<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1996
REGISTRATION NO. 333-
POST-EFFECTIVE AMENDMENT NO.
1 TO
REGISTRATION STATEMENT NO.
33-99324
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MBNA AMERICA BANK, NATIONAL ASSOCIATION
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME AS SPECIFIED IN REGISTRANT'S CHARTER)
<TABLE>
<S> <C> <C>
UNITED STATES 6025 51-0331454
(STATE OR OTHER (PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE (I.R.S. EMPLOYER
ORGANIZATION) NUMBER) IDENTIFICATION NUMBER)
</TABLE>
WILMINGTON, DELAWARE 19884
(800) 362-6255
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
M. SCOT KAUFMAN
VICE CHAIRMAN
MBNA AMERICA BANK, NATIONAL ASSOCIATION
WILMINGTON, DELAWARE 19884-0864
(800) 362-6255
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
<TABLE>
<S> <C>
CAMERON L. COWAN, ESQ. RICHARD F. KADLICK, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1150 18TH STREET, N.W. 919 THIRD AVENUE
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10022
(202) 463-3400 (212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities registered on this form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED CERTIFICATE* PRICE* FEE
<S> <C> <C> <C> <C>
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Asset Backed Certificates..................... $10,000,000,000 100% $10,000,000,000 $3,030,304
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</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
In accordance with Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the Prospectus included herein is a combined
prospectus which also relates to $1,366,850,000 of unissued Asset Backed
Certificates registered under Registration Statement No. 33-99324 and this
Registration Statement constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 33-99324. A filing fee of $471,327.59 was paid with
Registration Statement No. 33-99324 in connection with such unissued Asset
Backed Certificates.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 4, 1996
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 18 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 , 1996.
<PAGE> 3
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 at 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, Wilmington, Delaware 19884-0786. Telephone requests for such copies
should be directed to MBNA America Bank, National Association at
(800) 362-6255.
2
<PAGE> 4
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.
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
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" con-
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
3
<PAGE> 5
sists 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, currency
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
"Description 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
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
circumstances, 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,
4
<PAGE> 6
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 and
currency 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
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 Percentage."
The Certificates of each Series will represent
interests in the related Trust only and will not
represent interests in or obligations of the
5
<PAGE> 7
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 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."
6
<PAGE> 8
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 Certificate"), 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 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
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<PAGE> 9
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 Certificates 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."
SELLER AND SERVICER........ MBNA America Bank, National Association. The
principal executive offices of MBNA are located
in Wilmington, Delaware 19884, telephone number
1-800-362-6255. 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
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<PAGE> 10
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 or
deposited into an escrow account or other account
for the benefit of such Series of Certificates or
Class thereof 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 or deposits 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
or deposit 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 -- 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
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<PAGE> 11
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 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 or deposited on or before 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 or deposits
with respect to the
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<PAGE> 12
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 (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
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<PAGE> 13
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 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 the
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 Termina-
12
<PAGE> 14
tion 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 or
deposited with respect to the Certificateholders
of such Series or Class on or before 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 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),
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<PAGE> 15
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 -- Application
of Collections," "-- Shared Excess Finance Charge
Collections," "-- Defaulted Receivables; Rebates
and Fraudulent Charges; Investor Charge-Offs" and
"Credit Enhancement."
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
additional amounts specified in the related
Prospectus Supplement will be payable to the
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<PAGE> 16
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 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
provided 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, 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
15
<PAGE> 17
under existing law the Certificates of each
Series will be 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.
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."
16
<PAGE> 18
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.
17
<PAGE> 19
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 conservator or
receiver of the Seller, the conservator's or 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 conservator or receiver for the Seller. Positions
taken by the FDIC staff prior to the passage of FIRREA do not suggest that the
FDIC, as receiver or conservator 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. In addition, the FDIC, if appointed as conservator or receiver for the
Seller, has the power under the FDIA to repudiate contracts, including secured
contracts of the Seller. The FDIA provides that a claim for damages arising from
the repudiation of a contract is limited to "actual direct compensatory
damages". In the event the FDIC were to be appointed as conservator or receiver
of the Seller and were to repudiate the Agreement, then the amount payable out
of available collateral to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates.
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
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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 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 and may be able to require that new Principal Receivables be
transferred to the Trust. 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 May 1996, a lawsuit was filed against
MBNA in the United States District Court for the Middle District of Florida.
This suit is a purported class action. The plaintiff complains that MBNA's
advertising of its cash advance promotional rate program was deceptive. The
plaintiff seeks to recover unspecified damages which the plaintiff alleges
resulted from MBNA's breach of contract and violation of federal and state law.
In October 1996, the case was transferred to the District Court of Delaware.
MBNA believes its advertising practices are proper under applicable federal and
state law and intends to defend vigorously against the action.
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
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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 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 or other
United States territories and possessions. 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,
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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
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
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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 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."
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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.
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 Hallmark
Information Services, Inc. ("MBNA Hallmark"). See "-- Description of MBNA
Hallmark." MBNA Hallmark 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
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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 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 HALLMARK
Credit card processing services performed by MBNA Hallmark include data
processing, payment processing, statement rendering, card production and network
services. MBNA Hallmark'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
Hallmark'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."
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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 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 Wilmington, 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.
For each Series of Certificates, payments and deposits of interest and
principal will be made on Distribution Dates to Certificateholders in whose
names the Certificates were registered on the record dates 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.
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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 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
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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 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
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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 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
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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").
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.
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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 or deposited with respect to Certificateholders on the Distribution
Dates. Interest payments or deposits 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 or deposit 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 the dates specified in the related
Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a Principal Funding Account for later distribution to
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.
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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 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.
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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.
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,
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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 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
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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 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
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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.
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
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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 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
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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 & 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
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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 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
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
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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 or deposited 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.
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
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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 dates specified in the related Prospectus
Supplement 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 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.
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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
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 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.
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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.
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
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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 Hallmark; 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 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.
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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 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.
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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 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
close of business on the last day of the preceding Monthly Period (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.
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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
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
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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.
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.
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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 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.
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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 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 and
other nonconsensual 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 conservator or receiver of the Seller, certain administrative
expenses of the conservator or 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 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
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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. In addition, the FDIC, if appointed as conservator or
receiver for the Seller, has the power under the FDIA to repudiate contracts,
including secured contracts of the Seller. The FDIA provides that a claim for
damages arising from the repudiation of a contract is limited to "actual direct
compensatory damages". In the event the FDIC were to be appointed as conservator
or receiver of the Seller and were to repudiate the Agreement, then the amount
payable out of available collateral to the Certificateholders could be lower
than the outstanding principal and accrued interest on the Certificates.
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."
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
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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 offered hereunder. 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
interest in a Certificate is effectively connected with that person's conduct of
a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Seller expresses 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.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the seller has relinquished (and the purchaser has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary ones examined are whether the purchaser has the opportunity to gain if
the property increases in value, and has the risk of loss if the property
decreases in value. Except to the extent otherwise specified in the related
Prospectus Supplement, Orrick, Herrington & Sutcliffe LLP, 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
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to that contemplated herein has been the subject of any Treasury regulation,
revenue ruling or judicial decision, for federal income tax purposes the
Certificates offered hereunder will not constitute an ownership interest in the
Receivables but will properly be characterized as debt. Except where indicated
to the contrary, the following discussion assumes that the Certificates offered
hereunder are debt for federal income tax purposes.
TREATMENT OF THE TRUST
General. 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 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"
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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.
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,
the IRS could take the position based on Treasury regulations that none of the
interest payable on a Certificate is "unconditionally payable" and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
the tax liability of most Certificate Owners, but prospective U.S. Certificate
Owners should consult their own tax advisers concerning the impact to them in
their particular circumstances.
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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 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.
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If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-U.S.
Certificate Owner would be required to file a federal income tax return and, in
general, would be subject to U.S. federal income tax (including the branch
profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
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
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
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violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and section 4975 of the Code for such persons,
unless a statutory, regulatory or administrative exemption is available. Plans
that are governmental plans (as defined in section 3(32) of ERISA) and certain
church plans (as defined in section 3(33) of ERISA) are not subject to ERISA
requirements.
A violation of the prohibited transaction rules could occur if 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 five class exemptions
that may apply to otherwise prohibited transactions arising from the purchase or
holding of the Certificates: DoL Prohibited Transaction Exemptions 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-house Asset Managers),
95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts) and 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in 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 the most
senior Class of Certificates will meet the foregoing criteria for treatment as
"public-offered securities." No restrictions will be imposed on the transfer of
such Certificates. Except to the extent otherwise disclosed in the related
Prospectus Supplement, it is expected that the most senior 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. The most
senior 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
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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 five 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, 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
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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
LLP, 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 LLP. Certain legal matters relating to
the issuance of the Certificates will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Mr. Scheflen owns
beneficially 225,624 shares of common stock of the Corporation, including
options exercisable within sixty days under the Corporation's 1991 Long Term
Incentive Plan.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Accounts............................................................................ 1
Accumulation Period................................................................. 5
Additional Accounts................................................................. 4
Additional Interest................................................................. 13
Agreement........................................................................... 3
Agreement I......................................................................... 3
Agreement II........................................................................ 3
Amortization Period................................................................. 4
Assignment.......................................................................... 36
Bank Portfolio...................................................................... 3
Base Rate........................................................................... 21
BIF................................................................................. 38
Cash Collateral Account............................................................. 49
Cash Collateral Guaranty............................................................ 49
Cede................................................................................ 2
CEDEL............................................................................... 29
CEDEL Participants.................................................................. 29
Certificate Owners.................................................................. 2
Certificate Rate.................................................................... 4
Certificateholder................................................................... 28
Certificateholders.................................................................. 2
Certificates........................................................................ 1, 3
Class............................................................................... 1, 3
Closing Date........................................................................ 9
Code................................................................................ 16, 55
Collateral Interest................................................................. 50
Collection Account.................................................................. 8
Commission.......................................................................... 2
Controlled Accumulation Amount...................................................... 11
Controlled Accumulation Period...................................................... 11
Controlled Amortization Amount...................................................... 10
Controlled Amortization Period...................................................... 10
Controlled Deposit Amount........................................................... 11
Controlled Distribution Amount...................................................... 10
Cooperative......................................................................... 29
Corporation......................................................................... 8
Credit Enhancement.................................................................. 4
Credit Enhancement Percentage....................................................... 39
Credit Enhancement Provider......................................................... 46
Cut-Off Date........................................................................ 6
Defaulted Accounts.................................................................. 5
Definitive Certificates............................................................. 8
Depositaries........................................................................ 27
Depository.......................................................................... 27
Determination Date.................................................................. 41
Disclosure Document................................................................. 7
Discount Percentage................................................................. 37
Distribution Account................................................................ 37
Distribution Date................................................................... 9
DoL................................................................................. 58
DTC................................................................................. 2
Eligible Account.................................................................... 34
Eligible Receivable................................................................. 35
Enhancement......................................................................... 4
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Enhancement Invested Amount......................................................... 49
ERISA............................................................................... 16
Euroclear........................................................................... 29
Euroclear Operator.................................................................. 29
Euroclear Participants.............................................................. 29
Excess Finance Charge Collections................................................... 13
Exchange............................................................................ 7
Exchange Act........................................................................ 2
FDIA................................................................................ 18
FDIC................................................................................ 6
Finance Charge Account.............................................................. 37
Finance Charge Receivables.......................................................... 6
FIRREA.............................................................................. 18
Full Investor Interest.............................................................. 14
Funding Period...................................................................... 14
Group............................................................................... 13
Holders............................................................................. 30
Independent Investors............................................................... 16
Indirect Participants............................................................... 28
Ineligible Receivable............................................................... 34
Interchange......................................................................... 3
Interest Funding Account............................................................ 31
Interest Period..................................................................... 9
Investor Charge-Off................................................................. 13
Investor Default Amount............................................................. 13
Investor Interest................................................................... 5
Investor Percentage................................................................. 5
Investor Servicing Fee.............................................................. 13
IRS................................................................................. 53
L/C Bank............................................................................ 49
MBNA................................................................................ 1
MBNA Hallmark....................................................................... 23
Minimum Seller Interest............................................................. 6
Monthly Interest.................................................................... 13
Monthly Period...................................................................... 9
Moody's............................................................................. 38
New Agreement....................................................................... 3
New Trust........................................................................... 3
OID................................................................................. 55
Participants........................................................................ 28
Participation Agreement............................................................. 35
Participations...................................................................... 4, 35
Pay Out Event....................................................................... 12
Permitted Investments............................................................... 38
Plan Asset Regulation............................................................... 58
Plans............................................................................... 57
Portfolio Yield..................................................................... 21
Pre-Funding Account................................................................. 14
Pre-Funding Amount.................................................................. 14
Principal Account................................................................... 37
Principal Amortization Period....................................................... 10
Principal Commencement Date......................................................... 9
Principal Funding Account........................................................... 11
Principal Receivables............................................................... 6
Principal Terms..................................................................... 7
Prospectus Supplement............................................................... 1
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Qualified Institution............................................................... 38
Rapid Accumulation Period........................................................... 12
Rapid Amortization Period........................................................... 13
Rating Agency....................................................................... 16
Receivables......................................................................... 1, 35
Regulations......................................................................... 54
Removed Accounts.................................................................... 7
Reserve Account..................................................................... 50
Revolving Period.................................................................... 9
SAIF................................................................................ 38
Scheduled Payment Date.............................................................. 10
Securities Act...................................................................... 7
Seller.............................................................................. 4
Seller Certificate.................................................................. 7
Seller Interest..................................................................... 5
Seller Percentage................................................................... 27
Senior Certificates................................................................. 5
Series.............................................................................. 1, 3
Series Supplement................................................................... 3
Series Termination Date............................................................. 42
Service Transfer.................................................................... 45
Servicer............................................................................ 8
Servicer Default.................................................................... 45
Servicing Fee....................................................................... 8
Shared Principal Collections........................................................ 14
Special Counsel..................................................................... 53
Spread Account...................................................................... 50
Standard & Poor's................................................................... 38
Subordinated Certificates........................................................... 5
Tax Opinion......................................................................... 7
Terms and Conditions................................................................ 29
Transfer Date....................................................................... 11
Trust............................................................................... 1, 3
Trust I............................................................................. 3
Trust II............................................................................ 3
Trust Portfolio..................................................................... 24
Trust Termination Date.............................................................. 42
Trustee............................................................................. 3
U.S. Certificate Owner.............................................................. 53
U.S. Person......................................................................... 53
UCC................................................................................. 51
Unallocated Principal Collections................................................... 40
Underwriting Agreement.............................................................. 59
Withholding Agent................................................................... 56
</TABLE>
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MBNA Master
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 Master 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
Master Credit Card Trust issues in same-day funds.
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
A-1
<PAGE> 66
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 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
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<PAGE> 67
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 generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are 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.
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, any state thereof, or any political subdivision of either
(including the District of Columbia), 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.
Further, the IRS has recently proposed new regulations that
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<PAGE> 68
would revise some aspects of the current system for withholding on amounts paid
to foreign persons. Under these proposed regulations, interest or OID paid to a
nonresident alien would continue to be exempt from U.S. withholding taxes
(including backup withholding) provided that the holder complies with the new
certification procedures.
A-4
<PAGE> 69
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee................................................ $3,030,304
Printing and Engraving.......................................... 420,000
Trustee's Fees.................................................. 45,000
Legal Fees and Expenses......................................... 1,200,000
Blue Sky Fees and Expenses...................................... 20,000
Accountants' Fees and Expenses.................................. 180,000
Rating Agency Fees.............................................. 3,600,000
Miscellaneous Fees.............................................. 60,000
----------
Total...................................................... $8,555,304
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Articles of Association of MBNA America Bank, National
Association (the "Bank"), provides that the Bank shall indemnify and advance
expenses to (a) its currently acting and its former directors to the fullest
extent permitted by the Maryland General Corporation Law, and (b) to its
officers to the same extent as its directors (and may do so to such further
extent as is consistent with law). In addition, such Article provides that the
Board of Directors may by by-law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law. Further, such Article
provides that the Bank may purchase insurance for the purpose of indemnifying
its directors and officers to the extent that such indemnification is permitted
by the foregoing provisions and not prohibited by federal banking laws and
regulations.
Section 17 of the By-laws of the Bank provides that the Bank shall
indemnify (a) its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law and (b) its
officers to the same extent as its directors (and to such further extent as is
consistent with law). In addition, such Section provides that the Bank shall
indemnify its directors and officers who, while serving as directors or officers
of the Bank, also serve at the request of the Bank as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law.
Section 17 of the Bank's By-laws also provides that any director or officer
seeking indemnification within the foregoing rights of indemnification shall be
entitled to advances from the Bank for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law and that the Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. Further, such Section provides that the foregoing rights of
indemnification shall not be deemed exclusive of any other right, with respect
to indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
The Maryland General Corporation Law provides that a corporation may
indemnify any director made a party to a proceeding by reason of service in that
capacity unless it is established that: (1) the act or omission of the director
was material to the matter giving rise to the proceeding and (a) was committed
in bad faith or (b) was the result of active and deliberate dishonesty, or (2)
the director actually received an improper personal benefit in money, property
or services, or (3) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. To the extent
that a director had been successful in defense of any proceeding, the Maryland
General Corporation Law provides that he shall be
II-1
<PAGE> 70
indemnified against reasonable expenses incurred in connection therewith. A
Maryland corporation may indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the
registrant's Registration Statement on Form S-3, No. 33-64244)
4.1 -- Pooling and Servicing Agreement dated as of September 25, 1991, and certain other
related agreements as Exhibits thereto (incorporated by reference to Exhibit 4.1 to
the registrant's Registration Statement on Form S-1, No. 33-47934)
4.2 -- Pooling and Servicing Agreement dated as of August 4, 1994, and certain other related
agreements as Exhibits thereto (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on October 14, 1994)
4.3 -- First Amendment to Pooling and Servicing Agreement dated as of March 11, 1996
(incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission on May 14, 1996)
4.4 -- Form of Pooling and Servicing Agreement (incorporated by reference to Exhibit 4.2 to
the registrant's Registration Statement on Form S-3, No. 33-80538)
4.5 -- Form of Series Supplement, Version #1 (including form of Certificate) (incorporated
by reference to Exhibit 4.3 to the registrant's Registration Statement on Form S-3,
No. 33-80538)
4.6 -- Form of Series Supplement, Version #2 (including forms of Certificates) (incorporated
by reference to Exhibit 4.4 to the registrant's Registration Statement on Form S-3,
No. 33-80538)
4.7 -- Form of Prospectus Supplement, Version #1 (incorporated by reference to Exhibit 4.5
to the registrant's Registration Statement on Form S-3, No. 33-80538)
4.8 -- Form of Prospectus Supplement, Version #2 (incorporated by reference to Exhibit 4.6
to the registrant's Registration Statement on Form S-3, No. 33-80538)
5.1 -- Opinion of Richards, Layton & Finger with respect to legality, including an opinion
of John W. Scheflen, Esq. with respect to certain corporate matters as an Exhibit
thereto
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters
23.1 -- Consent of John W. Scheflen, Esq. (included in his opinion filed as an Exhibit to
Exhibit 5.1)
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed as
Exhibit 8.1)
23.3 -- Consent of Richards, Layton & Finger (included in its opinion filed as Exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
</TABLE>
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent
II-2
<PAGE> 71
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change in such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering hereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 72
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF WILMINGTON, STATE OF DELAWARE, ON DECEMBER 4, 1996.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
as originator of the Trust and Registrant
By: /s/ THOMAS DUNN
-------------------------------------------
THOMAS DUNN
SENIOR VICE PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vernon H.C. Wright, Thomas Wren, Mary Lou Beigel
and Thomas Dunn, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for and in his name,
place and stead, in any and all capacities to sign any or all amendments
(including post-effective amendments) to this Registration Statement and any or
all other documents in connection therewith, and to file the same, with all
exhibits thereto, with the Securities and Exchange Commission, granting unto
said authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON DECEMBER 4, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ JAMES H. BERICK, ESQ. Director
- ---------------------------------------------
JAMES H. BERICK, ESQ.
/s/ CHARLES M. CAWLEY Chief Executive Officer, Director
- ---------------------------------------------
CHARLES M. CAWLEY
/s/ BENJAMIN R. CIVILETTI, ESQ. Director
- ---------------------------------------------
BENJAMIN R. CIVILETTI, ESQ.
/s/ JOHN R. COCHRAN Director
- ---------------------------------------------
JOHN R. COCHRAN
/s/ RONALD W. DAVIES Director
- ---------------------------------------------
RONALD W. DAVIES
/s/ BRUCE L. HAMMONDS Director
- ---------------------------------------------
BRUCE L. HAMMONDS
/s/ M. SCOT KAUFMAN Chief Financial Officer, Director
- ---------------------------------------------
M. SCOT KAUFMAN
/s/ ALFRED LERNER Director
- ---------------------------------------------
ALFRED LERNER
</TABLE>
II-4
<PAGE> 73
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ RANDOLPH D. LERNER Director
- ---------------------------------------------
RANDOLPH D. LERNER
/s/ VICTOR P. MANNING Chief Accounting Officer
- ---------------------------------------------
VICTOR P. MANNING
/s/ STUART L. MARKOWITZ, M.D. Director
- ---------------------------------------------
STUART L. MARKOWITZ, M.D.
/s/ MICHAEL ROSENTHAL, PH.D. Director
- ---------------------------------------------
MICHAEL ROSENTHAL, PH.D.
/s/ LANCE L. WEAVER Director
- ---------------------------------------------
LANCE L. WEAVER
/s/ VERNON H.C. WRIGHT Chief Corporate Finance Officer, Director
- ---------------------------------------------
VERNON H.C. WRIGHT
</TABLE>
II-5
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------
<S> <C>
1.1 -- Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the
registrant's Registration Statement on Form S-3, No. 33-64244)................
4.1 -- Pooling and Servicing Agreement dated as of September 25, 1991, and certain
other related agreements as Exhibits thereto (incorporated by reference to
Exhibit 4.1 to the registrant's Registration Statement on Form S-1, No.
33-47934).....................................................................
4.2 -- Pooling and Servicing Agreement dated as of August 4, 1994, and certain other
related agreements as Exhibits thereto (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on October 14, 1994)........
4.3 -- First Amendment to Pooling and Servicing Agreement dated as of March 11, 1996
(incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission on May 14, 1996)...................................................
4.4 -- Form of Pooling and Servicing Agreement (incorporated by reference to Exhibit
4.2 to the registrant's Registration Statement on Form S-3, No. 33-80538).....
4.5 -- Form of Series Supplement, Version #1 (including form of Certificate)
(incorporated by reference to Exhibit 4.3 to the registrant's Registration
Statement on Form S-3, No. 33-80538)..........................................
4.6 -- Form of Series Supplement, Version #2 (including forms of Certificates)
(incorporated by reference to Exhibit 4.4 to the registrant's Registration
Statement on Form S-3, No. 33-80538)..........................................
4.7 -- Form of Prospectus Supplement, Version #1 (incorporated by reference to
Exhibit 4.5 to the registrant's Registration Statement on Form S-3, No.
33-80538).....................................................................
4.8 -- Form of Prospectus Supplement, Version #2 (incorporated by reference to
Exhibit 4.6 to the registrant's Registration Statement on Form S-3, No.
33-80538).....................................................................
5.1 -- Opinion of Richards, Layton & Finger with respect to legality, including an
opinion of John W. Scheflen, Esq. with respect to certain corporate matters as
an Exhibit thereto............................................................
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters.....
23.1 -- Consent of John W. Scheflen, Esq. (included in his opinion filed as an Exhibit
to Exhibit 5.1)...............................................................
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed
as Exhibit 8.1)...............................................................
23.3 -- Consent of Richards, Layton & Finger (included in its opinion filed as Exhibit
5.1)..........................................................................
24.1 -- Powers of Attorney (included on page II-5)....................................
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
December 4, 1996
MBNA America Bank, National Association
400 Christiana Road
Newark, Delaware 19713
Re: MBNA Master Credit Card Trusts
Ladies and Gentlemen:
We have acted as special Delaware counsel for MBNA America
Bank, National Association, a national banking association (the "Bank"), in
connection with (i) the proposed issuance and sale of series certificates (the
"New Certificates") by the MBNA Master Credit Card Trust II pursuant to a
Pooling and Servicing Agreement, dated as of August 4, 1994, as amended by the
First Amendment to the MBNA Master Credit Card Trust II Pooling and Servicing
Agreement, dated as of March 11, 1996 (the "Original New Pooling and Servicing
Agreement"), by and between the Bank, as Seller and Servicer, and The Bank of
New York, a banking corporation organized and existing under the laws of the
State of New York, as trustee (the "New Trustee"), as amended by Assignment No.
1 of Receivables in Additional Accounts, dated as of September 19, 1994
("Assignment No. 1"), by and between the Bank, as Seller and Servicer, and the
New Trustee, by Assignment No. 2 of Receivables in Additional Accounts, dated
as of November 15, 1994 ("Assignment No. 2"), by and between the Bank, as
Seller and Servicer, and the New Trustee, by Assignment No. 3 of Receivables in
Additional Accounts, dated as of March 30, 1995 ("Assignment No. 3"), by and
between the Bank, as Seller and Servicer, and the New Trustee, by Assignment
No. 4 of Receivables in Additional Accounts, dated as of July 6, 1995
("Assignment No. 4"), by and between the Bank, as Seller and Servicer, and the
New Trustee, by Assignment No. 5 of Receivables in Additional Accounts, dated
as of October 3, 1995 ("Assignment No.
<PAGE> 2
MBNA America Bank, National Association
December 4, 1996
Page 2
5"), by and between the Bank, as Seller and Servicer, and the New Trustee, by
Assignment No. 6 of Receivables in Additional Accounts, dated as of March 8,
1996 ("Assignment No. 6"), by and between the Bank, as Seller and Servicer, and
the New Trustee, by Assignment No. 7 of Receivables in Additional Accounts,
dated as of May 30, 1996 ("Assignment No. 7"), by and between the Bank, as
Seller and Servicer, and the New Trustee, by Assignment No. 8 of Receivables in
Additional Accounts, dated as of September 4, 1996 ("Assignment No. 8"), by and
between the Bank, as Seller and Servicer, and the New Trustee, by Assignment
No. 9 of Receivables in Additional Accounts, dated as of October 3, 1996
("Assignment No. 9"), by and between the Bank, as Seller and Servicer, and the
New Trustee, and by Assignment No. 10 of Receivables in Additional Accounts,
dated as of November 5, 1996 ("Assignment No. 10"), by and between the Bank, as
Seller and Servicer, and the New Trustee, and as to be supplemented from time
to time by Supplements in the form of the supplements which are attached as
Exhibits 4.5 and 4.6 to the Registration Statement (as defined below) (each, a
"Supplement") (the Original New Pooling and Servicing Agreement, as amended by
Assignment No. 1, Assignment No. 2, Assignment No. 3, Assignment No. 4,
Assignment No. 5, Assignment No. 6, Assignment No. 7, Assignment No. 8,
Assignment No. 9 and Assignment No. 10, and as to be supplemented by a
Supplement is hereinafter referred to as the "New Pooling and Servicing
Agreement"), and (ii) the proposed issuance and sale of series certificates
(the "Old Certificates") by the MBNA Master Credit Card Trust pursuant to a
Pooling and Servicing Agreement, dated as of September 25, 1991 (the "Original
Old Pooling and Servicing Agreement"), by and between the Bank, as Seller and
Servicer, and Bankers Trust Company, a banking corporation organized and
existing under the laws of the State of New York, as trustee (the "Trustee"),
as amended by Assignment No. 1 of Receivables in Additional Accounts, dated as
of March 30, 1992 (the "First Assignment"), by and between the Bank, as Seller
and Servicer, and the Trustee, by Assignment No. 2 of Receivables in Additional
Accounts, dated as of August 26, 1992 (the "Second Assignment"), by and between
the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 3 of
Receivables in Additional Accounts, dated as of January 28, 1993 (the "Third
Assignment"), by and between the Bank, as Seller and Servicer, and the Trustee,
by Assignment No. 4 of Receivables in Additional Accounts, dated as of May 20,
1993 (the "Fourth Assignment"), by and between the Bank, as Seller and
Servicer, and the Trustee, by Assignment No. 5 of Receivables in Additional
Accounts, dated as of July 29, 1993 (the "Fifth Assignment"), by and between
the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 6 of
Receivables in Additional Accounts, dated as of November 17, 1993 (the "Sixth
Assignment"), by and between the Bank, as Seller and Servicer, and the Trustee,
by Assignment No. 7 of Receivables in Additional Accounts, dated as of February
9, 1994 (the "Seventh Assignment"), by and between the Bank, as Seller and
Servicer, and the Trustee, and by Assignment No. 8 of Receivables in Additional
Accounts, dated as of May 11, 1994 (the "Eighth Assignment"), by and
<PAGE> 3
MBNA America Bank, National Association
December 4, 1996
Page 3
between the Bank, as Seller and Servicer, and the Trustee, and as to be
supplemented by a Supplement (the Original Old Pooling and Servicing Agreement,
as amended by the First Assignment, the Second Assignment, the Third
Assignment, the Fourth Assignment, the Fifth Assignment, the Sixth Assignment,
the Seventh Assignment and the Eighth Assignment, and as to be supplemented by
a Supplement, is hereinafter referred to as the "Old Pooling and Servicing
Agreement"). At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of the
following:
(a) The Old Pooling and Servicing Agreement;
(b) The New Pooling and Servicing Agreement;
(c) Post Effective Amendment No. 1 to Registration
Statement No. 33-99324 on Form S-3 (the "Registration
Statement"), filed by the Bank with the Securities
and Exchange Commission on December 4, 1996,
including a related preliminary prospectus (the
"Prospectus"); and
(d) A certificate of an officer of the Bank, dated
December 4, 1996.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed above, and we have assumed that there
exists no provision in any document not listed above that bears upon or is
inconsistent with the opinions stated herein. We have conducted no factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects. In connection with the
formation and authorization to transact business of the Bank, in rendering this
opinion, we have relied upon an opinion, dated December 4, 1996, of John W.
Scheflen, Esquire, a copy of which is attached hereto as Exhibit "A."
With respect to all documents examined by us, we have assumed
that (i) all signatures on documents examined by us are genuine, (ii) all
documents submitted to us as originals are authentic, and (iii) all documents
submitted to us as copies conform with the original copies of those documents.
For purposes of this opinion, we have assumed that, at the
time of issuance and sale of the New Certificates and the Old Certificates, (i)
the due authorization, execution and delivery by all parties thereto of all
documents examined
<PAGE> 4
MBNA America Bank, National Association
December 4, 1996
Page 4
by us, (ii) the Bank will be a national banking association duly formed and
validly existing under the laws of the United States of America, (iii) the Bank
will have all necessary corporate power and authority to cause the issuance and
sale of the New Certificates and the Old Certificates, (iv) the Bank will have
taken all necessary corporate action to cause the issuance and sale of the New
Certificates and the Old Certificates, (v) the issuance and sale of the New
Certificates or the Old Certificates, as the case may be, will not be contrary
to any applicable law, rule, regulation or order, and (vi) in connection with
the documents of which we have reviewed a form, all blanks contained in such
documents will be properly and appropriately completed, and optional provisions
included in such documents will be properly and appropriately selected, and as
executed, such documents will conform with the forms of the documents reviewed
by us.
This opinion is limited to the laws of the State of Delaware
and United States of America federal law, and we have not considered and
express no opinion on the laws of any other jurisdiction. Our opinions are
rendered only with respect to Delaware and United States of America federal
laws and rules, regulations and orders thereunder which are currently in
effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes as we have considered necessary or appropriate,
and subject to the assumptions, qualifications, limitations and exceptions set
forth herein, we are of the opinion that:
1. When issued and sold in accordance with the terms of
the New Pooling and Servicing Agreement, including when duly executed and
authenticated by the New Trustee in accordance with the terms of the New
Pooling and Servicing Agreement and issued and delivered against payment
therefor, the New Certificates will be legally issued, fully paid and
nonassessable and entitled to the benefits of the New Pooling and Servicing
Agreement.
2. When issued and sold in accordance with the terms of
the Old Pooling and Servicing Agreement, including when duly executed and
authenticated by the Trustee in accordance with the terms of the Old Pooling
and Servicing Agreement and issued and delivered against payment therefor, the
Old Certificates will be legally issued, fully paid and nonassessable and
entitled to the benefits of the Old Pooling and Servicing Agreement.
We understand that you will file this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
in connection with the filing by the Bank of the Registration Statement under
the Securities Act of 1933, as
<PAGE> 5
MBNA America Bank, National Association
December 4, 1996
Page 5
amended. We hereby consent to the filing of this opinion with the Securities
and Exchange Commission. This opinion is rendered solely for your benefit in
connection with the foregoing. We hereby consent to the use of our name under
the heading "Legal Matters" in the Prospectus. In giving the foregoing
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior consent, this opinion
may not be furnished or quoted to, or relied upon by, any other person or
entity for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
MIL/WAY/MM/bw
<PAGE> 6
EXHIBIT A
December 4, 1996
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Re: MBNA Master Credit Card Trusts, Asset Backed Certificates
MBNA America Bank, National Association (Seller)
Registration Statement on Form S-3
Gentlemen:
I am familiar with the registration statement on Form S-3 (the
"Registration Statement") to be filed on or about December 4, 1996 by MBNA
America Bank, National Association, a national banking association (the "Bank")
on behalf of MBNA Master Credit Card Trusts (each, a "Trust") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), with respect to the issuance from time to time by a specified
Trust of a series (each, a "Series") of its Asset Backed Certificates
representing undivided interests in such Trust. The Series of Asset Backed
Certificates to be issued by the Trusts in offerings pursuant to the
Registration Statement are collectively referred to herein as the
"Certificates."
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records and other instruments
as I have deemed necessary or appropriate for the purposes of this opinion.
Based upon the forgoing, I am of the opinion that the Bank is a
national banking association formed under the laws of the United States of
America and is authorized thereunder to transact the business of banking.
I am admitted to the Bar of the State of Maryland, and express no
opinion as to the law of any jurisdiction other than the laws of the United
States of America.
You may rely on this opinion in connection with an opinion to be
submitted by you to the Bank and filed by the Bank with the Securities and
Exchange Commission as an exhibit to the Registration Statement. I hereby
consent of the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
prospectus relating to the Certificates. In giving such consent, I do not
thereby admit that I am in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
/s/ JOHN W. SCHEFLEN
----------------------
John W. Scheflen, Esq.
<PAGE> 1
EXHIBIT 8.1
December 4, 1996
MBNA America Bank,
National Association
1100 North King Street
Wilmington, Delaware 19884
Re: MBNA MASTER CREDIT CARD TRUSTS
ASSET BACKED CERTIFICATES
MBNA AMERICA BANK, NATIONAL ASSOCIATION (SELLER)
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel for MBNA America Bank, National Association,
a national banking association (the "Seller"), in connection with the
preparation of the Registration Statement on Form S-3 (the "Registration
Statement"), which has been filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), for the registration
under the Act of series (each, a "Series") of Asset Backed Certificates
(collectively, the "Certificates"), each such series representing an undivided
interest in a specified MBNA Master Credit Card Trust (each, a "Trust"). Each
Series of Certificates will be issued pursuant to a pooling and servicing
agreement (each a, "Pooling and Servicing Agreement"), between the Seller and a
trustee to be named. The Pooling and Servicing Agreement dated as of September
25, 1991 relating to the MBNA Master Credit Card Trust ("Trust I") formed by
the Seller on such date and the Series Supplements relating to Series of
Certificates issued by Trust I have been incorporated by reference in the
Registration Statement. The Pooling and Servicing Agreement dated as of August
4, 1994 relating to the MBNA Master Credit Card Trust II ("Trust II") formed by
the Seller on such date, the First Amendment thereto dated as of March 11,
1996, and the Series Supplements relating to Series of Certificates issued by
Trust II have been incorporated by reference in the Registration Statement.
The form of Pooling and Servicing Agreements relating to Trusts to be formed
by the Seller and the forms of Series Supplements relating to Series of
Certificates to be issued by such Trusts have been filed as Exhibits 4.4, 4.5,
and 4.6, to the Registration Statement.
<PAGE> 2
MBNA America Bank,
National Association
December 4, 1996
Page 2
We hereby confirm that the statements set forth in the prospectus
relating to the Certificates (the "Prospectus") forming a part of the
Registration Statement under the heading "Certain Federal Income Tax
Consequences" and the statements set forth in each of the forms of prospectus
supplements, filed as Exhibits 4.7 and 4.8 to the Registration Statement,
relating to the Certificates (collectively, the "Prospectus Supplement")
forming a part of the Registration Statement under the heading "Summary of
Terms - Tax Status", which statements have been prepared by us, to the extent
that they constitute matters of law or legal conclusions with respect thereto,
are correct in all material respects.
We note that the forms of Prospectus and Prospectus Supplement do not
relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences may, under certain
circumstances, require modification in the context of an actual transaction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Orrick, Herrington
& Sutcliffe LLP under the captions "Legal Matters" and "Certain Federal Income
Tax Consequences" in the Prospectus. In giving such consent, we do not admit
that we are "experts," within the meaning of the term used in the Act or the
rules and regulations of the Securities and Exchange Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
