seller Interest (the "Seller Certifi-
cate"), which initially will be held by the Seller and
which will be transferable only as provided in the related
Agreement. Pursuant to any one or more Series Supplements
to the related Agreement, the holder of the Seller
Certificate may tender the Seller Certificate or, if
provided in the relevant Series Supplement, Certificates
representing any Series (which may include Series offered
pursuant to this Prospectus) issued by such Trust and the
Seller Certificate, to the Trustee in exchange for one or
more new Series (which may include Series offered pursuant
to this Prospectus) and a reissued Seller Certificate (any
such tender, an "Exchange"). Any such Series may be
offered to the public or other investors under a
prospectus or other disclosure document (a "Disclosure
Document") in offerings pursuant to this Prospectus or in
transactions either registered under the Securities Act of
1933, as amended (the "Securities Act"), or exempt from
registration thereunder, directly or through one or more
other underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
An Exchange may occur only upon delivery to the Trustee of
the following: (i) a Series Supplement specifying the
principal terms of such Series (the "Principal Terms"),
(ii) (a) an opinion of counsel to the effect that, unless
otherwise stated in the related
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Series Supplement, the Certificates of such Series will be
characterized as indebtedness for federal income tax
purposes and (b) an opinion of counsel to the effect that,
for federal income tax purposes, (1) such issuance will
not adversely 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, (2)
following such issuance the Trust will not be deemed to be
an association (or publicly traded partnership) taxable as
a corporation and (3) such issuance will not cause or
constitute an event in which gain or loss would be
recognized by any Certificateholder or the Trust (an
opinion of counsel with respect to any matter to the
effect referred to in clause (b) with respect to any
action is referred to herein as a "Tax Opinion"), (iii) if
required by the related Series Supplement, the form of
Credit Enhancement, (iv) if Credit Enhancement is required
by the Series Supplement, an appropriate Credit
Enhancement agreement with respect thereto, (v) written
confirmation from each Rating Agency that the Exchange
will not result in such Rating Agency reducing or
withdrawing its rating on any then outstanding Series
rated by it, (vi) an officer's certificate of the Seller
to the effect that after giving effect to the Exchange the
Seller would not be required to add the Receivables of any
Additional Accounts pursuant to the related Agreement and
the Seller Interest would be at least equal to the Minimum
Seller Interest and (vii) the existing Seller Certificate
and, if applicable, the Certificates representing the
Series to be exchanged. See "Description of the
Certificates -- Exchanges."
DENOMINATIONS................ Unless otherwise specified in the related Prospectus
Supplement, beneficial interests in the Certificates will be
offered for purchase in denominations of $1,000 and
integral multiples thereof.
REGISTRATION OF
CERTIFICATES................. Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series initially will
be represented by Certificates registered in the name of
Cede, as the nominee of DTC. No Certificate Owner will be
entitled to receive a definitive certificate representing
such person's interest, except in the event that Certifi-
cates in fully registered, certificated form ("Definitive
Certificates") are issued under the limited circumstances
described herein. See "Description of the
Certificates -- Definitive Certificates."
CLEARANCE AND SETTLEMENT..... Unless otherwise provided in the related Prospectus
Supplement, Certificate Owners of each Series offered hereby
may elect to hold their Certificates through any of DTC
(in the United States) or CEDEL or Euroclear (in Europe).
Transfers within DTC, CEDEL or Euroclear, as the case may
be, will be made in accordance with the usual rules and
operating procedures of the relevant system. Cross-market
transfers between persons holding directly or indirectly
through DTC, on the one hand, and counterparties holding
directly or indirectly through CEDEL or Euroclear, on the
other, will be effected in DTC through the relevant
Depositaries of CEDEL or Euroclear. See "Description of
the Certificates -- Book-Entry Registration."
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SELLER AND SERVICER.......... MBNA America Bank, National Association. The principal
executive offices of MBNA are located at 400 Christiana
Road, Newark, Delaware 19713, telephone number (302)
453-9930. The Servicer will receive a fee as servicing
compensation from the related Trust in respect of each
Series in the amounts and at the times specified in the
related Prospectus Supplement (the "Servicing Fee"). The
Servicing Fee may be payable from Finance Charge
Receivables, Interchange or other amounts as specified in
the related Prospectus Supplement. In certain limited
circumstances, MBNA may resign or be removed, in which
event the Trustee or a third party servicer may be
appointed as successor servicer (MBNA, or any such
successor servicer, is referred to herein as the
"Servicer"). MBNA is a wholly-owned subsidiary of MBNA
Corporation (the "Corporation"). See "MBNA and MBNA
Corporation."
COLLECTIONS.................. Unless otherwise specified in the related Prospectus
Supplement, the Servicer will deposit all collections of
Receivables in an account required to be established for
such purpose by the related Agreement (the "Collection
Account"). All amounts deposited in the Collection Account
with respect to a Trust will be allocated by the Servicer
between amounts collected on Principal Receivables and
amounts collected on Finance Charge Receivables. If so
specified in the related Prospectus Supplement, Principal
Receivables and/or Finance Charge Receivables may be
otherwise characterized. See "Description of the
Certificates -- Discount Option." All such amounts will
then be allocated in accordance with the respective
interests of the Certificateholders of each Series of
Certificates or Class thereof and the holder of the Seller
Certificate and, in certain circumstances, certain Credit
Enhancement Providers. See "Description of the
Certificates -- Investor Percentage and Seller
Percentage."
INTEREST PAYMENTS............ Interest on each Series of Certificates or Class thereof for
each accrual period (each, an "Interest Period") specified
in the related Prospectus Supplement will be distributed
in the amounts and on the dates (which may be monthly,
quarterly, semiannually or otherwise as specified in the
related Prospectus Supplement) (each, a "Distribution
Date") specified in the related Prospectus Supplement.
Interest payments on each Distribution Date will be funded
from collections of Finance Charge Receivables allocated
to the Investor Interest during the preceding monthly
period or periods (each, a "Monthly Period"), as described
in the related Prospectus Supplement, and may be funded
from certain investment earnings on funds in certain
accounts of the related Trust and from any applicable
Enhancement, if necessary, or certain other amounts as
specified in the related Prospectus Supplement. If the
Distribution Dates for payment of interest for a Series or
Class occur less frequently than monthly, such collections
or other amounts allocable to such Series or Class may be
deposited in one or more trust accounts pending
distribution to the Certificateholders of such Series or
Class, all as described in the related Prospectus
Supplement. See "Description of the Certificates --
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Application of Collections," " -- Shared Excess Finance
Charge Collections," "Credit Enhancement" and "Risk
Factors -- Credit Enhancement."
REVOLVING PERIOD............. Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series and any Class
thereof, no principal will be payable to
Certificateholders until the Principal Commencement Date
or the Scheduled Payment Date with respect to such Series
or Class, as described below. For the period beginning on
the date of issuance of the related Series (the "Closing
Date") and ending with the commencement of an Amortization
Period or an Accumulation Period (the "Revolving Period"),
collections of Principal Receivables otherwise allocable
to the Investor Interest will, subject to certain
limitations, be paid from the Trust to the holder of the
Seller Certificate or, under certain circumstances and if
so specified in the related Prospectus Supplement, will be
treated as Shared Principal Collections and paid to the
holders of other Series of Certificates issued by such
Trust, as described herein and in the related Prospectus
Supplement. See "Description of the Certificates -- Pay
Out Events" for a discussion of the events which might
lead to early termination of the Revolving Period.
PRINCIPAL PAYMENTS........... The principal of the Certificates of each Series offered
hereby will be scheduled to be paid either in installments
commencing on a date specified in the related Prospectus
Supplement (the "Principal Commencement Date"), in which
case such Series will have either a Controlled
Amortization Period or a Principal Amortization Period, as
described below, or on an expected date specified in, or
determined in the manner specified in, the related
Prospectus Supplement (the "Scheduled Payment Date"), in
which case such Series will have an Accumulation Period,
as described below. If a Series has more than one Class of
Certificates, a different method of paying principal,
Principal Commencement Date or Scheduled Payment Date may
be assigned to each Class. The payment of principal with
respect to the Certificates of a Series or Class may
commence earlier than the applicable Principal
Commencement Date or Scheduled Payment Date, and the final
principal payment with respect to the Certificates of a
Series or Class may be made later than the applicable
expected payment date, Scheduled Payment Date or other
expected date, if a Pay Out Event occurs and the Rapid
Amortization Period commences with respect to such Series
or Class or under certain other circumstances described
herein. See "Description of the Certificates -- Principal
Payments."
CONTROLLED AMORTIZATION
PERIOD..................... If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period with respect
to such Series commences, the Certificates of such Series
or any Class thereof will have an amortization period (the
"Controlled Amortization Period") during which collections
of Principal Receivables allocable to the Investor
Interest of such Series (and certain other amounts if so
specified in the related Prospectus Supplement) will
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be used on each Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any Class of such
Series then scheduled to receive such distributions. The
amount to be distributed on any Distribution Date during
the Controlled Amortization Period will be limited to an
amount (the "Controlled Distribution Amount") equal to an
amount specified in the related Prospectus Supplement (the
"Controlled Amortization Amount") plus any existing
deficit controlled amortization amount arising from prior
Distribution Dates. 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. The Controlled
Amortization Period will commence at the close of business
on a date specified in the related Prospectus Supplement
and continue until the earliest of (a) the commencement of
the Rapid Amortization Period, (b) payment in full of the
Investor Interest of the Certificates of such Series or
Class and, if so specified in the related Prospectus
Supplement, of the Collateral Interest, if any, with
respect to such Series, and (c) the Series Termination
Date with respect to such Series.
PRINCIPAL AMORTIZATION
PERIOD..................... If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period with respect
to such Series commences, the Certificates of such Series
or any Class thereof will have an amortization period (the
"Principal Amortization Period") during which collections
of Principal Receivables allocable to the Investor
Interest of such Series (and certain other amounts if so
specified in the related Prospectus Supplement) will be
used on each Distribution Date to make principal
distributions to the Certificateholders of such Series or
any Class of such Series then scheduled to receive such
distributions. If a Series has more than one Class of
Certificates, the related Prospectus Supplement may
describe certain priorities among such Classes with
respect to such distributions. The Principal Amortization
Period will commence at the close of business on a date
specified in the related Prospectus Supplement and
continue until the earlier of (a) the commencement of the
Rapid Amortization Period, (b) payment in full of the
Investor Interest of the Certificates of such Series or
Class and, if so specified in the related Prospectus
Supplement, of the Collateral Interest, if any, with
respect to such Series, and (c) the Series Termination
Date with respect to such Series.
CONTROLLED ACCUMULATION
PERIOD..................... If the Prospectus Supplement relating to a Series so
specifies, unless a Rapid Amortization Period or, if so
specified in the related Prospectus Supplement, a Rapid
Accumulation Period with respect to such Series commences,
the Certificates of such Series or any Class thereof will
have an accumulation period (the "Controlled Accumulation
Period") during which collections of Principal Receivables
allocable to the Investor Interest of such Series
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(and certain other amounts if so specified in the related
Prospectus Supplement) will be deposited on the business
day immediately prior to each Distribution Date or other
business day specified in the related Prospectus
Supplement (each a "Transfer Date") in a trust account
established for the benefit of the Certificateholders of
such Series or Class (a "Principal Funding Account") and
used to make distributions of principal to the
Certificateholders of such Series or Class on the
Scheduled Payment Date. The amount to be deposited in the
Principal Funding Account on any Transfer Date will be
limited to an amount (the "Controlled Deposit Amount")
equal to an amount specified in the related Prospectus
Supplement (the "Controlled Accumulation Amount") plus any
deficit Controlled Accumulation Amount arising from prior
Distribution Dates. If a Series has more than one Class of
Certificates, each Class may have a separate Principal
Funding Account and Controlled Accumulation Amount. In
addition, the related Prospectus Supplement may describe
certain priorities among such Classes with respect to
deposits of principal into such Principal Funding
Accounts. The Controlled Accumulation Period will commence
at the close of business on a date specified in or
determined in the manner specified in the related
Prospectus Supplement and continue until the earliest of
(a) the commencement of the Rapid Amortization Period or,
if so specified in the related Prospectus Supplement, the
Rapid Accumulation Period, (b) payment in full of the
Investor Interest of the Certificates of such Series or
Class and, if so specified in the related Prospectus
Supplement, of the Collateral Interest, if any, with
respect to such Series and (c) the Series Termination Date
with respect to such Series.
Funds on deposit in any Principal Funding Account may be
invested in permitted investments or subject to a
guaranteed rate or investment contract or other
arrangement intended to assure a minimum return on the
investment of such funds. Investment earnings on such
funds may be applied to pay interest on the related Series
of Certificates. In order to enhance the likelihood of
payment in full of principal at the end of an Accumulation
Period with respect to a Series of Certificates, such
Series may be subject to a principal guaranty or other
similar arrangement.
RAPID ACCUMULATION PERIOD.... If so specified and under the conditions set forth in the
Prospectus Supplement relating to a Series having a
Controlled Accumulation Period, during the period from the
day on which a Pay Out Event has occurred until the
earliest of (a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor Interest of
the Certificates of such Series and, if so specified in
the related Prospectus Supplement, of the Collateral
Interest, if any, with respect to such Series and (c) the
related Series Termination Date (the "Rapid Accumulation
Period"), collections of Principal Receivables allocable
to the Investor Interest of such Series (and certain other
amounts if so specified in the related Prospectus
Supplement) will be deposited on each Transfer Date in the
Principal Funding Account and used to make distributions
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of principal to the Certificateholders of such Series or
Class on the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account during the
Rapid Accumulation Period will not be limited to the
Controlled Deposit Amount. The term "Pay Out Event" with
respect to a Series of Certificates issued by a Trust
means any of the events identified as such in the related
Prospectus Supplement and any of the following: (a)
certain events of insolvency or receivership relating to
the Seller, (b) the Seller is unable for any reason to
transfer Receivables to such Trust in accordance with the
provisions of the related Agreement or (c) such trust
becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. See
"Description of the Certificates -- Pay Out Events" for a
discussion of the events which might lead to commencement
of a Rapid Accumulation Period.
During the Rapid Accumulation Period, funds on deposit in
any Principal Funding Account may be invested in permitted
investments or subject to a guaranteed rate or investment
contract or other arrangement intended to assure a minimum
return on the investment of such funds. Investment
earnings on such funds may be applied to pay interest on
the related Series of Certificates or make other payments
as specified in the related Prospectus Supplement. In
order to enhance the likelihood of payment in full of
principal at the end of the Rapid Accumulation Period with
respect to a Series of Certificates, such Series may be
subject to a principal guaranty or other similar
arrangement.
RAPID AMORTIZATION PERIOD.... During the period from the day on which a Pay Out Event has
occurred with respect to a Series or, if so specified in
the Prospectus Supplement relating to a Series with a
Controlled Accumulation Period, from such time specified
in the related Prospectus Supplement after a Pay Out Event
has occurred and the Rapid Accumulation Period has
commenced, to the earlier of (a) the date on which the
Investor Interest of the Certificates of such Series and
the Enhancement Invested Amount or the Collateral
Interest, if any, with respect to such Series have been
paid in full and (b) the related Series Termination Date
(the "Rapid Amortization Period"), collections of
Principal Receivables allocable to the Investor Interest
of such Series (and certain other amounts if so specified
in the related Prospectus Supplement) will be distributed
as principal payments to the Certificateholders of such
Series and, in certain circumstances, to the Credit
Enhancement Provider, monthly on each Distribution Date
with respect to such Series in the manner and order of
priority set forth in the related Prospectus Supplement.
During the Rapid Amortization Period with respect to a
Series, distributions of principal will not be subject to
any Controlled Deposit Amount or Controlled Distribution
Amount. In addition, upon the commencement of the Rapid
Amortization Period with respect to a Series, any funds on
deposit in a Principal Funding Account with respect to
such Series or any Class thereof will be paid to the
Certificateholders of such Series or Class on the
Distribution Date in the month
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following the commencement of the Rapid Amortization
Period. See "Description of the Certificates -- Pay Out
Events" for a discussion of the events which might lead to
commencement of a Rapid Amortization Period.
SHARED EXCESS FINANCE CHARGE
COLLECTIONS.................. Any Series offered hereby may be included in a group of
Series (a "Group"). If so specified in the related
Prospectus Supplement, the Certificateholders of a Series
within a Group or any Class thereof may be entitled to
receive all or a portion of Excess Finance Charge
Collections with respect to another Series within such
Group or Class thereof to cover any shortfalls with
respect to amounts payable from collections of Finance
Charge Receivables allocable to such Series or Class.
Unless otherwise provided in the related Prospectus
Supplement, with respect to any Series, "Excess Finance
Charge Collections" for any Monthly Period will equal the
excess of collections of Finance Charge Receivables,
annual membership fees and certain other amounts allocated
to the Investor Interest of such Series or Class over the
sum of (i) interest accrued for the current month
("Monthly Interest") and overdue Monthly Interest on the
Certificates of such Series or Class (together with, if
applicable, interest on overdue Monthly Interest at the
rate specified in the related Prospectus Supplement
("Additional Interest")), (ii) accrued and unpaid Investor
Servicing Fees with respect to such Series or Class
payable from collections of Finance Charge Receivables,
(iii) the Investor Default Amount with respect to such
Series or Class, (iv) unreimbursed Investor Charge-Offs
with respect to such Series or Class and (v) other amounts
specified in the related Prospectus Supplement. The term
"Investor Servicing Fee" for any Series of Certificates or
Class thereof means the Servicing Fee allocable to the
Investor Interest with respect to such Series or Class, as
specified in the related Prospectus Supplement. The term
"Investor Default Amount" means, for any Monthly Period
and for any Series or Class thereof, the aggregate amount
of the Investor Percentage of Principal Receivables in
Defaulted Accounts. The term "Investor Charge-Off" means,
for any Monthly Period, and for any Series or Class
thereof, the amount by which (a) the related Monthly
Interest and overdue Monthly Interest (together with, if
applicable, Additional Interest), the accrued and unpaid
Investor Servicing Fees payable from collections of
Finance Charge Receivables, the Investor Default Amount
and any other required fees exceeds (b) amounts available
to pay such amounts out of collections of Finance Charge
Receivables, available Credit Enhancement amounts, if any,
and other sources specified in the related Prospectus
Supplement, but not more than such Investor Default
Amount. See "Description of the Certificates -- Appli-
cation of Collections," " -- Shared Excess Finance Charge
Collections," " -- Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs" and "Credit
Enhancement."
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SHARED PRINCIPAL
COLLECTIONS.................. If so specified in the related Prospectus Supplement, to the
extent that collections of Principal Receivables that are
allocated to the Investor Interest of any Series are not
needed to make payments or deposits with respect to such
Series, such collections ("Shared Principal Collections")
will be applied to cover principal payments due to or for
the benefit of Certificateholders of another Series. If so
specified in the related Prospectus Supplement, the
allocation of Shared Principal Collections may be among
Series within a Group. Any such reallocation will not
result in a reduction in the Investor Interest of the
Series to which such collections were initially allocated.
FUNDING PERIOD............... The Prospectus Supplement relating to a Series of
Certificates may specify that for a period beginning on the
Closing Date and ending on a specified date before the
commencement of an Amortization Period or Accumulation
Period with respect to such Series (the "Funding Period"),
the aggregate amount of Principal Receivables in the
related Trust allocable to such Series may be less than
the aggregate principal amount of the Certificates of such
Series and that the amount of such deficiency (the "Pre-
Funding Amount") will be held in a trust account
established with the related Trustee for the benefit of
Certificateholders of such Series (the "Pre-Funding
Account") pending the transfer of additional Principal
Receivables to the Trust or pending the reduction of the
Investor Interests of other Series issued by the related
Trust. The related Prospectus Supplement will specify the
initial Investor Interest on the Closing Date with respect
to such Series, the aggregate principal amount of the
Certificates of such Series (the "Full Investor Interest")
and the date by which the Investor Interest is expected to
equal the Full Investor Interest. The Investor Interest
will increase as Principal Receivables are delivered to
the related Trust or as the Investor Interests of other
Series of the related Trust are reduced. The Investor
Interest may also decrease due to Investor Charge-Offs or
the occurrence of a Pay Out Event and the commencement of
the Rapid Amortization Period, as specified in the related
Prospectus Supplement.
During the Funding Period, funds on deposit in the
Pre-Funding Account for a Series of Certificates will be
withdrawn and paid to the Seller to the extent of any
increases in the Investor Interest. In the event that the
Investor Interest does not for any reason equal the Full
Investor Interest by the end of the Funding Period, any
amount remaining in the Pre-Funding Account and any addi-
tional amounts specified in the related Prospectus
Supplement will be payable to the Certificateholders of
such Series in a manner and at such time as set forth in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies
in the Pre-Funding Account with respect to any Series will
be invested by the Trustee in Permitted Investments or
will be subject to a guaranteed rate or investment
agreement or other similar
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arrangement, and investment earnings and any applicable
payment under any such investment arrangement will be
applied to pay interest on the Certificates of such
Series.
CREDIT ENHANCEMENT........... Credit Enhancement with respect to a Series or any Class
thereof may be provided in the form or forms of
subordination, a letter of credit, a cash collateral
guaranty or account, a collateral interest, a surety bond,
an insurance policy, a spread account, a reserve account
or other form of support as specified in the related
Prospectus Supplement. Credit Enhancement may also be pro-
vided to a Class or Classes of different Series by a
cross-support feature which requires that distributions of
principal and/or interest be made with respect to
Certificates of one or more Classes of a particular Series
before distributions are made to one or more Classes of
another Series.
The type, characteristics and amount of the Credit
Enhancement will be determined based on several factors,
including the characteristics of the Receivables and
Accounts included in the Trust Portfolio as of the Closing
Date with respect to any Series, and will be established
on the basis of requirements of each Rating Agency rating
the Certificates of such Series. If so specified in the
related Prospectus Supplement, any such Credit Enhancement
will apply only in the event of certain types of losses
and the protection against losses provided by such Credit
Enhancement will be limited. The terms of the Credit
Enhancement with respect to a Series, and the conditions
under which the Credit Enhancement may be increased,
reduced or replaced, will be described in the related
Prospectus Supplement. See "Credit Enhancement" and "Risk
Factors -- Certificate Rating."
OPTIONAL REPURCHASE.......... With respect to each Series of Certificates, the Investor
Interest will be subject to optional repurchase by the
Seller on any Distribution Date after the Investor
Interest and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than
or equal to 5% of the initial Investor Interest, if any,
or such other amount specified in the related Prospectus
Supplement, if certain conditions set forth in the related
Agreement are met. Unless otherwise specified in the
related Prospectus Supplement, the repurchase price will
be equal to the Investor Interest (less the amount, if
any, on deposit in any Principal Funding Account with
respect to such Series), plus the Enhancement Invested
Amount, if any, with respect to such Series, plus accrued
and unpaid interest on the Certificates and interest or
other amounts payable on the Enhancement Invested Amount
or the Collateral Interest, if any, through the day
preceding the Distribution Date on which the repurchase
occurs. See "Description of the Certificates -- Final
Payment of Principal; Termination."
TAX STATUS................... Except to the extent otherwise specified in the related
Prospectus Supplement, Special Counsel to the Seller will
deliver its opinion that under existing law the
Certificates of each Series will be
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characterized as debt for federal income tax purposes.
Except to the extent otherwise specified in the related
Prospectus Supplement, the Certificate Owners will agree
to treat the Certificates as debt for federal, state and
local income and franchise tax purposes. See "Certain
Federal Income Tax Consequences" for additional
information concerning the application of federal income
tax laws.
ERISA CONSIDERATIONS......... Subject to the considerations described below and except to
the extent otherwise specified in the related Prospectus
Supplement, the Seller anticipates that each Class of
Certificates will be eligible for purchase by employee
benefit plan investors. Under a regulation issued by the
Department of Labor, the assets of each Trust would not be
deemed "plan assets" of an employee benefit plan holding
the Certificates of any Class if certain conditions are
met, including that the Certificates of such Class must be
held, upon completion of the public offering being made
hereby and by the related Prospectus Supplement, by at
least 100 investors who are independent of the Seller and
of one another ("Independent Investors"). Except to the
extent otherwise disclosed in the related Prospectus
Supplement, the Seller expects that each Class of
Certificates will be held by at least 100 Independent
Investors at the conclusion of the initial public
offering, although no assurance can be given, and no
monitoring or other measures will be taken to ensure that
such condition will be met. The Seller anticipates that
the other conditions of the regulation will be met. If the
assets of a Trust were deemed to be "plan assets" of an
employee benefit plan investor (e.g., if the 100
Independent Investor criterion is not satisfied),
violation of the "prohibited transaction" rules of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), could result and generate excise tax
and other liabilities under ERISA and section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"),
unless a statutory, regulatory or administrative exemption
is available. It is uncertain whether existing exemptions
from the "prohibited transaction" rules of ERISA would
apply to all transactions involving such Trust's assets if
such assets were treated for ERISA purposes as "plan
assets" of employee benefit plan investors. Accordingly,
fiduciaries or other persons contemplating purchasing
Certificates or any Class on behalf or with "plan assets"
of any employee benefit plan should consult their counsel
before making a purchase. See "ERISA Considerations."
CERTIFICATE RATING........... It will be a condition to the issuance of the certificates
of each Series or Class thereof offered pursuant to this
Prospectus and the related Prospectus Supplement that they
be rated in one of the four highest rating categories by
at least one nationally recognized rating organization
(the rating agency or agencies selected by the Seller to
rate any Series, the "Rating Agency"). The rating or
ratings applicable to the Certificates of each Series or
Class thereof offered hereby will be set forth in the
related Prospectus Supplement.
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A rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating. See
"Risk Factors -- Certificate Rating."
LISTING...................... If so specified in the Prospectus Supplement relating to a
Series, application will be made to list the Certificates of
such Series, or all or a portion of any Class thereof, on
the Luxembourg Stock Exchange or any other specified
exchange.
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RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will develop
with respect to the Certificates of any Series offered hereby, or if it does
develop, that it will provide Certificateholders with liquidity of investment or
that it will continue for the life of such Certificates.
Transfer of Receivables. While the Seller has transferred interests in
Receivables to each of Trust I and Trust II and will transfer interests in
Receivables to each New Trust, a court could treat any such transaction as an
assignment of collateral as security for the benefit of holders of Certificates
issued by such Trust. The Seller has represented and warranted in each of
Agreement I and Agreement II and will represent and warrant in each New
Agreement that the transfer of the Receivables to the related Trust is either a
valid transfer and assignment of the related Receivables to such Trust or the
grant to the related Trust of a security interest in such Receivables. With
respect to Trust I and Trust II, the Seller has taken and will take, and with
respect to each New Trust the Seller will take, certain actions as are required
to perfect each such Trust's security interest in the related Receivables and,
with respect to Trust I and Trust II has warranted, and with respect to each New
Trust will warrant, that if the transfer to such Trust is deemed to be a grant
to such Trust of a security interest in the related Receivables, the Trustee
will have a first priority perfected security interest therein, and, with
certain exceptions and for certain limited periods of time provided for in the
Uniform Commercial Code, in the proceeds thereof (subject, in each case, to
certain potential tax liens referred to under "Description of the
Certificates -- Representations and Warranties"). Nevertheless, if the transfer
of Receivables to a Trust is deemed to create a security interest therein, a tax
or government lien or other nonconsensual lien on property of the Seller arising
before Receivables come into existence may have priority over the Trust's
interest in such Receivables, and if the FDIC were appointed receiver of the
Seller, the receiver's administrative expenses may also have priority over the
Trust's interest in such Receivables. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables."
Certain Matters Relating to Receivership. To the extent that the Seller has
granted or will grant a security interest in Receivables to a Trust and that
security interest is validly perfected before the Seller's insolvency and was
not or will not be taken in contemplation of insolvency of the Seller, or with
the intent to hinder, delay or defraud the Seller or the creditors of the
Seller, the Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA"), provides that such security interest should not be subject to
avoidance by the FDIC, as receiver for the Seller. Positions taken by the FDIC
staff prior to the passage of FIRREA do not suggest that the FDIC, as receiver
for the Seller, would interfere with the timely transfer to a Trust of payments
collected on the related Receivables. If, however, the FDIC were to assert a
contrary position, such as requiring the Trustee to establish its right to those
payments by submitting to and completing the administrative claims procedure
under the FDIA, or the conservator or receiver were to request a stay of
proceedings with respect to the Seller as provided under the FDIA, delays in
payments on the related Series of Certificates and possible reductions in the
amount of those payments could occur.
If a conservator or receiver were appointed for the Seller, then a Pay Out
Event could occur with respect to all Series then outstanding and, pursuant to
the related Agreement, new Principal Receivables would not be transferred to the
related Trust and the Trustee would sell the Receivables (unless otherwise
instructed by holders of more than 50% of the Investor Interest of each Series
of Certificates, or with respect to any Series with more than one Class, of each
Class, and any other Person specified in the related Agreement or a Series
Supplement), thereby causing early termination of the Trust and a
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loss to Certificateholders of a Series if the net proceeds of such sale
allocable to such Series were insufficient to pay the Certificateholders of such
Series in full. If a Pay Out Event occurs involving either the insolvency of the
Seller or the appointment of a conservator or receiver for the Seller, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the Rapid
Amortization Period or, if applicable with respect to a Series as specified in
the related Prospectus Supplement, the Rapid Accumulation Period. A conservator
or receiver may also have the power to cause the early sale of the Receivables
and the early retirement of the Certificates of each Series or to prohibit the
continued transfer of Principal Receivables to a Trust. In addition, in the
event of a Servicer Default relating to the conservatorship or receivership of
the Servicer, if no Servicer Default other than such conservatorship or
receivership exists, the conservator or receiver for the Servicer may have the
power to prevent either the Trustee or the Certificateholders from appointing a
successor Servicer under the related Agreement. See "Certain Legal Aspects of
the Receivables -- Certain Matters Relating to Receivership."
Consumer Protection Laws. Federal and state consumer protection laws impose
requirements on the making and enforcement of consumer loans. Congress and the
states may enact new laws and amendments to existing laws to regulate further
the credit card and consumer credit industry or to reduce finance charges or
other fees or charges applicable to credit card accounts. Such laws, as well as
any new laws or rulings which may be adopted, may adversely affect the
Servicer's ability to collect on the Receivables or maintain previous levels of
monthly periodic finance charges and other credit card fees. One effect of any
legislation which regulates the amount of interest and other charges that may be
assessed on credit card account balances would be to reduce the Portfolio Yield
on the Accounts. If such legislation were to result in a significant reduction
in the Portfolio Yield, a Pay Out Event could occur, in which case the Rapid
Amortization Period or, if so specified in the related Prospectus Supplement,
the Rapid Accumulation Period would commence. See "Description of the
Certificates -- Pay Out Events."
Pursuant to each Agreement, the Seller will covenant to accept reassignment,
subject to certain conditions described under "Description of the
Certificates -- Representations and Warranties," of each Receivable that does
not comply in all material respects with all requirements of applicable law. The
Seller will make certain other representations and warranties relating to the
validity and enforceability of the Receivables. However, it is not anticipated
that the Trustee will make any examination of the related Receivables or the
records relating thereto for the purpose of establishing the presence or absence
of defects, compliance with such representations and warranties, or for any
other purpose. The sole remedy if any such representation or warranty is
breached and such breach continues beyond the applicable cure period is that the
Seller will be obligated to accept reassignment, subject to certain conditions
described under "Description of the Certificates -- Representations and
Warranties," of the Receivables affected thereby. See "Description of the
Certificates -- Representations and Warranties" and "Certain Legal Aspects of
the Receivables -- Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available from any Credit Enhancement or other sources. See "Description
of the Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Legal Matters and Litigation. In October 1991, the United States District
Court for the State of Massachusetts held that Greenwood Trust Company (a
federally-insured, Delaware-chartered bank that issues the Discover credit card)
was prohibited by Massachusetts law from assessing late charges on credit card
accounts of Massachusetts residents. On August 6, 1992, that decision was
reversed by the United States Court of Appeals for the First Circuit, which held
that the Massachusetts law was preempted by federal law permitting the charges
in question. In January 1993, the United States Supreme Court denied a petition
from the Commonwealth of Massachusetts to accept the case.
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Following the District Court's decision, a number of class action lawsuits or
administrative actions were filed in several states against out-of-state banks
(both federally-insured, state-chartered banks and federally-insured, national
banks) which issue credit cards. These actions challenge a portion or all of the
various fees and charges (such as late fees, overlimit fees, returned check
fees, and annual membership fees) assessed against residents of states in which
such suits were filed, based on restrictions or prohibitions under such states'
laws alleged to be applicable to the out-of-state credit card issuers.
In January 1992, a lawsuit was filed against the Seller in the Court of
Common Pleas of Allegheny County, Pennsylvania. The Seller removed the case to
federal court in 1992. In March 1992, lawsuits were filed against the Seller and
other credit card issuers in the Superior Court for the State of California for
the County of Los Angeles. In June 1992, a lawsuit was filed against the Seller
in the State District Court in Denver, Colorado. In December 1995, a lawsuit was
filed against the Seller in the Superior Court of New Jersey, Law Division,
Passaic County. In February 1996, a lawsuit was filed against the Seller in the
Superior Court of New Jersey, Law Division, Camden County. The Seller removed
these cases to federal court in January and April 1996, respectively. Each of
these suits is a purported class action. The plaintiffs seek to recover certain
credit card fees which the plaintiffs allege were improperly charged under state
law. These actions are similar to a number of other suits against other credit
card issuers filed in various states. The Seller has filed pretrial motions for
dismissal of each of these cases, except the New Jersey cases, in which the time
for the Seller to answer or otherwise plead has been stayed. The Seller's motion
was granted in the Pennsylvania case. An appeal is pending in the U.S. Court of
Appeals for the Third Circuit. The Seller's motion was granted in the Colorado
case and that decision was affirmed by the Colorado Supreme Court. Plaintiffs
have asked the U.S. Supreme Court to hear an appeal from the decision of the
Colorado Supreme Court and that petition is pending. In several similar actions,
including an action in California, other bank defendants have prevailed. The
Seller is aware of decisions by the New Jersey Supreme Court and Pennsylvania
lower courts in similar cases adverse to other banks. The U.S. Supreme Court
accepted an appeal from the California Supreme Court's decision which found that
the charge in question was governed by federal law and was proper thereunder.
The Seller believes that all charges collected by it are governed by federal law
and are proper thereunder. It intends to defend vigorously these cases and any
similar cases which may be brought against it. There can be no assurance that
the Seller will not be named as a defendant in future lawsuits or administrative
actions. Such litigation involving the Seller, if decided adversely to the
Seller, could result in the reduction of the Portfolio Yield on the Accounts. If
the Portfolio Yield is significantly reduced, a Pay Out Event could occur, in
which case the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period would commence. See
"Description of the Certificates -- Pay Out Events."
Competition in the Credit Card Industry. The credit card industry is highly
competitive. As new credit card issuers enter the market and all issuers seek to
expand their share of the market, there is increased use of advertising, target
marketing and pricing competition. Each Trust will be dependent upon the
Seller's continued ability to generate new Receivables. If the rate at which new
Receivables are generated declines significantly and the Seller is unable to
designate Additional Accounts with respect to a Trust, a Pay Out Event could
occur with respect to each Series relating to such Trust, in which case the
Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period with respect to each such Series would
commence.
Payments and Maturity. The Receivables may be paid at any time and there is
no assurance that there will be additional Receivables created in the Accounts
or that any particular pattern of cardholder repayments will occur. The
commencement and continuation of a Controlled Amortization Period, a Principal
Amortization Period or a Controlled Accumulation Period for a Series or Class
thereof with respect to a Trust will be dependent upon the continued generation
of new Receivables to be conveyed to such 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 and the commencement of the Rapid Amortization
Period or, if so specified in the related Prospectus Supplement, the Rapid
Accumulation Period for each such
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Series. Certificateholders should be aware that the Seller's ability to continue
to compete in the current industry environment will affect the Seller's ability
to generate new Receivables to be conveyed to each Trust and may also affect
payment patterns. In addition, changes in periodic finance charges can alter the
monthly payment rates of cardholders. A significant decrease in such monthly
payment rate could slow the return or accumulation of principal during an
Amortization Period or Accumulation Period. See "Maturity Assumptions."
Social, Legal and Economic Factors. Changes in use of credit and payment
patterns by customers may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels and
relative interest rates. Cardholders whose accounts are included in the Bank
Portfolio have addresses in all 50 states and the District of Columbia. The
Seller, however, is unable to determine and has no basis to predict whether, or
to what extent, social, legal or economic factors will affect future use of
credit or repayment patterns.
Effect of Subordination. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, unless otherwise specified in the
related Prospectus Supplement, payments of principal in respect of the
Subordinated Certificates of a Series will not commence until after the final
principal payment with respect to the Senior Certificates of such Series. In
addition, if so specified in the related Prospectus Supplement, if collections
of Finance Charge Receivables allocable to the Certificates of a Series are
insufficient to cover required amounts due with respect to the Senior
Certificates of such Series, the Investor Interest with respect to the
Subordinated Certificates will be reduced, resulting in a reduction of the
portion of collections of Finance Charge Receivables allocable to the
Subordinated Certificates in future periods and a possible delay or reduction in
principal and interest payments on the Subordinated Certificates. Moreover, if
so specified in the related Prospectus Supplement, in the event of a sale of
Receivables in a Trust due to the insolvency of the Seller or the appointment of
a conservator or receiver for the Seller, or due to the inability of the Trustee
to act as or find a successor Servicer after a Servicer Default, the portion of
the net proceeds of such sale allocable to pay principal to the Certificates of
a Series will be used first to pay amounts due to the Senior Certificateholders
and any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
Ability to Change Terms of the Receivables. Pursuant to each Agreement, the
Seller does not transfer to the related Trust the Accounts but only the
Receivables arising in the Accounts. As owner of the Accounts, the Seller
retains the right to determine the monthly periodic finance charges and other
fees which will be applicable from time to time to the Accounts, to alter the
minimum monthly payment required on the Accounts and to change various other
terms with respect to the Accounts, including changing the annual percentage
rate from a fixed rate to a variable rate. A decrease in the monthly periodic
finance charge and a reduction in credit card or other fees would decrease the
effective yield on the Accounts with respect to a Trust and could result in the
occurrence of a Pay Out Event with respect to each Series relating to such Trust
and the commencement of the Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period with respect to
each such Series. Under each of Agreement I and Agreement II the Seller has
agreed, and, unless otherwise specified in the related Prospectus Supplement,
under each New Agreement the Seller will agree, that, except as otherwise
required by law or as is deemed by the Seller to be necessary in order to
maintain its credit card business, based upon a good faith assessment by it, in
its sole discretion, of the nature of the competition in that business, the
Seller will not reduce the annual percentage rate of the monthly periodic
finance charges assessed on the related Receivables or other fees on the related
Accounts if, as a result of such reduction, the Portfolio Yield for any Series
as of such date would be less than the Base Rate for such Series. The terms
"Portfolio Yield" and "Base Rate" for each Series will have the meanings set
forth in the Prospectus Supplement relating to each such Series. In addition,
each of Agreement I and Agreement II provides, and, unless otherwise specified
in the related Prospectus Supplement, each New Agreement will provide, that the
Seller may change the terms of the contracts relating to the related Accounts or
its policies and procedures with respect to the servicing thereof (including
without limitation the reduction of the required minimum monthly payment and the
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calculation of the amount or the timing of finance charges, credit card fees,
and charge offs), if such change (i) would not, in the reasonable belief of the
Seller, cause a Pay Out Event for any related Series to occur, and (ii) is made
applicable to the comparable segment of revolving credit card accounts owned and
serviced by the Seller which have characteristics the same as or substantially
similar to the related Accounts which are subject to such change. In servicing
the Accounts, the Servicer will be required to exercise the same care and apply
the same policies that it exercises in handling similar matters for its own
comparable accounts. Except as specified above or in any Prospectus Supplement,
there will be no restrictions on the Seller's ability to change the terms of the
Accounts. There can be no assurance that changes in applicable law, changes in
the marketplace or prudent business practice might not result in a determination
by the Seller to take actions which would change this or other Account terms.
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts in a Trust will have finance charges set at a variable rate
above a designated prime rate or other designated index. A Series of
Certificates issued by such Trust may bear interest at a fixed rate or at a
floating rate based on an index other than such prime rate or other designated
index. If there is a decline in such prime rate or other designated index, the
amount of collections of Finance Charge Receivables on such Accounts may be
reduced, whereas the amounts payable as Monthly Interest on such Series of
Certificates and other amounts required to be funded out of collections of
Finance Charge Receivables with respect to such Series may not be similarly
reduced.
Master Trust Considerations. Trust I and Trust II, as master trusts, have
each issued Series of Certificates prior to the date of this Prospectus and are
expected to issue additional Series from time to time. Each New Trust, as a
master trust, may issue Series from time to time. While the Principal Terms of
any Series will be specified in a Series Supplement, the provisions of a Series
Supplement and, therefore, the terms of any additional Series, will not be
subject to the prior review by or consent of, holders of the Certificates of any
previously issued Series. Such Principal Terms may include methods for
determining applicable investor percentages and allocating collections,
provisions creating different or additional security or other Credit
Enhancement, provisions subordinating such Series to another Series or other
Series (if the Series Supplement relating to such Series so permits) to such
Series, and any other amendment or supplement to the related Agreement which is
made applicable only to such Series. It is a condition precedent to the issuance
of any additional Series by a Trust that each Rating Agency that has rated any
outstanding Series issued by such Trust deliver written confirmation to the
Trustee that the Exchange will not result in such Rating Agency reducing or
withdrawing its rating on any outstanding Series. There can be no assurance,
however, that the Principal Terms of any other Series, including any Series
issued from time to time hereafter, might not have an impact on the timing and
amount of payments received by a Certificateholder of any other Series. See
"Description of the Certificates -- Exchanges."
Addition of Trust Assets. The Seller expects, and in some cases will be
obligated, to designate Additional Accounts, the Receivables in which will be
conveyed to a Trust. Such Additional Accounts may include accounts originated
using criteria different from those which were applied to the Accounts
designated on the Cut-Off Date related to such Trust or to previously-designated
Additional Accounts, because such accounts were originated at a different date
or were acquired from another institution. Consequently, there can be no
assurance that Additional Accounts designated in the future will be of the same
credit quality as previously-designated Accounts. In addition, the Agreement
provides that the Seller may add Participations to a Trust. The designation of
Additional Accounts and Participations will be subject to the satisfaction of
certain conditions described herein under "Description of the
Certificates -- Addition of Trust Assets."
Control. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the related Agreement or the related Series Supplement. However, the related
Agreement or related Series Supplement may provide that under certain
circumstances the consent or approval of a specified percentage of the aggregate
Investor
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Interest of other Series or of the Investor Interest of a specified Class of
such other Series will be required to direct certain actions, including
requiring the appointment of a successor Servicer following a Servicer Default,
amending the related Agreement in certain circumstances and directing a
repurchase of all outstanding Series upon the breach of certain representations
and warranties by the Seller. Certificateholders of such other Series may have
interests which do not coincide in any way with the interests of
Certificateholders of the subject Series. In such instances, it may be difficult
for the Certificateholders of such Series to achieve the results from the vote
that they desire.
Certificate Rating. Any rating assigned to the Certificates of a Series or a
Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under the Agreement and
will be based primarily on the value of the Receivables in the Trust and the
availability of any Enhancement with respect to such Series or Class. However,
any such rating will not, unless otherwise specified in the related Prospectus
Supplement with respect to any Class or Series offered hereby, address the
likelihood that the principal of, or interest on, any Certificates of such Class
or Series will be paid on a scheduled date. In addition, any such rating will
not address the possibility of the occurrence of a Pay Out Event with respect to
such Class or Series or the possibility of the imposition of United States
withholding tax with respect to non-U.S. Certificateholders. The rating will not
be a recommendation to purchase, hold or sell Certificates of such Series or
Class, and such rating will not comment as to the marketability of such
Certificates, any market price or suitability for a particular investor. 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 in
such Rating Agency's judgment circumstances so warrant.
The Seller will request a rating of the Certificates offered hereby of each
Series by at least one Rating Agency. There can be no assurance as to whether
any rating agency not requested to rate the Certificates will nonetheless issue
a rating with respect to any Series of Certificates or Class thereof, and, if
so, what such rating would be. A rating assigned to any Series of Certificates
or Class thereof by a rating agency that has not been requested by the Seller to
do so may be lower than the rating assigned by a Rating Agency pursuant to the
Seller's request.
Credit Enhancement. Although Credit Enhancement may be provided with respect
to a Series of Certificates or any Class thereof, the amount available will be
limited and will be subject to certain reductions. If the amount available under
any Credit Enhancement is reduced to zero, Certificateholders of the Series or
Class thereof covered by such Credit Enhancement will bear directly the credit
and other risks associated with their undivided interest in the Trust. See
"Credit Enhancement."
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be recognized
by the Trustee as Certificateholders, as that term will be used in each
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, CEDEL or
Euroclear and their participating organizations. See "Description of the
Certificates -- Book-Entry Registration" and "-- Definitive Certificates."
THE TRUSTS
Trust I and Trust II have been formed, and each New Trust will be formed, in
accordance with the laws of the State of Delaware pursuant to an Agreement. No
Trust will engage in any business activity other than acquiring and holding
Receivables, issuing Series of Certificates and the related Seller Certificate,
making payments thereon and engaging in related activities (including, with
respect to any Series, obtaining any Enhancement and entering into an
Enhancement agreement relating thereto). As a consequence, no Trust is expected
to have any need for additional capital resources other than the assets of such
Trust.
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MBNA'S CREDIT CARD ACTIVITIES
GENERAL
With respect to each Series of Certificates, the Receivables conveyed or to
be conveyed to a Trust by MBNA pursuant to the related Agreement have been or
will be generated from transactions made by holders of selected MasterCard and
VISA credit card accounts, including premium accounts and standard accounts,
from the Bank Portfolio. Generally, both premium and standard accounts undergo
the same credit analysis, but premium accounts carry higher credit limits and
offer a wider variety of services to the cardholders. MBNA currently services
the Bank Portfolio in the manner described in the related Prospectus Supplement.
Certain data processing and administrative functions associated with the
servicing of the Bank Portfolio are performed on behalf of MBNA by MBNA
Information Services, Inc. ("MBNA I.S."). See "-- Description of MBNA I.S." MBNA
I.S. is a wholly-owned subsidiary of MBNA.
ACQUISITION AND USE OF CREDIT CARD ACCOUNTS
MBNA primarily relies on affinity marketing in the acquisition of new credit
card accounts. Affinity marketing involves the solicitation of prospective
cardholders from identifiable groups with a common interest or a common cause.
Affinity marketing is conducted through two approaches: the first relies on the
solicitation of members of organized membership groups with the endorsement of
such group's leadership, and the second utilizes direct solicitation of
purchased list prospects. MBNA also relies on targeted direct response marketing
in the acquisition of new accounts.
Credit applications that are approved are reviewed individually by a credit
analyst, who approves the application and assigns a credit line based on a
review of the potential customer's financial history and capacity to repay.
Credit analysts review credit reports obtained through an independent credit
reporting agency, and use a delinquency probability model to assist them in
reaching a credit decision for each applicant. Credit analysts also review and
verify other information, such as employment and income, when necessary to make
a credit decision. Further levels of review are automatically triggered,
depending upon the levels of risk indicated by the delinquency probability
model. Credit analysts review applications obtained through pre-approved offers
to ensure adherence to credit standards and that the appropriate credit limit is
assigned. MBNA's Loan Review Department independently reviews selected
applications to ensure quality and consistency. Less than half of all credit
applications are approved.
Credit card accounts that have been purchased by the Seller were originally
opened using criteria established by institutions other than MBNA and may not
have been subject to the same level of credit review as accounts established by
MBNA. It is expected that portfolios of credit card accounts purchased by the
Seller from other credit card issuers will be added to Trusts from time to time.
Each cardholder is subject to an agreement with MBNA governing the terms and
conditions of the related MasterCard or VISA account. Pursuant to each such
agreement, MBNA reserves the right, upon advance notice to the cardholder, to
add or to change any terms, conditions, services or features of its MasterCard
or VISA accounts at any time, including increasing or decreasing periodic
finance charges, other charges or minimum payment terms. The agreement with each
cardholder provides that MBNA may apply such changes, when applicable, to
current outstanding balances as well as to future transactions. The cardholder
can avoid certain changes in terms by giving timely written notification to MBNA
and by not using the account.
A cardholder may use the credit card for two types of transactions:
purchases and cash advances. Cardholders make purchases when using the credit
card to buy goods or services. A cash advance is made when a credit card is used
to obtain cash from a financial institution or an automated teller machine.
Cardholders may use special cash advance checks issued by MBNA to draw against
their
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MasterCard or VISA credit lines. Cardholders may draw against their MBNA credit
lines by transferring balances owed to other creditors to their MBNA accounts.
DESCRIPTION OF MBNA I.S.
Credit card processing services performed by MBNA I.S. include data
processing, payment processing, statement rendering, card production and network
services. MBNA I.S.'s data network provides an interface to MasterCard
International Inc. and VISA U.S.A., Inc. for performing authorizations and funds
transfers. Most data processing and network functions are performed at MBNA
I.S.'s facility in Addison, Texas.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
Interchange as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior to initial billing.
Under the VISA and MasterCard systems, a portion of this Interchange in
connection with cardholder charges for goods and services is passed from banks
which clear the transactions for merchants to credit card issuing banks.
Interchange fees are set annually by MasterCard and VISA and are based on the
number of credit card transactions and the amount charged per transaction. The
Seller may be required, as described in the related Prospectus Supplement, to
transfer to a Trust a percentage of the Interchange attributed to cardholder
charges for goods and services in the related Accounts. If so required to be
transferred, Interchange arising under the Accounts will be allocated to the
related Certificates of any Series in the manner provided in the related
Prospectus Supplement, and, unless otherwise provided in the related Prospectus
Supplement, will be treated as collections of Finance Charge Receivables and
will be used to pay required monthly payments including interest on the related
Series of Certificates, and, in some cases, to pay all or a portion of the
Servicing Fee to the Servicer.
THE RECEIVABLES
The Receivables conveyed to each Trust will arise in Accounts selected from
the Bank Portfolio on the basis of criteria set forth in the related Agreement
as applied on the relevant Cut-Off Date and, with respect to Additional
Accounts, as of the related date of their designation (the "Trust Portfolio").
The Seller will have the right (subject to certain limitations and conditions
set forth therein), and in some circumstances will be obligated, to designate
from time to time Additional Accounts and to transfer to the related Trust all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created, or to transfer to such Trust Participations in
lieu of such Receivables or in addition thereto. Any Additional Accounts
designated pursuant to an Agreement must be Eligible Accounts as of the date the
Seller designates such accounts as Additional Accounts. Furthermore, pursuant to
each Agreement, the Seller has the right (subject to certain limitations and
conditions) to designate certain Accounts as Removed Accounts and to require the
Trustee to reconvey all receivables in such Removed Accounts to the Seller,
whether such Receivables are then existing or thereafter created. Throughout the
term of each Trust, the related Accounts from which the Receivables arise will
be the Accounts designated by the Seller on the relevant Cut-Off Date plus any
Additional Accounts minus any Removed Accounts. With respect to each Series of
Certificates, the Seller will represent and warrant to the related Trust that,
as of the Closing Date and the date Receivables are conveyed to the Trust, such
Receivables meet certain eligibility requirements. See "Description of the
Certificates -- Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the related Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount of
Principal Receivables, the amount of Finance Charge Receivables, the range
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of principal balances of the Accounts and the average thereof, the range of
credit limits of the Accounts and the average thereof, the range of ages of the
Accounts and the average thereof, the geographic distribution of the Accounts,
the types of Accounts and delinquency statistics relating to the Accounts.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Principal Receivables are
expected to be distributed to the Certificateholders of such Series or any
specified Class thereof on each specified Distribution Date during the
Controlled Amortization Period or the Principal Amortization Period, or are
expected to be accumulated for payment to Certificateholders of such Series or
any specified Class thereof during an Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Rapid Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related Prospectus
Supplement. The related Prospectus Supplement will specify when the Controlled
Amortization Period, the Principal Amortization Period or an Accumulation
Period, as applicable, will commence, the principal payments expected or
available to be received or accumulated during such Controlled Amortization
Period, Principal Amortization Period or Accumulation Period, or on the
Scheduled Payment Date, as applicable, the manner and priority of principal
accumulations and payments among the Classes of a Series of Certificates, the
payment rate assumptions on which such expected principal accumulations and
payments are based and the Pay Out Events which, if any were to occur, would
lead to the commencement of a Rapid Amortization Period or, if so specified in
the related Prospectus Supplement, a Rapid Accumulation Period.
No assurance can be given, however, that the Principal Receivables allocated
to be paid to Certificateholders or the holders of any specified Class thereof
will be available for distribution or accumulation for payment to
Certificateholders on each Distribution Date during the Controlled Amortization
Period, the Principal Amortization Period or an Accumulation Period, or on the
Scheduled Payment Date, as applicable. In addition, the Seller can give no
assurance that the payment rate assumptions for any Series will prove to be
correct. The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge-offs and other related
information relating to the Bank Portfolio. There can be no assurance that
future events will be consistent with such historical data.
The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to any Trust Portfolio, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments of
principal on their Certificates during an Amortization Period or Accumulation
Period, or on any Scheduled Payment Date, as applicable, will be similar to any
historical experience set forth in a related Prospectus Supplement. If a Pay Out
Event occurs and the Rapid Amortization Period commences, the average life and
maturity of such Series of Certificates could be significantly reduced.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of collections
of Principal Receivables scheduled or available to be distributed or accumulated
for later payment to Certificateholders or any specified Class thereof during an
Amortization Period or an Accumulation Period or on any Scheduled Payment Date,
as applicable, or a Pay Out Event may occur which could initiate the Rapid
Amortization Period, there can be no assurance that the actual number of months
elapsed from the date of issuance of such Series of Certificates to the final
Distribution Date with respect to the Certificates will equal the expected
number of months.
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USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered hereby
will be paid to the Seller. The Seller will use such proceeds for its general
corporate purposes.
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking association
located in Newark, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. MBNA is a wholly-owned
subsidiary of the Corporation. MBNA was organized in January 1991 as the
successor of a national bank formed in 1982. The Corporation is a bank holding
company organized under the laws of Maryland on December 6, 1990 and registered
under the Bank Holding Company Act of 1956, as amended. The Prospectus
Supplement for each Series of Certificates will provide additional information,
including financial information, relating to MBNA, MBNA's credit card activities
and the Corporation.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the specified Trust other than the interests represented by any
other Series of Certificates issued by such Trust (which may include Series
offered pursuant to this Prospectus) and the Seller Certificate. Each Series
will be issued pursuant to an Agreement entered into by MBNA and the Trustee
named in the related Prospectus Supplement and a Series Supplement to the
Agreement, a copy of the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Prospectus
Supplement for each Series will describe any provisions of the particular
Agreement relating to such Series which may differ materially from the Agreement
filed as an exhibit to the Registration Statement. The following summaries
describe certain provisions common to each Series of Certificates. The summaries
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the related Agreement and
Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the related Trust, including the right to the applicable
Investor Percentage of all cardholder payments on the Receivables in such Trust.
For each Series of Certificates, unless otherwise specified in the related
Prospectus Supplement, the Investor Interest on any date will be equal to the
initial Investor Interest as of the related Closing Date for such Series
(increased by the principal balance of any Certificates of such Series issued
after the Closing Date for such Series) minus the amount of principal paid to
the related Certificateholders prior to such date and minus the amount of
unreimbursed Investor Charge-Offs with respect to such Certificates prior to
such date. If so specified in the Prospectus Supplement relating to any Series
of Certificates, under certain circumstances the Investor Interest may be
further adjusted by the amount of principal allocated to Certificateholders, the
funds on deposit in any specified account, and any other amount specified in the
related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be Subordinated
Certificates. Each Class of a Series will evidence the right to receive a
specified portion of each distribution of principal or interest or both. The
Investor Interest with respect to a Series with more than one Class will be
allocated among the Classes as described in the related Prospectus Supplement.
The Certificates of a Class may differ from Certificates of other Classes of the
same Series in, among other things, the amounts allocated to principal payments,
maturity date, Certificate Rate and the availability of Enhancement.
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For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the record
dates (each, a "Record Date") specified in the related Prospectus Supplement.
Interest will be distributed to Certificateholders in the amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
For each Series of Certificates, the Seller initially will own the Seller
Certificate. The Seller Certificate will represent the undivided interest in
each Trust not represented by the Certificates issued and outstanding under such
Trust or the rights, if any, of any Credit Enhancement Providers to receive
payments from each Trust. The holder of the Seller Certificate will have the
right to a percentage (the "Seller Percentage") of all cardholder payments from
the Receivables in the Trust. If provided in the related Agreement and
Prospectus Supplement, the Seller Certificate may be transferred in whole or in
part subject to certain limitations and conditions set forth therein. See
"-- Certain Matters Regarding the Seller and the Servicer."
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the amount
of the Investor Interest in the Trust will remain constant except under certain
limited circumstances. See "-- Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs." The amount of Principal Receivables in each
Trust, however, will vary each day as new Principal Receivables are created and
others are paid. The amount of the Seller Interest will fluctuate each day,
therefore, to reflect the changes in the amount of the Principal Receivables in
the Trust. When a Series is amortizing, the Investor Interest of such Series
will decline as customer payments of Principal Receivables are collected and
distributed to or accumulated for distribution to the Certificateholders. As a
result, the Seller Interest will generally increase to reflect reductions in the
Investor Interest for such Series and will also change to reflect the variations
in the amount of Principal Receivables in the related Trust. The Seller Interest
in each Trust may also be reduced as the result of an Exchange. See
"-- Exchanges."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, with respect to
each Series of Certificates, beneficial interests in the Certificates will be
available for purchase in minimum denominations of $1,000 and integral multiples
thereof in book-entry form only. The Seller has been informed by DTC that DTC's
nominee will be Cede. Accordingly, Cede is expected to be the holder of record
of each Series of Certificates. No Certificate Owner acquiring an interest in
the Certificates will be entitled to receive a certificate representing such
person's interest in the Certificates. Unless and until Definitive Certificates
are issued for any Series under the limited circumstances described herein, all
references herein to actions by Certificateholders shall refer to actions taken
by DTC upon instructions from its Participants (as defined below), and all
references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
See "-- Book-Entry Registration" and "-- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or
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CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in CEDEL's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee through the 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
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of DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Agreement, and Certificate
Owners will only be permitted to exercise the rights of Certificateholders
indirectly through the Participants who in turn will exercise the 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 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 actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under any related Agreement only at the direction
of one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Seller that it will take such
actions with respect to specified percentages of the Investor Interest only at
the direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Certificates. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euro-clear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities
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clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for the
Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters of
any Series of Certificates. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences." CEDEL or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by a
Certificateholder under related Agreement on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Seller advises the Trustee for such
Series in writing that DTC is no longer willing or able to discharge properly
its responsibilities as Depository with respect to such Series of Certificates,
and the Trustee or the Seller is unable to locate a qualified successor, (ii)
the Seller, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% (or such
other percentage specified in the related Prospectus Supplement) of the Investor
Interest advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
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Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Holders in whose
names the Definitive Certificates were registered at the close of business on
the related Record Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the 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),
however, will be made only upon presentation and surrender of such Certificate
at the office or agency 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 such final
distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith. The
Transfer Agent and Registrar shall not be required to register the transfer or
exchange of Definitive Certificates for a period of fifteen days preceding the
due date for any payment with respect to such Definitive Certificates.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the relevant Closing Date on the applicable Investor Interest at the applicable
Certificate Rate, which may be a fixed, floating or other type of rate as
specified in the related Prospectus Supplement. Interest will be distributed to
Certificateholders on the Distribution Dates specified in the related Prospectus
Supplement. Interest payments on any Distribution Date will be funded from
collections of Finance Charge Receivables allocated to the Investor Interest
during the preceding Monthly Period or Periods and may be funded from certain
investment earnings on funds held in accounts of the related Trust and, from any
applicable Credit Enhancement, if necessary, or certain other amounts as
specified in the related Prospectus Supplement. If the Distribution Dates for
payment of interest for a Series or Class occur less frequently than monthly,
such collections or other amounts (or the portion thereof allocable to such
Class) may be deposited in one or more trust accounts (each, an "Interest
Funding Account") pending distribution to the Certificateholders of such Series
or Class, as described in the related Prospectus Supplement. If a Series has
more than one Class of Certificates, each such Class may have a separate
Interest Funding Account. The Prospectus Supplement relating to each Series of
Certificates and each Class thereof will describe the amounts and sources of
interest payments to be made, the Certificate Rate, and, for a Series or Class
thereof bearing interest at a floating Certificate Rate, the initial Certificate
Rate, the dates and the manner for determining subsequent Certificate Rates, and
the formula, index or other method by which such Certificate Rates are
determined.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the Closing
Date relating to such Series and ends on the day before an Amortization Period
or Accumulation Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization Period or
Principal Amortization Period, as applicable, which will be scheduled to begin
on the date specified in, or determined in the manner specified in, the related
Prospectus Supplement, and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period, principal will be paid to
the Certificateholders in the amounts and on Distribution Dates specified in the
related Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a Principal Funding Account for later distribution to
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Certificateholders on the Scheduled Payment Date in the amounts specified in the
related Prospectus Supplement. Principal payments for any Series or Class
thereof will be funded from collections of Principal Receivables received during
the related Monthly Period or Periods as specified in the related Prospectus
Supplement and allocated to such Series or Class and from certain other sources
specified in the related Prospectus Supplement. In the case of a Series with
more than one Class of Certificates, the Certificateholders of one or more
Classes may receive payments of principal at different times. The related
Prospectus Supplement will describe the manner, timing and priority of payments
of principal to Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a Series may
be subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement 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
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
With respect to Trust I and Trust II, the Seller has transferred and
assigned, and with respect to any New Trust the Seller will transfer and assign
at the time of formation of each such Trust, all of its right, title and
interest in and to the Receivables in the related Accounts and all Receivables
thereafter created in such Accounts.
In connection with each previous transfer of the Receivables to Trust I and
Trust II, the Seller indicated, and in connection with each subsequent transfer
of Receivables to a Trust, the Seller will indicate, in its computer files that
the related Receivables have been conveyed to such Trust. In addition, the
Seller has provided to the Trustee, with respect to each of Trust I and Trust
II, and will provide to the Trustee with respect to each New Trust, computer
files or microfiche lists, containing a true and complete list showing each
related Account, identified by account number and by total outstanding balance
on the date of transfer. The Seller will not deliver to the related Trustee any
other records or agreements relating to the Accounts or the Receivables, except
in connection with additions or removals of Accounts. Except as stated above,
the records and agreements relating to the Accounts and the Receivables
maintained by the Seller or the Servicer are not and will not be segregated by
the Seller or the Servicer from other documents and agreements relating to other
credit card accounts and receivables and are not and will not be stamped or
marked to reflect the transfer of the Receivables to a Trust, but the computer
records of the Seller are and will be required to be marked to evidence such
transfer. The Seller has filed, with respect to each of Trust I and Trust II,
and will file with respect to each New Trust, Uniform Commercial Code financing
statements with respect to the Receivables meeting the requirements of Delaware
state law. See "Risk Factors -- Transfer of Receivables" and "Certain Legal
Aspects of the Receivables."
EXCHANGES
For each Series of Certificates, the related Agreement will provide for the
related Trustee to issue two types of certificates: (i) one or more Series of
Certificates which are transferable and have the characteristics described below
and (ii) the Seller Certificate, a certificate which evidences the Seller
Interest, which initially will be held by the Seller and will be transferable
only as provided in the related Agreement. The related Prospectus Supplement may
also provide that, pursuant to any one or more Series Supplements, the holder of
the Seller Certificate may tender such Seller Certificate, or the Seller
Certificate and the Certificates evidencing any Series of Certificates issued by
such Trust, to the related Trustee in exchange for one or more new Series (which
may include Series offered pursuant to this Prospectus) and a reissued Seller
Certificate. Pursuant to each Agreement, the holder of the Seller
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Certificate may define, with respect to any newly issued Series, all Principal
Terms of such new Series. Upon the issuance of an additional Series of
Certificates, none of the Seller, the Servicer, the Trustee or the related Trust
will be required or will intend to obtain the consent of any Certificateholder
of any other Series previously issued by such Trust. However, as a condition of
an Exchange, the holder of the Seller Certificate will deliver to the Trustee
written confirmation that the Exchange will not result in the reduction or
withdrawal by any Rating Agency of its rating of any outstanding Series. The
Seller may offer any Series under a Disclosure Document in offerings pursuant to
this Prospectus or in transactions either registered under the Securities Act or
exempt from registration thereunder directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless otherwise specified in the related Prospectus Supplement, the holder
of the Seller Certificate may perform Exchanges and define Principal Terms such
that each Series issued under a Trust has a period during which amortization or
accumulation of the principal amount thereof is intended to occur which may have
a different length and begin on a different date than such period for any other
Series. Further, one or more Series may be in their amortization or accumulation
periods while other Series are not. Moreover, each Series may have the benefit
of a Credit Enhancement which is available only to such Series. Under the
related Agreement, the Trustee shall hold any such form of Credit Enhancement
only on behalf of the Series with respect to which it relates. Likewise, with
respect to each such form of Credit Enhancement, the holder of the Seller
Certificate may deliver a different form of Credit Enhancement agreement. The
holder of the Seller Certificate may specify different certificate rates and
monthly servicing fees with respect to each Series (or a particular Class within
such Series). The holder of the Seller Certificate will also have the option
under the related Agreement to vary between Series the terms upon which a Series
(or a particular Class within such Series) may be repurchased by the Seller or
remarketed to other investors. Additionally, certain Series may be subordinated
to other Series, or Classes within a Series may have different priorities. There
will be no limit to the number of Exchanges that may be performed under a
related Agreement.
Unless otherwise specified in the related Prospectus Supplement, an Exchange
may only occur upon the satisfaction of certain conditions provided in the
related Agreement. Under each Agreement, the holder of the Seller Certificate
may perform an Exchange by notifying the Trustee at least three days in advance
of the date upon which the Exchange is to occur. Under each Agreement, the
notice will state the designation of any Series to be issued on the date of the
Exchange and, with respect to each such Series: (i) its initial principal amount
(or method for calculating such amount) which amount may not be greater than the
current principal amount of the Seller Certificate, (ii) its certificate rate
(or method of calculating such rate) and (iii) the provider of Credit
Enhancement, if any, which is expected to provide support with respect to it.
Each Agreement will provide that on the date of the Exchange the Trustee will
authenticate any such Series only upon delivery to it of the following, among
others, (i) a Series Supplement specifying the Principal Terms of such Series,
(ii) (a) an opinion of counsel to the effect that, unless otherwise stated in
the related Series Supplement, the Certificates of such Series will be
characterized as indebtedness for federal income tax purposes and (b) a Tax
Opinion, (iii) if required by the related Series Supplement, the form of Credit
Enhancement, (iv) if Credit Enhancement is required by the Series Supplement, an
appropriate Credit Enhancement agreement with respect thereto executed by the
Seller and the issuer of the Credit Enhancement, (v) written confirmation from
each Rating Agency that the Exchange will not result in such Rating Agency's
reducing or withdrawing its rating on any then outstanding Series rated by it,
(vi) an officer's certificate of the Seller to the effect that after giving
effect to the Exchange the Seller would not be required to add Additional
Accounts pursuant to the related Agreement and the Seller Interest would be at
least equal to the Minimum Seller Interest and (vii) the existing Seller
Certificate and, if applicable, the certificates representing the Series to be
exchanged. Upon satisfaction of such conditions, the Trustee will cancel the
existing Seller Certificate and the Certificates of the exchanged Series, if
applicable, and authenticate the new Series and a new Seller Certificate.
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REPRESENTATIONS AND WARRANTIES
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in each of Agreement I and Agreement II,
and will make in each New Agreement, certain representations and warranties to
the Trust to the effect that, among other things, (a) as of the Closing Date,
the Seller was duly incorporated and in good standing and that it has the
authority to consummate the transactions contemplated by the related Agreement
and (b) as of the relevant Cut-Off Date (or as of the date of the designation of
Additional Accounts), each Account was an Eligible Account (as defined below).
If so provided in the related Prospectus Supplement, if (i) any of these
representations and warranties proves to have been incorrect in any material
respect when made, and continues to be incorrect for 60 days after notice to the
Seller by the related Trustee or to the Seller and the related Trustee by the
Certificateholders holding more than 50% of the Investor Interest of the related
Series, and (ii) as a result the interests of the Certificateholders are
materially and adversely affected, and continue to be materially and adversely
affected during such period, then the Trustee or Certificateholders holding more
than 50% of the Investor Interest may give notice to the Seller (and to the
related Trustee in the latter instance) declaring that a Pay Out Event has
occurred, thereby commencing the Rapid Amortization Period or, if so specified
in the related Prospectus Supplement, the Rapid Accumulation Period.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in each of Agreement I and Agreement II,
and will make in each New Agreement, representations and warranties to the
related Trust relating to the Receivables in such Trust to the effect, among
other things, that (a) as of the Closing Date of the initial Series of
Certificates issued by such Trust, each of the Receivables then existing is an
Eligible Receivable (as defined below) and (b) as of the date of creation of any
new Receivable, such Receivable is an Eligible Receivable and the representation
and warranty set forth in clause (b) in the immediately following paragraph is
true and correct with respect to such Receivable. In the event (i) of a breach
of any representation and warranty set forth in this paragraph, within 60 days,
or such longer period as may be agreed to by the Trustee, of the earlier to
occur of the discovery of such breach by the Seller or Servicer or receipt by
the Seller of written notice of such breach given by the Trustee, or, with
respect to certain breaches relating to prior liens, immediately upon the
earlier to occur of such discovery or notice and (ii) that as a result of such
breach, the Receivables in the related Accounts are charged off as
uncollectible, the Trust's rights in, to or under the Receivables or its
proceeds are impaired or the proceeds of such Receivables are not available for
any reason to the Trust free and clear of any lien, the Seller shall accept
reassignment of each Principal Receivable as to which such breach relates (an
"Ineligible Receivable") on the terms and conditions set forth below; provided,
however, that no such reassignment shall be required to be made with respect to
such Ineligible Receivable if, on any day within the applicable period (or such
longer period as may be agreed to by the Trustee), the representations and
warranties with respect to such Ineligible Receivable shall then be true and
correct in all material respects. The Seller shall accept reassignment of each
such Ineligible Receivable by directing the Servicer to deduct the amount of
each such Ineligible Receivable from the aggregate amount of Principal
Receivables used to calculate the Seller Interest. In the event that the
exclusion of an Ineligible Receivable from the calculation of the Seller
Interest would cause the Seller Interest to be a negative number, on the date of
reassignment of such Ineligible Receivable the Seller shall make a deposit in
the Principal Account in immediately available funds in an amount equal to the
amount by which the Seller Interest would be reduced below zero. Any such
deduction or deposit shall be considered a repayment in full of the Ineligible
Receivable. The obligation of the Seller to accept reassignment of any
Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties set forth in this paragraph with respect to such
Receivable available to the Certificateholders or the Trustee on behalf of
Certificateholders.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in each of Agreement I and Agreement II,
and will make in each New Agreement, representations and warranties to the
related Trust to the effect, among other things, that as of the
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Closing Date of the initial Series of Certificates issued by such Trust (a) the
related Agreement will constitute a legal, valid and binding obligation of the
Seller and (b) the transfer of Receivables by it to the Trust under the
Agreement will constitute either a valid transfer and assignment to the Trust of
all right, title and interest of the Seller in and to the Receivables (other
than Receivables in Additional Accounts), whether then existing or thereafter
created and the proceeds thereof (including amounts in any of the accounts
established for the benefit of Certificateholders) or the grant of a first
priority perfected security interest in such Receivables (except for certain tax
liens) and the proceeds thereof (including amounts in any of the accounts
established for the benefit of Certificateholders), which is effective as to
each such Receivable upon the creation thereof. In the event of a breach of any
of the representations and warranties described in this paragraph, either the
Trustee or the Holders of Certificates evidencing undivided interests in the
Trust aggregating more than 50% of the aggregate Investor Interest of all Series
outstanding under such Trust may direct the Seller to accept reassignment of the
Trust Portfolio within 60 days of such notice, or within such longer period
specified in such notice. The Seller will be obligated to accept reassignment of
such Receivables on a Distribution Date occurring within such applicable period.
Such reassignment will not be required to be made, however, if at any time
during such applicable period, or such longer period, the representations and
warranties shall then be true and correct in all material respects. The deposit
amount for such reassignment will be equal to the Investor Interest and
Enhancement Invested Amount, if any, for each Series outstanding under such
Trust on the last day of the Monthly Period preceding the Distribution Date on
which the reassignment is scheduled to be made less the amount, if any,
previously allocated for payment of principal to such Certificateholders or such
holders of the Enhancement Invested Amount or the Collateral Interest, if any,
on such Distribution Date, plus an amount equal to all accrued and the unpaid
interest less the amount, if any, previously allocated for payment of such
interest on such Distribution Date. The payment of the reassignment deposit
amount and the transfer of all other amounts deposited for the preceding month
in the Distribution Account will be considered a payment in full of the Investor
Interest and the Enhancement Invested Amount, if any, for each such Series
required to be repurchased and will be distributed upon presentation and
surrender of the Certificates for each such Series. If the Trustee or
Certificateholders give a notice as provided above, the obligation of the Seller
to make any such deposit will constitute the sole remedy respecting a breach of
the representations and warranties available to the Trustee or such
Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Account" will be defined to
mean, as of the relevant Cut-Off Date (or, with respect to Additional Accounts,
as of their date of designation for inclusion in the related Trust), each
Account owned by the Seller (a) which was in existence and maintained with the
Seller, (b) which is payable in United States dollars, (c) the customer of which
has provided, as his most recent billing address, an address located in the
United States or its territories or possessions, (d) which has not been
classified by the Seller as cancelled, counterfeit, deleted, fraudulent, stolen
or lost, (e) which has either been originated by the Seller or acquired by the
Seller from other institutions, and (f) which has not been charged off by the
Seller in its customary and usual manner for charging off such Account as of the
Cut-Off Date and, with respect to Additional Accounts, as of their date of
designation for inclusion in the Trust. Under Agreement II and each New
Agreement, the definition of Eligible Account may be changed by amendment to
such Agreement without the consent of the related Certificateholders if (i) the
Seller delivers to the Trustee a certificate of an authorized officer to the
effect that, in the reasonable belief of the Seller, such amendment will not as
of the date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not result in
a withdrawal or reduction of the rating of any outstanding Series under the
related Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Receivable" will be defined
to mean each Receivable (a) which has arisen under an Eligible Account, (b)
which was created in compliance, in all material respects, with all requirements
of law applicable to the Seller, and pursuant to a credit card agreement which
complies in
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all material respects with all requirements of law applicable to the Seller, (c)
with respect to which all consents, licenses or authorizations of, or
registrations with, any governmental authority required to be obtained or given
by the Seller in connection with the creation of such Receivable or the
execution, delivery, creation and performance by the Seller of the related
credit card agreement have been duly obtained or given and are in full force and
effect as of the date of the creation of such Receivable, (d) as to which, at
the time of its creation, the Seller or the related Trust had good and
marketable title free and clear of all liens and security interests arising
under or through the Seller (other than certain tax liens for taxes not then due
or which the Seller is contesting), (e) which is the legal, valid and binding
payment obligation of the obligor thereon, legally enforceable against such
obligor in accordance with its terms (with certain bankruptcy-related
exceptions) and (f) which constitutes an "account" under Article 9 of the UCC.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, it will not be required or anticipated that the Trustee will
make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the presence
or absence of defects, compliance with the Seller's representations and
warranties or for any other purpose. The Servicer, however, will deliver to the
Trustee on or before March 31 of each year (or such other date specified in the
related Prospectus Supplement) an opinion of counsel with respect to the
validity of the security interest of the Trust in and to the Receivables and
certain other components of the Trust.
ADDITION OF TRUST ASSETS
As described above under "The Receivables," the Seller will have the right
to designate for each Trust, from time to time, Additional Accounts to be
included as Accounts with respect to such Trust. In addition, the Seller will be
required to designate Additional Accounts under the circumstances and in the
amounts specified in the related Prospectus Supplement. The Seller will convey
to the related Trust its interest in all Receivables of such Additional
Accounts, whether such Receivables are then existing or thereafter created.
Each Additional Account must be an Eligible Account at the time of its
designation. However, Additional Accounts may not be of the same credit quality
as the initial Accounts. Additional Accounts may have been originated by the
Seller using credit criteria different from those which were applied by the
Seller to the initial Accounts or may have been acquired by the Seller from an
institution which may have had different credit criteria.
If so specified in the Prospectus Supplement relating to a Series, in
addition to or in lieu of Additional Accounts, the Seller under Agreement II is,
and under each New Agreement will be, permitted to add to the related Trust
participations representing undivided interests in a pool of assets primarily
consisting of receivables arising under consumer revolving credit card accounts
owned by the Seller and collections thereon ("Participations"). Participations
may be evidenced by one or more certificates of ownership issued under a
separate pooling and servicing agreement or similar agreement (a "Participation
Agreement") entered into by the Seller which 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 specified herein. The rights and
remedies of the related Trust as the holder of a Participation (and therefore
the Certificateholders) will be subject to all the terms and provisions of the
related Participation Agreement. Agreement II and each New Agreement may be
amended to permit the addition of a Participation in a Trust without the consent
of the related Certificateholders if (i) the Seller delivers to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, such amendment will not as of the date of such amendment
adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust.
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A conveyance by the Seller to a Trust of Receivables in Additional Accounts
or Participations is subject to the following conditions, among others: (i) the
Seller shall give the Trustee, each Rating Agency and the Servicer written
notice that such Additional Accounts or Participations will be included, which
notice shall specify the approximate aggregate amount of the Receivables or
interests therein to be transferred; (ii) the Seller shall have delivered to the
Trustee a written assignment (including an acceptance by the Trustee on behalf
of the Trust for the benefit of the Certificateholders) as provided in the
Agreement relating to such Additional Accounts or Participations (the
"Assignment") and, the Seller shall have delivered to the Trustee a computer
file or microfiche list, dated the date of such Assignment, containing a true
and complete list of such Additional Accounts or Participations; (iii) the
Seller shall represent and warrant that (x) each Additional Account is, as of
the Addition Date, an Eligible Account, and each Receivable in such Additional
Account is, as of the Addition Date, an Eligible Receivable, (y) no selection
procedures believed by the Seller to be materially adverse to the interests of
the Certificateholders were utilized in selecting the Additional Accounts from
the available Eligible Accounts from the Bank Portfolio, and (z) as of the
Addition Date, the Seller is not insolvent; (iv) the Seller shall deliver
certain opinions of counsel with respect to the transfer of the Receivables in
the Additional Accounts or the Participations to the Trust and (v) under certain
circumstances with respect to Additional Accounts, and in all cases with respect
to Participations, each Rating Agency then rating any Series of Certificates
outstanding under such Trust shall have consented to the addition of such
Additional Accounts or Participations.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer intends
to file, on behalf of each Trust, a Report on Form 8-K with respect to any
addition to a Trust of Receivables in Additional Accounts or Participations that
would have a material effect on the composition of the assets of such Trust.
REMOVAL OF ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, subject to the conditions set forth in the next succeeding
sentence, the Seller may, but shall not be obligated to, designate from time to
time (which may be restricted to certain periods if so specified in the related
Prospectus Supplement) certain Accounts to be Removed Accounts, all Receivables
in which shall be subject to deletion and removal from the related Trust;
provided, however, that the Seller shall not make more than one such designation
in any Monthly Period. The Seller will be permitted to designate and require
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions: (i) the removal of any Receivables of
any Removed Accounts shall not, in the reasonable belief of the Seller, cause a
Pay Out Event to occur; (ii) the Seller shall have delivered to the related
Trustee for execution a written assignment and a computer file or microfiche
list containing a true and complete list of all Removed Accounts identified by
account number and the aggregate amount of the Receivables in such Removed
Accounts; (iii) either (a) the Trust Portfolio is not more than 15% delinquent
and the weighted average delinquency rate of such Trust Portfolio does not
exceed 60 days or (b) the Trust Portfolio is not more than 7% delinquent and the
weighted average delinquency rate of such Trust Portfolio does not exceed 90
days or (c) the Trust Portfolio is not more than the specified percentage
delinquent and the weighted average delinquency rate of such Trust Portfolio
does not exceed the number of days specified in the related Prospectus
Supplement; (iv) the Seller shall represent and warrant that no selection
procedures believed by the Seller to be materially adverse to the interests of
the holders of any Series of Certificates outstanding under such Trust were
utilized in selecting the Removed Accounts to be removed from such Trust; (v)
each Rating Agency then rating each Series of Certificates outstanding under
such Trust shall have received notice of such proposed removal of Accounts and
the Seller shall have received notice from each such Rating Agency that such
proposed removal will not result in a downgrade of its then-current rating for
any such Series; (vi) the aggregate amount of Principal Receivables of the
Accounts then existing less the aggregate amount of Principal Receivables of the
Removed Accounts shall not be less than the amount, if any, specified for any
period
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specified; (vii) the Principal Receivables of the Removed Accounts shall not
equal or exceed 5% (or such other percentage specified in the related Prospectus
Supplement) of the aggregate amount of the Principal Receivables in such Trust
at such time; provided, that if any Series has been paid in full, the Principal
Receivables in such Removed Accounts may equal or approximately equal the
initial Investor Interest or Full Investor Interest, as applicable, of such
Series; (viii) such other conditions as are specified in the related Prospectus
Supplement; and (ix) the Seller shall have delivered to the Trustee an officer's
certificate confirming the items set forth in clauses (i) through (viii) above.
Notwithstanding the above, the Seller will be permitted to designate as a
Removed Account without the consent of the related Trustee, Certificateholders
or Rating Agencies any Account that has a zero balance and which the Seller will
remove from its computer file.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to the
Receivables. The Servicer will be required to maintain fidelity bond coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of credit card receivables covering such actions and
in such amounts as the Servicer believes to be reasonable from time to time.
DISCOUNT OPTION
The Seller may at any time designate a specified fixed or variable
percentage (the "Discount Percentage") of the amount of Receivables arising in
the Accounts with respect to the related Trust on and after the date such option
is exercised that otherwise would have been treated as Principal Receivables to
be treated as Finance Charge Receivables. Such designation will become effective
upon satisfaction of the requirements set forth in the related Agreement,
including written confirmation by each Rating Agency in writing of its then
current rating on each outstanding Series of the related Trust. On the date of
processing of any collections, the product of the Discount Percentage and
collections of Receivables that arise in the Accounts on such day on or after
the date such option is exercised that otherwise would be Principal Receivables
will be deemed collections of Finance Charge Receivables and will be applied
accordingly, unless otherwise provided in the related Prospectus Supplement.
TRUST ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Trust,
the related Trustee will establish and maintain in the name of the Trust two
separate accounts in a segregated trust account (which need not be a deposit
account), a "Finance Charge Account" and a "Principal Account," for the benefit
of the Certificateholders of all related Series, including any Series offered
pursuant to this Prospectus. Each Agreement will provide that the Trustee shall
have the power to establish series accounts in Series Supplements, including an
Interest Funding Account, a Principal Funding Account, a Pre-Funding Account or
such other account specified in the related Series Supplement, each of which
series accounts shall be held for the benefit of the Certificateholders of the
related Series and for the purposes set forth in the related Prospectus
Supplement. The Trustee will also establish a "Distribution Account" (a
non-interest bearing segregated demand deposit account established with a
Qualified Institution other than the Seller). The Servicer will establish and
maintain, in the name of the Trust, for the benefit of Certificateholders of all
Series issued thereby including any Series offered pursuant to this Prospectus,
a Collection Account, which will be a non-interest bearing segregated account
established and maintained with the Servicer or with a "Qualified Institution,"
defined as a depository institution or trust company, which may include the
related Trustee, organized under the laws of the United States or any one of the
states thereof, which at all times has a certificate of deposit rating of P-1 by
Moody's Investors Service, Inc. ("Moody's") and of A-1+ by Standard & Poor's
Corporation ("Standard &
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Poor's") or long-term unsecured debt obligation (other than such obligation the
rating of which is based on collateral or on the credit of a person other than
such institution or trust company) rating of Aa3 by Moody's and deposit
insurance provided by either the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), each administered by the FDIC, or a
depository institution, which may include the Trustee, which is acceptable to
the Rating Agency. Unless otherwise specified in the related Prospectus
Supplement, funds in the Principal Account and the Finance Charge Account for
each Trust will be invested, at the direction of the Servicer, in (i)
obligations fully guaranteed by the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of depository institutions or
trust companies, the certificates of deposit of which have the highest rating
from Moody's and Standard & Poor's, (iii) commercial paper having, at the time
of the Trust's investment, a rating in the highest rating category from Moody's
and Standard & Poor's, (iv) bankers' acceptances issued by any depository
institution or trust company described in clause (ii) above, (v) money market
funds which have the highest rating from, or have otherwise been approved in
writing by, Moody's and Standard & Poor's, (vi) certain open end diversified
investment companies, and (vii) any other investment if the Rating Agency
confirms in writing that such investment will not adversely affect its then
current rating or ratings of the Investor Certificates (such investments,
"Permitted Investments"). Unless otherwise specified in the related Prospectus
Supplement, any earnings (net of losses and investment expenses) on funds in the
Finance Charge Account or the Principal Account will be paid to the Seller.
Funds in any other series account established by a Series Supplement may be
invested in Permitted Investments or otherwise as provided in the related
Prospectus 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 Finance Charge Account and the Principal
Account for the purpose of carrying out the Servicer's duties under the
Agreement. Unless otherwise specified in the related Prospectus Supplement, the
Trustee will initially be the paying agent and will have the revocable power to
withdraw funds from the Distribution Account for the purpose of making
distributions to the Certificateholders.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer of additional Receivables to the Trust
or pending the reduction of the Investor Interests of other Series issued by the
related Trust. The related Prospectus Supplement will specify the initial
Investor Interest with respect to such Series, the Full Investor Interest and
the date by which the Investor Interest is expected to equal the Full Investor
Interest. The Investor Interest will increase as Receivables are delivered to
the related Trust or as the Investor Interests of other Series of the related
Trust are reduced. The Investor Interest may also decrease due to Investor
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 the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Seller to the extent of
any increases in the Investor Interest. In the event that the Investor Interest
does not for any reason equal the Full Investor Interest by the end of the
Funding Period, any amount remaining in the Pre-Funding 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
Pre-Funding Account will be invested by the Trustee in Permitted 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 Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the
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Finance Charge Account for distribution in respect of interest on the
Certificates of the related Series in the manner specified in the related
Prospectus Supplement.
INVESTOR PERCENTAGE AND SELLER PERCENTAGE
For each Trust, the Servicer will allocate between the Investor Interest of
each Series issued by such Trust and outstanding (and between each Class of each
Series) and the Seller Interest, and, in certain circumstances, the interest of
certain Credit Enhancement Providers, all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all Receivables
in Defaulted Accounts. The Servicer will make each allocation by reference to
the applicable Investor Percentage of each Series and the Seller Percentage,
and, in certain circumstances, the percentage interest of certain Credit
Enhancement Providers (the "Credit Enhancement Percentage") with respect to such
Series. The Prospectus Supplement relating to a Series will specify the Investor
Percentage and, if applicable, the Credit Enhancement Percentage with respect to
the allocations of collections of Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted Accounts during the Revolving Period,
any Amortization Period and any Accumulation Period, as applicable. In addition,
for each Series of Certificates having more than one Class, the related
Prospectus Supplement will specify the method of allocation between each Class.
The Seller Percentage will, in all cases, be equal to 100% minus the
aggregate Investor Percentages and, if applicable, the Credit Enhancement
Percentages, for all Series then outstanding.
TRANSFER OF ANNUAL MEMBERSHIP FEES
Unless otherwise specified in the related Prospectus Supplement, on or
before the Transfer Date following each annual membership fee processing date,
the Seller will accept reassignment of the Receivables representing such annual
membership fee from the related Trust. The Seller will pay to the Trust for such
Receivable the amount of such annual membership fee. An amount equal to the
product of (a) the Investor Percentage of the related Series (and, if a Trust
has issued more than one Series, the Investor Percentages with respect to all
Series issued thereby) with respect to Finance Charge Receivables and (b) the
amount of such annual membership fee will be deposited by the Seller into the
Finance Charge Account and an amount equal to the product of (a) the Seller
Percentage and (b) the amount of such annual membership fee will be paid to the
holder of the Seller Certificate. Simultaneously with such reassignment, the
Seller will retransfer the Receivable representing such annual membership fee to
the Trust. Upon such retransfer, the Seller will make certain representations
and warranties with respect to such Receivables, as provided above under
"-- Representations and Warranties," as if such Receivable were a new Receivable
created in an existing Account. Further, the amount of the Seller Interest will
be increased to reflect the addition of such annual membership fee Receivable to
the Trust. Unless otherwise provided in the related Prospectus Supplement,
collections with respect to such annual membership fees will be treated as
collections of Principal Receivables.
APPLICATION OF COLLECTIONS
Unless otherwise specified in the related Prospectus Supplement, except as
otherwise provided below, the Servicer will deposit into the Collection Account
for the related Trust, no later than the second business day (or such other day
specified in the related Prospectus Supplement) following the date of
processing, any payment collected by the Servicer on the Receivables. On the
same day as any such deposit is made, the Servicer will make the deposits and
payments to the accounts and parties as indicated below; provided, however, that
for as long as MBNA remains the Servicer under the related Agreement, and (a)(i)
the Servicer provides to the Trustee a letter of credit covering risk collection
of the Servicer acceptable to the Rating Agency and (ii) the Seller shall not
have received a notice from the Rating Agency that such letter of credit would
result in the lowering of such Rating Agency's then-existing rating of the
related Series (and if a Trust has issued more than one Series, any Series of
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certificates previously-issued and then-outstanding thereunder), or (b) the
Servicer has and maintains a certificate of deposit rating of P-1 by Moody's and
of A-1 by Standard & Poor's and deposit insurance provided by either BIF or
SAIF, then the Servicer may make such deposits and payments on a monthly or
other periodic basis on the Transfer Date in an amount equal to the net amount
of such deposits and payments which would have been made had the conditions of
this proviso not applied.
Unless otherwise specified in the related Prospectus Supplement,
notwithstanding anything in the related Agreement to the contrary, whether the
Servicer is required to make monthly or daily deposits from the Collection
Account into the Finance Charge Account or the Principal Account, with respect
to any Monthly Period, (i) the Servicer will only be required to deposit
Collections from the Collection Account into the Finance Charge Account, the
Principal Account or any series account established by a related Series
Supplement up to the required amount to be deposited into any such deposit
account or, without duplication, distributed on or prior to the related
Distribution Date to Certificateholders or to the provider of Enhancement and
(ii) if at any time prior to such Distribution Date the amount of Collections
deposited in the Collection Account exceeds the amount required to be deposited
pursuant to clause (i) above, the Servicer will be permitted to withdraw the
excess from the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will withdraw the following amounts from the Collection Account for
application as indicated:
(a) an amount equal to the Seller Percentage of the aggregate amount of
such deposits in respect of Principal Receivables and Finance Charge
Receivables, respectively, will be paid or held for payment to the holder of
the Seller Certificate;
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be deposited into the Finance Charge Account for allocation and
distribution as described in the related Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid or held for payment to the holder of the
Seller Certificate, provided that if after giving effect to the inclusion in
the related Trust of all Receivables on or prior to such date of processing
and the application of payments referred to in paragraph (a) above the
Seller Interest is reduced to zero, the excess will be deposited in the
Principal Account or other specified account and will be used as described
in the related Prospectus Supplement, including for payment to other Series
of Certificates issued by the related Trust;
(d) during the Controlled Amortization Period, Controlled Accumulation
Period or Rapid Accumulation Period, as applicable, an amount equal to the
applicable Investor Percentage of such deposits in respect of Principal
Receivables up to the amount, if any, as specified in the related Prospectus
Supplement will be deposited in the Principal Account or Principal Funding
Account, as applicable, for allocation and distribution to
Certificateholders as described in the related Prospectus Supplement,
provided that if collections of Principal Receivables exceed the principal
payments which may be allocated or distributed to Certificateholders, the
amount of such excess will be paid to the holder of the Seller Certificate
until the Seller Interest is reduced to zero, and thereafter will be
deposited in the Principal Account or other specified account and will be
used as described in the related Prospectus Supplement, including for
payment to other Series of Certificates issued by the related Trust; and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Principal Receivables will be
deposited into the Principal Account for application and distribution as
provided in the related Prospectus Supplement.
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In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class in
the manner and order of priority described in the related Prospectus Supplement.
Any amounts collected in respect of Principal Receivables and not paid to
the Seller because the Seller Interest is zero as described above (with respect
to each Series, "Unallocated Principal Collections"), together with any
adjustment payments as described below, will be paid to and held in the
Principal Account and paid to the Seller if and to the extent that the Seller
Interest is equal to or greater than zero. If an Amortization Period or
Accumulation Period has commenced, Unallocated Principal Collections will be
held for distribution to the Certificateholders on the related Distribution Date
or accumulated for distribution on the Scheduled Payment Date, as applicable,
and distributed to the Certificateholders of each Class or held for and
distributed to the Certificateholders of other Series of Certificates issued by
the related Trust in the manner and order of priority specified in the related
Prospectus Supplement.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a Group. The Prospectus
Supplement relating to a Series will specify whether such Series will be
included in a Group and will identify any previously issued Series included in
such Group. If so specified in the related Prospectus Supplement, the
Certificateholders of a Series within a Group or any Class thereof may be
entitled to receive all or a portion of Excess Finance Charge Collections with
respect to another Series within such Group to cover any shortfalls with respect
to amounts payable from collections of Finance Charge Receivables allocable to
such Series or Class. See "Description of the Certificates -- Application of
Collections" and "-- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
SHARED PRINCIPAL COLLECTIONS
If so specified in the related Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest of any Series are not needed to make payments
or deposits with respect to such Series, such collections will constitute Shared
Principal Collections and will be applied to cover principal payments due to or
for the benefit of Certificateholders of other Series. If so specified in the
related Prospectus Supplement, the allocation of Shared Principal Collections
may be among Series within a Group. Any such reallocation will not result in a
reduction in the Investor Interest of the Series to which such collections were
initially allocated.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on the fourth business day preceding each Transfer Date
(the "Determination Date"), the Servicer will calculate the aggregate Investor
Default Amount for the preceding Monthly Period, which will be equal to the
aggregate amount of the Investor Percentage of Principal Receivables in
Defaulted Accounts; that is, Accounts which in such Monthly Period were written
off as uncollectible in accordance with the Servicer's policies and procedures
for servicing credit card receivables, comparable to the Receivables. In the
case of a Series of Certificates having more than one Class, the Investor
Default Amount will be allocated among the Classes in the manner described in
the related Prospectus Supplement. If so provided in the related Prospectus
Supplement, an amount equal to the Investor Default Amount for any Monthly
Period may be paid from other amounts, including collections in the Finance
Charge Account or from Credit Enhancement, and applied to pay principal to
Certificateholders or the holder of the Seller Certificate, as appropriate. In
the case of a Series of Certificates having one or more Classes of Subordinated
Certificates, the related Prospectus Supplement may provide that all or a
portion of amounts otherwise allocable to such Subordinated Certificates may be
paid to the holders of
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the Senior Certificates to make up any Investor Default Amount allocable to such
holders of Senior Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs for
any Monthly Period. Investor Charge-Offs will be reimbursed on any Distribution
Date to the extent amounts on deposit in the Finance Charge Account and
otherwise available therefor exceed such interest, fees and any aggregate
Investor Default Amount payable on such date. Such reimbursement of Investor
Charge-Offs will result in an increase in the Investor Interest with respect to
such Series. In the case of a Series of Certificates having more than one Class,
the related Prospectus Supplement will describe the manner and priority of
allocating Investor Charge-Offs and reimbursements thereof among the Investor
Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because of
transactions occurring in respect of a rebate or refund to a cardholder, or
because such Principal Receivable was created in respect of merchandise which
was refused or returned by a cardholder, then the amount of the Seller Interest
in the related Trust will be reduced, on a net basis, by the amount of the
adjustment. In addition, the Seller Interest in such Trust will be reduced, on a
net basis, as a result of transactions in respect of any Principal Receivable
which was discovered as having been created through a fraudulent or counterfeit
charge.
DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Seller may terminate its substantive obligations in respect of such Series or
the related Trust by depositing with the Trustee, from amounts representing, or
acquired with, collections of Receivables, money or Permitted Investments
sufficient to make all remaining scheduled interest and principal payments on
such Series or all outstanding Series of Certificates of such Trust, as the case
may be, on the dates scheduled for such payments and to pay all amounts owing to
any Credit Enhancement Provider with respect to such Series or all outstanding
Series, as the case may be, if such action would not result in a Pay Out Event
for any Series. Prior to its first exercise of its right to substitute money or
Permitted Investments for Receivables, the Seller will deliver to the Trustee
(i) an opinion of counsel to the effect that such deposit and termination of
obligations will not result in the related Trust being required to register as
an "investment company" within the meaning of the Investment Company Act of
1940, as amended and (ii) a Tax Opinion.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Seller on any Distribution Date after the total Investor
Interest of such Series and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than or equal to 5% of the
initial Investor Interest, if any (or such other amount specified in the related
Prospectus Supplement), if certain conditions set forth in the related Agreement
are met. Unless otherwise specified in the related Prospectus Supplement, the
repurchase price will be equal to the total Investor Interest of such Series
(less the amount, if any, on deposit in any Principal Funding Account with
respect to such Series), plus the Enhancement Invested Amount, if any, with
respect to such Series, plus accrued and unpaid interest on the Certificates and
interest or other amounts payable on the Enhancement Invested Amount or the
Collateral Interest, if any, through the day preceding the Distribution Date on
which the repurchase occurs.
The Certificates of each Series will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment to
the Seller or otherwise. Each Prospectus Supplement will specify the final date
on which principal and interest with respect to the related Series of
Certificates will be scheduled to be
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distributed (the "Series Termination Date"); provided, however, that the
Certificates may be subject to prior termination as provided above. If the
Investor Interest is greater than zero on the Series Termination Date, the
Trustee or Servicer may be required to sell or cause to be sold certain
Receivables in the manner provided in the related Agreement and Series
Supplement and to pay the net proceeds of such sale and any collections on the
Receivables, in an amount at least equal to the sum of the Investor Interest and
the Enhancement Invested Amount, if any, with respect to such Series plus
accrued interest due thereon.
Unless the Servicer and the holder of the Seller Certificate instruct the
Trustee otherwise, each Trust will terminate on the earlier of (a) the day after
the Distribution Date on which the aggregate Investor Interest and Enhancement
Invested Amount or Collateral Interest, if any, with respect to each Series
outstanding is zero, (b) December 31, 2024, or (c) if the Receivables are sold,
disposed of or liquidated following the occurrence of an Insolvency Event,
immediately following such sale, disposition or liquidation (such date, the
"Trust Termination Date"). Upon the termination of each Trust and the surrender
of the Seller Certificate, the Trustee shall convey to the holder of the Seller
Certificate all right, title and interest of the Trust in and to the Receivables
and other funds of the Trust.
PAY OUT EVENTS
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless a Pay Out Event occurs prior to such
date. A Pay Out Event occurs with respect to all Series issued by a Trust upon
the occurrence of either of the following events:
(a) certain events of insolvency or receivership relating to the Seller;
(b) the Seller is unable for any reason to transfer Receivables to such
Trust in accordance with the provisions of the related Agreement; or
(c) such Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the related Prospectus Supplement. On
the date on which a Pay Out Event is deemed to have occurred, the Rapid
Amortization Period or, if so specified in the related Prospectus Supplement,
the Rapid Accumulation Period will commence. If, because of the occurrence of a
Pay Out Event, the Rapid Amortization Period begins earlier than the scheduled
commencement of an Amortization Period or prior to a Scheduled Payment Date,
Certificateholders will begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
In addition to the consequences of a Pay Out Event discussed above, unless
otherwise specified in the related Prospectus Supplement, if pursuant to certain
provisions of federal law, the Seller voluntarily enters liquidation or a
receiver is appointed for the Seller, on the day of such event the Seller 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 liquidation or the appointment stating that the Trustee
intends to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner. Unless otherwise instructed within a specified
period by Certificateholders representing undivided interests aggregating more
than 50% of the Investor Interest of each Series (or if any Series has more than
one Class, of each Class, and any other Person specified in the related
Agreement or a Series Supplement) issued and outstanding, the Trustee will sell,
dispose of, or otherwise liquidate the Receivables in a commercially reasonable
manner and on commercially reasonable terms. The proceeds from the sale,
disposition or liquidation of the Receivables will be treated as collections of
the Receivables and applied as specified above in "-- Application of
Collections" and in the related Prospectus Supplement.
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If the only Pay Out Event to occur is either the insolvency of the Seller or
the appointment of a conservator or receiver for the Seller, the conservator or
receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of a Rapid Amortization
Period or, if applicable with respect to a Series as specified in the related
Prospectus Supplement, a Rapid Accumulation Period. In addition, a conservator
or receiver may have the power to cause the early sale of the Receivables and
the early retirement of the Certificates. See "Risk Factors -- Certain Matters
Relating to Receivership" and "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, the Servicer's compensation for its servicing activities
and reimbursement for its expenses will take the form of the payment to it of
the Servicing Fee payable at the times and in the amounts specified in the
related Prospectus Supplement. The Investor Servicing Fee will be funded from
collections of Finance Charge Receivables allocated to the Investor Interest and
will be paid each month, or on such other specified periodic basis, from amounts
so allocated and on deposit in the Finance Charge Account (which, if so
specified in the related Prospectus Supplement, may include all or a portion of
the Interchange arising from the Accounts) or, in certain limited circumstances,
from amounts available from Enhancement and other sources, if any. The remainder
of the servicing fee for each Trust will be allocable to the Seller Interest,
the Investor Interests of any other Series issued by such Trust and the interest
represented by the Enhancement Invested Amount or the Collateral Interest, if
any, with respect to such Series, as described in the related Prospectus
Supplement. Neither the Trust nor the Certificateholders will have any
obligation to pay the portion of the servicing fee allocable to the Seller
Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
the Agreement to be payable by the related Trust or the Certificateholders other
than any tax imposed on or measured by income, including any federal, state and
local income and franchise taxes, if any, of the Trust or the
Certificateholders.
CERTAIN MATTERS REGARDING THE SELLER AND THE SERVICER
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the related Agreement, except upon
determination that performance of its duties is 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 related Agreement. MBNA, as initial Servicer, intends to
delegate some of its servicing duties to MBNA I.S.; however, such delegation
will not relieve it of its obligation to perform such duties in accordance with
the related Agreement.
Each of Agreement I and Agreement II provides and each New Agreement will
provide that the Servicer will indemnify the related Trust and Trustee from and
against any loss, liability, expense, damage or injury suffered or sustained by
reason of any acts or omissions or alleged acts or omissions of the Servicer
with respect to the activities of the Trust or the Trustee; provided, however,
that the Servicer shall not indemnify (a) the Trustee for liabilities imposed by
reason of fraud, negligence, or willful misconduct by the Trustee in the
performance of its duties under the Agreement, (b) the Trust, the
Certificateholders or the Certificate Owners for liabilities arising from
actions taken by the Trustee at the request of Certificateholders, (c) the
Trust, the Certificateholders or the Certificate Owners for any losses, claims,
damages or liabilities incurred by any of them in their capacities as investors,
including without limitation, losses incurred as a result of defaulted
Receivables or Receivables which are written off as uncollectible, or (d) the
Trust, the Certificateholders or the Certificate Owners for any
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liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including without limitation, any
federal, state or local income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by the Trust, the
Certificateholders or the Certificate Owners in connection with the Agreement to
any taxing authority.
In addition, each of Agreement I and Agreement II provides and each New
Agreement will provide that, subject to certain exceptions, the Seller will
indemnify an injured party for any losses, claims, damages or liabilities (other
than those incurred by a Certificateholder as an investor in the Certificates or
those which arise from any action of a Certificateholder) arising out of or
based upon the arrangement created by the Agreement as though the Agreement
created a partnership under the Delaware Uniform Partnership Law in which the
Seller is a general partner.
Each of Agreement I and Agreement II provides and each New Agreement will
provide that neither the Seller nor the Servicer nor any of their respective
directors, officers, employees or agents will be under any other liability to
the related Trust, Trustee, Certificateholders or any other person for any
action taken, or for refraining from taking any action, in good faith pursuant
to the Agreement. Neither the Seller, the Servicer, nor any of their respective
directors, officers, employees or agents will be protected against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence of the Seller, the Servicer or any such person in the
performance of its duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, each of Agreement I and Agreement II provides
and each New Agreement will provide that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement and which in
its opinion may expose it to any expense or liability.
Each of Agreement I and Agreement II provides and each New Agreement will
provide that, in addition to Exchanges, if applicable, the Seller may transfer
its interest in all or a portion of the Seller Certificate, provided that prior
to any such transfer (a) the Trustee receives written notification from each
Rating Agency that such transfer will not result in a lowering of its
then-existing rating of the Certificates of each outstanding Series rated by it
and (b) the Trustee receives a written opinion of counsel confirming that such
transfer would not adversely affect the treatment of the Certificates of each
outstanding Series as debt for federal income tax purposes.
Any person into which, in accordance with each Agreement, the Seller or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Seller or the Servicer is a party, or any person
succeeding to the business of the Seller or the Servicer, upon execution of a
supplement to the Agreement, delivery of an opinion of counsel with respect to
the compliance of the transaction with the applicable provisions of the
Agreement, will be the successor to the Seller or the Servicer, as the case may
be, under the Agreement.
SERVICER DEFAULT
Unless otherwise specified in the related Prospectus Supplement, in the
event of any Servicer Default (as defined below), either the Trustee or
Certificateholders representing undivided interests aggregating more than 50% of
the Investor Interests for all Series of Certificates of the related Trust, by
written notice to the Servicer (and to the Trustee if given by the
Certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Seller under the related Agreement
and in the Seller Interest will not be affected by such termination. The related
Trustee shall as promptly as possible appoint a successor Servicer. If no such
Servicer has been appointed and has accepted such appointment by the time the
Servicer ceases to act as Servicer, all authority, power and obligations of the
Servicer under the Agreement shall pass to and be vested in the Trustee. If the
Trustee is unable to obtain any bids from
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eligible servicers and the Servicer delivers an officer's certificate to the
effect that it cannot in good faith cure the Servicer Default which gave rise to
a transfer of servicing, and if the Trustee is legally unable to act as
successor Servicer, then the Trustee shall give the Seller the right of first
refusal to purchase the Receivables on terms equivalent to the best purchase
offer as determined by the Trustee.
Unless otherwise specified in the related Prospectus Supplement, "Servicer
Default" under any Agreement refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions to the Trustee to make certain payments, transfers or
deposits, on the date the Servicer is required to do so under the related
Agreement or any Series Supplement (or within the applicable grace period,
which shall not exceed 10 business days);
(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the Certificateholders of any Series issued and
outstanding under such Trust and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse effect
on such Certificateholders; or the delegation by the Servicer of its duties
under the Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer
in the Agreement, or in any certificate delivered pursuant to the Agreement,
proves to have been incorrect when made which has a material adverse effect
on the Certificateholders of any Series issued and outstanding under such
Trust, and which continues to be incorrect in any material respect for a
period of 60 days after written notice and continues to have a material
adverse effect on such Certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer; or
(e) such other event specified in the related Prospectus Supplement.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the exercise
of reasonable diligence by the Servicer and such delay or failure was caused by
an act of God or other similar occurrence. Upon the occurrence of any such
event, the Servicer shall not be relieved from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of the
Agreement, and the Servicer shall provide the Trustee, any provider of
Enhancement and/or any issuer of any third-party Credit Enhancement (a "Credit
Enhancement Provider"), the Seller and the holders of Certificates of each
Series issued and outstanding under the related Trust prompt notice of such
failure or delay by it, together with a description of the cause of such failure
or delay and its efforts to perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or the
majority of the certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on each Distribution Date, or as soon thereafter as is
practicable, as specified in the related Prospectus Supplement, the Paying Agent
will forward to each Certificateholder of record a statement prepared by the
Servicer setting forth, among other things: (a) the total amount distributed,
(b) the amount of the distribution on such Distribution Date allocable to
principal on the Certificates, (c) the amount of such
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distribution allocable to interest on the Certificates, (d) the amount of
collections of Principal Receivables processed during the preceding month or
months since the last Distribution Date and allocated in respect of the
Certificates, (e) the aggregate amount of Principal Receivables, the Investor
Interest and the Investor Interest as a percentage of the aggregate amount of
the Principal Receivables in the Trust as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (f) the
aggregate outstanding balance of Accounts which are 35 or more days delinquent
by class of delinquency as of the end of the last day of the preceding Monthly
Period or Periods since the last Distribution Date, (g) the aggregate Investor
Default Amount for the preceding Monthly Period or Periods since the last
Distribution Date, (h) the amount of Investor Charge-Offs for the preceding
Monthly Period or Periods since the last Distribution Date and the amount of
reimbursements of previous Investor Charge-Offs for the preceding Monthly Period
or Periods since the last Distribution Date, (i) the amount of the Investor
Servicing Fee for the preceding Monthly Period or Periods since the last
Distribution Date, (j) the amount available under any Enhancement and Credit
Enhancement, if any, as of the close of business on such Distribution Date, (k)
the "pool factor" as of the end of the related Record Date (consisting of a
seven-digit decimal expressing the ratio of the Investor Interest to the initial
Investor Interest), (l) the aggregate amount of collections on Finance Charge
Receivables and annual membership fees processed during the preceding Monthly
Period or Periods since the last Distribution Date, (m) the Portfolio Yield for
the preceding Monthly Period or Periods since the last Distribution Date, and
(n) certain information relating to the floating or variable Certificate Rates,
if applicable, for the Monthly Period or Periods ending on such Distribution
Date. In the case of a Series of Certificates having more than one Class, the
statements forwarded to Certificateholders will provide information as to each
Class of Certificates, as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will furnish to
each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing the
information required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the Trustee or
the Servicer deems necessary or desirable to enable the Certificateholders to
prepare their United States tax returns.
EVIDENCE AS TO COMPLIANCE
Each of Agreement I and Agreement II provides and each New Agreement will
provide that on or before August 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Servicer will cause a firm
of independent certified public accountants to furnish a report to the effect
that such accounting firm has made a study and evaluation of the Servicer's
internal accounting controls relative to the servicing of the Accounts and that,
on the basis of such examination, such firm is of the opinion that, assuming the
accuracy of reports by the Servicer's third party agents, the system of internal
accounting controls in effect on the date of such statement relating to
servicing procedures performed by the Servicer, taken as a whole, was sufficient
for the prevention and detection of errors and irregularities in amounts that
would be material to the financial statements of the Servicer and that such
servicing was conducted in compliance with the sections of the related Agreement
during the period covered by such report (which shall be the period from July 1
(or for the initial period, the relevant Closing Date) of the preceding calendar
year to and including June 30 of such calendar year, except for such exceptions
or errors as such firm shall believe to be immaterial and such other exceptions
as shall be set forth in such statement.
Each of Agreement I and Agreement II provides and each New Agreement will
provide for delivery to the Trustee on or before August 31 of each calendar year
or such other date as specified in the related Prospectus Supplement, of an
annual statement signed by an officer of the Servicer to the effect that the
Servicer has fully performed its obligations under the Agreement throughout the
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preceding year, or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
AMENDMENTS
Unless otherwise specified in the related Prospectus Supplement, each
Agreement and any Series Supplement may be amended by the Seller, the Servicer
and the related Trustee, without the consent of Certificateholders of any Series
then outstanding, for any purpose, provided that (i) the Seller delivers an
opinion of counsel acceptable to the Trustee to the effect that such amendment
will not adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust.
Agreement II and each New Agreement and any related Series Supplement may be
amended by the Seller, the Servicer and the related Trustee, without the consent
of the Certificateholders of any Series then outstanding, to provide for
additional Enhancement or substitute Enhancement with respect to a Series, to
change the definition of Eligible Account or to provide for the addition to the
Trust of a Participation, provided, that (i) the Seller delivers to the Trustee
a certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, such amendment will not as of the date of such amendment
adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust.
Each Agreement and the related Series Supplement may be amended by the
Seller, the Servicer and the related Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66 2/3%
(or such other percentage specified in the related Prospectus Supplement) of the
Investor Interests for all Series of the related Trust, for the purpose of
adding any provisions to, changing in any manner or eliminating any of the
provisions of the Agreement or the related Series Supplement or of modifying in
any manner the rights of Certificateholders of any outstanding Series of the
Trust. No such amendment, however, may (a) reduce in any manner the amount of,
or delay the timing of, distributions required to be made on the related Series
or any Series, (b) change the definition of or the manner of calculating the
interest of any Certificateholder of such Series or any Certificateholder of any
other Series issued by the Trust or (c) reduce the aforesaid percentage of
undivided interests the holders of which are required to consent to any such
amendment, in each case without the consent of all Certificateholders of the
related Series and Certificateholders of all Series adversely affected. Promptly
following the execution of any amendment to the Agreement, the Trustee will
furnish written notice of the substance of such amendment to each
Certificateholder. Any Series Supplement and any amendments regarding the
addition or removal of Receivables from the Trust will not be considered an
amendment requiring Certificateholder consent under the provisions of the
related Agreement and any Series Supplement.
LIST OF CERTIFICATEHOLDERS
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the related
Prospectus Supplement) of the Investor Interest, the Trustee after having been
adequately indemnified by such Certificateholders for its costs and expenses,
and having given the Servicer notice that such request has been made, will
afford such Certificateholders access during business hours to the current list
of Certificateholders of the Trust for purposes of communicating with other
Certificateholders with respect to their rights under the Agreement. See
"-- Book-Entry Registration" and "-- Definitive Certificates" above.
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THE TRUSTEE
The Prospectus Supplement for each Series will specify the Trustee under the
related Agreement. The Seller, the Servicer and their respective affiliates may
from time to time enter into normal banking and trustee relationships with the
Trustee and its affiliates. The Trustee, the Seller, the Servicer and any of
their respective affiliates may hold Certificates in their own names. 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 conferred or imposed
upon the Trustee by the Agreement 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 Seller will be
obligated to appoint a successor Trustee. The Seller may also remove the Trustee
if the Trustee ceases to be eligible to continue as such under the Agreement or
if the Trustee becomes insolvent. In such circumstances, the Seller 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.
CREDIT ENHANCEMENT
GENERAL
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, a letter of credit,
the establishment of a cash collateral guaranty or account, a collateral
interest, a surety bond, an insurance policy, a spread account, a reserve
account, the use of cross support features or another method of Credit
Enhancement described in the related Prospectus Supplements, or any combination
of the foregoing. If so specified in the related Prospectus Supplement, any form
of Credit Enhancement may be structured so as to be drawn upon by more than one
Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement 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 which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Credit Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (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 provision of any
agreement relating to such Credit Enhancement. Additionally, the related
Prospectus Supplement may set forth certain information with respect to any
Credit Enhancement Provider, 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 which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policy holders' surplus, if applicable,
and other appropriate financial information as of the date specified in the
Prospectus Supplement. If so specified in the related Prospectus Supplement,
Credit Enhancement with respect to a Series 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, the Credit
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Enhancement Provider will have an interest in certain cash flows in respect of
the Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount").
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more of any
Series will be subordinated as described in the related Prospectus Supplement to
the extent necessary to fund payments with respect to the Senior Certificates.
The rights of the holders of any such Subordinated Certificates to receive
distributions of principal and/or interest on any Distribution Date for such
Series will be subordinate in right and priority to the rights of the holders of
Senior Certificates, but only to the extent set forth in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, subordination
may apply only in the event of certain types of losses not covered by another
Credit Enhancement. The related Prospectus Supplement will also set forth
information concerning the amount of subordination of a 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 Senior Certificates.
If collections of Receivables otherwise distributable to holders of a
Subordinated Class of a Series will be used as support for a Class of another
Series, the related Prospectus Supplement will specify the manner and conditions
for applying such a cross-support feature.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain losses
in addition to or in lieu of other Credit Enhancement. The issuer of the letter
of credit (the "L/C Bank") will be obligated to honor demands with respect to
such letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to such conditions as are
specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related Prospectus
Supplement of the initial Investor Interest of a Series or a Class of such
Series. The maximum amount available at any time to be paid under a letter of
credit will be determined in the manner specified therein and in the related
Prospectus Supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the Cash
Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account 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 Account or from the Cash Collateral Account directly.
COLLATERAL INTEREST
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral
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Account with an initial amount on deposit therein, if any, as specified in the
Prospectus Supplement which will be increased (i) to the extent the Seller
elects, subject to certain conditions specified in the related Prospectus
Supplement, to apply collections of Principal Receivables allocable to the
Collateral Interest to decrease the Collateral Interest, (ii) to the extent
collections of Principal Receivables allocable to the Collateral Interest are
required to be deposited into the Cash Collateral Account as specified in the
related Prospectus Supplement and (iii) to the extent excess collections of
Finance Charge Receivables are required to be deposited into the Cash Collateral
Account as specified in the related Prospectus Supplement. The total amount of
the Credit Enhancement available pursuant to the Collateral Interest and, if
applicable, the Cash Collateral Guaranty or Cash Collateral Account will be the
lesser of the sum of the Collateral Interest and the amount on deposit in the
Cash Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments which otherwise would be made to holders of the Collateral
Interest will be distributed to holders of Certificates and, if applicable, the
circumstances under which payment will be made under the Cash Collateral
Guaranty or under the Cash Collateral Account.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with respect
to a Series or one or more Classes thereof will 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 will be
purchased for the benefit of the holders of any Series or Class or such Series
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Certificates of such Class or Series in the manner
specified in the related Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account"). The
Reserve Account may be funded, to the extent provided in the related Prospectus
Supplement, by an initial cash deposit, the retention of certain periodic
distributions of principal or interest or both otherwise payable to one or more
Classes of Certificates, including the Subordinated Certificates, or the
provision of a letter of credit, guarantee, insurance policy or other form of
credit or any combination thereof. The Reserve Account will be established to
assist with the subsequent distribution of principal or interest on the
Certificates of such Series or Class thereof or such other amount owing on any
Enhancement thereto in the manner provided in the related Prospectus Supplement.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Seller has represented and warranted in each of Agreement I and
Agreement II, and will represent and warrant in each New Agreement, that the
transfer of Receivables by it to the related Trust is either a valid transfer
and assignment to such Trust of all right, title and interest of the Seller in
and to the related Receivables, except for the interest of the Seller as holder
of the Seller Certificate, or the grant to the Trust of a security interest in
such Receivables. The Seller also has represented and warranted in each of
Agreement I and Agreement II and will represent and warrant in each New
Agreement that, in the event the transfer of Receivables by the Seller to the
related Trust is deemed to create a security interest under the Uniform
Commercial Code, as in effect in the State of Delaware (the "UCC"), there will
exist a valid, subsisting and enforceable first priority perfected security
interest in such Receivables created thereafter in favor of such Trust on and
after their creation, except for certain tax and other governmental liens. For a
discussion of the Trust's rights arising from a breach of these warranties, see
"Description of the Certificates -- Representations and Warranties."
The Seller has represented as to previously conveyed Receivables, and will
represent as to Receivables to be conveyed, that the Receivables are "accounts"
for purposes of the UCC. Both the transfer and assignment of accounts and the
transfer of accounts as security for an obligation are treated under Article 9
of the UCC as creating a security interest therein and are subject to its
provisions, and the filing of an appropriate financing statement is required to
perfect the security interest of the related Trust. Financing statements
covering the Receivables have been and will be filed with the appropriate state
and local governmental authority to protect the interests of the related Trust
in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Closing Date
could have an interest in such Receivables with priority over such Trust's
interest. Under each of Agreement I and Agreement II, however, the Seller has
represented and warranted, and under each New Agreement, the Seller will
represent and warrant, that it transferred the Receivables to the Trust free and
clear of the lien of any third party. In addition, the Seller has covenanted and
will covenant that it will not sell, pledge, assign, transfer or grant any lien
on any Receivable (or any interest therein) other than to the Trust. A tax or
government lien or other nonconsensual lien on property of the Seller arising
prior to the time a Receivable comes into existence may also have priority over
the interest of the Trust in such Receivable. In addition, if the FDIC were
appointed as receiver of the Seller, certain administrative expenses of the
receiver may also have priority over the interest of the Trust in such
Receivable.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Seller is chartered as a national banking association and is subject to
regulation and supervision by the Office of the Comptroller of the Currency,
which is authorized to appoint the FDIC as conservator or receiver of the Seller
upon the occurrence of certain events relating to the Seller's financial
condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC in
its capacity as conservator or receiver for the Seller could exercise. Positions
taken by the FDIC prior to the passage of FIRREA do not suggest that the FDIC,
if appointed as conservator or receiver for the Seller, would interfere with the
timely transfer to a Trust of payments collected on the Receivables or interfere
with the timely liquidation of related Receivables, as described below. To the
extent that the Seller has granted a security interest in related Receivables to
a Trust, and that interest was validly perfected before the Seller's insolvency
and was not taken in contemplation of the insolvency of the Seller, or with the
intent to hinder, delay or defraud the Seller or the creditors of the Seller,
the FDIA provides that such security interest should not be subject to
avoidance. As a result, payments to such Trust with
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respect to the Receivables should not be subject to recovery by the FDIC as
conservator or receiver of the Seller. If, however, the FDIC, as conservator or
receiver for the Seller, were to assert a contrary position, or were to require
the Trustee to establish its right to those payments by submitting to and
completing the administrative claims procedure established under the FDIA, or
the conservator or receiver were to request a stay of proceedings with respect
to the Seller as provided under the FDIA, delays in payments on the related
Series of Certificates and possible reductions in the amount of those payments
could occur.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Seller, the Seller will promptly give notice
thereof to each Trustee and a Pay Out Event will occur with respect to all
Series then outstanding under the related Trust. Pursuant to each Agreement,
newly created Principal Receivables will not be transferred to the related Trust
on and after any such appointment or voluntary liquidation, and the Trustee will
proceed to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, unless
otherwise instructed within a specified period by holders of Certificates
representing undivided interests aggregating more than 50% of the Investor
Interest of each Series (or if any Series has more than one Class, of each
Class, and any other Person specified in the related Agreement or a Series
Supplement), or unless otherwise required by the FDIC as receiver or conservator
of the Seller. Under the Agreement, the proceeds from the sale of the
Receivables would be treated as collections of the Receivables and the Investor
Percentage of such proceeds would be distributed to the Certificateholders or,
if so specified in the related Prospectus Supplement, collected and held for the
benefit of Certificateholders. This procedure could be delayed, as described
above. If the only Pay Out Event to occur is either the insolvency of the Seller
or the appointment of a conservator or receiver for the Seller, the conservator
or receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of a Rapid Amortization
Period or, if applicable with respect to a Series as specified in the related
Prospectus Supplement, a Rapid Accumulation Period. In addition, a conservator
or receiver may have the power to cause the early sale of the Receivables and
the early retirement of the Certificates or to prohibit the continued transfer
of Principal Receivables to the Trust. See "Description of the
Certificates -- Pay Out Events."
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender
are extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Seller, the most significant laws include
the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
Fair Debt Collection Practice and Electronic Funds Transfer Acts. These statutes
impose disclosure requirements when a credit card account is advertised, when it
is opened, at the end of monthly billing cycles, and at year end. In addition,
these statutes limit customer liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, and impose certain limitations on
the type of account-related charges that may be assessed. Cardholders are
entitled under these laws to have payments and credits applied to the credit
card accounts promptly, to receive prescribed notices and to require billing
errors to be resolved promptly. A Trust may be liable for certain violations of
consumer protection laws that apply to the related Receivables, either as
assignee from the Seller with respect to obligations arising before transfer of
the Receivables to such Trust or as a party directly responsible for obligations
arising after the transfer. In addition, a cardholder may be entitled to assert
such violations by way of set-off against his obligation to pay the amount of
Receivables owing. The Seller has warranted in each of Agreement I and Agreement
II and will warrant in each New Agreement that all related Receivables have been
and will be created in compliance with the requirements of such laws. The
Servicer will also agree in each Agreement to indemnify the Trust, among other
things, for any liability arising from such violations caused by the Servicer.
For a discussion of the Trust's rights arising from the breach of these
warranties, see "Description of the Certificates -- Representations and
Warranties."
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Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Seller's credit card operations
or the yield on the Receivables in a Trust.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
related Receivables being written off as uncollectible when the amount available
under any Credit Enhancement is equal to zero. See "Description of the
Certificates -- Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
CERTAIN 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. Additional federal income tax considerations relevant to a
particular Series may be set forth in the related Prospectus Supplement. 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
interests 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 Seller and the Certificate Owners express in Agreement I and Agreement
II and will express in each New Agreement the intent that for federal, state and
local income and franchise tax purposes, the Certificates will be debt secured
by the Receivables. The Seller, by entering into an Agreement, and each
investor, by the acceptance of a beneficial interest in a Certificate, will
agree to treat the Certificates as debt for federal, state and local income and
franchise tax purposes. However, each 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 Seller will
treat each Agreement for certain non-tax accounting purposes as causing a
transfer of an ownership interest in the Receivables and not as creating a debt
obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers as
well as the Internal Revenue Service (the "IRS") to treat a transaction in
accordance with its economic substance, as determined under federal income tax
law, even though the participants in the transaction have characterized it
differently for non-tax purposes.
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The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the seller has relinquished (and the purchaser has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary ones examined are whether the purchaser has the opportunity to gain if
the property increases in value, and has the risk of loss if the property
decreases in value. Unless otherwise specified in the related Prospectus
Supplement, Orrick, Herrington & Sutcliffe, counsel to the Seller ("Special
Counsel"), will deliver its opinion generally to the effect that, under current
law as in effect on the Closing Date, although no transaction closely comparable
to that contemplated herein has been the subject of any Treasury regulation,
revenue ruling or judicial decision, for federal income tax purposes the
Certificates 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 are debt for federal
income tax purposes.
TREATMENT OF THE TRUST
General. Agreement I and Agreement II permit the issuance of Certificates
and certain other interests (including any Collateral Interest) in the related
Trust, each of which may be treated for federal income tax purposes either as
debt or as equity interests in the related Trust. If all of the Certificates and
other interests (other than the Seller Certificate) in a Trust were
characterized as debt, that Trust might be characterized as a security
arrangement for debt collateralized by the Receivables and issued directly by
the Seller (or other holder of the Seller Certificate). Under such a view, that
Trust would be disregarded for federal income tax purposes. Alternatively, if
some of the Certificates or other interests (other than the Seller Certificate)
in a Trust were characterized as equity, that Trust might be characterized as a
separate entity owning the Receivables, issuing its own debt, and jointly owned
by the Seller (or other holder of the Seller Certificate) and the other holders
of equity interests in the Trust. However, Special Counsel will deliver its
opinion generally to the effect that, under current law as in effect on the
Closing Date, any such entity constituted by a Trust will not be an association
or publicly traded partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership, a Publicly Traded
Partnership or an Association. Although, as described above, Special Counsel
will deliver its opinion that the Certificates will properly be treated as debt
for federal income tax purposes and that each Trust will not be treated as an
association or publicly traded partnership taxable as a corporation, such
opinion will not bind the IRS and thus no assurance can be given that such
treatment will prevail. Further, such opinion will be made with respect to
current law, which is subject to change. If the IRS were to contend successfully
that some or all of the Certificates or any other interest in a Trust (other
than a Seller Certificate), including any Collateral Interest, were not debt
obligations for federal income tax purposes, all or a portion of the related
Trust could be classified as a partnership or an association taxable as a
corporation for such purposes. Because Special Counsel will deliver its opinion
that the Certificates will be characterized as debt for federal income tax
purposes and because any holder of an interest in a Collateral Interest will
agree to treat that interest as debt for such purposes, no attempt will be made
to comply with any tax reporting requirements that would apply as a result of
such alternative characterizations.
If a Trust were treated in whole or in part as a partnership in which some
or all holders of interests in the publicly offered Certificates were partners,
that partnership could be classified as a publicly traded partnership, and so
could be taxable as a corporation. Further, regulations published by the
Treasury Department on December 4, 1995 (the "Regulations") could cause a Trust
to constitute a publicly traded partnership even if all holders of interests in
publicly offered Certificates are treated as holding debt. The Regulations
generally apply to taxable years beginning after December 31, 1995, and thus
could affect the classification of presently existing entities and the ongoing
tax treatment of already completed transactions. Although the Regulations
provide for a 10-year grandfather period for a
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partnership actively engaged in an activity before December 4, 1995, it is not
clear whether Trust I or Trust II would qualify for this grandfather period, and
any New Trust would not qualify. If a Trust were classified as a publicly traded
partnership, whether by reason of the treatment of publicly offered Certificates
as equity or by reason of the Regulations, it would avoid taxation as a
corporation if its income was not derived in the conduct of a "financial
business"; however, whether the income of a Trust would be so classified is
unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that a Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Seller expects such measures will ultimately
be successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradable" on a "secondary market" or its
"substantial equivalent" are not fully within the control of the Seller. As a
result, there can be no assurance that the measures the Seller intends to take
will in all circumstances be sufficient to prevent a Trust from being classified
as a publicly traded partnership under the Regulations.
If a Trust treated as a partnership nevertheless were 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 Seller (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 a 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.
From time to time, legislation has been introduced in Congress that would affect
the treatment of any "large partnership," defined as any partnership in which
there are at least 250 partners in a taxable year. Under such legislative
proposals, among other things, the availability of certain deductions to
partners may be limited, and certain computations (such as those relating to the
level of allowable miscellaneous itemized deductions and the netting of capital
gains and losses) would be made at the partnership rather than the partner
level. No prediction can be made regarding whether any such legislation will be
enacted or, if so, what its ultimate effective date will be.
If the arrangement created by an Agreement were treated in whole or in part
as a publicly traded partnership or an association 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
related 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, 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.
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Original Issue Discount. If the Certificates are issued with original issue
discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code of 1986 (the "Code") will apply to the Certificates. Under
those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its "stated redemption price" exceeds its "issue price,"
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
because the failure to pay interest currently on a Certificate is not a default
and may not be considered to give rise to any penalty or remedy to compel
payment, the IRS could take the position based on Treasury regulations that all
of the interest payable on a Certificate should be included in its 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.
Market Discount. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to the
"market discount" rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of a Certificate
and partial principal payments on a Certificate are treated as ordinary income
to the extent of accrued market discount. The market discount rules also provide
for deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
Market Premium. A U.S. 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 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 cost, increased by any OID or market discount
includible in income with respect to the interest in the Certificate prior to
its sale and reduced by any principal payments previously received with respect
to the interest in the Certificate and any amortized premium. Subject to the
market discount rules, gain or loss will be capital gain or loss if the interest
in the Certificate was held as a capital asset. Capital losses generally may be
used only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S. federal
income tax on interest (including OID) on a beneficial interest in a Certificate
unless (i) the non-U.S. Certificate Owner actually or constructively owns 10
percent or more of the total combined voting power of all classes of stock of
the Seller entitled to vote (or of a profits or capital interest of a Trust
characterized as a partnership), (ii) the non-U.S. Certificate Owner is a
controlled foreign corporation that is related to the Seller (or a Trust treated
as a partnership) through stock ownership, (iii) the non-U.S. Certificate Owner
is a bank receiving interest described in Code Section 881(c)(3)(A), (iv) such
interest is contingent interest described in Code Section 871(h)(4), or (v) the
non-U.S. Certificate Owner bears certain relationships to any holder of either
the Seller Certificate other than the Seller or any other interest in a Trust
not properly characterized as debt. To qualify for the exemption from taxation,
the
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last U.S. Person in the chain of payment prior to payment to a non-U.S.
Certificate Owner (the "Withholding Agent") must have received (in the year in
which a payment of interest or principal occurs or in either of the two
preceding years) a statement that (i) is signed by the non-U.S. Certificate
Owner under penalties of perjury, (ii) certifies that the non-U.S. Certificate
Owner is not a U.S. Person and (iii) provides the name and address of the
non-U.S. Certificate Owner. The statement may be made on a Form W-8 or
substantially similar substitute form, and the non-U.S. Certificate Owner 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 a Form W-8 or
substitute form provided by the non-U.S. Certificate Owner to the organization
or institution holding the Certificate on behalf of the non-U.S. Certificate
Owner. The U.S. Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
Generally, any gain or income realized by a non-U.S. Certificate Owner 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 described in the preceding paragraph for exemption from
withholding are satisfied. Certain exceptions may be applicable, and an
individual non-U.S. Certificate Owner should consult a tax adviser.
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.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Certificate Owner must be reported to the IRS, unless the U.S.
Certificate Owner is an exempt recipient or otherwise establishes an exemption.
Compliance with the identification procedures (described in the preceding
section) would establish an exemption from backup withholding for a non-U.S.
Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either (i)
the broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides certain identifying information in the required
manner, and in the case of a non-U.S. Certificate Owner certifies that the
seller is a non-U.S. Certificate Owner (and certain other conditions are met).
Such a sale must also be reported by the broker to the IRS, unless either (i)
the broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence. As defined by Treasury
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regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker, and
the information reporting requirements generally will apply to a foreign office
of a U.S. broker as well as to a foreign office of a foreign broker (i) that is
a controlled foreign corporation within the meaning of section 957(a) of the
Code or (ii) 50 percent or more of whose gross income from all sources for the
three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trusts or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Section 406 of ERISA and section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively, "Plans")
from engaging in certain transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
with respect to the Plan. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and section 4975 of
the Code for such persons, unless a statutory, regulatory or administrative
exemption is available. Plans that are governmental plans (as defined in section
3(32) of ERISA) and certain church plans (as defined in section 3(33) of ERISA)
are not subject to ERISA requirements.
Subject to the considerations described below and except to the extent
otherwise specified in the related Prospectus Supplement, the Seller anticipates
that each Class of Certificates will be eligible for purchase by Plan investors.
A violation of the prohibited transaction rules could occur if any Series of
Certificates were to be purchased with assets of any Plan if the Seller, the
Trustee, any underwriters of such Series or any of their affiliates were a
"party in interest" or a "disqualified person," with respect to such Plan,
unless a statutory, regulatory or administrative exemption is available or an
exception applies under a regulation (the "Plan Asset Regulation") issued by the
Department of Labor (the "DoL"). The Seller, the Trustee, any underwriters of a
Series and their affiliates are likely to be "parties in interest" and
"disqualified persons" 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 Series or any of
their affiliates and consult their counsel regarding the purchase in light of
the considerations described below. The DoL has issued four class exemptions
that may apply to otherwise prohibited transactions arising from the purchase or
holding of the Certificates: DoL Prohibited Transaction Exemptions 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).
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Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in a Trust,
and despite the agreement of the Seller and the Certificate Owners to treat each
Series of Certificates as debt instruments, the Certificates are likely to be
considered equity interests in the Trust for purposes of the Plan Asset
Regulation, with the result that the assets of the Trust are likely to be
treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ("Independent Investors") and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. For purposes of the 100
Independent Investor criterion, except to the extent otherwise disclosed in the
related 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. Except to the extent otherwise
disclosed in the related Prospectus Supplement, it is anticipated that each
Class of Certificates will meet the foregoing criteria for treatment as
"public-offered securities." No restrictions will be imposed on the transfer of
the Certificates. Except to the extent otherwise disclosed in the related
Prospectus Supplement, the Seller expects that each Class of Certificates will
be held by at least 100 Independent Investors at the conclusion of the initial
public offering although no assurance can be given, and no monitoring or other
measures will be taken to ensure, that such condition is met. Each Class of
Certificates will be sold as part of an offering pursuant to an effective
registration statement under the Act and then will be timely registered under
the Exchange Act.
The 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 a 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 related 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 any 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 neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to a Trust and the Trust were considered to hold "plan
assets," transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to a Plan that is a Certificate Owner might
be prohibited under section 406 of ERISA and/or section 4975 of the Code and
result in excise tax and other liabilities under ERISA and section 4975 of the
Code unless an exemption were available. The three DoL class exemptions
mentioned above may not provide relief for all transactions involving the assets
of a 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 the 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,
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and (ii) will be based on the particular investment needs of such Plan; or (c)
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's assets were considered "plan assets," and the possibility
of exemptive relief from the prohibited transaction rules. 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 the "Risk Factors" and other factors discussed herein and in the related
Prospectus Supplement.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each Series of
Certificates, the Seller will agree to sell to each of the underwriters named
therein and in the related Prospectus Supplement, and each of such underwriters
will severally agree to purchase from the Seller, the principal amount of
Certificates set forth therein and in the related Prospectus Supplement (subject
to proportional adjustment on the terms and conditions set forth in the related
Underwriting Agreement in the event of an increase or decrease in the aggregate
amount of Certificates offered hereby and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Certificates
offered hereby and by the related Prospectus Supplement if any of such
Certificates are purchased. In the event of a default by any underwriter, each
Underwriting Agreement will provide that, in certain circumstances, purchase
commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers participating
in the offering of such Certificates. After the initial public offering, the
public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify the
related underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
The place and time of delivery for any Series of Certificates in respect of
which this Prospectus is delivered will be set forth in the accompanying
Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller by John W. Scheflen, Executive Vice President,
General Counsel and Secretary of the Corporation and Senior Executive Vice
President, Cashier and Secretary of MBNA, and by Orrick, Herrington & Sutcliffe,
Washington, D.C., special counsel to the Seller. Certain legal matters relating
to the issuance of the Certificates under the laws of the State of Delaware will
be passed upon for the Seller by Richards, Layton & Finger, Wilmington,
Delaware. Certain legal matters relating to the federal tax consequences of the
issuance of the Certificates will be passed upon for the Seller by Orrick,
Herrington & Sutcliffe. Certain legal matters relating to the issuance of the
Certificates will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom, New York, New York. Mr. Scheflen owns beneficially 160,000
shares of common stock of the Corporation, including options exercisable within
sixty days under the Corporation's 1991 Long Term Incentive Plan.
64
<PAGE>
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
Accounts.............................................................................. 3
Accumulation Period................................................................... 5
Additional Accounts................................................................... 4
Additional Interest................................................................... 14
Agreement............................................................................. 3
Agreement I........................................................................... 3
Agreement II.......................................................................... 3
Amortization Period................................................................... 5
Assignment............................................................................ 39
Bank Portfolio........................................................................ 3
Base Rate............................................................................. 22
BIF................................................................................... 41
Cash Collateral Account............................................................... 53
Cash Collateral Guaranty.............................................................. 53
Cede.................................................................................. 2
CEDEL................................................................................. 31
CEDEL Participants.................................................................... 31
Certificate Owners.................................................................... 2
Certificate Rate...................................................................... 5
Certificateholder..................................................................... 30
Certificateholders.................................................................... 2
Certificates.......................................................................... 3
Class................................................................................. 3
Closing Date.......................................................................... 10
Code.................................................................................. 17
Collateral Interest................................................................... 53
Collection Account.................................................................... 9
Commission............................................................................ 2
Controlled Accumulation Amount........................................................ 12
Controlled Accumulation Period........................................................ 11
Controlled Amortization Amount........................................................ 11
Controlled Amortization Period........................................................ 10
Controlled Deposit Amount............................................................. 12
Controlled Distribution Amount........................................................ 11
Cooperative........................................................................... 31
Corporation........................................................................... 9
Credit Enhancement.................................................................... 4
Credit Enhancement Percentage......................................................... 42
Credit Enhancement Provider........................................................... 49
Cut-Off Date.......................................................................... 6
Defaulted Accounts.................................................................... 6
Definitive Certificates............................................................... 8
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
Depositaries.......................................................................... 30
Depository............................................................................ 29
Determination Date.................................................................... 44
Disclosure Document................................................................... 7
Discount Percentage................................................................... 40
Distribution Account.................................................................. 40
Distribution Date..................................................................... 9
DoL................................................................................... 62
DTC................................................................................... 2
Eligible Account...................................................................... 37
Eligible Receivable................................................................... 37
Enhancement........................................................................... 4
Enhancement Invested Amount........................................................... 53
ERISA................................................................................. 17
Euroclear............................................................................. 31
Euroclear Operator.................................................................... 31
Euroclear Participants................................................................ 31
Excess Finance Charge Collections..................................................... 14
Exchange.............................................................................. 7
Exchange Act.......................................................................... 2
FDIA.................................................................................. 19
FDIC.................................................................................. 6
Finance Charge Account................................................................ 40
Finance Charge Receivables............................................................ 6
FIRREA................................................................................ 19
Full Investor Interest................................................................ 15
Funding Period........................................................................ 15
Group................................................................................. 14
Holders............................................................................... 32
Independent Investors................................................................. 17
Indirect Participants................................................................. 30
Ineligible Receivable................................................................. 36
Interchange........................................................................... 4
Interest Funding Account.............................................................. 33
Interest Period....................................................................... 9
Investor Charge-Off................................................................... 14
Investor Default Amount............................................................... 14
Investor Interest..................................................................... 5
Investor Percentage................................................................... 6
Investor Servicing Fee................................................................ 14
IRS................................................................................... 57
L/C Bank.............................................................................. 53
MBNA.................................................................................. 3
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
MBNA I.S.............................................................................. 25
Minimum Seller Interest............................................................... 7
Monthly Interest...................................................................... 14
Monthly Period........................................................................ 9
Moody's............................................................................... 40
New Agreement......................................................................... 3
New Trust............................................................................. 3
OID................................................................................... 60
Participants.......................................................................... 30
Participation Agreement............................................................... 38
Participations........................................................................ 4
Pay Out Event......................................................................... 13
Permitted Investments................................................................. 41
Plan Asset Regulation................................................................. 62
Plans................................................................................. 62
Portfolio Yield....................................................................... 22
Pre-Funding Account................................................................... 15
Pre-Funding Amount.................................................................... 15
Principal Account..................................................................... 40
Principal Amortization Period......................................................... 11
Principal Commencement Date........................................................... 10
Principal Funding Account............................................................. 12
Principal Receivables................................................................. 6
Principal Terms....................................................................... 7
Prospectus Supplement................................................................. 1
Qualified Institution................................................................. 40
Rapid Accumulation Period............................................................. 12
Rapid Amortization Period............................................................. 13
Rating Agency......................................................................... 17
Receivables........................................................................... 3
Record Date........................................................................... 29
Regulations........................................................................... 58
Removed Accounts...................................................................... 7
Reserve Account....................................................................... 54
Revolving Period...................................................................... 10
SAIF.................................................................................. 41
Scheduled Payment Date................................................................ 10
Securities Act........................................................................ 7
Seller................................................................................ 4
Seller Certificate.................................................................... 7
Seller Interest....................................................................... 5
Seller Percentage..................................................................... 29
Senior Certificates................................................................... 5
</TABLE>
67
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
Series................................................................................ 3
Series Supplement..................................................................... 3
Series Termination Date............................................................... 46
Service Transfer...................................................................... 48
Servicer.............................................................................. 9
Servicer Default...................................................................... 49
Servicing Fee......................................................................... 9
Shared Principal Collections.......................................................... 15
Special Counsel....................................................................... 58
Spread Account........................................................................ 54
Standard & Poor's..................................................................... 40
Subordinated Certificates............................................................. 5
Tax Opinion........................................................................... 8
Terms and Conditions.................................................................. 32
Transfer Date......................................................................... 12
Trust................................................................................. 3
Trust I............................................................................... 3
Trust II.............................................................................. 3
Trust Portfolio....................................................................... 26
Trust Termination Date................................................................ 46
Trustee............................................................................... 3
U.S. Certificate Owner................................................................ 57
U.S. Person........................................................................... 57
UCC................................................................................... 55
Unallocated Principal Collections..................................................... 44
Underwriting Agreement................................................................ 64
Withholding Agent..................................................................... 61
</TABLE>
68
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MBNA Credit
Card Trusts Asset Backed Certificates (the "Global Securities") to be issued in
Series from time to time (each, a "Series") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
any of The Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European and
U.S. domestic markets. Initial settlement and all secondary trades will settle
in same-day funds.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior MBNA Credit Card Trust issues.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior MBNA
Credit Card Trust issues in same-day funds.
A-1
<PAGE>
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by the respective
Depositary to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL Participant's or
A-2
<PAGE>
Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date. Finally, day traders
that use CEDEL or Euroclear and that purchase Global Securities from DTC
Participants for delivery to CEDEL Participants or Euroclear Participants should
note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Certificates
that are non-U.S. Persons can obtain a complete exemption from the withholding
tax by filing a signed Form W-8 (Certificate of Foreign Status). If the
information shown on Form W-8 changes, a new Form W-8 must be filed within 30
days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
A-3
<PAGE>
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
A-4
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE SELLER OR ANY AGENT OR UNDERWRITER. NEITHER THIS PROSPECTUS SUPPLEMENT
NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE SELLER OR THE
RECEIVABLES OR THE ACCOUNTS SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms...................... S-3
MBNA's Credit Card Portfolio.......... S-18
The Receivables....................... S-20
Maturity Assumptions.................. S-24
Receivable Yield Considerations....... S-26
MBNA and MBNA Corporation............. S-27
Description of the Certificates....... S-27
Underwriting.......................... S-47
Index of Terms for Prospectus
Supplement............................ S-49
Annex I: Other Series Issued.......... A-1
PROSPECTUS
Prospectus Supplement................. 2
Reports to Certificateholders......... 2
Available Information................. 2
Incorporation of Certain Documents by
Reference............................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 19
The Trusts............................ 24
MBNA's Credit Card Activities......... 25
The Receivables....................... 26
Maturity Assumptions.................. 27
Use of Proceeds....................... 28
MBNA and MBNA Corporation............. 28
Description of the Certificates....... 28
Credit Enhancement.................... 52
Certain Legal Aspects of the
Receivables........................... 55
Certain Federal Income Tax
Consequences.......................... 57
ERISA Considerations.................. 62
Plan of Distribution.................. 64
Legal Matters......................... 64
Index of Terms for Prospectus......... 65
Annex I: Global Clearance, Settlement
and Tax Documentation Procedures..... A-1
</TABLE>
MBNA MASTER
CREDIT CARD TRUST II
<PAGE>
$637,500,000 CLASS A
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-E
$56,250,000 CLASS B
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1996-E
MBNA AMERICA BANK,
NATIONAL ASSOCIATION
SELLER AND SERVICER
------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
J.P. MORGAN & CO.
LEHMAN BROTHERS
This document is printed entirely on recycled paper.
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