<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 5, 1997)
$930,000,000
AT&T UNIVERSAL CARD MASTER TRUST
$850,000,000 CLASS A SERIES 1997-1 FLOATING RATE ASSET BACKED CERTIFICATES
$80,000,000 CLASS B SERIES 1997-1 FLOATING RATE ASSET BACKED CERTIFICATES
AT&T UNIVERSAL FUNDING CORP.
TRANSFEROR
AT&T UNIVERSAL CARD SERVICES CORP.
SERVICER
---------------------------
The Class A Series 1997-1 Floating Rate Asset Backed Certificates (the
"Class A Certificates") and the Class B Series 1997-1 Floating Rate Asset Backed
Certificates (the "Class B Certificates" and, together with the Class A
Certificates, the "Series 1997-1 Certificates") offered hereby will represent
undivided interests in certain assets of the AT&T Universal Card Master Trust
(the "Trust") created pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") among AT&T Universal Funding Corp. ("AT&T
Universal Funding"), as transferor (in such capacity, the "Transferor"), AT&T
Universal Card Services Corp. ("UCS"), as servicer (in such capacity, the
"Servicer"), and Bankers Trust Company, as trustee (the "Trustee"). The property
of the Trust includes the Transferor's ownership interest in receivables (such
interest in receivables, the "Receivables") generated from time to time in a
portfolio of MasterCard(R) and VISA(R) revolving credit card accounts (the
"Accounts") owned by Universal Bank, N.A. ("Universal Bank") and Columbus Bank &
Trust Company ("CB&T"), collections thereon and certain other property as more
fully described herein. In addition, the Collateral Interest (as defined herein)
will be issued in the initial amount of $70,000,000 and will be subordinated to
the Series 1997-1 Certificates as described herein. The Transferor initially
will own the remaining undivided interest in the Trust not represented by the
Series 1997-1 Certificates and the other investor certificates or interests
issued by the Trust.
(continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE SERIES 1997-1 CERTIFICATES,
AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, THAT IT
WILL CONTINUE UNTIL THE SERIES 1997-1 CERTIFICATES ARE PAID IN FULL. POTENTIAL
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE S-14 HEREIN AND ON PAGE 17 IN THE PROSPECTUS.
THE SERIES 1997-1 CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY
AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, UNIVERSAL
BANK, CB&T, UCS, AT&T CORP., THE SERVICER OR ANY AFFILIATE OF ANY THEREOF.
NEITHER THE SERIES 1997-1 CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
------------- ------------- -----------------
<S> <C> <C> <C>
<CAPTION>
<S> <C> <C> <C>
Per Class A Certificate...................................... 100% 0.275% 99.725%
Per Class B Certificate...................................... 100% 0.325% 99.675%
Total........................................................ $930,000,000 $2,597,500 $927,402,500
</TABLE>
- ---------------
(1) Plus accrued interest, if any, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from May 14, 1997.
(2) Before deduction of expenses payable by the Transferor, estimated to be
$800,000.
The Series 1997-1 Certificates are offered by the Underwriters when, as and
if issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Series 1997-1 Certificates will be delivered in book-entry form on or about
May 14, 1997, through the facilities of The Depository Trust Company, Cedel
Bank, societe anonyme and the Euroclear System.
---------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
LEHMAN BROTHERS J.P. MORGAN & CO.
May 7, 1997
<PAGE> 2
(continued from previous page)
The Transferor has offered and may offer from time to time other series of
certificates that evidence undivided interests in certain assets of the Trust,
which may have terms significantly different from the Series 1997-1 Certificates
and which are not offered hereby. The issuance of additional series of
certificates may impact the timing or amount of payments received by holders of
the Series 1997-1 Certificates.
Interest will accrue on the Class A Certificates from May 14, 1997 (the
"Closing Date") to and excluding August 18, 1997 and with respect to each
Interest Period thereafter at the rate of 0.09% per annum above the London
interbank offered quotations rate ("LIBOR") for three-month United States dollar
deposits (or, in certain limited circumstances described herein, one-month
United States dollar deposits) prevailing on the related LIBOR Determination
Date (defined herein) determined as described herein (the "Class A Certificate
Rate"). Interest will accrue on the Class B Certificates from the Closing Date
to and excluding August 18, 1997 and with respect to each subsequent Interest
Period at the rate of 0.28% per annum above LIBOR for three-month United States
dollar deposits (or, in certain limited circumstances described herein,
one-month United States dollar deposits) prevailing on the related LIBOR
Determination Date determined as described herein (the "Class B Certificate
Rate"). Interest with respect to the Series 1997-1 Certificates will be
distributed quarterly on the 17th day of May, August, November and February (or,
if such 17th day is not a business day, the next business day) and on the
Expected Final Payment Date (defined herein) (each, an "Interest Payment Date")
commencing on the August 1997 Distribution Date and ending on the related
maturity date or, under certain limited circumstances described herein and in
the Prospectus, monthly on or about the 17th day of each calendar month.
Principal with respect to the Class A Certificates and the Class B
Certificates is scheduled to be distributed on the April 2002 Distribution Date,
but may be paid earlier or later under certain limited circumstances described
herein. See "Maturity Considerations" and "Series Provisions -- Pay Out Events"
herein and "Description of the Certificates -- Pay Out Events and Reinvestment
Events" in the Prospectus. Principal payments will not be made to Class B
Certificateholders until the final principal payment has been made in respect of
the Class A Certificates. See "Series Provisions -- Principal Payments."
Application will be made to list the Series 1997-1 Certificates on the
Luxembourg Stock Exchange.
------------------------
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY THE CLASS B
CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND PAYMENTS WITH
RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED HEREIN.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SERIES 1997-1
CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF THE
SERIES 1997-1 CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.
------------------------
THE SERIES 1997-1 CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES
OF INVESTOR CERTIFICATES BEING OFFERED BY THE TRUST FROM TIME TO TIME PURSUANT
TO A PROSPECTUS DATED MAY 5, 1997. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN
COMPLETE INFORMATION ABOUT THE OFFERING OF THE SERIES 1997-1 CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED
TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE
SERIES 1997-1 CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UPON RECEIPT OF A REQUEST BY AN INVESTOR, OR HIS OR HER REPRESENTATIVE,
WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE
UNDERWRITERS WILL TRANSMIT OR CAUSE TO BE TRANSMITTED PROMPTLY, WITHOUT CHARGE
AND IN ADDITION TO ANY SUCH DELIVERY REQUIREMENTS, A PAPER COPY OF A PROSPECTUS
SUPPLEMENT AND A PROSPECTUS OR A PROSPECTUS SUPPLEMENT AND A PROSPECTUS IN
ELECTRONIC FORMAT.
S-2
<PAGE> 3
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Index of Defined Terms in this
Prospectus Supplement and the Prospectus for the location herein and therein of
the definitions of certain capitalized terms used herein. Certain capitalized
terms used but not defined herein have the meanings assigned to them in the
Prospectus.
TRUST......................... AT&T Universal Card Master Trust (the
"Trust").
TITLE OF SECURITIES........... $850,000,000 Class A Series 1997-1 Floating
Rate Asset Backed Certificates (the "Class A
Certificates") and $80,000,000 Class B Series
1997-1 Floating Rate Asset Backed
Certificates (the "Class B Certificates" and,
together with the Class A Certificates, the
"Series 1997-1 Certificates").
INITIAL INVESTED AMOUNT....... $1,000,000,000 (the "Initial Invested
Amount").
CLASS A INITIAL INVESTED
AMOUNT........................ $850,000,000 (the "Class A Initial Invested
Amount").
CLASS B INITIAL INVESTED
AMOUNT........................ $80,000,000 (the "Class B Initial Invested
Amount").
COLLATERAL INITIAL INVESTED
AMOUNT........................ $70,000,000 (the "Collateral Initial Invested
Amount").
SERIES REQUIRED TRANSFEROR
AMOUNT........................ For any date, 7% of the Invested Amount (the
"Series Required Transferor Amount").
CLASS A CERTIFICATE RATE...... The Class A Certificate Rate for an Interest
Period will be a rate per annum equal to
LIBOR for United States dollar deposits for a
period of three months (or, following the
occurrence of a Pay Out Event, for a period
of one month), determined as of the LIBOR
Determination Date as described herein, plus
0.09%.
CLASS B CERTIFICATE RATE...... The Class B Certificate Rate for an Interest
Period will be a rate per annum equal to
LIBOR for United States dollar deposits for a
period of three months (or, following the
occurrence of a Pay Out Event, for a period
of one month), determined as of the LIBOR
Determination Date as described herein, plus
0.28%.
INTEREST PAYMENT DATES........ The 17th day of May, August, November and
February (or, if any such day is not a
business day, the next succeeding business
day) and on the Expected Final Payment Date,
commencing on the August 1997 Distribution
Date.
CONTROLLED ACCUMULATION
AMOUNT........................ For each Distribution Date with respect to the
Controlled Accumulation Period, $77,500,000;
except that, if the commencement of the
Controlled Accumulation Period is delayed as
described herein under "Series
Provisions -- Principal Payments," the
Controlled Accumulation Amount for each
Distribution Date with respect to the
Controlled Accumulation Period will be
determined as described under "Series
Provisions -- Application of
Collections -- Payments of Principal."
EXPECTED FINAL PAYMENT DATE... The April 2002 Distribution Date.
CLOSING DATE.................. May 14, 1997 (the "Closing Date").
SERIES INVESTED AMOUNT........ The Initial Invested Amount.
S-3
<PAGE> 4
THE SERIES 1997-1
CERTIFICATES;
THE COLLATERAL INTEREST..... Each of the Series 1997-1 Certificates offered
hereby represents an undivided interest in
the Trust. The portion of the Trust Assets
allocated to Series 1997-1 as described under
"The Pooling and Servicing Agreement
Generally -- Allocations" in the Prospectus
will be further allocated among the interest
of the holders of the Class A Certificates
(the "Class A Certificateholders' Interest"),
the interest of the holders of the Class B
Certificates (the "Class B
Certificateholders' Interest") and the
interest of the Collateral Interest Holder
(as defined below), and the interest of the
holders of the Transferor Certificates (the
"Transferor's Interest"), as described below.
The Class A Certificateholders' Interest and
the Class B Certificateholders' Interest are
sometimes collectively referred to herein as
the "Series 1997-1 Certificateholders'
Interest." A specified undivided interest in
the Trust Assets (the "Collateral Interest")
in the initial amount of $70,000,000 (which
amount represents 7% of the sum of the Class
A Initial Invested Amount, the Class B
Initial Invested Amount and the Collateral
Initial Invested Amount) constitutes Credit
Enhancement for the Series 1997-1
Certificates. The provider of such Credit
Enhancement is referred to herein as the
"Collateral Interest Holder." Allocations
will be made to the Collateral Interest and
the Collateral Interest Holder will have
voting and certain other rights as if the
Collateral Interest were a subordinated class
of Series 1997-1 Certificates. For purposes
of this Prospectus Supplement, the
"Collateral Interest" shall be deemed to be
the "Enhancement Invested Amount" for the
Series 1997-1 Certificates for all purposes
under the Prospectus. The Transferor's
Interest will represent the right to the
assets of the Trust not allocated to the
Class A Certificateholders' Interest, the
Class B Certificateholders' Interest, the
Collateral Interest or the holders of other
undivided interests in the Trust. The
principal amount of the Transferor's Interest
will fluctuate as the amount of Receivables
in the Trust changes from time to time.
The aggregate amount of Principal Receivables
allocated to the Series 1997-1
Certificateholders' Interest and the
Collateral Interest (the "Invested Amount")
will be $1,000,000,000 on the Closing Date
(the "Initial Invested Amount").
The aggregate amount of Principal Receivables
allocable to the Class A Certificateholders'
Interest (as more fully defined herein, the
"Class A Invested Amount") will be
$850,000,000 on the Closing Date (the "Class
A Initial Invested Amount"). The aggregate
amount of Principal Receivables allocable to
the Class B Certificateholders' Interest (as
more fully defined herein, the "Class B
Invested Amount") will be $80,000,000 on the
Closing Date (the "Class B Initial Invested
Amount"). The aggregate amount of Principal
Receivables allocable to the Collateral
Interest (as more fully defined herein, the
"Collateral Invested Amount") will be
$70,000,000 on the Closing Date (the
"Collateral Initial Invested Amount"). The
Class B Certificateholders' Interest will
decline in certain circumstances as
S-4
<PAGE> 5
a result of (a) the allocation to the Class B
Certificateholders' Interest of certain
Defaulted Amounts, including such amounts
otherwise allocable to the Class A
Certificateholders' Interest when the
Collateral Interest is zero, and (b) the
reallocation of collections of Principal
Receivables otherwise allocable to the Class
B Certificateholders' Interest to fund
certain payments in respect of the Class A
Certificates. Any such reductions in the
Class B Certificateholders' Interest may be
reimbursed out of Excess Spread, if any,
Excess Finance Charge Collections allocable
to Series 1997-1, if any, and the
reallocation of certain amounts allocable to
the Collateral Interest as described herein.
During the Controlled Accumulation Period,
for the purpose of allocating collections of
Finance Charge Receivables and the Defaulted
Amount with respect to each Monthly Period,
the Class A Certificateholders' Interest will
be further reduced (in an amount not to
exceed the Class A Invested Amount) by the
amount on deposit in the Principal Funding
Account (as so reduced, the "Class A Adjusted
Invested Amount") and the Class B
Certificateholders' Interest will be further
reduced by the amount by which the amount on
deposit in the Principal Funding Account
exceeds the Class A Invested Amount (as so
reduced, the "Class B Adjusted Invested
Amount," and, together with the Class A
Adjusted Invested Amount and the Collateral
Invested Amount, the "Adjusted Invested
Amount"). The principal amount of the
Transferor's Interest will fluctuate as the
amount of Principal Receivables in the Trust,
the adjusted invested amount of each Series
and the amounts on deposit in the Special
Funding Account change from time to time.
The Class A Certificates, the Class B
Certificates and the Collateral Interest will
each include the right to receive (but only
to the extent needed to make payments of
interest on each Interest Payment Date at the
applicable certificate rate and payments of
principal and subject to any reallocation of
such amounts as described herein), varying
percentages of the collections of Finance
Charge Receivables and Principal Receivables
and will be allocated varying percentages of
the Defaulted Amount with respect to each
Monthly Period. Collections of Finance Charge
Receivables and Principal Receivables and the
Defaulted Amount will be allocated to Series
1997-1 based on the Series Allocation
Percentage for Series 1997-1 (subject to
reallocation, in the case of certain Series
Allocable Finance Charge Collections, to
other Series in Group I as described under
"The Pooling and Servicing Agreement
Generally -- Reallocations Among Certificates
of Different Series within a Reallocation
Group" in the Prospectus). Reallocated
Investor Finance Charge Collections and the
Investor Default Amount will be further
allocated to the holders of the Class A
Certificates and the holders of the Class B
Certificates and the Collateral Interest
based on the Class A Floating Percentage and
the Class B Floating Percentage and the
Collateral Floating Percentage, respectively
(each defined herein). The Principal Allo-
S-5
<PAGE> 6
cation Percentage of Series Allocable
Principal Collections will be allocated to
the holders of the Class A Certificates, the
Class B Certificates and the Collateral
Interest based on the Class A Principal
Percentage, the Class B Principal Percentage
and the Collateral Principal Percentage,
respectively (each defined herein).
OTHER SERIES.................. The Series 1997-1 Certificates will be the
ninth Series of investor certificates issued
by the Trust, all of which will be
outstanding on the Closing Date. See "Annex
I -- Other Series" for a summary of the
principal terms of the eight outstanding
Series of investor certificates. Additional
Series are expected to be issued from time to
time by the Trust. See "The Pooling and
Servicing Agreement Generally -- New
Issuances" and "-- Reallocations Among
Certificates of Different Series within a
Reallocation Group" in the Prospectus and
"Maturity Considerations" herein.
RECEIVABLES................... The Receivables arise in Accounts that have
been selected from the AT&T Universal
Portfolio, based on criteria provided in the
Pooling and Servicing Agreement as applied on
the Initial Cut-Off Date and as more fully
described herein under "The AT&T Universal
Portfolio." The aggregate amount of
Receivables in the Accounts as of March 31,
1997 was $9,228,786,217, (which amount
includes Receivables in Additional Accounts
conveyed to the Trust on April 24, 1997, but
excludes Calling Card Transactions and the
Account Owner Retained Interest) comprised of
$9,147,140,524 of Principal Receivables and
$81,645,693 of Finance Charge Receivables.
DENOMINATIONS................. Beneficial interests in the Series 1997-1
Certificates will be offered for purchase in
denominations of $1,000 and integral
multiples thereof.
REGISTRATION OF SERIES 1997-1
CERTIFICATES................ The Series 1997-1 Certificates initially will
be represented by Series 1997-1 Certificates
registered in the name of Cede, as the
nominee of DTC. No purchaser of a Series
1997-1 Certificate will be entitled to
receive a definitive certificate except under
certain limited circumstances described in
the Prospectus. Purchasers of the Series
1997-1 Certificates may elect to hold their
Series 1997-1 Certificates through DTC (in
the United States) or Cedel or Euroclear (in
Europe). See "Description of the
Certificates -- Definitive Certificates" in
the Prospectus.
SERVICING FEE................. The Servicing Fee Rate for the Series 1997-1
Certificates will be 2.0% per annum. The
Class A Servicing Fee, the Class B Servicing
Fee and the Collateral Interest Servicing Fee
will be paid on each Distribution Date as
described under "Series
Provisions -- Application of
Collections -- Payment of Fees, Interest and
Other Items" and "-- Servicing Compensation
and Payment of Expenses" herein. See
"Description of the Certificates -- Servicing
Compensation and Payment of Expenses" in the
Prospectus.
S-6
<PAGE> 7
REVOLVING PERIOD AND
CONTROLLED
ACCUMULATION PERIOD......... The "Revolving Period" with respect to the
Series 1997-1 Certificates means the period
from and excluding April 30, 1997 (the
"Series 1997-1 Cut-Off Date"), to, but not
including, the earlier of (a) the
commencement of the controlled accumulation
period with respect to the Series 1997-1
Certificates (the "Controlled Accumulation
Period") and (b) the commencement of the
Early Amortization Period. Unless a Pay Out
Event has occurred, the Controlled
Accumulation Period will commence at the
close of business on March 31, 2001;
provided, that subject to the conditions set
forth under "Series Provisions -- Principal
Payments" herein, the day on which the
Revolving Period ends and the Controlled
Accumulation Period begins may be delayed to
no later than the close of business on
February 28, 2002. The Controlled
Accumulation Period will end on the earliest
of (a) the commencement of the Early
Amortization Period, (b) the payment in full
of the Invested Amount and (c) the Series
Termination Date for Series 1997-1 (the
"Series 1997-1 Termination Date"). No
principal will be payable to Class A
Certificateholders until the April 2002
Distribution Date (the "Expected Final
Payment Date"), or, upon the occurrence of a
Pay Out Event as described herein, the first
Distribution Date with respect to the Early
Amortization Period. No principal will be
payable to the Class B Certificateholders
until the Class A Invested Amount is paid in
full. No principal will be payable to the
Collateral Interest Holder until the Class B
Invested Amount is paid in full; provided,
that during the Revolving Period or the
Controlled Accumulation Period, certain
collections of Principal Receivables
allocable to the Series 1997-1
Certificateholders' Interest and the
Collateral Interest will be paid to the
Collateral Interest Holder to the extent the
Collateral Invested Amount exceeds the
Required Collateral Invested Amount. For the
period beginning on the Closing Date and
ending with the commencement of the
Controlled Accumulation Period or the Early
Amortization Period, collections of Principal
Receivables otherwise allocable to the Series
1997-1 Certificateholders' Interest and the
Collateral Interest (other than collections
of Principal Receivables allocated to the
Class B Certificateholders' Interest and the
Collateral Interest ("Reallocated Principal
Collections") that are used to pay any
deficiency in the Class A Required Amount or
Class B Required Amount) will, subject to
certain limitations, be treated as Shared
Principal Collections and applied to cover
principal payments due to or for the benefit
of Certificateholders of other Principal
Sharing Series, or paid to the holders of the
Transferor Certificates or, in certain
circumstances, deposited in the Special
Funding Account. See "Series
Provisions -- Pay Out Events" herein and
"Description of the Certificates -- Pay Out
Events and Reinvestment Events" in the
Prospectus for a discussion of the events
which might lead to the termination of the
Revolving Period prior to the commencement of
the Controlled Accumulation Period. In
addition, see "Series Provisions -- Principal
Payments" herein and "The Pooling and
Servicing Agreement Generally -- Shared
Principal Collections" in the Prospectus.
S-7
<PAGE> 8
EARLY AMORTIZATION PERIOD..... During the period from the day on which a Pay
Out Event has occurred and ending on the
earlier of (a) the payment of the Invested
Amount in full and (b) the Series 1997-1
Termination Date (the "Early Amortization
Period"), Available Principal Collections (as
defined herein) will be distributed monthly
on each Distribution Date to the holders of
the Class A Certificates and, following
payment in full of the Class A Invested
Amount, to the holders of the Class B
Certificates and, following payment in full
of the Class B Invested Amount, to the
Collateral Interest Holder beginning with the
Distribution Date in the month following the
commencement of the Early Amortization
Period. See "Series Provisions -- Pay Out
Events" herein and "Description of the
Certificates -- Pay Out Events and
Reinvestment Events" in the Prospectus for a
discussion of the events which might lead to
the commencement of the Early Amortization
Period.
SUBORDINATION OF THE CLASS B
CERTIFICATES AND THE
COLLATERAL INTEREST......... The Class B Certificates and the Collateral
Interest will be subordinated, as described
herein, to the extent necessary to fund
payments with respect to the Class A
Certificates as described herein. In
addition, the Collateral Interest will be
subordinated to the extent necessary to fund
certain payments with respect to the Class B
Certificates. If the Collateral Interest is
reduced to zero, holders of the Class B
Certificates will bear directly the credit
and other risks associated with their
interest in the Trust. To the extent the
Class B Invested Amount is reduced, the
percentage of collections of Finance Charge
Receivables allocable to holders of the Class
B Certificates in subsequent Monthly Periods
will be reduced. Moreover, to the extent the
amount of such reduction in the Class B
Invested Amount is not reimbursed, the amount
of principal distributable to holders of the
Class B Certificates will be reduced. Such
reductions of the Class B Invested Amount
will thereafter be reimbursed and the Class B
Invested Amount increased on each
Distribution Date by the amount, if any, of
Excess Spread and Excess Finance Charge
Collections allocable to Series 1997-1 for
such Distribution Date available for that
purpose. See "The Pooling and Servicing
Agreement Generally -- Credit
Enhancement -- Subordination" in the
Prospectus.
ADDITIONAL AMOUNTS AVAILABLE
TO CERTIFICATEHOLDERS......... With respect to any Distribution Date, Excess
Spread and Excess Finance Charge Collections
allocable to Series 1997-1 will be applied to
fund the Class A Required Amount and the
Class B Required Amount, if any, as well as
certain other items. The "Class A Required
Amount" means with respect to any
Distribution Date the amount, if any, by
which the sum of (a) the Class A Monthly
Interest due on such Distribution Date and
any overdue Class A Monthly Interest and
Class A Additional Interest thereon, (b) if
UCS or an affiliate of UCS is no longer the
Servicer, the Class A Servicing Fee for the
related Monthly Period and any overdue Class
A Servicing Fee and (c) the Class A Investor
Default Amount, if any, for the related
S-8
<PAGE> 9
Monthly Period exceeds the Class A Available
Funds for the related Monthly Period. The
"Class B Required Amount" means the amount
equal to the sum of (a) the amount, if any,
by which the sum of (i) Class B Monthly
Interest due on the related Distribution Date
and any overdue Class B Monthly Interest and
Class B Additional Interest thereon and (ii)
if UCS or an affiliate of UCS is no longer
the Servicer, the Class B Servicing Fee for
the related Monthly Period and any overdue
Class B Servicing Fee exceeds the Class B
Available Funds for the related Monthly
Period and (b) the Class B Investor Default
Amount, if any, for the related Monthly
Period. The "Required Amount" for any Monthly
Period shall mean the sum of (a) the Class A
Required Amount and (b) the Class B Required
Amount for such Monthly Period. "Excess
Spread" for any Transfer Date will equal the
sum of (a) the excess of (i) Class A
Available Funds for the related Monthly
Period over (ii) the sum of the amounts
referred to in clauses (a), (b) and (c) in
the definition of "Class A Required Amount"
above and (b) the excess of (i) Class B
Available Funds for the related Monthly
Period over (ii) the sum of the amounts
referred to in clauses (a)(i) and (ii) in the
definition of "Class B Required Amount" above
and (c) Collateral Available Funds (defined
herein) for the related Monthly Period not
used, if UCS or an affiliate of UCS is no
longer the Servicer, to pay the Collateral
Interest Servicing Fee, as described herein.
If, on any Distribution Date, Excess Spread
and Excess Finance Charge Collections
allocable to Series 1997-1 are less than the
Class A Required Amount, Reallocated
Principal Collections allocable first to the
Collateral Interest and then to the Class B
Certificateholders' Interest with respect to
the related Monthly Period will be used to
fund the remaining Class A Required Amount.
If Reallocated Principal Collections with
respect to such Monthly Period are
insufficient to fund the remaining Class A
Required Amount for the related Distribution
Date, then the Collateral Invested Amount
(after giving effect to reductions for any
Collateral Charge-Offs (defined herein) and
Reallocated Principal Collections on such
Distribution Date) will be reduced by the
amount of such deficiency (but not by more
than the Class A Investor Default Amount for
such Monthly Period). In the event that such
reduction would cause the Collateral Invested
Amount to be a negative number, the
Collateral Invested Amount will be reduced to
zero, and the Class B Invested Amount (after
giving effect to reductions for any Class B
Investor Charge-Offs (defined below) and any
Reallocated Class B Principal Collections on
such Distribution Date) will be reduced by
the amount by which the Collateral Invested
Amount would have been reduced below zero
(but not by more than the excess of the Class
A Investor Default Amount, if any, for such
Monthly Period over the amount of such
reduction, if any, of the Collateral Invested
Amount with respect to such Monthly Period).
In the event that such reduction would cause
the Class B Invested Amount to be a negative
number, the Class B Invested Amount will be
reduced to zero
S-9
<PAGE> 10
and the Class A Invested Amount will be
reduced by the amount by which the Class B
Invested Amount would have been reduced below
zero (but not by more than the excess, if
any, of the Class A Investor Default Amount
for such Monthly Period over such reductions
in the Collateral Invested Amount and the
Class B Invested Amount with respect to such
Monthly Period) (such reduction, a "Class A
Investor Charge-Off"). If the Collateral
Invested Amount and the Class B Invested
Amount are reduced to zero, the Class A
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. See "Series
Provisions -- Reallocation of Cash Flows" and
"-- Defaulted Receivables; Investor
Charge-Offs."
If, on any Distribution Date, Excess Spread
and Excess Finance Charge Collections
allocated to Series 1997-1 not required to
pay the Class A Required Amount or reimburse
Class A Investor Charge-Offs is less than the
Class B Required Amount, Reallocated
Principal Collections allocable to the
Collateral Interest for the related Monthly
Period not required to pay the Class A
Required Amount will be used to fund the
remaining Class B Required Amount. If such
remaining Reallocated Principal Collections
allocable to the Collateral Interest with
respect to such Monthly Period are
insufficient to fund the remaining Class B
Required Amount for such Distribution Date,
then the Collateral Invested Amount (after
giving effect to reductions for any
Collateral Charge-Offs, Reallocated Principal
Collections and any adjustments made thereto
for the benefit of the Class A
Certificateholders) will be reduced by the
amount of such deficiency (but not by more
than the Class B Investor Default Amount for
such Monthly Period). In the event that such
reduction would cause the Collateral Invested
Amount to be a negative number, the
Collateral Invested Amount will be reduced to
zero, and the Class B Invested Amount will be
reduced by the amount by which the Collateral
Invested Amount would have been reduced below
zero (but not by more than the excess, if
any, of the Class B Investor Default Amount
for such Monthly Period over such reduction
in the Collateral Invested Amount with
respect to such Monthly Period) (such
reduction, a "Class B Investor Charge-Off").
In the event of a reduction of the Class A
Invested Amount, the Class B Invested Amount
or the Collateral Invested Amount, the amount
of principal and interest available to fund
payments with respect to the Class A
Certificates and the Class B Certificates
will be decreased. See "Description of the
Certificates -- Reallocation of Cash Flows"
and "-- Defaulted Receivables; Investor
Charge-Offs."
REQUIRED COLLATERAL INVESTED
AMOUNT........................ The "Required Collateral Invested Amount" with
respect to any Distribution Date means (i)
initially $70,000,000 and (ii) thereafter on
each Distribution Date an amount equal to 7%
of the sum of the Class A Adjusted Invested
Amount on such Distribution Date, the Class B
Adjusted Invested Amount on such Distribution
Date (in each case after taking into account
distributions and deposits to be made on such
Distribution Date) and the Collateral
Invested Amount on the prior Distri-
S-10
<PAGE> 11
bution Date (after any adjustments made on
such prior Distribution Date), but not less
than $30,000,000; provided, however, that (1)
if certain reductions in the Collateral
Invested Amount are made or if a Pay Out
Event occurs, the Required Collateral
Invested Amount for such Distribution Date
shall equal the Required Collateral Invested
Amount for the Distribution Date immediately
preceding the occurrence of such reduction or
Pay Out Event, (2) in no event shall the
Required Collateral Invested Amount exceed
the unpaid principal amount of the Series
1997-1 Certificates as of the last day of the
Monthly Period preceding such Distribution
Date and (3) the Required Collateral Invested
Amount may be reduced to a lesser amount at
any time if the Rating Agency Condition is
satisfied.
REALLOCATED INVESTOR
FINANCE CHARGE
COLLECTIONS................. The Series 1997-1 Certificates will be the
sixth Series issued by the Trust in a Group
of Series ("Group I"), constituting a
Reallocation Group, which may be issued by
the Trust from time to time. The Series
1995-1 Certificates, the Series 1995-3
Certificates, the Series 1996-1 Certificates,
the Series 1996-2 and Series 1996-3
Certificates are the other Series issued by
the Trust in Group I. Collections of Finance
Charge Receivables allocable to the investor
certificates of each Series in Group I will
be aggregated and made available for certain
required distributions to all Series in Group
I pro rata based upon the relative amount of
such required distributions for each Series
in Group I as described under "The Pooling
and Servicing Agreement Generally --
Reallocations Among Certificates of Different
Series within a Reallocation Group" in the
Prospectus. Consequently, any issuance of a
new Series in Group I may have the effect of
reducing or increasing the amount of
collections of Finance Charge Receivables
allocable to the Series 1997-1 Certificates.
See "Risk Factors -- Issuance of New Series"
in the Prospectus. In addition, it has not
been determined whether any Series issued by
the Trust in the future will be included in
Group I.
SHARED PRINCIPAL
COLLECTIONS................... Series 1997-1 has been designated as a
Principal Sharing Series. Collections of
Principal Receivables and certain other
amounts otherwise allocable to other
Principal Sharing Series, if any, to the
extent such collections are not needed to
make payments to or deposits for the benefit
of the certificateholders of such other
Series, will be applied to cover principal
payments due to or for the benefit of the
holders of the Series 1997-1 Certificates and
the Collateral Interest. See "The Pooling and
Servicing Agreement Generally -- Shared
Principal Collections" in the Prospectus.
Every Series issued to date has been a
Principal Sharing Series. There can be no
assurance that any Series issued by the Trust
in the future will be designated a Principal
Sharing Series.
EXCESS FINANCE CHARGE
COLLECTIONS................... Series 1997-1 has been designated as an Excess
Allocation Series. See "The Pooling and
Servicing Agreement Generally -- Sharing of
Excess Finance Charge Collections Among
Excess Allocation Series" in the Prospectus.
Every Series issued to date has been an
Excess Allocation Series.
S-11
<PAGE> 12
OPTIONAL REPURCHASE........... The Series 1997-1 Certificateholders' Interest
and the Collateral Interest will be subject
to optional repurchase by the Transferor on
any Distribution Date after the sum of the
Class A Invested Amount, the Class B Invested
Amount and the Collateral Invested Amount, if
any, is reduced to an amount which is not
more than $100,000,000 (10% of the Initial
Invested Amount). The purchase price will be
equal to the sum of the Class A Invested
Amount and the Class B Invested Amount (less
the Principal Funding Account Balance, if
any), the Collateral Invested Amount, if any,
and accrued and unpaid interest on the Series
1997-1 Certificates and the Collateral
Interest (and accrued and unpaid interest
with respect to interest amounts that were
due but not paid on a prior Interest Payment
Date) through (a) if the day on which such
purchase occurs is a Distribution Date, the
day preceding such Distribution Date or (b)
if the day on which such repurchase occurs is
not a Distribution Date, the day preceding
the Distribution Date next following such
day.
SERIES 1997-1 TERMINATION
DATE.......................... The April 2004 Distribution Date. See "Series
Provisions -- Series Termination."
TRUSTEE....................... Bankers Trust Company, in its capacity as
Trustee under the Pooling and Servicing
Agreement.
TAX STATUS.................... Special tax counsel to the Transferor is of
the opinion that under existing law the
Series 1997-1 Certificates will be
characterized as debt for federal income tax
purposes. Under the Pooling and Servicing
Agreement, the Certificate Owners will agree
to treat the Series 1997-1 Certificates as
debt of the Transferor for federal income tax
purposes. See "Tax Matters" in the Prospectus
for additional information concerning the
application of federal income tax laws.
ERISA CONSIDERATIONS.......... Subject to the considerations described below,
the Class A Certificates are eligible for
purchase by employee benefit plan investors.
Under a regulation issued by the Department
of Labor, the Trust's assets would not be
deemed "plan assets" of an employee benefit
plan holding the Class A Certificates if
certain conditions are met, including that
the Class A Certificates must be held, upon
completion of the public offering made
hereby, by at least 100 investors who are
independent of the Transferor and of one
another. The Underwriters expect that the
Class A Certificates will be held by at least
100 independent investors at the conclusion
of the offering, although no assurance can be
given, and no monitoring or other measures
will be taken to ensure, that such condition
will be met with respect to the Class A
Certificates. The Transferor anticipates that
the other conditions of the regulation will
be met. If the Trust's assets were deemed to
be "plan assets" of an employee benefit plan
investor (e.g., if the 100 independent
investor criterion is not satisfied),
violations of the "prohibited transaction"
rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
could result and generate excise tax and
other liabilities under ERISA and section
4975 of the Internal Revenue Code of 1986 as
amended (the "Code"), unless a statutory,
regulatory or administrative exemption is
available. It
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<PAGE> 13
is uncertain whether existing exemptions from
the "prohibited transaction" rules of ERISA
would apply to all transactions involving the
Trust's assets. Accordingly, fiduciaries or
other persons contemplating purchasing the
Series 1997-1 Certificates on behalf or with
"plan assets" of any employee benefit plan
should consult their counsel before making a
purchase. See "ERISA Considerations" in the
Prospectus.
The Underwriters currently do not expect that
the Class B Certificates will be held by at
least 100 independent investors and,
therefore, do not expect that such Class B
Certificates will qualify as publicly offered
securities under the regulation referred to
in the preceding paragraph. Accordingly, the
Class B Certificates may not be acquired by
(a) any employee benefit plan that is subject
to ERISA, (b) any plan or other arrangement
(including an individual retirement account
or Keogh plan) that is subject to section
4975 of the Code, or (c) any entity whose
underlying assets include "plan assets" under
the regulation by reason of any such plan's
investment in the entity. By its acceptance
of a Class B Certificate, each Class B
Certificateholder will be deemed to have
represented and warranted that it is not
subject to the foregoing limitation.
CLASS A CERTIFICATE RATING.... It is a condition to the issuance of the Class
A Certificates that they be rated in the
highest rating category by at least one
nationally recognized rating agency. The
rating of the Class A Certificates is based
primarily on the value of the Receivables,
the terms of the Class B Certificates and the
benefits of the Collateral Interest. See
"Risk Factors -- Limited Nature of Rating" in
the Prospectus.
CLASS B CERTIFICATE RATING.... It is a condition to the issuance of the Class
B Certificates that they be rated in one of
the three highest rating categories by at
least one nationally recognized rating
agency. The rating of the Class B
Certificates is based primarily on the value
of the Receivables and the benefits of the
Collateral Interest. See "Risk
Factors -- Limited Nature of Rating" in the
Prospectus.
LISTING....................... Application will be made to list the Series
1997-1 Certificates on the Luxembourg Stock
Exchange.
S-13
<PAGE> 14
RISK FACTORS
Potential investors should consider, among other things, the risk factors
discussed under "Risk Factors" in the Prospectus and the following risk factors
in connection with the purchase of the Series 1997-1 Certificates.
Limited Amounts of Credit Enhancement. Although Credit Enhancement with
respect to the Class A Certificates will be provided by the subordination of the
Class B Certificates to the extent described herein and by the Collateral
Interest, and with respect to the Class B Certificates, will be provided by the
Collateral Interest, the amount available thereunder is limited, may decline
during the Controlled Accumulation Period and will be reduced by payments made
pursuant thereto. If the Collateral Invested Amount has been reduced to zero,
Class B Certificateholders will bear directly the credit and other risks
associated with their undivided interests in the Trust and the Class B Invested
Amount may be reduced. If the Class B Invested Amount is reduced to zero, Class
A Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust. Further, in the event of a reduction
of the Class B Invested Amount or the Collateral Invested Amount, the amount of
principal and interest available to make distributions with respect to the Class
A Certificates and the Class B Certificates may be reduced.
Effect of Subordination of Class B Certificates; Principal Payments. The
Class B Certificates are subordinated in right of payment of principal to the
Class A Certificates. Payments of principal in respect of the Class B
Certificates will not commence until after the final principal payment with
respect to the Class A Certificates has been made as described herein. Moreover,
the Class B Invested Amount is subject to reduction if the Class A Required
Amount for any Monthly Period is greater than zero and is not funded from Excess
Spread and Excess Finance Charge Collections allocated to Series 1997-1,
Reallocated Principal Collections with respect to the Collateral Interest and
reductions in the Collateral Invested Amount, if any. To the extent the Class B
Invested Amount is reduced, the percentage of collections of Finance Charge
Receivables allocable to the Class B Certificateholders' Interest in future
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Invested Amount is not reimbursed, the amount of
principal and interest distributable to the Class B Certificateholders will be
reduced. See "Series Provisions -- Allocation Percentages" and "-- Subordination
of the Class B Certificates and the Collateral Interest" herein. If the Class B
Invested Amount is reduced to zero, the holders of the Class A Certificates will
bear directly the credit and other risks associated with their undivided
interest in the Trust.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Supplement for Series 1997-1
(the "Series 1997-1 Supplement") provide that the Class A Certificateholders
will not receive payments of principal until the April 2002 Distribution Date
(the "Expected Final Payment Date"), or earlier in the event of a Pay Out Event
which results in the commencement of the Early Amortization Period. Class A
Certificateholders will receive payments of principal on each Distribution Date
following the Monthly Period in which a Pay Out Event occurs (each such
Distribution Date, a "Special Payment Date") until the Class A Invested Amount
has been paid in full or the Series 1997-1 Termination Date has occurred. The
Class B Certificateholders will not begin to receive payments of principal until
the final principal payment on the Class A Certificates has been made.
On each Distribution Date during the Controlled Accumulation Period,
amounts equal to the least of (a) Available Principal Collections (see "Series
Provisions -- Principal Payments") for the related Monthly Period on deposit in
the Collection Account, (b) the Controlled Deposit Amount, which is equal to the
sum of the Controlled Accumulation Amount for such Monthly Period and any
Deficit Controlled Accumulation Amount (both as defined under "Series
Provisions -- Application of Collections -- Payments of Principal") and (c) the
sum of the Class A Adjusted Invested Amount and the Class B Adjusted Invested
Amount will be deposited in the Principal Funding Account for Series 1997-1 held
by the Trustee (the "Principal Funding Account") until the Expected Final
Payment Date or the first Special Payment Date. See "Series
Provisions -- Principal Payments" for a discussion of the circumstances under
which the commencement of the Controlled Accumulation Period may be delayed.
S-14
<PAGE> 15
The Transferor may, at or after the time at which the Controlled
Accumulation Period commences for Series 1997-1, cause the Trust to issue
another Series (or some portion thereof, to the extent that the full principal
amount of such other Series is not otherwise outstanding at such time) as a
Paired Series with respect to Series 1997-1 to be used to finance the increase
in the Transferor Amount caused by the accumulation of principal in the
Principal Funding Account with respect to Series 1997-1. Although no assurances
can be given as to whether such other Series will be issued and, if issued, the
terms thereof, the outstanding principal amount of such Series may vary from
time to time (whether or not a Pay Out Event occurs with respect to the Series
1997-1 Certificates), and the interest rate with respect to certificates of such
other Series may be established on its date of issuance and may be reset
periodically. Further, since the terms of the Series 1997-1 Certificates will
vary from the terms of such other Series, the Pay Out Events or Reinvestment
Events with respect to such other Series will vary from the Pay Out Events with
respect to Series 1997-1 and may include Pay Out Events or Reinvestment Events
which are unrelated to the status of the Transferor or the Servicer or the
Receivables, such as Pay Out Events or Reinvestment Events related to the
continued availability and rating of certain providers of Series Enhancement to
such other Series. If a Pay Out Event or Reinvestment Event does occur with
respect to any such Paired Series prior to the payment in full of the Series
1997-1 Certificates, the final payment of principal to the Series 1997-1
Certificateholders may be delayed.
Should a Pay Out Event occur with respect to the Series 1997-1 Certificates
and the Early Amortization Period commence, any amount on deposit (a) in the
Principal Funding Account will be paid to the Series 1997-1 Certificateholders
on the first Special Payment Date and the Series 1997-1 Certificateholders will
be entitled to receive Available Principal Collections on each Distribution Date
with respect to such Early Amortization Period as described herein until the
Class A Invested Amount and Class B Invested Amount are paid in full or until
the Series 1997-1 Termination Date occurs and (b) in the Special Funding Account
will be released and treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of any Series,
including Series 1997-1, entitled to the benefits of Shared Principal
Collections. See "Description of the Certificates -- Pay Out Events and
Reinvestment Events" in the Prospectus and "Series Provisions -- Pay Out Events"
herein.
The ability of the Series 1997-1 Certificateholders to receive payments of
principal on the Expected Final Payment Date depends on the payment rates on the
Receivables, the amount of outstanding Receivables, delinquencies, charge-offs
and new borrowings on the Accounts, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. Monthly
payment rates on the Receivables may vary because, among other things,
cardmembers may fail to make required minimum payments, may only make payments
as low as the minimum required amount or may make payments as high as the entire
outstanding balance. Monthly payment rates may also vary due to seasonal
purchasing and payment habits of cardmembers and to changes in any terms of
rebate programs in which cardmembers participate. See the table entitled
"Cardmember Monthly Payment Rates -- AT&T Universal Portfolio" under "The AT&T
Universal Portfolio -- Payment Rates" herein. The Transferor cannot predict, and
no assurance can be given, as to the cardmember monthly payment rates that will
actually occur in any future period, as to the actual rate of payment of
principal of the Series 1997-1 Certificates or whether the terms of any
subsequently issued Series might have an impact on the amount or timing of any
such payment of principal. See "Risk Factors -- Generation of Additional
Receivables; Dependency on Cardmember Repayments" and "The Pooling and Servicing
Agreement Generally -- Shared Principal Collections" in the Prospectus.
In addition, the amount of outstanding Receivables and the delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month due
to seasonal variations, the availability of other sources of credit, legal
factors, general economic conditions and spending and borrowing habits of
individual cardmembers. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which
Series 1997-1 Certificateholders could expect to receive payments of principal
on their Series 1997-1 Certificates during the Early Amortization Period or the
rate at which the Principal Funding Account could be funded during the
Controlled Accumulation Period, will be similar to the historical experience set
forth in the table entitled "Cardmember Monthly Payment Rates -- AT&T Universal
Portfolio" under "The AT&T Universal Portfolio -- Payment Rates" herein. As
described under
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<PAGE> 16
"Series Provisions -- Principal Payments," the Transferor may shorten the
Accumulation Period and, in such event, there can be no assurance that there
will be sufficient time to accumulate all amounts necessary to pay the Class A
Invested Amount and the Class B Invested Amount on the Expected Final Payment
Date. In addition, the Trust, as a master trust, may issue additional Series
from time to time, and there can be no assurance that the terms of any such
Series might not have an impact on the timing or amount of payments received by
the Series 1997-1 Certificateholders. Further, if a Pay Out Event occurs, the
average life and maturity of the Class A Certificates and the Class B
Certificates could be significantly reduced.
Due to the reasons set forth above, there can be no assurance that deposits
in the Principal Funding Account will be made on or prior to the Expected Final
Payment Date in an amount equal to the sum of the Class A Invested Amount and
the Class B Invested Amount or that the actual number of months elapsed from the
date of issuance of the Class A Certificates and Class B Certificates to their
respective final Distribution Dates will equal the expected number of months.
See "Risk Factors -- Generation of Additional Receivables; Dependency on
Cardmember Repayments" in the Prospectus.
THE AT&T UNIVERSAL PORTFOLIO
GENERAL
The Transferor has identified a pool of consumer revolving credit card
accounts serviced by UCS (the "AT&T Universal Portfolio"), from which the
Accounts included in the Trust (the "Trust Portfolio") were selected based upon
the eligibility criteria specified in the Pooling and Servicing Agreement
applied as of the Initial Cut-Off Date and with respect to Additional Accounts
as of their respective cut-off dates. See "Risk Factors -- Addition of Trust
Assets" in the Prospectus for a description of those eligibility criteria. Set
forth below is certain information with respect to the AT&T Universal Portfolio.
See "The Credit Card Business of AT&T Universal Card Services Corp." and "The
Accounts" in the Prospectus. There can be no assurance that the yield, loss and
delinquency experience with respect to the Receivables will be comparable to
that set forth below with respect to the entire AT&T Universal Portfolio.
LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the loss and delinquency experience for the
AT&T Universal Portfolio for each of the periods shown.
LOSS EXPERIENCE FOR THE AT&T UNIVERSAL PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1997 1996 1995 1994
------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)... $ 12,895,887 $13,129,500 $12,345,066 $9,972,220
Total Net Charge-Offs(2)(3).......... 208,956 826,019 587,139 323,066
Total Net Charge-Offs as a Percentage
of Average Receivables
Outstanding........................ 6.48%(4) 6.29% 4.76% 3.24%
</TABLE>
- ---------------
(1) Average Receivables Outstanding ("Average Receivables Outstanding") is
calculated by determining the daily average of outstanding account balances
for each month during the period indicated (excluding estimated average
Calling Card Transactions, which is calculated as the average of one-half of
the monthly Calling Card Transactions for each month during the period
indicated, and including the aggregate Account Owner Retained Interest
representing 0.31%, 0.30%, 0.32% and 0.15% of the Average Receivables
Outstanding for the indicated 1997, 1996, 1995 and 1994 periods,
respectively) and then dividing the sum of such daily averages for such
months by the number of months in such period.
(2) Gross Charge-Offs as a Percentage of Average Receivables Outstanding for the
three months ended March 31, 1997 and for each of the years ended December
31, 1996, 1995 and 1994 were 7.39%, 7.01%, 5.26% and 3.68%, respectively.
Gross Charge-Offs are Total Principal Charge-Offs before recoveries and do
not include the amount of any reductions in Average Receivables Outstanding
due to fraud, returned goods, customer disputes or other miscellaneous
credit adjustments. Net Charge-Offs are Gross Charge-Offs less recoveries.
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<PAGE> 17
(3) Total Net Charge-Offs and Gross Charge-Offs are inclusive of those
attributable to the Universal Bank Account Owner Retained Interest for the
three months ended March 31, 1997 and the years ended December 31, 1996 and
1995, but otherwise exclude those attributable to the Account Owner Retained
Interest. Estimated average Calling Card Transactions are also excluded from
Total Net Charge-Offs and Gross Charge-Offs.
(4) The percentage reflected for the three months ended March 31, 1997 is an
annualized figure.
During 1994, increased numbers of accounts were established with
cardmembers who maintained revolving balances in their accounts, as opposed to
convenience users. This change, combined with the seasoning of the AT&T
Universal Portfolio and certain other factors, resulted in the trends toward
increased total revenues, an increase in losses and a decrease in the payment
rates as reflected in the historical tables included herein. The use of
promotional rate pricing at account acquisitions beginning in the second half of
1995 and during 1996 and certain other factors have reduced the average revenue
yield as reflected in the historical tables included herein.
DELINQUENCIES AS A PERCENTAGE OF THE AT&T UNIVERSAL PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 1997 1996 1995 1994
-------------------------- -------------------------- -------------------------- --------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
----------- ------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(1) $12,648,895 $13,394,878 $14,030,781 $12,232,310
Receivables
Delinquent:(2)
31 -- 60
Days..... $ 186,140 1.47% $ 215,830 1.61% $ 213,042 1.52% $ 138,028 1.13%
61 -- 90
Days..... 84,411 0.67 97,045 0.72 85,841 0.61 62,992 0.51
91 -- 120
Days..... 83,657 0.66 90,726 0.68 78,572 0.56 53,316 0.44
121 Days or
More..... 129,903 1.03 133,922 1.00 116,827 0.83 72,444 0.59
----------- ---- ----------- ---- ----------- ---- ----------- ----
Total... $ 484,111 3.83% $ 537,523 4.01% $ 494,282 3.52% $ 326,780 2.67%
=========== ==== =========== ==== =========== ==== =========== ====
</TABLE>
- ---------------
(1) The Receivables Outstanding in the Accounts consist of all amounts due from
cardmembers as posted to the Accounts, including the aggregate Account Owner
Retained Interest, but excluding estimated average Calling Card
Transactions.
(2) The Receivables Delinquent include the aggregate Account Owner Retained
Interest, but exclude estimated average Calling Card Transactions.
REVENUE EXPERIENCE
The revenues for the AT&T Universal Portfolio from finance charges and fees
billed to cardmembers and Interchange are set forth in the following table for
each of the periods shown.
The historical revenue figures in the tables include interest on purchases
and cash advances and fees accrued during the cycle. Cash collections on the
receivables may not reflect the historical experience in the table. During
periods of increasing delinquencies, billings of finance charges and fees may
exceed cash payments as amounts collected on credit card receivables lag behind
amounts billed to cardmembers. Conversely, as delinquencies decrease, cash
payments may exceed billings of finance charges and fees as amounts collected in
a current period may include amounts billed during prior periods. Revenues from
finance charges and fees on both a billed and a cash basis will be affected by
numerous factors, including the periodic finance charges on the receivables, the
amount of fees paid by cardmembers, the percentage of cardmembers who pay off
their balances in full each month and do not incur periodic finance charges on
purchases and changes in the level of delinquencies on the receivables. See
"Risk Factors" in the Prospectus. See also "-- Loss and Delinquency Experience"
for a description of factors that have affected the revenue experience for the
AT&T Universal Portfolio.
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<PAGE> 18
REVENUE EXPERIENCE FOR THE AT&T UNIVERSAL PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1997 1996 1995 1994
------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)... $ 12,895,887 $13,129,500 $12,345,066 $9,972,220
Total Finance Charges and Fees 471,902 1,901,655 1,956,894 1,431,712
Billed(2)(4).......................
Interchange(3)(4).................... 68,109 313,383 323,288 318,725
----------- ----------- ----------- -----------
Total Finance Charges and Fees Billed $ 540,011 $ 2,215,038 $ 2,280,182 $1,750,437
and Interchange....................
Average Revenue Yield(5)............. 16.75%(6) 16.87% 18.47% 17.55%
</TABLE>
- ---------------
(1) Average Receivables Outstanding is calculated by determining the daily
average of outstanding account balances for each month during the period
indicated (excluding estimated average Calling Card Transactions and
including the aggregate Account Owner Retained Interest representing 0.31%,
0.30%, 0.32% and 0.15% of the Average Receivables Outstanding for the
indicated 1997, 1996, 1995, and 1994 periods, respectively) and then
dividing the sum of such daily averages for such months by the number of
months in such period.
(2) Total Finance Charges and Fees Billed are comprised of periodic finance
charges, cash advance fees, annual membership fees and other charges.
(3) Interchange represents revenue attributable to Interchange received during
the period indicated. The amount of Interchange allocable to each period
indicated above has been estimated.
(4) Total Finance Charges and Fees Billed and Interchange are inclusive of those
attributable to the Universal Bank Account Owner Retained Interest for the
three months ended March 31, 1997 and the years ended December 31, 1996 and
1995 (representing 0.13%, 0.12% and 0.14%, respectively, of Total Finance
Charges and Fees Billed and Interchange for those periods), but otherwise
exclude those attributable to the Account Owner Retained Interest for the
periods indicated.
(5) Average Revenue Yield is the result of dividing Total Finance Charges and
Fees Billed and Interchange by the Average Receivables Outstanding during
the period indicated.
(6) The percentage reflected for the three months ended March 31, 1997 is an
annualized figure.
The revenues for the AT&T Universal Portfolio shown in the tables above are
related to finance charges, together with fees, billed to holders of the
accounts and Interchange. The revenues related to finance charges depend in part
upon the collective preference of cardmembers to use their credit cards as
revolving debt instruments for purchases and cash advances and paying off credit
card account balances over several months as opposed to convenience use, where
the cardmembers prefer instead to pay off their entire balance each month,
thereby avoiding finance charges on purchases, and upon other services of which
cardmembers choose to avail themselves and which are paid for by the use of the
card. Revenues related to finance charges and fees also depend on the types of
charges and fees assessed by the Account Owners on the accounts in the AT&T
Universal Portfolio and on whether such accounts are nonpremium or premium
credit card accounts. Accordingly, revenues will be affected by future changes
in the types of charges and fees assessed on the accounts and on the respective
percentages of the receivable balances of nonpremium and premium credit card
accounts. Revenues could be adversely affected by future changes in the charges
and fees assessed by the Account Owners and other factors. See "Certain Legal
Aspects of the Receivables -- Consumer Protection Laws" in the Prospectus.
Neither the Servicer nor any of its affiliates has any basis to predict how any
future changes in the usage of the accounts by cardmembers or in the terms of
accounts may affect the revenue for the AT&T Universal Portfolio.
INTERCHANGE
The Transferor will be required, pursuant to the terms of the Series 1997-1
Supplement, to transfer to the Trust for the benefit of Series 1997-1, a
percentage of the Interchange attributed to cardmember charges for goods and
services in the Accounts. Interchange arising under the Accounts will be
allocated to Series 1997-1 on the basis of the Series Allocation Percentage for
Series 1997-1 of the amount of Interchange attributable to
S-18
<PAGE> 19
the Accounts, as reasonably estimated by the Transferor. MasterCard and VISA may
from time to time change the amount of Interchange reimbursed to banks issuing
their credit cards. Interchange will be treated as a portion of Series Allocable
Finance Charge Collections for the purposes of allocating collections of Finance
Charge Receivables, making required monthly payments, and calculating the
Portfolio Yield. See "The Credit Card Business of AT&T Universal Card Services
Corp. -- Interchange" in the Prospectus.
In the future, subject to certain requirements contained in the Series
1997-1 Supplement and the Pooling and Servicing Agreement, the Transferor may,
in lieu of transferring Interchange to the Trust as set forth above, allocate
Interchange to the Trust and Series 1997-1 by treating a percentage of
collections of the Principal Receivables (whether arising from cardmember
charges for goods and services or cash advances), as collections of Finance
Charge Receivables approximately equivalent to the then current Interchange on
the credit card accounts in the AT&T Universal Portfolio (subject to adjustment
at the option of the Transferor upon the satisfaction of certain conditions as
described in the Prospectus under "The Pooling and Servicing Agreement Generally
- -- Discount Option").
PAYMENT RATES
The following table sets forth the highest and lowest cardmember monthly
payment rates for the AT&T Universal Portfolio during any month in the period
shown and the average cardmember monthly payment rates for all months during
each period shown, calculated as the percentage equivalent of a fraction. For
the highest and lowest monthly payment rates, the numerator of the fraction is
equal to all payments from cardmembers as posted to the accounts during the
applicable month, including the aggregate Account Owner Retained Interest, but
excluding estimated Calling Card Transactions (based on the prior month's volume
of Calling Card Transactions), and the denominator is equal to the Average
Receivables Outstanding for such month. For the monthly average payment rate,
the numerator of the fraction is equal to all payments from cardmembers as
posted to the accounts during the indicated period, including the aggregate
Account Owner Retained Interest, but excluding estimated Calling Card
Transactions during the period indicated, divided by the number of months in the
period, and the denominator is equal to the Average Receivables Outstanding. See
"-- Loss and Delinquency Experience" for a description of factors that have
affected the payment rates for the AT&T Universal Portfolio.
CARDMEMBER MONTHLY PAYMENT RATES
AT&T UNIVERSAL PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------
MARCH 31, 1997 1996 1995 1994
------------------ ------ ------ ------
<S> <C> <C> <C> <C>
Lowest Month................................. 15.97% 14.85% 15.25% 17.70%
Highest Month................................ 18.45 19.07 20.57 23.44
Monthly Average.............................. 17.48 16.88 17.70 19.96
</TABLE>
THE RECEIVABLES
The Receivables in the Trust Portfolio (including $1,135,346,991 of
Receivables in 1,124,163 Additional Accounts conveyed to the Trust on April 24,
1997), as of March 31, 1997, included $9,147,140,524 of Principal Receivables
and $81,645,693 of Finance Charge Receivables. The following figures in this
paragraph include $1,135,346,991 of Receivables in 1,124,163 Additional Accounts
conveyed to the Trust on April 24, 1997. The Accounts had an average total
receivables balance of $691 and an average credit limit of $5,527. The
percentage of the aggregate total receivables balance to the aggregate total
credit limit was 12.5%. The average age of the Accounts was approximately 54
months. As of March 31, 1997, all of the Accounts in the Trust Portfolio were
VISA or MasterCard credit card accounts, of which 53.6% were non-premium
accounts and 46.4% were premium accounts, and the total receivables balances of
non-premium accounts and premium accounts, as a percentage of the total
receivables, were 40.8% and 59.2%, respectively. Approximately 12.7%, 8.1%,
7.5%, 6.0% and 5.5% of the Receivables related to cardmembers having billing
addresses in
S-19
<PAGE> 20
California, New York, Florida, Texas and New Jersey, respectively. Not more than
5% of the Receivables related to cardmembers having billing addresses in any
other single state.
The following tables summarize the Trust Portfolio (including
$1,135,346,991 of Receivables in 1,124,163 Additional Accounts conveyed to the
Trust on April 24, 1997) by various criteria as of March 31, 1997. Because the
future composition of the Trust Portfolio may change over time, these tables are
not necessarily indicative of the composition of the Trust Portfolio at any time
subsequent to March 31, 1997. References to "Receivables Outstanding,"
"Receivables" and to "total receivables" in the preceding paragraph and in the
following tables include Finance Charge Receivables, Principal Receivables,
$23,155,171 estimated aggregate Account Owner Retained Interest and $9,850,939
in Calling Card Transactions.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------------------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Credit Balance............................ 247,952 1.8% $(16,274,731) (0.2)%
No Balance................................ 7,156,756 53.4 0 0.0
$ 0.01 -- $ 1,500.00.................. 3,961,201 29.5 1,584,075,294 17.1
$ 1,500.01 -- $ 5,000.00.................. 1,607,722 12.0 4,529,520,905 48.9
$ 5,000.01 -- $10,000.00.................. 385,221 2.9 2,604,941,983 28.1
$10,000.01 or More........................ 49,313 0.4 559,528,876 6.1
---------- ----- -------------- -----
TOTAL........................... 13,408,165 100.0% $9,261,792,327 100.0%
========== ===== ============== =====
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------------------------ ----------- --------- --------------- -----------
<S> <C> <C> <C> <C>
$0.00 or less than $1,500.00.............. 1,856,523 13.8% $314,832,948 3.4%
$ 1,500.01 -- $ 5,000.00.................. 4,786,341 35.7 3,220,596,744 34.8
$ 5,000.01 -- $10,000.00.................. 5,382,355 40.1 3,711,672,326 40.1
$10,000.01 or More........................ 1,382,946 10.4 2,014,690,309 21.7
---------- ----- -------------- -----
TOTAL........................... 13,408,165 100.0% $9,261,792,327 100.0%
========== ===== ============== =====
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------------------------ ---------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent............................ 12,566,522 93.7% $8,556,258,232 92.4%
Up to 30 Days............................. 246,994 1.8 438,385,881 4.7
31 -- 60 Days............................ 85,194 0.6 92,930,835 1.0
61 -- 90 Days............................ 58,844 0.4 58,247,357 0.6
91 -- 120 Days........................... 47,780 0.4 45,819,167 0.5
121 or More Days.......................... 402,831 3.1 70,150,855 0.8
---------- ----- -------------- -----
TOTAL........................... 13,408,165 100.0% $9,261,792,327 100.0%
========== ===== ============== =====
</TABLE>
S-20
<PAGE> 21
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------------------------ ---------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Not More than 6 Months.................... 27,797 0.2% $ 33,567,043 0.4%
Over 6 Months to 12 Months................ 171,905 1.3 70,312,920 0.8
Over 12 Months to 24 Months............... 1,260,040 9.4 960,248,820 10.4
Over 24 Months to 36 Months............... 2,541,441 19.0 1,805,983,527 19.5
Over 36 Months to 48 Months............... 1,741,597 13.0 1,371,198,221 14.8
Over 48 Months............................ 7,665,385 57.1 5,020,481,796 54.1
---------- ----- -------------- -----
TOTAL........................... 13,408,165 100.0% $9,261,792,327 100.0%
========== ===== ============== =====
</TABLE>
USE OF PROCEEDS
The net proceeds from the sale of the Series 1997-1 Certificates will be
paid to the Transferor. The Transferor will use such proceeds primarily for the
repayment of intercompany loans borrowed from UCS to pay to UCS the purchase
price of the Receivables.
THE ACCOUNT OWNERS
In its March 31, 1997 Call Report, Universal Bank reported total deposits
of approximately $21,400,000, total assets of approximately $32,768,000 and
total equity of approximately $4,478,000. In its March 31, 1997 Call Report,
CB&T reported total deposits of approximately $1,147,756,000, total assets of
approximately $1,923,394,000 and total equity of approximately $273,531,000. A
Call Report is required to be prepared in accordance with regulatory accounting
principles, which differ in some respects from generally accepted accounting
principles. See "Universal Bank, N.A." and "Columbus Bank and Trust Company" in
the Prospectus.
THE SERVICER
As of March 31, 1997, UCS had approximately $6,398,714,000 in total assets,
approximately $5,519,423,000 in total liabilities and approximately $879,291,000
in shareholder's equity.
SERIES PROVISIONS
The Series 1997-1 Certificates will be issued pursuant to the Pooling and
Servicing Agreement and a Supplement specifying the Principal Terms of the
Certificates (the "Series 1997-1 Supplement"), the forms of which have been
filed as exhibits to the Registration Statement of which the Prospectus and this
Prospectus Supplement are a part. The following summary describes certain terms
applicable to the Series 1997-1 Certificates. Reference should be made to the
Prospectus for additional information concerning the Series 1997-1 Certificates
and the Pooling and Servicing Agreement. See "The Pooling and Servicing
Agreement Generally" in the Prospectus.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the outstanding principal balance of the Class A
Certificates and the Class B Invested Amount at the Class A Certificate Rate and
Class B Certificate Rate, respectively. Interest will be distributed quarterly
on the 17th day of May, August, November and February (or if any such day is not
a business day, the next succeeding business day) and on the Expected Final
Payment Date, commencing on the August 1997 Distribution Date and ending on the
Expected Final Payment Date and, following the occurrence of a Pay Out Event, on
each Special Payment Date to the Series 1997-1 Certificateholders in whose names
the Series 1997-1 Certificates
S-21
<PAGE> 22
were registered at the close of business on the last day of the calendar month
preceding the date of such payment (each, a "Record Date"). Interest for any
Interest Payment Date or Special Payment Date will accrue from and including the
preceding Interest Payment Date or Special Payment Date (or in the case of the
first Interest Payment Date, from and including the Closing Date) to but
excluding the next Interest Payment Date or Special Payment Date.
Interest payments or deposits with respect to the Class A Certificates for
each Distribution Date will be calculated on the outstanding principal balance
of the Class A Certificates as of the preceding Record Date (or in the case of
the initial Distribution Date, on the Class A Initial Invested Amount) based
upon the Class A Certificate Rate. The initial Distribution Date will be June
17, 1997, on which date amounts allocated to Series 1997-1 for the month of May
1997 will be applied as described herein. Interest payments or deposits with
respect to each Distribution Date will be calculated on the basis of the actual
number of days in the period from and including the preceding Distribution Date
(or in the case of the initial Distribution Date, the Closing Date) to but
excluding such Distribution Date and a 360-day year. On each Distribution Date,
Class A Monthly Interest and Class A Monthly Interest previously due but not
deposited in the Interest Funding Account (as defined below) or paid to the
Class A Certificateholders and any Class A Additional Interest will be (i) paid
to the Class A Certificateholders, if such Distribution Date is an Interest
Payment Date or a Special Payment Date, or (ii) deposited in an Eligible Deposit
Account in the name of the Trustee and for the benefit of the Series 1997-1
Certificateholders (the "Interest Funding Account"), if such Distribution Date
is not an Interest Payment Date or a Special Payment Date. Payments to the Class
A Certificateholders or deposits into the Interest Funding Account in respect of
interest on the Class A Certificates on any Distribution Date will be funded
from Class A Available Funds for the related Monthly Period. To the extent Class
A Available Funds allocated to the Class A Certificateholders' Interest for such
Monthly Periods are insufficient to pay such interest, Excess Spread and Excess
Finance Charge Collections allocated to Series 1997-1 and Reallocated Principal
Collections allocable first to the Collateral Invested Amount and then the Class
B Invested Amount will be used to make such payments or deposits. "Class A
Available Funds" means, with respect to any Monthly Period, an amount equal to
the sum of (i) the Class A Floating Percentage of Reallocated Investor Finance
Charge Collections allocated to the Series 1997-1 Certificates and the
Collateral Interest with respect to such Monthly Period (including any
investment earnings and certain other amounts that are to be treated as
collections of Finance Charge Receivables allocable to Series 1997-1 in
accordance with the Pooling and Servicing Agreement and the Series 1997-1
Supplement), (ii) if such Monthly Period relates to a Distribution Date with
respect to the Controlled Accumulation Period, Principal Funding Investment
Proceeds, if any, with respect to the related Distribution Date, and (iii)
amounts, if any, to be withdrawn from the Reserve Account that must be included
in Class A Available Funds pursuant to the Series 1997-1 Supplement with respect
to such Distribution Date.
Interest payments or deposits with respect to the Class B Certificates for
each Distribution Date will be calculated on the Class B Invested Amount as of
the preceding Record Date (or in the case of the initial Distribution Date, on
the Class B Initial Invested Amount) based upon the Class B Certificate Rate and
the actual number of days in the period from and including the previous
Distribution Date (or in the case of the initial Distribution Date, the Closing
Date) to but excluding such Distribution Date and a 360-day year. On each
Distribution Date, Class B Monthly Interest and Class B Monthly Interest
previously due but not deposited in the Interest Funding Account or paid to the
Class B Certificateholders and any Class B Additional Interest will be (i) paid
to the Class B Certificateholders, if such Distribution Date is an Interest
Payment Date or a Special Payment Date, or (ii) deposited in the Interest
Funding Account, if such Distribution Date is not an Interest Payment Date or a
Special Payment Date. Payments to the Class B Certificateholders or deposits
into the Interest Funding Account in respect of interest on the Class B
Certificates on any Distribution Date will be funded from Class B Available
Funds for the related Monthly Period. To the extent Class B Available Funds
allocated to the Class B Certificateholders' Interest for such Monthly Period
are insufficient to pay such interest or make such deposits, as applicable,
Excess Spread and Excess Finance Charge Collections allocated to Series 1997-1
and Reallocated Principal Collections allocable to the Collateral Invested
Amount and not required to pay the Class A Required Amount or reimburse Class A
Investor Charge-Offs will be used to make such payments or deposits. "Class B
Available Funds" means, with respect to any Monthly Period, an amount equal to
the Class B Floating Percentage of
S-22
<PAGE> 23
Reallocated Investor Finance Charge Collections allocated to the Series 1997-1
Certificates and the Collateral Interest with respect to such Monthly Period
(including any investment earnings and certain other amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Pooling and Servicing Agreement).
Funds on deposit in the Interest Funding Account generally will be invested
in certain Eligible Investments. For purposes of investments of funds in the
Interest Funding Account allocable to (i) Class B Monthly Interest, (ii) Class B
Outstanding Monthly Interest and (iii) Class B Additional Interest, the term
"highest rating" as used in the definition of "Eligible Investments" in the
Prospectus shall include A-1 as well as A-1+, in the case of a short-term rating
by Standard & Poor's.
Any earnings (net of losses and investment expenses) on funds in the
Interest Funding Account ("Interest Funding Investment Proceeds") will be
deposited in the Collection Account and treated as collections of Finance Charge
Receivables allocable to Series 1997-1. If an Early Amortization Period
commences, then thereafter Class A Monthly Interest will be distributed to the
Class A Certificateholders monthly on each Special Payment Date and Class B
Monthly Interest will be distributed to the Class B Certificateholders monthly
on each Special Payment Date and any amounts on deposit in the Interest Funding
Account will be distributed to the Class A Certificateholders and the Class B
Certificateholders on the first Special Payment Date.
The Servicer will determine LIBOR (i) for the initial Interest Period on
the second London business day prior to the Closing Date and (ii) for each
Interest Period following the initial Interest Period on the second London
business day prior to the commencement of such Interest Period (each a "LIBOR
Determination Date"). For purposes of calculating LIBOR, a London business day
is any day on which dealings in deposits in United States dollars are transacted
in the London interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period) which appears on Telerate
Page 3750 (as defined below) as of 11:00 a.m., London Time, on such date. If
such rate does not appear on Telerate page 3750, the rate for that day will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks (as defined below) at approximately 11:00
a.m., London Time, on that day to prime banks in the London interbank market for
a period equal to the relevant Interest Period (commencing on the first day of
such Interest Period). The Servicer will request the principal London office of
each of the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for the day will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that day will be the arithmetic mean of the rates quoted by major banks
in New York City, selected by the Servicer, at approximately 11:00 a.m., New
York City time, on that day for loans in United States dollars to leading
international banks for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period). If the banks selected by
the Servicer are not quoting rates as provided in the immediately preceding
sentence, LIBOR for such Interest Period will be LIBOR in effect for the
immediately preceding Interest Period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means three major banks in the London interbank market
selected by the Servicer.
"Interest Period" means, with respect to any Interest Payment Date or
Special Payment Date, a period from and including the preceding Interest Payment
Date or Special Payment Date, as applicable, to but excluding such Interest
Payment Date or Special Payment Date, as applicable; provided, however, that the
initial Interest Period will commence on the Closing Date.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Series 1997-1 Cut-Off Date
and ends on the day before the commencement of the Controlled Accumulation
Period or, if earlier, the Early Amortization
S-23
<PAGE> 24
Period), no principal payments will be made to the Series 1997-1
Certificateholders. During the Controlled Accumulation Period (on or prior to
the Expected Final Payment Date), principal will be deposited in the Principal
Funding Account as described below and on the Expected Final Payment Date will
be distributed to Class A Certificateholders up to the Class A Invested Amount
and then to Class B Certificateholders up to the Class B Invested Amount. During
the Early Amortization Period, which will begin upon the occurrence of a Pay Out
Event, and until the Series 1997-1 Termination Date occurs, principal will be
paid first to the Class A Certificateholders until the Class A Invested Amount
has been paid in full, and then to the Class B Certificateholders until the
Class B Invested Amount has been paid in full. Unless a reduction in the
Required Collateral Invested Amount has occurred, no principal payments will be
made in respect of the Collateral Invested Amount until the final principal
payment has been made to the Class A Certificateholders and the Class B
Certificateholders.
On each Distribution Date with respect to the Controlled Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (b) the Controlled
Deposit Amount for such Distribution Date and (c) the sum of the Class A
Adjusted Invested Amount and the Class B Adjusted Invested Amount, until the
Principal Funding Account Balance equals the sum of the Class A Invested Amount
and the Class B Invested Amount. Amounts on deposit in the Principal Funding
Account will be paid to the Class A Certificateholders and, if the amount on
deposit in the Principal Funding Account exceeds the Class A Invested Amount, to
the Class B Certificateholders on the Expected Final Payment Date.
If a Pay Out Event occurs with respect to the Series 1997-1 Certificates
during the Controlled Accumulation Period, the Early Amortization Period will
commence and any amount on deposit in the Principal Funding Account will be paid
first to the Class A Certificateholders on the first Special Payment Date and
then, after the Class A Invested Amount is paid in full, to the Class B
Certificateholders. If, on the Expected Final Payment Date, moneys on deposit in
the Principal Funding Account are insufficient to pay the Class A Invested
Amount and the Class B Invested Amount, a Pay Out Event will occur and the Early
Amortization Period will commence. After payment in full of the Class A Invested
Amount, the Class B Certificateholders will be entitled to receive an amount
equal to the Class B Invested Amount.
"Available Principal Collections" means, with respect to any Monthly
Period, an amount equal to the sum of (1) an amount equal to the Principal
Allocation Percentage of the Series Allocation Percentage of all collections of
Principal Receivables received during such Monthly Period (minus certain
Reallocated Principal Collections used to fund the Required Amount), (2) any
Shared Principal Collections with respect to other Principal Sharing Series that
are allocated to Series 1997-1, and (3) certain other amounts which pursuant to
the Series 1997-1 Supplement are to be treated as Available Principal
Collections with respect to the related Distribution Date.
The Controlled Accumulation Period is currently expected to commence at the
close of business on March 31, 2001; however, the date on which the Controlled
Accumulation Period actually commences may be delayed if the Controlled
Accumulation Period Length (determined as described below) is less than twelve
months. Beginning on the Determination Date immediately preceding the March 2001
Distribution Date and on each Determination Date thereafter until the Controlled
Accumulation Period actually commences, the Transferor will determine the
"Controlled Accumulation Period Length" based on, among other things, the then
current principal payment rate on the Accounts and the principal amount of
Principal Sharing Series that are entitled to share principal with Series
1997-1; provided, however, that the Controlled Accumulation Period Length will
not be less than one month. If the Controlled Accumulation Period Length is less
than twelve months, the Controlled Accumulation Period will commence later than
the close of business on March 31, 2001, and the number of months in the
Controlled Accumulation Period will be equal to the Controlled Accumulation
Period Length. The effect of the foregoing calculation is to reduce the
Controlled Accumulation Period Length based on the invested amounts of other
Principal Sharing Series that are scheduled to be in their revolving periods and
thus scheduled to create Shared Principal Collections during the Controlled
Accumulation Period. In addition, if the Controlled Accumulation Period Length
shall have been determined to be less than 12 months and, after the date on
which such determination is made, a Pay Out Event or Reinvestment Event (as
those terms are defined in the Supplement for such Series) shall occur with
respect
S-24
<PAGE> 25
to any outstanding Principal Sharing Series, the Controlled Accumulation Period
will commence on the earlier of (i) the date that such Pay Out Event or
Reinvestment Event shall have occurred with respect to such Series and (ii) the
date on which the Controlled Accumulation Period is then scheduled to commence.
On each Distribution Date with respect to the Early Amortization Period
until the Class A Invested Amount has been paid in full or the Series 1997-1
Termination Date occurs, the holders of the Class A Certificates will be
entitled to receive Available Principal Collections in an amount up to the Class
A Invested Amount. After payment in full of the Class A Invested Amount, the
holders of the Class B Certificates will be entitled to receive, on each
Distribution Date, Available Principal Collections until the earlier of the date
the Class B Invested Amount is paid in full and the Series 1997-1 Termination
Date. After payment in full of the Class B Invested Amount, the Collateral
Interest Holder will be entitled to receive, on each Distribution Date,
Available Principal Collections until the earlier of the date the Collateral
Invested Amount is paid in full and the Series 1997-1 Termination Date.
SUBORDINATION OF THE CLASS B CERTIFICATES AND THE COLLATERAL INTEREST
The Class B Certificateholders' Interest and the Collateral Interest will
be subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments otherwise allocable to the Collateral Interest may be reallocated to
the Class A Certificateholders and the Class B Certificateholders and the
Collateral Invested Amount may be reduced. If the Collateral Invested Amount is
reduced to zero, holders of the Class B Certificates will bear directly the
credit and other risks associated with their interest in the Trust. To the
extent the Class B Invested Amount is reduced, the percentage of collections of
Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal distributable to the Class B Certificateholders will be reduced. If
the Class B Invested Amount is reduced to zero, the Class A Certificateholders
will bear directly the credit and other risks associated with their undivided
interest in the Trust. In the event of a reduction in the Class A Invested
Amount, the Class B Invested Amount or the Collateral Invested Amount, the
amount of principal and interest available to fund payments with respect to the
Class A Certificates and the Class B Certificates will be decreased. See
"-- Allocation Percentages," "-- Reallocation of Cash Flows," "-- Application of
Collections -- Excess Spread; Excess Finance Charge Collections" below.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among Series 1997-1 and all other Series outstanding all collections of Finance
Charge Receivables and Principal Receivables and the Defaulted Amount with
respect to such Monthly Period as described under "The Pooling and Servicing
Agreement Generally -- Allocations" in the Prospectus and, with respect to
Series 1997-1 specifically, as described below.
Pursuant to the Pooling and Servicing Agreement, during each Monthly
Period, the Servicer will allocate to Series 1997-1 its Series Allocable Finance
Charge Collections, Series Allocable Principal Collections and Series Allocable
Defaulted Amount.
"Series Allocable Finance Charge Collections," "Series Allocable Principal
Collections" and "Series Allocable Defaulted Amount" mean, with respect to
Series 1997-1 and for any Monthly Period, the product of (a) the Series
Allocation Percentage for Series 1997-1 and (b) the amount of collections of
Finance Charge Receivables deposited in the Collection Account, the amount of
collections of Principal Receivables deposited in the Collection Account and the
amount of all Defaulted Amounts with respect to such Monthly Period,
respectively.
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"Series Allocation Percentage" means, with respect to Series 1997-1 and for
any Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the sum of the Series Adjusted Invested Amount for Series 1997-1 as of
the last day of the immediately preceding Monthly Period plus the Series
Required Transferor Amount for Series 1997-1 as of the last day of the
immediately preceding Monthly Period and the denominator of which is the Trust
Adjusted Invested Amount plus the sum of all Series Required Transferor Amounts
as of such last day.
"Series Adjusted Invested Amount" means, with respect to Series 1997-1 and
for any Monthly Period, the Series Invested Amount for Series 1997-1, less the
excess, if any, of all reductions in the Invested Amount (other than any
reductions occasioned by payments of principal to the Series 1997-1
Certificateholders or to the Collateral Interest Holder) as of the last day of
the preceding Monthly Period over the aggregate amount of any reimbursement of
such reductions as of such last day.
The Series Allocable Finance Charge Collections and the Series Allocable
Defaulted Amount for Series 1997-1 with respect to any Monthly Period will be
allocated to the Series 1997-1 Certificates and the Collateral Interest based on
the Floating Allocation Percentage and the remainder of such Series Allocable
Finance Charge Collections and Series Allocable Defaulted Amount will be
allocated to the Transferor's Interest. The "Floating Allocation Percentage"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Adjusted Invested Amount as of the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, the Initial Invested Amount) and the
denominator of which is the product of (a) the sum of the total amount of the
Principal Receivables in the Trust as of such day (subject to adjustment to give
effect to designations of Additional Accounts and Removed Accounts) (or with
respect to the first Monthly Period, the total amount of Principal Receivables
in the Trust on the Closing Date) and the principal amount on deposit in the
Special Funding Account as of such day and (b) the Series Allocation Percentage.
Investor Finance Charge Collections (which for any Monthly Period is equal
to the product of the Floating Allocation Percentage and the Series Allocable
Finance Charge Collections) will be reallocated among all Series in Group I as
set forth in "The Pooling and Servicing Agreement Generally -- Reallocations
Among Certificates of Different Series within a Reallocation Group" in the
Prospectus. Reallocated Investor Finance Charge Collections allocated to Series
1997-1 and the Investor Default Amount will be further allocated between the
Class A Certificateholders, the Class B Certificateholders and the Collateral
Interest Holder in accordance with the Class A Floating Percentage, the Class B
Floating Percentage and the Collateral Floating Percentage, respectively. The
"Class A Floating Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class A Adjusted Invested Amount as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the denominator
of which is equal to the Adjusted Invested Amount as of the close of business on
such day (or, with respect to the first Monthly Period, the Initial Invested
Amount). The "Class B Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Adjusted Invested
Amount as of the close of business on the last day of the preceding Monthly
Period (or with respect to the first Monthly Period, as of the Closing Date) and
the denominator of which is equal to the Adjusted Invested Amount at the close
of business on such day (or with respect to the first Monthly Period, the
Initial Invested Amount). The "Collateral Floating Percentage" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the
Collateral Invested Amount as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, as of the
Closing Date) and the denominator of which is equal to the Adjusted Invested
Amount as of the close of business on such day (or with respect to the first
Monthly Period, the Initial Invested Amount).
Series Allocable Principal Collections for Series 1997-1 will be allocated
to the Series 1997-1 Certificates and the Collateral Interest based on the
Principal Allocation Percentage and the remainder of such Series Allocable
Principal Collections will be allocated to the Transferor's Interest. The
"Principal Allocation Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall
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<PAGE> 27
never exceed 100%) of a fraction, the numerator of which is (a) during the
Revolving Period, the Series Adjusted Invested Amount for Series 1997-1 as of
the last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period, the Closing Date) and (b) during the Controlled
Accumulation Period or the Early Amortization Period, the Series Adjusted
Invested Amount for Series 1997-1 as of the last day of the Revolving Period and
the denominator of which is the product of (i) the sum of the total amount of
Principal Receivables in the Trust as of the last day of the immediately
preceding Monthly Period (subject to adjustment to give effect to designations
of Additional Accounts and Removed Accounts) and the principal amount on deposit
in the Special Funding Account as of such last day (or, in the case of the first
Monthly Period, the Closing Date) and (ii) the Series Allocation Percentage for
Series 1997-1 as of the last day of the immediately preceding Monthly Period;
provided, however, that because the Series 1997-1 Certificates offered hereby
are subject to being paired with a future Series, if a Pay Out Event or a
Reinvestment Event (as those terms are defined in the related Supplement) occurs
with respect to a Paired Series during the Controlled Accumulation Period with
respect to Series 1997-1, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator for the foregoing
fraction, provided that such numerator is not less than the Adjusted Invested
Amount as of the last day of the revolving period for such Paired Series and the
Transferor shall have received written notice from each Rating Agency that such
designation will satisfy the Rating Agency Condition and the Transferor shall
have delivered to the Trustee a certificate of an authorized officer to the
effect that, based on the facts known to such officer at the time, in the
reasonable belief of the Transferor, such designation will not cause a Pay Out
Event or an event that, after the giving of notice or lapse of time, would
constitute a Pay Out Event, to occur with respect to Series 1997-1.
Such amounts so allocated to the Series 1997-1 Certificates and the
Collateral Interest will be further allocated to the Class A Certificateholders,
the Class B Certificateholders and the Collateral Interest Holder based on the
Class A Principal Percentage, the Class B Principal Percentage and the
Collateral Principal Percentage, respectively. The "Class A Principal
Percentage" means, with respect to any Monthly Period (a) during the Revolving
Period, the percentage equivalent (which shall never exceed 100%) of a fraction,
the numerator of which is equal to the Class A Invested Amount as of the last
day of the immediately preceding Monthly Period (or, in the case of the first
Monthly Period, the Class A Initial Invested Amount), and the denominator of
which is equal to the Invested Amount as of such day (or, in the case of the
first Monthly Period, the Initial Invested Amount) and (b) during the Controlled
Accumulation Period or the Early Amortization Period, the percentage equivalent
(which shall never exceed 100%) of a fraction, the numerator of which is the
Class A Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Invested Amount as of such day. The "Class B
Principal Percentage" means, with respect to any Monthly Period, (i) during the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class B Invested Amount as of
the last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period, the Class B Initial Invested Amount) and the denominator
of which is the Invested Amount as of such day (or, in the case of the first
Monthly Period, the Initial Invested Amount) and (ii) during the Controlled
Accumulation Period or the Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the Class B Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Invested Amount as of such day. The "Collateral
Principal Percentage" means, with respect to any Monthly Period, (i) during the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Collateral Invested Amount as
of the last day of the immediately preceding Monthly Period (or, in the case of
the first Monthly Period, the Collateral Initial Invested Amount) and the
denominator of which is the Invested Amount as of such day (or in the case of
the first Monthly Period, the Initial Invested Amount) and (ii) during the
Controlled Accumulation Period or the Early Accumulation Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Collateral Invested Amount as of the end of the
Revolving Period, and the denominator of which is the Invested Amount as of such
day.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i)
the Class A Initial Invested Amount, less (ii) the amount of principal
payments made to holders of the Class A Certificates on or
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<PAGE> 28
prior to such date, less (iii) the excess, if any, of the aggregate amount
of Class A Investor Charge-Offs for all prior Distribution Dates over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for
all Distribution Dates prior to such date.
"Class B Invested Amount" for any date means an amount equal to (i)
the Class B Initial Invested Amount, less (ii) the amount of principal
payments made to holders of the Class B Certificates on or prior to such
date, less (iii) the aggregate amount of Class B Investor Charge-Offs for
all prior Distribution Dates, less (iv) the aggregate amount of Reallocated
Principal Collections for all prior Distribution Dates which have been used
to fund the Required Amount with respect to such Distribution Dates
(excluding any Reallocated Principal Collections that have resulted in a
reduction of the Collateral Invested Amount), less (v) an amount equal to
the amount by which the Class B Invested Amount has been reduced to cover
the Class A Investor Default Amount on all prior Distribution Dates as
described herein under "-- Defaulted Receivables; Investor Charge-Offs,"
plus (vi) the aggregate amount of Excess Spread and Excess Finance Charge
Collections allocated to Series 1997-1 and applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant
to the foregoing clauses (iii), (iv) and (v); provided, however, that the
Class B Invested Amount may not be reduced below zero.
"Class A Adjusted Invested Amount" for any date means an amount equal
to the then current Class A Invested Amount less the funds on deposit in
the Principal Funding Account (up to the Class A Invested Amount) on such
date.
"Class B Adjusted Invested Amount" for any date means an amount equal
to the Class B Invested Amount less the funds on deposit in the Principal
Funding Account in excess of the Class A Invested Amount on such date.
"Collateral Invested Amount" for any date means an amount equal to (a)
the Collateral Initial Invested Amount, less (b) the aggregate amount of
principal payments made to the Collateral Interest Holder prior to such
date, less (c) the aggregate amount of Collateral Charge-Offs for all prior
Distribution Dates, less (d) the aggregate amount of Reallocated Principal
Collections for all prior Distribution Dates, less (e) an amount equal to
the aggregate amount by which the Collateral Invested Amount has been
reduced to fund the Class A Investor Default Amount and the Class B
Investor Default Amount on all prior Distribution Dates as described under
"-- Defaulted Receivables; Investor Charge-Offs," and plus (f) the
aggregate amount of Excess Spread and Excess Finance Charge Collections
allocated to Series 1997-1 and applied on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c), (d) and (e); provided, however, that the Collateral Invested
Amount may not be reduced below zero.
"Invested Amount" for any date means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Collateral
Invested Amount on such date.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Principal Funding Account as a deposit account meeting
the eligibility requirements specified in the Pooling and Servicing Agreement
(an "Eligible Deposit Account") held for the benefit of the Series 1997-1
Certificateholders. During the Controlled Accumulation Period, the Servicer will
transfer collections in respect of Principal Receivables, Shared Principal
Collections allocated to Series 1997-1 and other amounts described herein to be
treated in the same manner as collections of Principal Receivables from the
Collection Account to the Principal Funding Account as described below under
"-- Application of Collections."
Unless a Pay Out Event has occurred with respect to the Series 1997-1
Certificates, all amounts on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Principal Funding Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. On each Distribution Date with respect to the Controlled
Accumulation
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<PAGE> 29
Period the interest and other investment income (net of investment expenses and
losses) earned on such investments (the "Principal Funding Investment Proceeds")
will be withdrawn from the Principal Funding Account and will be treated as a
portion of Class A Available Funds. If such investments with respect to any such
Distribution Date yield less than the Class A Certificate Rate, the Principal
Funding Investment Proceeds with respect to such Distribution Date will be less
than the Covered Amount for such Distribution Date. It is intended that any such
shortfall will be funded from other Class A Available Funds (including a
withdrawal from the Reserve Account, if necessary, as described below under
"-- Reserve Account"). The Available Reserve Account Amount at any time will be
limited and there can be no assurance that sufficient funds will be available to
fund any such shortfall. The "Covered Amount" shall mean for any Distribution
Date with respect to the Controlled Accumulation Period or the first Special
Payment Date, if such Special Payment Date occurs prior to the payment in full
of the Class A Invested Amount, an amount equal to the product of (i) a fraction
the numerator of which is the actual number of days in the related Interest
Period and the denominator of which is 360, times (ii) the Class A Certificate
Rate in effect with respect to such Interest Period, and (iii) the Principal
Funding Account Balance, if any, as of the preceding Distribution Date.
RESERVE ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the Class A
Certificateholders and the Collateral Interest Holder (the "Reserve Account").
The Reserve Account is established to assure the subsequent distribution of
interest on the Class A Certificates as provided in this Prospectus Supplement
during the Controlled Accumulation Period. On each Distribution Date from and
after the Reserve Account Funding Date, but prior to the termination of the
Reserve Account, the Trustee, acting pursuant to the Servicer's instructions,
will apply Excess Spread and Excess Finance Charge Collections allocated to
Series 1997-1 (in the order of priority described below under "-- Application of
Collections -- Excess Spread; Excess Finance Charge Collections") to increase
the amount on deposit in the Reserve Account (to the extent such amount is less
than the Required Reserve Account Amount). In addition, on each such
Distribution Date, the Transferor will have the option, but will not be
required, to make a deposit in the Reserve Account to the extent that the amount
on deposit in the Reserve Account, after giving effect to any Excess Spread and
Excess Finance Charge Collections allocated and available to be deposited in the
Reserve Account on such Distribution Date, is less than the Required Reserve
Account Amount. The "Reserve Account Funding Date" will be the Distribution Date
with respect to the Monthly Period that commences three months prior to the
Distribution Date with respect to the first Monthly Period in the Controlled
Accumulation Period, or such earlier date as the Transferor may determine. The
"Required Reserve Account Amount" for any Distribution Date on or after the
Reserve Account Funding Date will be equal to 0.5% of the Class A Invested
Amount as of the preceding Distribution Date, or any other amount designated by
the Transferor provided that the Transferor has received written notice from
each Rating Agency that such designation will satisfy the Rating Agency
Condition. On each Distribution Date, after giving effect to any deposit to be
made to, and any withdrawal to be made from, the Reserve Account on such
Distribution Date, the Trustee will withdraw from the Reserve Account an amount
equal to the excess, if any, of the amount on deposit in the Reserve Account
over the Required Reserve Account Amount and shall distribute such excess to the
Collateral Interest Holder for application in accordance with the terms of the
Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to be
made on such Distribution Date) will be invested to the following Distribution
Date by the Trustee at the direction of the Servicer in Eligible Investments.
The interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the Reserve Account (to the
extent the amount on deposit therein is less than the Required Reserve Account
Amount) or deposited in the Collection Account and treated as collections of
Finance Charge Receivables allocable to Series 1997-1.
On or before each Distribution Date with respect to the Controlled
Accumulation Period (on or prior to the Expected Final Payment Date) and on the
first Special Payment Date (if such Special Payment Date
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<PAGE> 30
occurs on or prior to the Expected Final Payment Date), a withdrawal will be
made from the Reserve Account, and the amount of such withdrawal will be
deposited in the Collection Account and included in Class A Available Funds in
an amount equal to the lesser of (a) the Available Reserve Account Amount with
respect to such Distribution Date or Special Payment Date and (b) the excess, if
any, of the Covered Amount with respect to such Distribution Date or Special
Payment Date over the Principal Funding Investment Proceeds with respect to such
Distribution Date or Special Payment Date; provided that the amount of such
withdrawal will be reduced to the extent that funds otherwise would be available
to be deposited in the Reserve Account on such Distribution Date or Special
Payment Date. On each Distribution Date, the amount available to be withdrawn
from the Reserve Account (the "Available Reserve Account Amount") will be equal
to the lesser of the amount on deposit in the Reserve Account (before giving
effect to any deposit to be made to the Reserve Account on such Distribution
Date) and the Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Series 1997-1 Certificates are paid in full
and (c) if the Controlled Accumulation Period has not commenced, the occurrence
of a Pay Out Event with respect to the Series 1997-1 Certificates or, if the
Controlled Accumulation Period has commenced, the earlier of the first Special
Payment Date and the Expected Final Payment Date. Upon the termination of the
Reserve Account, all amounts on deposit therein (after giving effect to any
withdrawal from the Reserve Account on such date as described above) will be
distributed to the Collateral Interest Holder for application in accordance with
the terms of the Loan Agreement. Any amounts withdrawn from the Reserve Account
and distributed to the Collateral Interest Holder as described above will not be
available for distribution to the Class A Certificateholders.
REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class A Required Amount"), which will
be equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Outstanding Monthly
Interest, (iii) any Class A Additional Interest, (iv) if UCS or an affiliate of
UCS is no longer the Servicer, the Class A Servicing Fee for such Distribution
Date and any unpaid Class A Servicing Fee and (v) the Class A Investor Default
Amount, if any, for such Distribution Date exceeds the sum of (A) the amount of
Principal Funding Investment Proceeds, if any, with respect to such Distribution
Date, (B) the Class A Floating Percentage of Reallocated Investor Finance Charge
Collections (including any investment earnings treated as collections of Finance
Charge Receivables in accordance with the Pooling and Servicing Agreement) and
(C) the amount of funds, if any, withdrawn from the Reserve Account and
allocated to the Class A Certificates pursuant to the Series 1997-1 Supplement.
If the Class A Required Amount is greater than zero, Excess Spread and Excess
Finance Charge Collections allocated to Series 1997-1 and available for such
purpose will be used to fund the Class A Required Amount with respect to such
Distribution Date. If such Excess Spread and Excess Finance Charge Collections
are insufficient to fund the Class A Required Amount, collections of Principal
Receivables allocable first to the Collateral Invested Amount and then to the
Class B Certificates for the related Monthly Period ("Reallocated Principal
Collections") will then be used to fund the remaining Class A Required Amount.
If Reallocated Principal Collections with respect to the related Monthly Period,
together with Excess Spread and Excess Finance Charge Collections allocated to
Series 1997-1, are insufficient to fund the Class A Required Amount for such
related Monthly Period, then the Collateral Invested Amount will be reduced by
the amount of such excess (but not by more than the Class A Investor Default
Amount for such Distribution Date). In the event that such reduction would cause
the Collateral Invested Amount to be a negative number, the Collateral Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the Collateral Invested Amount would have been reduced
below zero (but not by more than the excess of the Class A Investor Default
amount, if any, for such Distribution Date over the amount of such reduction, if
any, of the Collateral Invested Amount with respect to such Distribution Date).
In the event that such reduction would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount will be reduced to zero and the
Class A Invested Amount will be reduced by the amount by which the Class B
Invested Amount would have been reduced below zero, but not by more than the
excess, if any, of
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<PAGE> 31
the Class A Investor Default Amount for such Distribution Date over the amount
of the reductions, if any, of the Collateral Invested Amount and the Class B
Invested Amount with respect to such Distribution Date as described above. Any
such reduction in the Class A Invested Amount will have the effect of slowing or
reducing the return of principal and interest to the Class A Certificateholders.
In such case, the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust. See
"-- Defaulted Receivables; Investor Charge-Offs" below.
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class B Required Amount"), which will
be equal to the sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Outstanding
Monthly Interest, (iii) any Class B Additional Interest, and (iv) if UCS or an
affiliate of UCS is no longer the Servicer, the Class B Servicing Fee for such
Distribution Date and any unpaid Class B Servicing Fee exceeds the Class B
Floating Percentage of Reallocated Investor Finance Charge Collections
(including any investment earnings treated as collections of Finance Charge
Receivables in accordance with the Pooling and Servicing Agreement) and (b) the
Class B Investor Default Amount. If the Class B Required Amount is greater than
zero, Excess Spread and Excess Finance Charge Collections allocated to Series
1997-1 and not required to pay the Class A Required Amount or reimburse Class A
Investor Charge-Offs will be used to fund the Class B Required Amount with
respect to such Distribution Date. If such Excess Spread and Excess Finance
Charge Collections available with respect to such Distribution Date are less
than the Class B Required Amount, Reallocated Principal Collections allocable to
the Collateral Interest and not required to pay the Class A Required Amount for
the related Monthly Period will then be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections allocable to the
Collateral Interest with respect to the related Monthly Period are insufficient
to fund the remaining Class B Required Amount, then the Collateral Invested
Amount will be reduced by the amount of such insufficiency (but not by more than
the Class B Investor Default Amount for such Distribution Date). In the event
that such reduction would cause the Collateral Invested Amount to be a negative
number, the Collateral Invested Amount will be reduced to zero, and the Class B
Invested Amount will be reduced by the amount by which the Collateral Invested
Amount would have been reduced below zero (but not by more than the excess of
the Class B Investor Default Amount for such Distribution Date over the amount
of such reduction of the Collateral Invested Amount), and the Class B
Certificateholders will bear directly the credit and other risks associated with
their undivided interests in the Trust. See "-- Defaulted Receivables; Investor
Charge-Offs" below.
Reductions of the Class A Invested Amount or Class B Invested Amount shall
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount increased on each Distribution Date by the amount, if any, of Excess
Spread and Excess Finance Charge Collections allocable and available to
reimburse such amounts. See "-- Application of Collections -- Excess Spread;
Excess Finance Charge Collections" below. When such reductions of the Class A
Invested Amount and Class B Invested Amount have been fully reimbursed,
reductions of the Collateral Invested Amount shall be reimbursed and the
Collateral Invested Amount increased up to the Required Collateral Invested
Amount in a similar manner.
APPLICATION OF COLLECTIONS
Payment of Fees, Interest and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds (see
"-- Interest Payments" above) on deposit in the Collection Account in the
following priority:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus any Class A Outstanding Monthly Interest, plus
additional interest with respect to any such Class A Outstanding Monthly
Interest at a rate equal to the Class A Certificate Rate plus 2% per
annum (the "Class A Additional Interest"), will be (x) distributed to
holders of the Class A Certificates if such Distribution Date is an
Interest Payment Date or a Special Payment Date, or (y) deposited in the
Interest Funding Account, if such Distribution Date is not an Interest
Payment Date or a Special
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<PAGE> 32
Payment Date, for distribution to holders of the Class A Certificates on
the next Interest Payment Date or Special Payment Date therefor;
(ii) if UCS or an affiliate of UCS is no longer the Servicer, an
amount equal to the Class A Servicing Fee for such Distribution Date,
plus the amount of any Class A Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
such Distribution Date will be treated as a portion of Available
Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed or deposited as described under "-- Excess
Spread; Excess Finance Charge Collections" below.
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Outstanding Monthly
Interest, plus any additional interest with respect to any such Class B
Outstanding Monthly Interest at a rate equal to the Class B Certificate
Rate plus 2% per annum ("Class B Additional Interest"), will be (x)
distributed to the holders of the Class B Certificates if such
Distribution Date is an Interest Payment Date or a Special Payment Date,
or (y) deposited in the Interest Funding Account, if such Distribution
Date is not an Interest Payment Date or a Special Payment Date, for
distribution to the holders of the Class B Certificates on the next
Interest Payment Date or Special Payment Date therefor;
(ii) if UCS or an affiliate of UCS is no longer the Servicer, an
amount equal to the Class B Servicing Fee for such Distribution Date,
plus the amount of any Class B Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed or deposited as described under "-- Excess
Spread; Excess Finance Charge Collections" below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) if UCS or an affiliate of UCS is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee for such
Distribution Date, plus the amount of any Collateral Interest Servicing
Fee previously due but not distributed to the Servicer on a prior
Distribution Date, will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed or deposited as described
under "-- Excess Spread; Excess Finance Charge Collections" below.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) (A) a fraction, the numerator of which is the
actual number of days in the period from and including the prior Distribution
Date (or with respect to the initial Distribution Date, the Closing Date) to and
excluding such Distribution Date and the denominator of which is 360, times (B)
the Class A Certificate Rate and (ii) the outstanding principal balance of the
Class A Certificates as of the close of business on the preceding Record Date
(or with respect to the initial Distribution Date, the Closing Date).
"Class A Outstanding Monthly Interest" means, with respect to any
Distribution Date, the amount of Class A Monthly Interest previously due but not
(i) paid to the Class A Certificateholders or (ii) deposited in the Interest
Funding Account, as applicable.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) (A) a fraction, the numerator of which is the
actual number of days in the period from and including the prior Distribution
Date (or with respect to the initial Distribution Date, the Closing Date) to and
excluding such Distribution Date and the denominator of which is 360, times (B)
the Class B Certificate Rate
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and (ii) the Class B Invested Amount as of the close of business on the last day
of the preceding Record Date (or with respect to the initial Distribution Date,
the Closing Date).
"Class B Outstanding Monthly Interest" means, with respect to any
Distribution Date, the amount of Class B Monthly Interest previously due but not
(i) paid to the Class B Certificateholders or (ii) deposited in the Interest
Funding Account, as applicable.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Percentage of Reallocated Investor
Finance Charge Collections (including any investment earnings and certain other
amounts that are to be treated as collections of Finance Charge Receivables
allocable to Series 1997-1 in accordance with the Pooling and Servicing
Agreement and the Series 1997-1 Supplement).
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above, clause
(B)(iii) above and clause (C)(ii) above.
Excess Spread; Excess Finance Charge Collections. On each Distribution
Date, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread and Excess Finance Charge Collections allocated to Series 1997-1
with respect to the related Monthly Period, to make the following distributions
or deposits in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to the related Monthly Period will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under "-- Payment of Fees,
Interest and Other Items" in such order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Principal Collections for such Distribution Date as
described under "-- Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Distribution Date will be (I) used to fund any deficiency
pursuant to clauses (B)(i) and (ii) above under "-- Payment of Fees,
Interest and Other Items" in such order of priority and then (II) treated,
up to the Class B Investor Default Amount, as a portion of Available
Principal Collections for such Distribution Date;
(d) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "Class B Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of Available Principal Collections for such Distribution Date;
(e) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Distribution Date and any Collateral Additional Interest previously
due but not distributed to the Collateral Interest Holder on a prior
Distribution Date, will be distributed to the Collateral Interest Holder
for application in accordance with the Loan Agreement;
(f) an amount equal to the Monthly Servicing Fee due but not paid to
the Servicer on such Distribution Date or a prior Distribution Date shall
be paid to the Servicer;
(g) an amount equal to the Collateral Default Amount shall be treated
as a portion of Available Principal Collections with respect to such
Distribution Date;
(h) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (c), (d) and (e) of
the definition of "Collateral Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(i) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account terminates
as described under "-- Reserve Account" above, an
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amount up to the excess, if any, of the Required Reserve Account Amount
over the Available Reserve Account Amount shall be deposited into the
Reserve Account;
(j) an amount equal to the aggregate of any other amounts then
required to be applied pursuant to the Loan Agreement among the Transferor,
the Trustee, the Servicer and the Collateral Interest Holder (the "Loan
Agreement") (to the extent such amounts are required to be applied pursuant
to the Loan Agreement out of Excess Spread and Excess Finance Charge
Collections) shall be distributed to the Collateral Interest Holder for
application in accordance with the Loan Agreement; and
(k) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Excess Allocation Series or to the holders of the
Transferor Certificates as described in "The Pooling and Servicing
Agreement Generally -- Sharing of Excess Finance Charge Collections Among
Excess Allocation Series" in the Prospectus.
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i)(A) a fraction, the numerator of which is
the actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, times (B) the Collateral Rate and (ii) the Collateral Invested
Amount as of the preceding Record Date; provided, however, with respect to the
first Distribution Date, Collateral Monthly Interest shall be equal to the
interest accrued on the Collateral Initial Invested Amount at the Collateral
Rate for the period from the Closing Date to but excluding the first
Distribution Date.
"Collateral Rate" means a rate specified in the Loan Agreement not to
exceed one-month LIBOR plus 1% per annum.
"Collateral Additional Interest" means, with respect to any Distribution
Date, additional interest with respect to Collateral Monthly Interest due but
not paid to the Collateral Interest Holder on a prior Distribution Date at a
rate equal to the Collateral Rate.
Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections (see "-- Principal Payments" above) on deposit in the Collection
Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections will be distributed or deposited
in the following priority:
(A) an amount equal to the excess, if any, of the Collateral
Invested Amount over the Required Collateral Invested Amount will be
paid to the Collateral Interest Holder; and
(B) the balance will be treated as Shared Principal Collections and
applied as described under "The Pooling and Servicing Agreement
Generally -- Shared Principal Collections" in the Prospectus;
(ii) on each Distribution Date with respect to the Controlled
Accumulation Period, all such Available Principal Collections will be
distributed or deposited in the following priority:
(A) an amount equal to the lesser of (x) the Controlled Deposit
Amount and (y) the sum of the Class A Adjusted Invested Amount and the
Class B Adjusted Invested Amount will be deposited in the Principal
Funding Account;
(B) for each Distribution Date before the Class B Invested Amount
is paid in full, an amount equal to the balance, if any, of such
Available Principal Collections will be paid to the Collateral Interest
Holder, for application in accordance with the Loan Agreement, to the
extent the Collateral Invested Amount is greater than the Required
Collateral Invested Amount;
(C) for each Distribution Date beginning on the Distribution Date
on which the Class B Invested Amount is paid in full, an amount up to
the Collateral Invested Amount will be paid to the Collateral Interest
Holder; and
(D) for each Distribution Date, the balance, if any, of Available
Principal Collections not applied pursuant to paragraphs (A) and (B) or
(C) (as applicable) above will be treated as Shared
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Principal Collections and applied as described under "The Pooling and
Servicing Agreement Generally -- Shared Principal Collections" in the
Prospectus; and
(iii) on each Distribution Date with respect to the Early Amortization
Period, all such Available Principal Collections will be distributed as
follows:
(A) an amount up to the Class A Adjusted Invested Amount will be
distributed to the Class A Certificateholders;
(B) for each Distribution Date beginning on the Distribution Date
on which the Class A Invested Amount is paid in full, an amount up to
the Class B Adjusted Invested Amount will be distributed to the Class B
Certificateholders;
(C) for each Distribution Date beginning on the Distribution Date
on which the Class B Invested Amount is paid in full, an amount up to
the Collateral Invested Amount will be paid to the Collateral Interest
Holder; and
(D) for each Distribution Date, after giving effect to paragraphs
(A), (B) and (C) above, an amount equal to the balance, if any, of such
Available Principal Collections will be allocated to Shared Principal
Collections and applied in accordance with the Pooling and Servicing
Agreement.
"Controlled Accumulation Amount" means for any Distribution Date with
respect to the Controlled Accumulation Period, $77,500,000; provided, however,
that, if the commencement of the Controlled Accumulation Period is delayed as
described above under "-- Principal Payments," the Controlled Accumulation
Amount for each Distribution Date with respect to the Controlled Accumulation
Period may be different for each Distribution Date with respect to the
Controlled Accumulation Period and will be determined by the Transferor in
accordance with the Series 1997-1 Supplement based on the principal payment
rates for the Accounts and on the invested amounts of other Principal Sharing
Series that are scheduled to be in their revolving periods and then scheduled to
create Shared Principal Collections during the Controlled Accumulation Period.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Controlled Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Distribution Date
over the amount deposited in the Principal Funding Account on such Distribution
Date and (b) on each subsequent Distribution Date with respect to the Controlled
Accumulation Period, the excess, if any, of the Controlled Deposit Amount for
such subsequent Distribution Date over the amount deposited in the Principal
Funding Account on such subsequent Distribution Date.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Controlled Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.
REQUIRED COLLATERAL INVESTED AMOUNT
The "Required Collateral Invested Amount" with respect to any Distribution
Date means (i) initially $70,000,000 and (ii) thereafter on each Distribution
Date an amount equal to 7% of the sum of the Class A Adjusted Invested Amount on
such Distribution Date, the Class B Adjusted Invested Amount on such
Distribution Date (in each case after taking into account payments to be made on
such Distribution Date) and the Collateral Invested Amount on the prior
Distribution Date after any adjustments made on such Distribution Date, but not
less than $30,000,000; provided, however, that (1) if certain reductions in the
Collateral Invested Amount are made or if a Pay Out Event occurs, the Required
Collateral Invested Amount for such Distribution Date shall equal the Required
Collateral Invested Amount for the Distribution Date immediately preceding the
occurrence of such reduction or Pay Out Event, (2) in no event shall the
Required Collateral Invested Amount exceed the unpaid principal amount of the
Series 1997-1 Certificates as of the last day of the Monthly Period preceding
such Distribution Date after taking into account payments to be made on such
Distribution Date and (3) the Required Collateral Invested Amount may be reduced
to a lesser amount at any time if the Rating Agency Condition is satisfied.
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With respect to any Distribution Date, if the Collateral Invested Amount is
less than the Required Collateral Invested Amount, certain Excess Spread and
Excess Finance Charge Collections, if available, will be allocated to increase
the Collateral Invested Amount to the extent of such shortfall.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the Series
Allocable Defaulted Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class A Certificates (the "Class A
Investor Default Amount") on each Distribution Date in an amount equal to the
product of the Class A Floating Percentage applicable during the related Monthly
Period and the Investor Default Amount for such Monthly Period. A portion of the
Investor Default Amount will be allocated to the Class B Certificates (the
"Class B Investor Default Amount") in an amount equal to the product of the
Class B Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. An amount equal to the Class A
Investor Default Amount for each Monthly Period will be paid from Class A
Available Funds, Excess Spread and Excess Finance Charge Collections allocated
to Series 1997-1 and from Reallocated Principal Collections, if applicable, and
applied as described above in "-- Application of Collections -- Payment of Fees,
Interest and Other Items." An amount equal to the Class B Investor Default
Amount for each Monthly Period will be paid from Excess Spread and Excess
Finance Charge Collections allocated to Series 1997-1 and from Reallocated
Principal Collections allocable to the Collateral Invested Amount, if
applicable, and applied as described above under "-- Application of
Collections -- Excess Spread; Excess Finance Charge Collections."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1997-1 and Reallocated Principal Collections,
the Collateral Invested Amount will be reduced by the amount of such excess, but
not by more than the Class A Investor Default Amount for such Distribution Date.
In the event that such reduction would cause the Collateral Invested Amount to
be a negative number, the Collateral Invested Amount will be reduced to zero,
and the Class B Invested Amount will be reduced by the amount by which the
Collateral Invested Amount would have been reduced below zero, but not by more
than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount with respect to such Distribution Date. In the event that such
reduction would cause the Class B Invested Amount to be a negative number, the
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero, but not by more than the excess, if any, of the Class A
Investor Default Amount for such Distribution Date over the amount of the
reductions, if any, of the Collateral Invested Amount and of the Class B
Invested Amount with respect to such Distribution Date as described above (a
"Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal to the holders of the Class A Certificates. If
the Class A Invested Amount has been reduced by the amount of any Class A
Investor Charge-Offs, it will thereafter be increased on any Distribution Date
(but not by an amount in excess of the aggregate Class A Investor Charge-Offs)
by the amount of Excess Spread and Excess Finance Charge Collections allocable
to Series 1997-1 available for such purpose as described above under
"-- Application of Collections -- Excess Spread; Excess Finance Charge
Collections."
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1997-1 and not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs and Reallocated
Principal Collections allocable to the Collateral Interest and not required to
pay the Class A Required Amount, then the Collateral Invested Amount will be
reduced by the amount of such excess, but not by more than the Class B Investor
Default Amount for such Monthly Period. In the event that such reduction would
cause the Collateral Invested Amount to be a negative number, the Collateral
Invested Amount will be reduced to zero, and the Class B Invested Amount will be
reduced by the amount by which the Collateral Invested Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class B
Investor Default Amount for such Distribution Date over the amount of such
reduction, if any, of the Collateral Invested
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Amount with respect to such Distribution Date (a "Class B Investor Charge-Off").
The Class B Invested Amount will also be reduced by the amount of Reallocated
Principal Collections in excess of the Collateral Invested Amount and the amount
of any portion of the Class B Invested Amount allocated to the Class A
Certificates to avoid a reduction in the Class A Invested Amount. The Class B
Invested Amount will thereafter be increased on any Distribution Date (but not
by an amount in excess of the amount of such reductions in the Class B Invested
Amount) by the amount of Excess Spread and Excess Finance Charge Collections
allocable to Series 1997-1 available for such purpose as described above under
"-- Application of Collections -- Excess Spread; Excess Finance Charge
Collections."
On each Distribution Date, if the Collateral Floating Percentage of the
Investor Default Amount (the "Collateral Default Amount") for such Distribution
Date exceeds the amount of Excess Spread and Excess Finance Charge Collections
allocated to Series 1997-1 which is allocated and available to fund such amount
as described under "-- Application of Collections -- Excess Spread; Excess
Finance Charge Collections," the Collateral Invested Amount will be reduced by
the amount of such excess but not more than the lesser of the Collateral Default
Amount and the Collateral Invested Amount for such Distribution Date (a
"Collateral Charge-Off"). The Collateral Interest will also be reduced by the
amount of Reallocated Principal Collections and the amount of any portion of the
Collateral Invested Amount allocated to the Class A Certificates to avoid a
reduction in the Class A Invested Amount or to the Class B Certificates to avoid
a reduction in the Class B Invested Amount. The Collateral Invested Amount will
thereafter be increased on any Distribution Date (but not by an amount in excess
of the amount of such reductions in the Collateral Invested Amount) by the
amount of Excess Spread and Excess Finance Charge Collections allocated to
Series 1997-1 allocated and available for that purpose as described under
"-- Application of Collections -- Excess Spread; Excess Finance Charge
Collections."
PAIRED SERIES
The Series 1997-1 Certificates may be paired with one or more other Series
(each, a "Paired Series") at or after the commencement of the Controlled
Accumulation Period. As funds are accumulated in the Principal Funding Account,
the invested amount in the Trust of such Paired Series will increase by up to a
corresponding amount. Upon payment in full of the Series 1997-1 Certificates,
assuming that there have been no unreimbursed charge-offs with respect to any
related Paired Series, the aggregate invested amount of such related Paired
Series will have been increased by an amount up to an aggregate amount equal to
the Invested Amount paid to or deposited for the benefit of the Series 1997-1
Certificateholders after the Series 1997-1 Certificates were paired with the
Paired Series. The issuance of a Paired Series will be subject to the conditions
described under "The Pooling and Servicing Agreement Generally -- New Issuances"
in the Prospectus. There can be no assurance, however, that the terms of any
Paired Series might not have an impact on the timing or amount of payments
received by the Series 1997-1 Certificateholders. See "Risk Factors -- Issuance
of New Series" and "The Pooling and Servicing Agreement Generally -- Paired
Series" in the Prospectus.
PAY OUT EVENTS
The "Pay Out Events" with respect to the Series 1997-1 Certificates will
include each of the following:
(a) the occurrence of an Insolvency Event relating to the Transferor
or the occurrence of certain events of insolvency with respect to UCS
unless, in the latter case, the Rating Agency Condition is satisfied with
respect to the deletion of UCS from this Pay Out Event;
(b) the Trust becomes an investment company within the meaning of the
Investment Company Act of 1940, as amended;
(c) a failure on the part of the Transferor (i) to make any payment or
deposit required under the Pooling and Servicing Agreement or the Series
1997-1 Supplement within five business days after the day such payment or
deposit is required to be made; or (ii) to observe or perform any other
covenants or agreements of the Transferor set forth in the Pooling and
Servicing Agreement or the Series 1997-1 Supplement, which failure has a
material adverse effect on the Series 1997-1 Certificateholders and which
continues unremedied for a period of 60 days after written notice;
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(d) any representation or warranty made by the Transferor in the
Pooling and Servicing Agreement or the Series 1997-1 Supplement or any
information required to be given by the Transferor to the Trustee to
identify the Accounts proves to have been incorrect in any material respect
when made and continues to be incorrect in any material respect for a
period of 60 days after written notice and as a result of which the
interests of the Series 1997-1 Certificateholders are materially and
adversely affected; provided, however, that a Pay Out Event shall not be
deemed to occur thereunder if the Transferor has repurchased the related
Receivables or all such Receivables, if applicable, during such period in
accordance with the provisions of the Pooling and Servicing Agreement;
(e) a failure by the Transferor to make an Addition to the Trust
within five business days after the day on which it is required to make
such Addition pursuant to the Pooling and Servicing Agreement or the Series
1997-1 Supplement;
(f) the occurrence of any Servicer Default;
(g) a reduction of the average Series Adjusted Portfolio Yield for any
three consecutive Monthly Periods to a rate less than the average of the
Base Rates for such three Monthly Periods;
(h) the failure to pay in full the Class A Invested Amount and the
Class B Invested Amount on the Expected Final Payment Date; and
(i) the Transferor is unable for any reason to transfer Receivables to
the Trust in accordance with the Pooling and Servicing Agreement or the
Series 1997-1 Supplement.
Then, in the case of any event described in subparagraph (c), (d) or (f),
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Series 1997-1 Certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 1997-1 Certificates
by notice then given in writing to the Transferor and the Servicer (and to the
Trustee if given by the Series 1997-1 Certificateholders) may declare that a Pay
Out Event has occurred with respect to Series 1997-1 as of the date of such
notice, and, in the case of any event described in subparagraph (a), (b), (e),
(g), (h) or (i), a Pay Out Event shall occur with respect to Series 1997-1
without any notice or other action on the part of the Trustee immediately upon
the occurrence of such event.
For purposes of the Pay Out Event described in clause (g) above, the terms
"Base Rate" and "Series Adjusted Portfolio Yield" will be defined as follows
with respect to the Series 1997-1 Certificates:
"Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the
sum of Class A Monthly Interest, Class B Monthly Interest, Collateral
Monthly Interest and the Monthly Servicing Fee with respect to the Series
1997-1 Certificates and the Collateral Interest for the related
Distribution Date and the denominator of which is the Invested Amount as of
the last day of the preceding Monthly Period.
"Series Adjusted Portfolio Yield" means, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, (A) the
numerator of which is equal to (a) Reallocated Investor Finance Charge
Collections (including any investment earnings and certain other amounts
that are to be treated as collections of Finance Charges Receivables
allocable to Series 1997-1 in accordance with the Pooling and Servicing
Agreement) for such Monthly Period, plus (b) the amount of Principal
Funding Investment Proceeds for the related Distribution Date, plus (c)
provided that each Rating Agency has consented to the inclusion thereof in
calculating the Series Adjusted Portfolio Yield, any Excess Finance Charge
Collections that are allocated to Series 1997-1, plus (d) the amount of
funds withdrawn from the Reserve Account and included in Class A Available
Funds for the Distribution Date with respect to such Monthly Period, and
less (e) the Investor Default Amount for the Distribution Date with respect
to such Monthly Period, and (B) the denominator of which is the Invested
Amount as of the last day of the preceding Monthly Period.
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to the Transferor, as described in the
Prospectus under "Description of the Certificates -- Pay Out Events and
Reinvestment Events," allocated to the Class A Invested Amount and the proceeds
of any collections on the Receivables in the Collection Account and any amounts
on deposit in the Interest Funding
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Account are not sufficient to pay in full the remaining amount due on the Class
A Certificates, the Class A Certificateholders will suffer a corresponding loss
and no such proceeds will be available to the Class B Certificateholders. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Insolvency" in the Prospectus for a discussion of the impact of recent federal
legislation on the Trustee's ability to liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series 1997-1
Certificateholders and the Collateral Interest Holder with respect to any
Distribution Date (the "Monthly Servicing Fee") shall be equal to one-twelfth of
the product of (a) 2.0% (the "Servicing Fee Rate") and (b) (i) the Adjusted
Invested Amount as of the last day of the Monthly Period preceding such
Distribution Date, less (ii) the product of (A) any amount on deposit in the
Special Funding Account as of the last day of the Monthly Period preceding such
Distribution Date and (B) the Series Allocation Percentage for Series 1997-1
with respect to such Monthly Period (the amount calculated pursuant to this
clause (b) is referred to as the "Servicing Base Amount"); provided, however,
with respect to the first Distribution Date, the Monthly Servicing Fee shall be
equal to $913,978. The share of the Monthly Servicing Fee allocable to the Class
A Certificateholders with respect to any Distribution Date (the "Class A
Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class A
Floating Percentage, (b) the Servicing Fee Rate and (c) the Servicing Base
Amount; provided, however, that with respect to the first Distribution Date, the
Class A Servicing Fee shall be equal to $776,882. The share of the Monthly
Servicing Fee allocable to the Class B Certificateholders with respect to any
Distribution Date (the "Class B Servicing Fee") shall be equal to one-twelfth of
the product of (a) the Class B Floating Percentage, (b) the Servicing Fee Rate
and (c) the Servicing Base Amount; provided, however, that with respect to the
first Distribution Date, the Class B Servicing Fee shall be equal to $73,118.
The share of the Monthly Servicing Fee allocable to the Collateral Interest with
respect to any Distribution Date (the "Collateral Interest Servicing Fee") shall
be equal to one-twelfth of the product of (a) the Collateral Floating
Percentage, (b) the Servicing Fee Rate and (c) the Servicing Base Amount;
provided, however, that with respect to the first Distribution Date, the
Collateral Interest Servicing Fee shall be equal to $63,978. The remainder of
the Servicing Fee shall be paid by the holders of the Transferor Certificates or
the certificateholders of other Series (as provided in the related Supplements)
and in no event will the Trust, the Trustee or the Series 1997-1
Certificateholders be liable for the share of the Servicing Fee to be paid by
the holders of the Transferor Certificates or the certificateholders of any
other Series.
SERIES TERMINATION
If, on the Distribution Date which is two months prior to the Series 1997-1
Termination Date, the Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day period
beginning on such date, solicit bids for the sale of interests in the Principal
Receivables or certain Principal Receivables, together in each case with the
related Finance Charge Receivables, in an amount equal to the Invested Amount at
the close of business on the last day of the Monthly Period preceding the
Termination Date (after giving effect to all distributions required to be made
on the Termination Date other than from the proceeds of the sale). The
Transferor and the Collateral Interest Holder will be entitled to participate
in, and to receive notice of each bid submitted in connection with, such bidding
process. Upon the expiration of such 40-day period, the Trustee will determine
(a) which bid is the highest cash purchase offer (the "Highest Bid") and (b) the
amount (the "Available Final Distribution Amount") which otherwise would be
available in the Collection Account on the Termination Date for distribution to
the Series 1997-1 Certificateholders and the Collateral Interest Holder. The
Servicer will sell such Receivables on the Termination Date to the bidder who
provided the Highest Bid and will deposit the proceeds of such sale in the
Collection Account for allocation (together with the Available Final
Distribution Amount) to the Series 1997-1 Certificateholders' Interest and the
Collateral Interest in the order of priority specified herein.
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
the Collateral Interest Holder, a statement (the
S-39
<PAGE> 40
"Monthly Report") prepared by the Servicer setting forth certain information
with respect to the Trust and the Class A Certificates and the Class B
Certificates, including: (a) the aggregate amount of Principal Receivables and
Finance Charge Receivables in the Trust as of the end of such Monthly Period;
(b) the Invested Amount, the Class A Invested Amount, the Class B Invested
Amount and the Collateral Invested Amount at the close of business on the last
day of the preceding Monthly Period; (c) the Series Allocation Percentage, the
Floating Allocation Percentage, the Class A Floating Percentage, the Class B
Floating Percentage and the Collateral Floating Percentage and the Principal
Allocation Percentage, the Class A Principal Percentage, the Class B Principal
Percentage and the Collateral Principal Percentage; (d) the amount of
collections of Principal Receivables and Finance Charge Receivables processed
during the related Monthly Period and the portion thereof allocated to the
Series 1997-1 Certificateholders' Interest; (e) the aggregate outstanding
balance of Accounts that were 31, 61 and 91 days or more delinquent as of the
end of such Monthly Period; (f) the Investor Default Amount, the Class A
Investor Default Amount, the Class B Investor Default Amount and the Collateral
Default Amount and the Defaulted Amount with respect to such Monthly Period; (g)
the aggregate amount, if any, of Class A Investor Charge-Offs, Class B Investor
Charge-Offs, any reductions in the Class B Invested Amount pursuant to clauses
(iv) and (v) of the definition of "Class B Invested Amount," and the amounts by
which the Collateral Invested Amount has been reduced pursuant to clauses (c),
(d) and (e) of the definition of "Collateral Invested Amount" and any Class A or
Class B Investor Charge-Offs reimbursed on the related Monthly Period, for such
Monthly Period; (h) the Monthly Servicing Fee, Class A Servicing Fee, Class B
Servicing Fee and Collateral Interest Servicing Fee for such Monthly Period; (i)
the Series Adjusted Portfolio Yield for such Monthly Period; (j) the Base Rate
for such Monthly Period; (k) Reallocated Principal Collections; and (l) Shared
Principal Collections.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Transferor, UCS, the underwriters of
the Class A Certificates named below (the "Class A Underwriters") and the
underwriters of the Class B Certificates named below (the "Class B
Underwriters," and together with the Class A Underwriters, the "Underwriters"),
the Transferor has agreed to cause the Trust to sell to the Underwriters, and
the Underwriters have agreed to purchase, the principal amount of the Class A
Certificates and Class B Certificates set forth opposite their names:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS OF THE CLASS A CERTIFICATES CLASS A CERTIFICATES
------------------------------------------------------------------- --------------------
<S> <C>
Lehman Brothers Inc. .............................................. $170,000,000
Credit Suisse First Boston Corporation............................. 170,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 170,000,000
J.P. Morgan Securities Inc. ....................................... 170,000,000
Salomon Brothers Inc............................................... 170,000,000
------------
Total......................................................... $850,000,000
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS OF THE CLASS B CERTIFICATES CLASS B CERTIFICATES
------------------------------------------------------------------- --------------------
<S> <C>
Lehman Brothers Inc. .............................................. $ 40,000,000
J.P. Morgan Securities Inc. ....................................... 40,000,000
-----------
Total......................................................... $ 80,000,000
===========
</TABLE>
The Underwriting Agreement provides that the obligation of the Class A
Underwriters to pay for and accept delivery of the Class A Certificates and the
obligation of the Class B Underwriters to pay for and accept delivery of the
Class B Certificates are subject to the approval of certain legal matters by
their counsel and to certain other conditions. All of the Series 1997-1
Certificates offered hereby will be issued if any are issued.
The Underwriters presently intend to make a market in the Series 1997-1
Certificates offered hereby; however, they are not obligated to do so, any
market-making may be discontinued at any time, and there can be no assurance
that an active public market for the Series 1997-1 Certificates will develop.
If the Underwriters create a short position in the Series 1997-1
Certificates in connection with the offering, i.e., if they sell more Series
1997-1 Certificates than are set forth on the cover page of this Prospectus
S-40
<PAGE> 41
Supplement, the Underwriters may reduce that short position by purchasing Series
1997-1 Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchase.
None of the Seller, the Servicer, nor the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the prices of the Series 1997-1
Certificates. In addition, none of the Seller, the Servicer, nor the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.1625% of
the principal amount of the Class A Certificates. The Class A Underwriters may
allow, and such dealers may reallow, concessions not in excess of 0.075% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class A Underwriters.
The Class B Underwriters propose initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.2% of the
principal amount of the Class B Certificates. The Class B Underwriters may
allow, and such dealers may reallow, concessions not in excess of 0.1% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class B Underwriters.
Each Underwriter will represent and agree that:
(a) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Series 1997-1 Certificates in, from or otherwise involving
the United Kingdom;
(b) it has only issued, distributed or passed on and will only issue,
distribute or pass on in the United Kingdom any document received by it in
connection with the issue of the Series 1997-1 Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued, distributed or passed on;
(c) if it is an authorized person under Chapter III of Part I of the
Financial Services Act 1986, it has only promoted and will only promote (as
that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this Prospectus Supplement and the
Prospectus if that person is a kind described either in Section 76(2) of
the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The Transferor and UCS will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof. The
Underwriters have agreed to reimburse the Transferor for certain expenses of the
issuance and distribution of the Series 1997-1 Certificates.
LEGAL MATTERS
Certain legal matters relating to the Series 1997-1 Certificates will be
passed upon for the Transferor and the Trust by Orrick, Herrington & Sutcliffe
LLP, New York, New York. Certain legal matters will be passed upon for the
Underwriters by Cravath, Swaine & Moore, New York, New York. Certain legal
matters relating to the federal tax consequences of the issuance of the Series
1997-1 Certificates and certain other matters relating thereto will be passed
upon for the Transferor by Cravath, Swaine & Moore, New York, New York.
S-41
<PAGE> 42
INDEX OF DEFINED TERMS
Accounts.....................................................................S-1
Adjusted Invested Amount.....................................................S-5
AT&T Universal Funding.......................................................S-1
AT&T Universal Portfolio....................................................S-16
Available Final Distribution Amount.........................................S-39
Available Principal Collections.............................................S-24
Available Reserve Account Amount............................................S-30
Average Receivables Outstanding.............................................S-16
Base Rate...................................................................S-38
CB&T.........................................................................S-1
Class A Additional Interest.................................................S-31
Class A Adjusted Invested Amount.......................................S-5, S-28
Class A Available Funds.....................................................S-22
Class A Certificate Rate.....................................................S-2
Class A Certificateholders' Interest.........................................S-4
Class A Certificates....................................................S-1, S-3
Class A Floating Percentage.................................................S-26
Class A Initial Invested Amount.........................................S-3, S-4
Class A Invested Amount................................................S-4, S-27
Class A Investor Charge-Off...........................................S-10, S-36
Class A Investor Default Amount.............................................S-36
Class A Monthly Interest....................................................S-32
Class A Outstanding Monthly Interest........................................S-32
Class A Principal Percentage................................................S-27
Class A Required Amount................................................S-8, S-30
Class A Servicing Fee.......................................................S-39
Class A Underwriters........................................................S-40
Class B Additional Interest.................................................S-32
Class B Adjusted Invested Amount.......................................S-5, S-28
Class B Available Funds.....................................................S-22
Class B Certificate Rate.....................................................S-2
Class B Certificateholders' Interest.........................................S-4
Class B Certificates....................................................S-1, S-3
Class B Floating Percentage.................................................S-26
Class B Initial Invested Amount.........................................S-3, S-4
Class B Invested Amount................................................S-4, S-28
Class B Investor Charge-Off...........................................S-10, S-37
Class B Investor Default Amount.............................................S-36
Class B Monthly Interest....................................................S-32
Class B Outstanding Monthly Interest........................................S-33
Class B Principal Percentage................................................S-27
Class B Required Amount................................................S-9, S-31
Class B Servicing Fee.......................................................S-39
Class B Underwriters........................................................S-40
Closing Date............................................................S-2, S-3
Code........................................................................S-12
Collateral Additional Interest..............................................S-34
Collateral Available Funds..................................................S-33
Collateral Charge-Off.......................................................S-37
Collateral Default Amount...................................................S-37
Collateral Floating Percentage..............................................S-26
S-42
<PAGE> 43
Collateral Initial Invested Amount...........................................S-3
Collateral Interest..........................................................S-4
Collateral Interest Holder...................................................S-4
Collateral Interest Servicing Fee...........................................S-39
Collateral Invested Amount.............................................S-4, S-28
Collateral Monthly Interest.................................................S-34
Collateral Principal Percentage.............................................S-27
Collateral Rate.............................................................S-34
Controlled Accumulation Amount..............................................S-35
Controlled Accumulation Period...............................................S-7
Controlled Accumulation Period Length.......................................S-24
Controlled Deposit Amount...................................................S-35
Covered Amount..............................................................S-29
Deficit Controlled Accumulation Amount......................................S-35
Early Amortization Period....................................................S-8
Eligible Deposit Account....................................................S-28
Enhancement Invested Amount..................................................S-4
ERISA.......................................................................S-12
Excess Spread..........................................................S-9, S-33
Expected Final Payment Date............................................S-7, S-14
Floating Allocation Percentage..............................................S-26
Group I.....................................................................S-11
Highest Bid.................................................................S-39
Initial Invested Amount.................................................S-3, S-4
Interest Funding Account....................................................S-22
Interest Funding Investment Proceeds........................................S-23
Interest Payment Date........................................................S-2
Interest Period.............................................................S-23
Invested Amount........................................................S-4, S-28
Investor Default Amount.....................................................S-36
LIBOR.......................................................................S-23
LIBOR Determination Date....................................................S-23
Loan Agreement..............................................................S-34
Monthly Report..............................................................S-40
Monthly Servicing Fee.......................................................S-39
Paired Series...............................................................S-37
Pay Out Events..............................................................S-37
Pooling and Servicing Agreement..............................................S-1
Principal Allocation Percentage.............................................S-26
Principal Funding Account...................................................S-14
Principal Funding Account Balance...........................................S-28
Principal Funding Investment Proceeds.......................................S-29
Reallocated Principal Collections......................................S-7, S-30
Receivables..................................................................S-1
Record Date.................................................................S-22
Reference Banks.............................................................S-23
Required Amount..............................................................S-9
Required Collateral Invested Amount...................................S-10, S-35
Required Reserve Account Amount.............................................S-29
Reserve Account.............................................................S-29
Reserve Account Funding Date................................................S-29
Revolving Period.............................................................S-7
Series 1997-1 Certificateholders' Interest...................................S-4
S-43
<PAGE> 44
Series 1997-1 Certificates..............................................S-1, S-3
Series 1997-1 Cut-Off Date...................................................S-7
Series 1997-1 Supplement..............................................S-14, S-21
Series 1997-1 Termination Date...............................................S-7
Series Adjusted Invested Amount.............................................S-26
Series Adjusted Portfolio Yield.......................................S-38, S-39
Series Allocable Defaulted Amount...........................................S-25
Series Allocable Finance Charge Collections.................................S-25
Series Allocable Principal Collections......................................S-25
Series Allocation Percentage................................................S-26
Series Required Transferor Amount............................................S-3
Servicer.....................................................................S-1
Servicing Base Amount.......................................................S-39
Servicing Fee Rate..........................................................S-39
Special Payment Date........................................................S-14
Telerate Page 3750..........................................................S-23
Transferor...................................................................S-1
Transferor's Interest........................................................S-4
Trust........................................................................S-3
Trust Portfolio.............................................................S-16
Trustee......................................................................S-1
UCS..........................................................................S-1
Underwriters................................................................S-40
Underwriting Agreement......................................................S-40
Universal Bank...............................................................S-1
S-44
<PAGE> 45
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<PAGE> 46
ANNEX I
OTHER SERIES
The table below sets forth the principal characteristics of Series 1995-1,
Series 1995-2, Series 1995-3, Series 1995-4, Series 1995-5, Series 1996-1,
Series 1996-2 and 1996-3, the other Series issued by the Trust and currently
outstanding. Series 1995-4 and Series 1995-5 were issued in offerings exempt
from the registration requirements of the Securities Act. For more specific
information with respect to any Series, any prospective investor should contact
UCS at (904) 954-7500. UCS will provide, without charge, to any prospective
purchaser of the Series 1997-1 Certificates, a copy of the Prospectus Supplement
for any publicly-issued Series.
SERIES 1995-1
Initial Invested Amount...................................$1,000,000,000
Class A Initial Invested Amount.............................$870,000,000
Class A Certificate Rate..........Three-Month LIBOR plus 0.08% per annum
Class B Initial Invested Amount..............................$60,000,000
Class B Certificate Rate..........Three-Month LIBOR plus 0.20% per annum
Controlled Accumulation Amount (subject to adjustment).......$77,500,000
Commencement of Controlled Accumulation Period (subject to
adjustment)................................................July 31, 1997
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$70,000,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date................August 1998 Distribution Date
Series Issuance Date.....................................August 31, 1995
Group............................................................Group I
SERIES 1995-2
Initial Invested Amount.....................................$750,000,000
Class A Initial Invested Amount.............................$675,000,000
Class A Certificate Rate.................................5.95% per annum
Class B Initial Invested Amount..............................$35,625,000
Class B Certificate Rate.................................6.10% per annum
Controlled Accumulation Amount (subject to adjustment).......$59,218,750
Commencement of Controlled Accumulation Period
(subject to adjustment)..............................September 30, 1999
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$39,375,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date...............October 2000 Distribution Date
Series Issuance Date...................................November 15, 1995
Group...........................................................Group II
A-1
<PAGE> 47
SERIES 1995-3
Initial Invested Amount.....................................$750,000,000
Class A Initial Invested Amount.............................$652,500,000
Class A Certificate Rate..........Three-Month LIBOR plus 0.19% per annum
Class B Initial Invested Amount..............................$45,000,000
Class B Certificate Rate..........Three-Month LIBOR plus 0.30% per annum
Controlled Accumulation Amount (subject to adjustment).......$58,125,000
Commencement of Controlled Accumulation Period
(subject to adjustment)..............................September 30, 2001
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$52,500,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date...............October 2002 Distribution Date
Series Issuance Date...................................November 15, 1995
Group............................................................Group I
SERIES 1995-4
Initial Invested Amount.....................................$500,000,000
Class A Initial Invested Amount.............................$465,000,000
Class A Certificate Rate..........................Commercial Paper Index
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$35,000,000
Enhancement for the Class A Certificates......Collateral Invested Amount
Commencement of Controlled Amortization Period..............May 31, 1998
Expected Final Distribution Date.............June 1999 Distribution Date
Series Issuance Date...................................December 21, 1995
Group..........................................................Group III
SERIES 1995-5
Initial Invested Amount.....................................$500,000,000
Class A Initial Invested Amount.............................$455,000,000
Class A Certificate Rate..........................Commercial Paper Index
Annual Servicing Fee Percentage.............................2% per annum
Collateral Initial Invested Amount...........................$45,000,000
Enhancement for the Class A Certificates......Collateral Invested Amount
Commencement of Controlled Amortization Period..............May 31, 1998
Expected Final Distribution Date.............June 1999 Distribution Date
Series Issuance Date...................................December 21, 1995
Group...........................................................Group IV
A-2
<PAGE> 48
SERIES 1996-1
Initial Invested Amount...................................$1,000,000,000
Class A Initial Invested Amount.............................$850,000,000
Class A Certificate Rate.........Three-Month LIBOR plus 0.125% per annum
Class B Initial Invested Amount..............................$80,000,000
Class B Certificate Rate.........Three-Month LIBOR plus 0.260% per annum
Controlled Accumulation Amount (subject to adjustment).......$77,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment)..................................March 31, 2000
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$70,000,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date.................April 2001 Distribution Date
Series Issuance Date......................................April 30, 1996
Group............................................................Group I
SERIES 1996-2
Initial Invested Amount...................................$1,000,000,000
Class A Initial Invested Amount.............................$850,000,000
Class A Certificate Rate...........Three-Month LIBOR plus .07% per annum
Class B Initial Invested Amount..............................$80,000,000
Class B Certificate Rate...........Three-Month LIBOR plus .21% per annum
Controlled Accumulation Amount (subject to adjustment).......$77,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment)....................................May 31, 1998
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$70,000,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date..................June 1999 Distribution Date
Series Issuance Date.......................................June 27, 1996
Group............................................................Group I
SERIES 1996-3
Initial Invested Amount...................................$1,000,000,000
Class A Initial Invested Amount.............................$850,000,000
Class A Certificate Rate..........Three-Month LIBOR plus 0.10% per annum
Class B Initial Invested Amount..............................$80,000,000
Class B Certificate Rate..........Three-Month LIBOR plus 0.30% per annum
Controlled Accumulation Amount (subject to adjustment).......$77,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment).................................August 31, 2000
Annual Servicing Fee Percentage...........................2.0% per annum
Collateral Initial Invested Amount...........................$70,000,000
Enhancement for the Class A and Class B Certificates..........Collateral
Invested Amount
Other enhancement for the Class A Certificates......Subordination of the
Class B Certificates
Expected Final Payment Date.............September 2001 Distribution Date
Series Issuance Date..................................September 17, 1996
Group............................................................Group I
A-3
<PAGE> 49
- --------------------------------------------------------------------------------
P R O S P E C T U S
- --------------------------------------------------------------------------------
AT&T UNIVERSAL CARD MASTER TRUST
ASSET BACKED CERTIFICATES
AT&T UNIVERSAL FUNDING CORP.
TRANSFEROR
AT&T UNIVERSAL CARD SERVICES CORP.
SERVICER
---------------------
AT&T Universal Funding Corp. ("AT&T Universal Funding"), as transferor (in
such capacity, the "Transferor"), may sell from time to time one or more series
(each, a "Series") of asset backed certificates (the "Certificates") evidencing
undivided interests in certain assets of the AT&T Universal Card Master Trust
(the "Trust"), which was created pursuant to a pooling and servicing agreement
(the "Pooling and Servicing Agreement") among AT&T Universal Funding, as
Transferor, AT&T Universal Card Services Corp. ("UCS"), as servicer (in such
capacity, the "Servicer"), and Bankers Trust Company, as trustee (the
"Trustee"). The property of the Trust includes, among other things, the
Transferor's ownership interest in receivables as described herein (such
interest in receivables, the "Receivables") that are generated from time to time
in a portfolio of consumer revolving credit card accounts (the "Accounts") owned
by Universal Bank, N.A. ("Universal Bank") and Columbus Bank and Trust Company
("CB&T"). The Receivables in the Accounts are first sold by Universal Bank and
CB&T to UCS, then sold by UCS to AT&T Universal Funding and, finally,
transferred by AT&T Universal Funding to the Trust as more fully described
herein.
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and described in the related
prospectus supplement (each, a "Prospectus Supplement"). Each Series will
consist of one or more classes of Certificates (each, a "Class"). Each
Certificate will represent an undivided interest in certain assets of the Trust
and the interest of the holders of each Class or Series will include the right
to receive a varying percentage of each month's collections with respect to the
Receivables 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. A Series offered
hereby (or any Class within such Series) may be entitled to the benefits of a
cash collateral account, spread account, collateral interest, letter of credit,
surety bond, insurance policy or other form of credit 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 of payment to 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 offered hereby will be rated in
one of the four highest categories by at least one nationally recognized
statistical rating organization.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE 17 HEREIN AND IN THE RELATED
PROSPECTUS SUPPLEMENT.
---------------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, UNIVERSAL BANK, CB&T,
UCS, THE SERVICER OR AT&T CORP. OR ANY AFFILIATE OF ANY THEREOF. NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
Certificates may be sold by the Transferor 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 the Transferor 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 the Transferor associated with the issuance and distribution of such
Certificates. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OF ANY
SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
---------------------
THE DATE OF THIS PROSPECTUS IS MAY 5, 1997
<PAGE> 50
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<PAGE> 51
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT................... 2
REPORTS TO CERTIFICATEHOLDERS........... 2
AVAILABLE INFORMATION................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE............................. 2
PROSPECTUS SUMMARY...................... 3
RISK FACTORS............................ 17
USE OF PROCEEDS......................... 24
THE TRUST............................... 24
THE CREDIT CARD BUSINESS OF AT&T
UNIVERSAL CARD SERVICES CORP. ........ 25
General............................... 25
The Accounts.......................... 26
Additional Accounts................... 26
Billing and Payments.................. 27
Collection of Delinquent Accounts..... 29
Interchange........................... 30
AT&T UNIVERSAL CARD SERVICES CORP. ..... 30
AT&T UNIVERSAL FUNDING CORP. ........... 30
UNIVERSAL BANK, N.A. ................... 30
COLUMBUS BANK AND TRUST COMPANY......... 31
THE ACCOUNTS............................ 31
DESCRIPTION OF THE
CERTIFICATES.......................... 32
General............................... 32
Book-Entry Registration............... 32
Definitive Certificates............... 35
Interest.............................. 35
Principal............................. 36
Pay Out Events and Reinvestment
Events............................. 37
Servicing Compensation and Payment of
Expenses........................... 38
THE POOLING AND SERVICING AGREEMENT
GENERALLY............................. 38
Conveyance of Receivables............. 38
Representations and Warranties........ 39
The Transferor Certificates;
Additional Transferors............. 41
Additions of Accounts or Participation
Interests.......................... 42
Removal of Accounts................... 42
Discount Option....................... 43
Premium Option........................ 43
Indemnification....................... 44
Collection and Other Servicing
Procedures......................... 44
New Issuances......................... 45
Collection Account.................... 46
Allocations........................... 47
Groups of Series...................... 48
Reallocations Among Certificates of
Different Series within a
Reallocation Group................. 48
Sharing of Excess Finance Charge
Collections Among Excess Allocation
Series............................. 51
Shared Principal Collections.......... 51
Paired Series......................... 52
Special Funding Account............... 52
Funding Period........................ 53
Defaulted Receivables; Rebates and
Fraudulent Charges................. 53
Credit Enhancement.................... 53
Interest Rate Swaps and Related Caps,
Floors and Collars................. 55
Servicer Covenants.................... 56
Certain Matters Regarding the
Servicer........................... 56
Servicer Default...................... 56
Evidence as to Compliance............. 57
Amendments............................ 58
List of Certificateholders............ 58
The Trustee........................... 59
DESCRIPTION OF THE PURCHASE
AGREEMENTS............................ 59
Funding Purchase Agreement............ 59
UCS Purchase Agreements............... 60
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES........................... 61
Transfer of Receivables............... 61
Certain Matters Relating to
Insolvency......................... 62
Consumer Protection Laws.............. 64
Proposed Legislation.................. 65
Recent Litigation..................... 65
TAX MATTERS............................. 65
Federal Income Tax Consequences --
General............................ 65
Federal Income Tax Consequences --
United States Investors............ 66
Federal Income Tax Consequences --
Non-United States Investors........ 68
State and Local Tax Consequences...... 69
ERISA CONSIDERATIONS.................... 69
PLAN OF DISTRIBUTION.................... 71
FOR FLORIDA RESIDENTS................... 72
LEGAL MATTERS........................... 72
INDEX OF DEFINED TERMS.................. 73
</TABLE>
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<PAGE> 52
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to any Series 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 Rate (or method of
determining the Certificate Rate) of each such Class; (c) the expected date or
dates on which the Invested Amount with respect to each such Class will have
been paid to the holders of the Certificates of such Class; (d) the extent to
which any Class within a Series is subordinated to any other Class of such
Series or any other Series; (e) the Distribution Dates for the respective
Classes; (f) relevant financial information with respect to the Receivables; (g)
additional information with respect to any Series Enhancement relating to such
Series; and (h) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual unaudited reports, containing information concerning the
Trust and prepared by the Servicer, will be sent on behalf of the Trust to Cede
& Co. ("Cede"), as nominee of The Depository Trust Company ("DTC") and
registered holder of the Certificates pursuant to the Pooling and Servicing
Agreement. Such reports will be made available by DTC and its participants to
the Certificateholders in accordance with the rules, regulations and procedures
creating and affecting DTC. See "Series Provisions -- Reports" in the applicable
Prospectus Supplement and "The Pooling and Servicing Agreement
Generally -- Evidence as to Compliance". Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Pooling and Servicing Agreement does not require the sending of,
and the Transferor does not intend to send, any of its financial reports to the
Certificateholders or to the owners of beneficial interests in the Certificates
("Certificate Owners").
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") with respect to
the Certificates offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and amendments thereof and
exhibits thereto, which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and amendments thereof and
exhibits thereto may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Servicer will file with the Commission such periodic reports, if any,
with respect to the 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. In addition, the Commission maintains a public access
site on the Internet through the World Wide Web at which site reports, proxy and
information statements and other information regarding registrants, including
all electronic filings, may be viewed. The Internet address of the Commission's
World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
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 offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document 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 in any other subsequently filed document which
also 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 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 AT&T Universal Card Services Corp., 8787 Baypine Road,
Jacksonville, Florida 32256, Attention: Thomas Donahue. Telephone requests for
such copies should be directed to Thomas Donahue (904) 954-7500.
2
<PAGE> 53
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Index of Defined
Terms for the location herein of the definitions of certain capitalized terms
used herein. Unless the context requires otherwise, certain capitalized terms,
when used herein and in any accompanying Prospectus Supplement, relate only to
the particular Series being offered by such Prospectus Supplement.
Issuer..................... AT&T Universal Card Master Trust (the "Trust"). The
Trust, as a master trust, is expected to issue
series of Certificates (each, a "Series") from
time to time. The assets of the Trust are
expected to change over the life of the Trust as
certain interests in receivables in revolving
credit card accounts and related assets are
included in the Trust or removed therefrom and as
certain receivables in accounts included in the
Trust are charged-off or removed. See "The
Trust," "Risk Factors -- Addition of Trust
Assets," "The Pooling and Servicing Agreement
Generally -- Addition of Accounts or
Participation Interests" and "-- Removal of
Accounts."
Servicer................... AT&T Universal Card Services Corp. ("UCS"), a
Delaware corporation, as servicer (in such
capacity, the "Servicer"). UCS is a wholly owned
subsidiary of AT&T Corp. ("AT&T").
Trustee.................... Bankers Trust Company (the "Trustee"), a New York
banking corporation.
Account Owners............. Universal Bank, N.A. ("Universal Bank"), a national
banking association and an indirect, wholly owned
subsidiary of UCS, and Columbus Bank and Trust
Company ("CB&T"), a state-chartered bank
organized under the laws of the State of Georgia,
are the owners of the Accounts (as defined
herein). In the future, different sellers of
credit card receivables to UCS, the Transferor or
any Additional Transferor (as defined herein)
pursuant to a receivables purchase agreement
substantially similar to the UCS Purchase
Agreements may be "Account Owners" for purposes
of the Pooling and Servicing Agreement.
Transferor................. AT&T Universal Funding Corp. ("AT&T Universal
Funding"), a Delaware corporation and a wholly
owned subsidiary of UCS, as transferor (in such
capacity, the "Transferor"). Subject to certain
conditions described herein under "The Pooling
and Servicing Agreement Generally -- The
Transferor Certificates; Additional Transferors,"
AT&T Universal Funding may designate one or more
of its affiliates to transfer Receivables or
Participation Interests (as defined herein) to
the Trust from time to time, whereupon any such
affiliate will become a "Transferor" for purposes
of the Pooling and Servicing Agreement.
Trust Assets............... The assets of the Trust (the "Trust Assets")
include the interest of UCS in certain
receivables arising under the Accounts, as
conveyed to AT&T Universal Funding and as more
fully described in "The Accounts" (such interest
in receivables being herein referred to as the
"Receivables"), including the proceeds thereof,
monies on deposit in certain accounts of the
Trust for the benefit of Certificateholders,
Participation Interests (as defined herein), if
any, and any Series Enhancement (as defined
herein) issued with respect to a particular
Series (the drawing on or payment of any Series
Enhancement for the benefit of a Series or Class
of Certificateholders will not be available to
the Certificateholders of any other Series or
Class), certain rights of
3
<PAGE> 54
the Transferor to receive Recoveries (as defined
herein) and Interchange (as defined herein).
"Series Enhancement" means, with respect to any
Series or Class of Certificates, any Credit
Enhancement (as defined herein), interest rate
swap agreement, interest rate cap agreement or
other similar arrangement for the benefit of
Certificateholders of such Series or Class. The
subordination of any Series or Class of
Certificates to another Series or Class of
Certificates shall be deemed to be a Series
Enhancement. "Participation Interests" means
participations representing undivided interests
in a pool of assets primarily consisting of
revolving credit card receivables, consumer loan
receivables, charge card receivables and other
self-liquidating financial assets.
To the extent provided in any Supplement (as
defined herein), or in an amendment to the
Pooling and Servicing Agreement, all or a portion
of the Receivables or Participation Interests
conveyed to the Trust and all collections
received with respect thereto may be allocated to
one or more Series or groups of Series (each a
"Group") as long as the Rating Agency Condition
(as defined herein) shall have been satisfied
with respect to such allocation, and the Servicer
shall have delivered an officer's certificate to
the Trustee to the effect that the Servicer
reasonably believes such allocation will not have
an Adverse Effect (as defined herein).
The Certificates........... The Certificates will be issued in Series, each of
which will consist of one or more Classes. The
specific terms of a Series or Class will be
established as described herein under "The
Pooling and Servicing Agreement Generally -- New
Issuances." However, while the specific terms of
any Series or Class offered hereby will be
described in the related Prospectus Supplement,
the terms of such Series or Class will not be
subject to prior review by, or consent of, the
holders of the Certificates of any previously
issued Series.
The Certificates of a Series offered hereby will
generally be available for purchase in minimum
denominations of $1,000 and in integral multiples
thereof, and will only be available in book-entry
form except in certain limited circumstances as
described herein under "Description of the
Certificates -- Definitive Certificates."
Interests in the Trust Assets will be allocated
among (a) the Certificateholders, including
Credit Enhancers (as defined herein) holding
uncertificated subordinated interests (each, an
"Enhancement Invested Amount"), of a particular
Series (the "Certificateholders' Interest"), (b)
the Certificateholders (including such holders of
Enhancement Invested Amounts) of other Series, if
any, and (c) the interest of the Transferor and
its permitted transferees (the "Transferor's
Interest"), as described below. The Invested
Amount of a Series offered hereby will, except as
otherwise provided herein and except with respect
to Certificates with a variable principal amount,
remain fixed at the aggregate initial principal
amount of the Certificates of such Series. The
Certificateholders' Interest of a Series will
include the right to receive (but only to the
extent needed to make required payments under the
Pooling and Servicing Agreement, including the
related Supplement, and subject to any
reallocation of such amounts if the related
Supplement so provides) varying percentages of
collections of Finance Charge Receivables and
Principal Receivables and will be
4
<PAGE> 55
allocated a varying percentage of the Receivables
in Defaulted Accounts with respect to each
calendar month (each, a "Monthly Period"). See
"Description of the Certificates -- Interest" and
"-- Principal." If the Certificates of a Series
offered hereby include more than one Class of
Certificates, the collections allocable to the
Invested Amount of such Series may be further
allocated among each Class in such Series as
described in the related Prospectus Supplement.
The Transferor's
Interest................... The Transferor's Interest at any time represents
the right to the Trust Assets in excess of the
Certificateholders' Interest and Enhancement
Invested Amounts of all Series then outstanding.
The principal amount of the Transferor's Interest
(the "Transferor Amount") will fluctuate as the
amount of the Principal Receivables held by the
Trust changes from time to time. In addition, the
Transferor intends to cause the issuance of
Series from time to time and any such issuance
will have the effect of decreasing the Transferor
Amount to the extent of the initial Invested
Amount of such Series. See "Risk Factors --
Issuance of New Series."
The level of the "Required Transferor Amount,"
which equals the sum of the Series Required
Transferor Amounts for each outstanding Series,
is intended to enable the Transferor's Interest
to absorb fluctuations in the amount of Principal
Receivables held by the Trust from time to time
(due to, among other things, seasonal purchase
and payment habits of cardmembers or adjustments
in the amount of Principal Receivables because of
rebates, refunds, fraudulent charges or
otherwise). See "Risk Factors -- Generation of
Additional Receivables; Dependency on Cardmember
Repayments" and "The Pooling and Servicing
Agreement Generally -- Defaulted Receivables;
Rebates and Fraudulent Charges."
Issuance of New Series..... The Pooling and Servicing Agreement authorizes the
Trustee to issue three types of certificates: (a)
one or more Series of Certificates, (b) a
certificate evidencing the Transferor's Interest
in the Trust retained by the Transferor (the
"Transferor Certificate"), which Transferor
Certificate will be held by the Transferor, and
(c) certificates ("Supplemental Certificates")
held by transferees of a portion of the
Transferor Certificate. The Transferor
Certificate and any Supplemental Certificates are
collectively referred to as the "Transferor
Certificates." The Pooling and Servicing
Agreement provides that, pursuant to any one or
more supplements to the Pooling and Servicing
Agreement (each, a "Supplement"), the Transferor
may cause the Trustee without the consent of the
Certificateholders to issue one or more new
Series and accordingly cause a reduction in the
Transferor's Interest represented by the
Transferor Certificates. There can be no
assurance that the terms of any Series might not
have an impact on the timing or amount of
payments received by a Certificateholder of
another Series. Under the Pooling and Servicing
Agreement, the Transferor may define, with
respect to any Series, the Principal Terms of
such Series. See "The Pooling and Servicing
Agreement Generally -- New Issuances." The
Transferor may offer any Series to the public or
other investors under a disclosure document (a
"Disclosure Document"), which will consist of a
Prospectus Supplement in the case of a Series
offered hereby, in transactions either registered
under the Securities Act or exempt from
5
<PAGE> 56
registration thereunder, directly or through one
or more underwriters or placement agents, in
fixed-price offerings or in negotiated
transactions or otherwise. See "Plan of
Distribution."
A new Series may be issued only upon satisfaction
of the conditions described herein under
"Description of the Certificates -- New
Issuances" including, among others, that (a) such
issuance will satisfy the Rating Agency Condition
(as defined herein) and (b) the Transferor shall
have delivered to the Trustee and certain
providers of Series Enhancement a certificate of
an authorized representative to the effect that,
in the reasonable belief of the Transferor, such
issuance will not, based on the facts known to
such representative at the time of such
certification, have an Adverse Effect.
The Accounts............... The Accounts generally consist of nonpremium and
premium VISA(R)* and MasterCard(R)* consumer
revolving credit card accounts originated by an
Account Owner and designated from time to time by
UCS (or an affiliate thereof), that, in each
case, meet the criteria provided in the Pooling
and Servicing Agreement for an Eligible Account
(as defined herein), but do not include any
Removed Accounts (as defined herein). The
Accounts are not being sold or transferred to the
Trust and will continue to be controlled and held
by the applicable Account Owner unless
transferred as described herein. See "The Credit
Card Business of AT&T Universal Card Services
Corp." and "Description of the Purchase
Agreements."
The Account Owners have each entered into a
receivables purchase agreement (each, a "UCS
Purchase Agreement") with UCS. Pursuant to the
applicable UCS Purchase Agreement, each Account
Owner from time to time sells to UCS all of its
right, title and interest in the receivables in
the Accounts, other than (a) certain excluded
receivables ("Excluded Receivables") related to
the Accounts and (b) an undivided interest in
such receivables other than Excluded Receivables
retained by the applicable Account Owner (the
"Account Owner Retained Interest"). Currently,
Excluded Receivables are amounts owing to an
Account Owner resulting from use of the
applicable credit card to charge telephone calls
through a direct arrangement between the Account
Owners and AT&T (and not through VISA or
MasterCard). Collections received with respect to
any Monthly Period are first applied as
collections on the Excluded Receivables.
Currently, if payment on an Excluded Receivable
is not received when due, such Excluded
Receivable will convert to a delinquent
Receivable. The Account Owner Retained Interest
from any Monthly Period from a particular Account
Owner will be equal to the average daily
principal balance of the receivables in the
Accounts owned by such Account Owner for such
Monthly Period less the Excluded Receivables for
such Monthly Period multiplied by a fraction (not
less than zero) the numerator of which is
$25,000,000 less the amount of Excluded
Receivables for such Monthly Period and the
denominator of which is the average daily balance
of principal receivables in such Accounts for
such Monthly Period less the Excluded Receivables
for such Monthly Period. The receivables in the
Accounts other than the Excluded
- ---------------
*VISA and MasterCard are registered trademarks of VISA USA, Inc. ("VISA") and
MasterCard International Incorporated ("MasterCard"), respectively.
6
<PAGE> 57
Receivables and excluding each Account Owner
Retained Interest are herein referred to as the
"Receivables." The Account Owner Retained
Interests, as of September 30, 1995, aggregated
less than 1% of the principal receivables, other
than Excluded Receivables, in the Accounts. The
amount of and the determination of what
constitutes Excluded Receivables and the Account
Owner Retained Interest are subject to change at
any time in the future. Pursuant to each UCS
Purchase Agreement, the applicable Account Owner
from time to time sells to UCS all of its right,
title and interest in the Receivables arising in
the Accounts owned by such Account Owner whether
such Receivables are then existing or thereafter
created and such Account Owner is obligated to
sell to UCS the Receivables arising in Additional
Accounts (as defined herein) from time to time.
In addition, each Account Owner has assigned to
UCS its rights to Recoveries and Interchange
allocable to the Receivables. UCS may in the
future enter into a similar agreement with
additional Account Owners.
UCS and the Transferor have entered into a
receivables purchase agreement (together with any
supplements thereto, the "Funding Purchase
Agreement"). Pursuant to the Funding Purchase
Agreement, UCS from time to time sells to the
Transferor all of its right, title and interest
in the Receivables now existing and hereafter
created and arising in the Accounts and UCS is
obligated to sell to the Transferor the
Receivables arising in Additional Accounts (as
defined herein) from time to time. In addition,
UCS assigns to the Transferor its rights to
Recoveries and Interchange or its approximate
equivalent in the form of Discount Option
Receivables (as defined herein) allocable to the
Receivables. See "Description of the Purchase
Agreements." The Transferor may in the future
enter into a similar agreement with additional
Account Owners.
The Transferor in turn, from time to time,
transfers such Receivables, including the right
to Recoveries and Interchange, to the Trust
pursuant to the Pooling and Servicing Agreement.
The Transferor conveyed to the Trust Receivables
existing on July 31, 1995 (the "Initial Cut-Off
Date") in certain VISA and MasterCard consumer
revolving credit card accounts (the "Initial
Accounts") that met the criteria provided in the
Pooling and Servicing Agreement for an Eligible
Account as of the Initial Cut-Off Date and will
convey Receivables arising in the Initial
Accounts from time to time thereafter until the
termination of the Trust. In addition, pursuant
to the Pooling and Servicing Agreement, the
Transferor expects (subject to certain
limitations and conditions), and in some
circumstances will be obligated, to have
Additional Accounts designated, the Receivables
of which will be included in the Trust or, in
lieu thereof or in addition thereto, to include
Participation Interests in the Trust. Additional
Accounts include New Accounts (as defined herein)
and Aggregate Addition Accounts (as defined
herein). The Transferor will convey to the Trust
all Receivables in Additional Accounts, whether
such Receivables are then existing or thereafter
created. The addition to the Trust of Receivables
in Aggregate Addition Accounts or Participation
Interests will be subject to certain conditions,
including, among others, that (a) unless such
addition is a required addition or a designation
of New Accounts, such addition will satisfy the
Rating Agency Condition
7
<PAGE> 58
and (b) the Transferor shall have delivered to
the Trustee a certificate of an authorized
officer to the effect that, in the reasonable
belief of the Transferor, such addition will not
have an Adverse Effect. The Transferor will also
have the right, in certain circumstances, to
remove from the Trust all Receivables of certain
designated Accounts (the "Removed Accounts"). See
"The Pooling and Servicing Agreement
Generally -- Additions of Accounts or
Participation Interests" and "-- Removal of
Accounts."
The Receivables............ The Receivables include (a) periodic finance
charges, cash advance fees, administrative fees,
late charges, credit insurance premiums, annual
membership fees and the interest portion of any
Participation Interests as determined pursuant to
the applicable Supplement (the "Finance Charge
Receivables"), and (b) amounts charged by
cardmembers for merchandise and services, amounts
advanced to cardmembers as cash advances and the
principal portion of any Participation Interests
as determined pursuant to the applicable
Supplement (the "Principal Receivables").
Recoveries attributed to charged-off Receivables
(the "Recoveries") will be treated as collections
of Finance Charge Receivables. In addition,
certain Interchange or its equivalent in the form
of Discount Option Receivables attributed to
cardmember charges for merchandise and services
in the Accounts will be treated as collections of
Finance Charge Receivables. See "The Credit Card
Business of AT&T Universal Card Services
Corp. -- Interchange."
All new Receivables arising in the Accounts during
the term of the Trust will automatically be sold
by the Account Owner to UCS and by UCS to the
Transferor and then transferred by the Transferor
to the Trust. Accordingly, the amount of
Receivables will fluctuate from day to day as new
Receivables are generated and as existing
Receivables are collected, charged-off as
uncollectible or otherwise adjusted.
Clearance and Settlement... Unless otherwise provided in the related Prospectus
Supplement, Certificateholders may elect to hold
their Certificates through any of DTC (in the
United States) or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System ("Euroclear")
(in Europe). See "Description of the
Certificates -- Book-Entry Registration."
Interest................... Interest will accrue on the Invested Amount or
outstanding principal amount of the Certificates
of a Series or Class offered hereby at the per
annum rate either specified in or determined in
the manner specified in the related Prospectus
Supplement. Except as otherwise provided herein,
collections of Finance Charge Receivables and
certain other amounts allocable to the Invested
Amount of a Series offered hereby will generally
be used to make interest payments to
Certificateholders of such Series on each
Interest Payment Date with respect thereto;
provided that if an Early Amortization Period
commences with respect to such Series, thereafter
interest will be distributed to such
Certificateholders monthly on each Special
Payment Date (defined herein). If the Interest
Payment Dates for a Series or Class occur less
frequently than monthly, such collections or
other amounts (or the portion thereof allocable
to such Class) will be deposited in one or more
trust accounts (each, an "Interest Funding
Account") and used to make interest payments to
Certificateholders of such Series or Class on the
following Interest Payment Date with respect
thereto. If a Series has more than one Class of
Certificates,
8
<PAGE> 59
each such Class may have a separate Interest
Funding Account. See "Description of the
Certificates -- Interest."
Principal.................. The principal of the Certificates of each Series
offered hereby will be scheduled to be paid
either (a) in full on an expected date specified
in the related Prospectus Supplement (the
"Expected Final Payment Date"), in which case
such Series will have a Controlled Accumulation
Period as described below under "-- Controlled
Accumulation Period," or (b) in installments
commencing on a date specified in the related
Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series
will have a Controlled Amortization Period as
described below under "-- Controlled Amortization
Period." If a Series has more than one Class of
Certificates, each class may have a different
method of paying principal, Expected Final
Payment Date or Principal Commencement Date. The
payment of principal with respect to the
Certificates of a Series or Class may commence
earlier than the applicable Expected Final
Payment Date or Principal Commencement Date, and
the final principal payment with respect to the
Certificates of a Series or Class may be made
later than the applicable Expected Final Payment
Date or other expected date, if a Pay Out Event
occurs with respect to such Series or Class or
under certain other circumstances described
herein. See "Risk Factors -- Generation of
Additional Receivables; Dependency on Cardmember
Repayments" for a description of factors that may
affect the timing of principal payments on
Certificates. See "Description of the
Certificates -- Principal."
Revolving Period........... The Certificates of each Series offered hereby will
have a revolving period (the "Revolving Period")
that will commence on the date of issuance of the
related Series (the "Series Closing Date") or on
a date prior thereto specified in the related
Supplement and, for a Series offered hereby, the
related Prospectus Supplement (the "Series Cut-
Off Date") and continue until the earlier of (a)
the commencement of the Early Amortization Period
or Early Accumulation Period with respect to such
Series and (b) the date specified in the related
Prospectus Supplement as the end of the Revolving
Period with respect to such Series. If the
related Prospectus Supplement provides that a
Series is a Principal Sharing Series (as defined
herein), during the Revolving Period with respect
to such Series, collections of Principal
Receivables and certain other amounts otherwise
allocable to the Certificateholders' Interest of
such Series will be treated as Shared Principal
Collections and will be distributed to, or for
the benefit of, the Certificateholders of other
Principal Sharing Series or the holders of the
Transferor Certificates or deposited into the
Special Funding Account, as more fully described
in the related Prospectus Supplement. If the
related Prospectus Supplement provides that a
Series is not a Principal Sharing Series, during
the Revolving Period with respect to such Series,
collections of Principal Receivables and certain
other amounts otherwise allocable to the
Certificateholders' Interest of such Series will
be paid to the holders of the Transferor
Certificates or deposited into the Special
Funding Account, as more fully described in the
related Prospectus Supplement. See "Description
of the Certificates -- Principal," and "-- Pay
Out Events and Reinvestment Events" for a
discussion of the events that might lead to the
termina-
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tion of the Revolving Period with respect to a
Series prior to its scheduled date.
Controlled Accumulation
Period................... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period or, if so
specified in the related Prospectus Supplement,
an Early Accumulation Period commences with
respect to a Series offered hereby, the
Certificates of such Series will have a scheduled
accumulation period (the "Controlled Accumulation
Period") that will commence at the close of
business on the date or dates specified in or
determined as specified in such Prospectus
Supplement and continue until the earliest of (a)
the commencement of the Early Amortization Period
or, if so specified in the related Prospectus
Supplement, an Early Accumulation Period with
respect to such Series, (b) payment in full of
the Invested Amount, including the Enhancement
Invested Amount, if any, of the Certificates of
such Series, and (c) the series termination date
with respect to such Series (the "Series
Termination Date"). During the Controlled
Accumulation Period with respect to a Series,
collections of Principal Receivables and, if so
specified in the related Prospectus Supplement,
certain other amounts allocable to the
Certificateholders' Interest of such Series
(including Shared Principal Collections (as
defined herein), if any, allocable to such
Series) will be deposited on each Distribution
Date in a trust account established for the
benefit of the Certificateholders of such Series
(each, a "Principal Funding Account") and used to
make principal distributions to the
Certificateholders of such Series or any Class
thereof when due. The amount to be deposited in
the Principal Funding Account (the "Controlled
Deposit Amount") for any Series offered hereby on
any Distribution Date may, but will not
necessarily, be limited to an amount equal to an
amount specified in or determined as specified in
the related Prospectus Supplement (the
"Controlled Accumulation Amount") plus any
existing deficit controlled accumulation amount
arising from prior Distribution Dates. If the
Prospectus Supplement for a Series so specifies,
the amount to be deposited in the Principal
Funding Account on a Distribution Date may be a
variable amount. If a Series has more than one
Class of Certificates, each Class may have a
separate Principal Funding Account and Controlled
Accumulation Amount and the Controlled
Accumulation Period with respect to each Class
may commence on different dates. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to deposits of principal into such
Principal Funding Accounts.
Early 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 Reinvestment
Event (as defined herein) has occurred, until the
earliest of (a) the commencement of the Early
Amortization Period (if any), (b) payment in full
of the Invested Amount, including the Enhancement
Invested Amount, if any, of the Certificates of
such Series, and (c) the Series Termination Date
with respect to such Series (the "Early
Accumulation Period"), collections of Principal
Receivables and, if so specified in the related
Prospectus Supplement, certain other amounts
allocable to the Certificateholders' Interest of
such Series (including Shared Principal
Collections, if any, allocable to such
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<PAGE> 61
Series) will be deposited on each Distribution
Date in the Principal Funding Account and used to
make distributions of principal to the
Certificateholders of such Series or any Class
thereof on the Expected Final Payment Date. The
amount to be deposited in the Principal Funding
Account during the Early Accumulation Period will
not be limited to any Controlled Deposit Amount.
See "Description of the Certificates -- Pay Out
Events and Reinvestment Events" for a discussion
of the events which might lead to commencement of
an Early Accumulation Period.
Controlled Amortization
Period..................... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period commences
with respect to a Series offered hereby, the
Certificates of such Series will have an
amortization period (the "Controlled Amortization
Period") that will commence at the close of
business on the date specified in such Prospectus
Supplement and continue until the earliest of (a)
the commencement of the Early Amortization Period
with respect to such Series, (b) payment in full
of the Invested Amount, including the Enhancement
Invested Amount, if any, of the Certificates of
such Series and (c) the Series Termination Date
with respect to such Series. During the
Controlled Amortization Period with respect to a
Series, collections of Principal Receivables and
certain other amounts allocable to the
Certificateholders' Interest of such Series
(including Shared Principal Collections, if any,
allocable to such Series) will be used on each
Distribution Date to make principal distributions
to Certificateholders of such Series or any Class
thereof then scheduled to receive such
distributions. The amount to be distributed to
Certificateholders of any Series offered hereby
on any Distribution Date may, but will not
necessarily, be limited to an amount (the
"Controlled Distribution Amount") equal to an
amount (the "Controlled Amortization Amount")
specified in the related Prospectus Supplement
plus any existing deficit controlled amortization
amount arising from prior Distribution Dates. If
a Series has more than one Class of Certificates,
each Class may have a different Controlled
Amortization Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
such distributions.
Early Amortization
Period..................... During the period from the day on which a Pay Out
Event has occurred with respect to a Series to
the date on which the Invested Amount, including
the Enhancement Invested Amount, if any, of the
Certificates of such Series has been paid in full
or the related Series Termination Date has
occurred (the "Early Amortization Period"),
collections of Principal Receivables and certain
other amounts allocable to the
Certificateholders' Interest of such Series
(including Shared Principal Collections, if any,
allocable to such Series) will be distributed as
principal payments to the Certificateholders of
such Series monthly on each Distribution Date
beginning with the first Special Payment Date
with respect to such Series. During the Early
Amortization Period with respect to a Series,
distributions of principal to Certificateholders
will not be subject to any Controlled Deposit
Amount or Controlled Distribution Amount. In
addition, upon the commencement of the Early
Amortization Period with respect to a Series, any
funds on deposit in a Principal Funding Account
with respect to such Series will be paid to the
Certificateholders of the relevant Class or
Series on the first Special Payment Date with
respect
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<PAGE> 62
to such Series. See "Description of the
Certificates -- Pay Out Events and Reinvestment
Events" for a discussion of the events that might
lead to the commencement of the Early
Amortization Period with respect to a Series.
Allocations Among Series... Pursuant to the Pooling and Servicing Agreement,
during each Monthly Period, the Servicer is
required to first allocate to each Series
collections of Principal Receivables and Finance
Charge Receivables and the Defaulted Receivables
with respect to such Monthly Period based on the
Series Allocation Percentage (as defined herein).
See "The Pooling and Servicing Agreement
Generally -- Allocations." Subject to
reallocation among Series in a Reallocation
Group, such amounts allocated to each Series are
then further allocated within each Series to the
Certificateholders, any Series Enhancement and
the holders of the Transferor Certificates
pursuant to the terms of the related Supplement.
Sharing of Excess Finance
Charge Collections Among
Excess Allocation
Series................... If the Prospectus Supplement for a Series so
provides, any Series may be designated as a
Series that shares with other Series similarly
designated, subject to certain limitations,
certain Excess Finance Charge Collections (as
defined herein) allocable to any such Series (an
"Excess Allocation Series"). Subject to certain
limitations described under "The Pooling and
Servicing Agreement Generally -- Sharing of
Excess Finance Charge Collections Among Excess
Allocation Series," collections of Finance Charge
Receivables and certain other amounts allocable
to the Certificateholders' Interest of any Series
that is designated as an Excess Allocation Series
in excess of the amounts necessary to make
required payments with respect to such Series
(including payments to the provider of any
related Series Enhancement) will be applied to
cover shortfalls with respect to amounts payable
from collections of Finance Charge Receivables
allocable to any other Series designated as an
Excess Allocation Series, in each case pro rata
based upon the Invested Amount of each such
Series that has such a shortfall with respect to
the related Monthly Period. See "The Pooling and
Servicing Agreement Generally -- Sharing of
Excess Finance Charge Collections Among Excess
Allocation Series."
Shared Principal
Collections................ If the Prospectus Supplement for a Series so
provides, any Series may be designated as a
Series that shares with other Series similarly
designated, subject to certain limitations,
certain excess collections of Principal
Receivables and certain other amounts allocable
to the Certificateholders' Interest of such
Series (a "Principal Sharing Series"). To the
extent that collections of Principal Receivables
and certain other amounts that are allocated to
the Certificateholders' Interest of any Principal
Sharing Series are not needed to make payments to
the Certificateholders of such Series or required
to be deposited in a Principal Funding Account
for such Series, such collections may be applied
to cover principal payments due to or for the
benefit of Certificateholders of another
Principal Sharing Series. Any such reallocation
will not result in a reduction in the Invested
Amount of the Series to which such collections
were initially allocated. See "The Pooling and
Servicing Agreement Generally -- Shared Principal
Collections."
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<PAGE> 63
Reallocations Among Series
in a Reallocation Group.... If so specified in the related Prospectus
Supplement, the Certificates of a Series may be
included in a Group that will be subject to
reallocations of collections of Finance Charge
Receivables and other amounts or obligations
among the Series in such Group (a "Reallocation
Group"). Collections of Finance Charge
Receivables allocable to each Series in a
Reallocation Group will be aggregated and made
available for certain required payments for all
Series in such Group. Consequently, the issuance
of new Series in such Group may have the effect
of reducing or increasing the amount of
collections of Finance Charge Receivables
allocable to the Certificates of other Series in
such Group. See "Risk Factors -- Issuance of New
Series."
Paired Series.............. If so specified in the related Prospectus
Supplement, a Series of Certificates may be
issued (a "Paired Series") that is paired with
one or more other Series or a portion of one or
more other Series previously issued by the Trust
(a "Prior Series"). A Paired Series may be issued
at or after the commencement of a Controlled
Accumulation Period or Controlled Amortization
Period for a Prior Series. As the Invested Amount
of the Prior Series having a Paired Series is
reduced, the Invested Amount of the Paired Series
will increase by an equal amount. Upon payment in
full of such Prior Series, the Invested Amount of
the Paired Series will be equal to the amount of
the Invested Amount paid to Certificateholders of
such Prior Series. If a Pay Out Event or
Reinvestment Event occurs with respect to the
Prior Series having a Paired Series or with
respect to the Paired Series when such Prior
Series is in a Controlled Amortization Period or
Controlled Accumulation Period, the percentage
specified in the applicable Prospectus Supplement
for the allocation of collections of Principal
Receivables to the Certificateholders' Interest
of such Prior Series (the "Principal Allocation
Percentage") and the Series Allocation Percentage
for the Prior Series and the Principal Allocation
Percentage and the Series Allocation Percentage
for the Paired Series will be reset as specified
in the related Prospectus Supplement and the
Controlled Amortization Period, Controlled
Accumulation Period, Early Amortization Period or
Early Accumulation Period for such Prior Series
could be lengthened.
Special Funding Account.... If on any date the Transferor Amount is less than
or equal to the Required Transferor Amount, the
Servicer shall not distribute to the holders of
the Transferor Certificates any Collections of
Principal Receivables that otherwise would be
distributed to the holders of the Transferor
Certificates, but shall deposit such funds in the
Special Funding Account.
Funds on deposit in the Special Funding Account
will be withdrawn and paid to the holders of the
Transferor Certificates on any Distribution Date
to the extent that, after giving effect to such
payment, the Transferor Amount exceeds the
Required Transferor Amount on such date;
provided, however, that if a Controlled
Accumulation Period, Early Accumulation Period,
Controlled Amortization Period or Early
Amortization Period commences with respect to any
Series, any funds on deposit in the Special
Funding Account will be released and treated as
Collections of Principal Receivables to the
extent needed to cover principal payments due to
or for the benefit of such Series.
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<PAGE> 64
Funding Period............. The Prospectus Supplement relating to a Series of
Certificates may specify that for a period
beginning on the Series Closing Date and ending
on a specified date before the commencement of a
Controlled Amortization Period or Controlled
Accumulation Period with respect to such Series
(the "Funding Period"), the aggregate amount of
Principal Receivables in the Trust allocable to
such Series may be less than the aggregate
principal amount of the Certificates of such
Series and an amount equal to the amount of such
deficiency (the "Pre-Funding Amount") will be
held in a trust account established with the
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
Invested Amounts of other Series issued by the
Trust. The related Prospectus Supplement will
specify the initial Invested Amount on the Series
Closing Date with respect to such Series, the
aggregate principal amount of the Certificates of
such Series (the "Full Invested Amount") and the
date by which the Invested Amount is expected to
equal the Full Invested Amount. The Invested
Amount will increase as Principal Receivables are
delivered to the Trust or as the Invested Amounts
of other Series of the Trust are reduced. The
Invested Amount may also decrease due to the
occurrence of a Pay Out Event 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 Transferors to
the extent of any increases in the Invested
Amount. In the event that the Invested Amount
does not for any reason equal the Full Invested
Amount 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 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 Eligible 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......... The credit enhancement (the "Credit Enhancement")
with respect to a Series offered hereby may
include a letter of credit, a cash collateral
account, spread account, a collateral interest, a
surety bond, an insurance policy, guaranteed rate
agreement, maturity liquidity facility, tax
protection agreement or any other form of credit
enhancement described in the related Prospectus
Supplement. Credit Enhancement may also be
provided to a Class or Classes of a Series or to
a Series by subordination provisions which
require that distributions of principal or
interest be made with respect to the Certificates
of such Class or Classes or such Series before
distributions are made to one or more other
Classes of such Series or to another Series (if
the Supplement for such Series so provides).
The type, characteristics and amount of the Credit
Enhancement with respect to any Series will be
determined based on several factors,
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<PAGE> 65
including the characteristics of the Receivables
and Accounts underlying or comprising the Trust
Assets as of the Series Closing Date with respect
thereto, and will be established on the basis of
requirements of each applicable Rating Agency.
The terms of the Credit Enhancement with respect
to any Series offered hereby will be described in
the related Prospectus Supplement. If so
specified in the Prospectus Supplement for a
Series, the level of Credit Enhancement for such
Series may be reduced if such reduction satisfies
the Rating Agency Condition. See "The Pooling and
Servicing Agreement Generally -- Credit
Enhancement" and "Risk Factors -- Limited Nature
of Rating."
Servicing.................. UCS, in its capacity as Servicer under the Pooling
and Servicing Agreement, is the initial Servicer
for the Trust. The Servicer is responsible for
servicing, managing and making collections on the
Receivables. Subject to certain exceptions
provided by the Rating Agencies described under
"Risk Factors -- Characteristics as a Sale;
Insolvency and Receivership Risks," which would
permit the Servicer to make deposits on a monthly
basis, the Servicer will deposit any collections
on the Receivables in a Monthly Period into the
Collection Account within two business days of
the Date of Processing to the extent such
collections are allocable to the
Certificateholders' Interest of any Series and
are required to be deposited into an account for
the benefit of, or distributed to, the
Certificateholders of any Series or the provider
of any Series Enhancement. The "Distribution
Date" for a Series will be the seventeenth day of
each month (or, if such day is not a business
day, the next business day) or such other date
specified in the Supplement for a Series. The
"Transfer Date" for a Series will be the business
day preceding each Distribution Date or such
other date specified in the Supplement for a
Series. On the earlier of (a) the second business
day following the Date of Processing and (b) the
day on which the Servicer deposits any
collections into the Collection Account, subject
to certain exceptions described herein, the
Servicer will pay to the holders of the
Transferor Certificates their allocable portion
of any collections then held by the Servicer. The
"Date of Processing" is the business day on which
a record of any transaction is first recorded
pursuant to the Servicer's data processing
procedures. The "Determination Date" for a Series
will be the earlier of the third business day and
the fifth calendar day (or if the fifth calendar
day is not a business day, the immediately
preceding business day) preceding the seventeenth
day of each month, or such other date specified
in the Supplement for a Series. On each
Determination Date, the Servicer will calculate
the amounts to be allocated to the
Certificateholders of each Class or Series and
the holders of the Transferor Certificates as
described herein in respect of collections of
Receivables received with respect to the
preceding Monthly Period.
In certain limited circumstances, UCS may resign or
be removed as Servicer, in which event either the
Trustee or, so long as it meets certain
eligibility standards set forth in the Pooling
and Servicing Agreement, a third-party servicer
may be appointed as successor servicer. UCS is
permitted to delegate certain of its duties as
Servicer to any of its affiliates or, subject to
certain conditions, to third party service
providers, but any such delegation will not
relieve the Servicer of its liability and
responsibility with respect to such duties under
the
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<PAGE> 66
Pooling and Servicing Agreement or any
Supplement. In addition, UCS may assign all or
part of its obligations and duties as Servicer
under the Pooling and Servicing Agreement to an
affiliate of UCS as long as UCS shall have fully
guaranteed the performance of such obligations
and duties under the Pooling and Servicing
Agreement. The Servicer will receive servicing
fees payable with respect to each Series offered
hereby as servicing compensation from the Trust.
See "Description of the Certificates -- Servicing
Compensation and Payment of Expenses."
Income Tax Withholding..... Interest on the Certificates held by non-U.S.
persons will be subject to United States
withholding tax unless the holder complies with
applicable IRS identification requirements.
Interest on the Certificates held by U.S. persons
will be subject to backup withholding unless the
holder complies with applicable IRS
identification requirements.
Tax Status................. Except to the extent otherwise provided in the
related Prospectus Supplement, in the opinion of
special tax counsel for the Transferor and the
Trust, the Certificates of each Series offered
hereby are properly characterized as debt for
federal income tax purposes. Each
Certificateholder, by acceptance of a Certificate
of such a Series, will agree to treat the
Certificates of such Series as debt of the
Transferor for federal, state and local income
and franchise tax purposes. See "Tax Matters" for
additional information concerning the application
of federal income tax laws.
ERISA Considerations....... See "ERISA Considerations" herein and in the
applicable Prospectus Supplement.
Certificate Rating......... It will be a condition to the issuance of each
Series of Certificates or Class thereof offered
pursuant to this Prospectus and the related
Prospectus Supplement that they be rated in one
of the four highest applicable rating categories
by at least one nationally recognized statistical
rating organization selected by the Transferor,
as specified in the applicable Supplement (each
rating agency rating any Series, a "Rating
Agency"). The rating or ratings applicable to the
Certificates of each such Series or Class thereof
will be set forth in the related Prospectus
Supplement. A security rating should be evaluated
independently of similar ratings of different
types of securities. 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 -- Limited Nature
of Rating."
Listing.................... If so specified in the Prospectus Supplement
relating to a Series, application will be made to
list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg
Stock Exchange or any other specified exchange.
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<PAGE> 67
RISK FACTORS
Investors should consider, among other things, the following 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 can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide
Certificateholders of any Series offered hereby with liquidity of investment or
that it will continue for the life of such Certificates.
Characteristics as a Sale; Insolvency and Receivership Risks. Each Account
Owner represents and warrants in the applicable UCS Purchase Agreement that the
transfer of all Receivables pursuant thereto to UCS is a valid sale and
assignment of such Receivables from such Account Owner to UCS. The Account
Owners and UCS will file appropriate Uniform Commercial Code ("UCC") financing
statements to evidence this sale and perfect UCS's right, title and interest in
such Receivables. Nevertheless, if the transfer of Receivables by an Account
Owner to UCS is deemed to create a security interest under the UCC, a tax or
government lien or other nonconsensual lien on property of such Account Owner
arising before Receivables come into existence may have priority over UCS's
interest in such Receivables (and therefore the Transferor's and the Trust's
interest in such Receivables) and, if the Federal Deposit Insurance Corporation
("FDIC") were appointed receiver of either Universal Bank or CB&T, the
receiver's administrative expenses may also have priority over UCS's security
interest in the Receivables transferred to UCS by such party (and therefore the
Transferor's and the Trust's ownership or security interest in such
Receivables). If a conservatorship or receivership proceeding were to be
commenced involving an Account Owner, and the conservator or receiver of such
Account Owner were to take the position that the transfer of the Receivables
from the Account Owner to UCS should be characterized as the grant of a security
interest in such Receivables, then delays in payments on collections of
Receivables to UCS by such party (and therefore the Transferor and the Trust)
and possible reductions in the amount of such payments could result.
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 relevant Account
Owner. Positions taken by the FDIC staff prior to the passage of FIRREA do not
suggest that the FDIC, as conservator or receiver for the relevant Account
Owner, would interfere with the timely transfer to a Trust of payments collected
on the Receivables. If, however, the FDIC were to assert a contrary position,
such as by requiring the Trustee to establish its right to those payments by
submitting to and completing the administrative claims procedure under the FDIA,
or were the conservator or receiver to request a stay of proceedings with
respect to such Account Owner 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 an Account Owner, has the power under the FDIA to repudiate
contracts, including secured contracts of the Account Owners. 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 an Account Owner and were to repudiate
the Pooling and Servicing Agreement, then the amount payable out of available
collections on the Receivables to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates.
UCS represents and warrants in the Funding Purchase Agreement that the
transfer of all Receivables pursuant thereto to the Transferor is a valid sale
and assignment of such Receivables from UCS to the Transferor. UCS and the
Transferor will file appropriate UCC financing statements to evidence this sale
and perfect the Transferor's right, title and interest in such Receivables.
While UCS and the Transferor will treat the transactions described in the
Funding Purchase Agreement as a sale of the Receivables to the Transferor under
applicable state law, nevertheless, a tax or government lien or other
nonconsensual lien on property of UCS arising before a Receivable is transferred
to the Transferor may have priority over the Transferor's (and therefore the
Trust's) interest in such Receivable. In addition, if UCS were to become a
debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of UCS or
UCS itself were to take the position that
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<PAGE> 68
the sale of Receivables to the Transferor should be recharacterized as a pledge
of such Receivables to secure a borrowing of UCS, then delays in payments of
collections of Receivables to the Transferor (and therefore to the Trust and the
Certificateholders) and possible reductions in the amount of such payments could
result. See "Certain Legal Aspects of the Receivables -- Transfer of
Receivables."
Assuming the transactions contemplated in the Funding Purchase Agreement
are treated as a sale, the assets of the Transferor would not generally be part
of UCS's bankruptcy estate and would not be available to UCS's creditors. In a
recent case, however, the U.S. Court of Appeals for the Tenth Circuit concluded
that accounts receivable sold by a debtor prior to a filing for bankruptcy
remain property of the debtor's bankruptcy estate. UCS has a credit card
operation center, and AT&T Universal Funding will have its principal place of
business, in Salt Lake City, Utah, which is inside the geographic area subject
to the jurisdiction of the Tenth Circuit. If the conclusions in that case were
applied in a UCS bankruptcy, the Receivables would be subject to claims of
certain creditors and would be subject to the potential delays and reductions in
payments to the Transferor and the Certificateholders. See "Certain Legal
Aspects of the Receivables -- Certain Matters Relating to Insolvency."
The Transferor represents and warrants in the Pooling and Servicing
Agreement that the transfer of the Receivables by it to the Trust pursuant to
the Pooling and Servicing Agreement is either a valid sale and assignment of
such Receivables to the Trust or the grant to the Trust of a security interest
in such Receivables. The Transferor will file appropriate UCC financing
statements to evidence this sale and perfect the Trust's right, title and
interest in such Receivables. Nevertheless, a tax or government lien or other
nonconsensual lien on property of the Transferor arising before a Receivable is
transferred to the Trust may have priority over the Trust's ownership or
security interest in such Receivable. If the Transferor were to become a debtor
in a bankruptcy case and a bankruptcy trustee or a creditor of the Transferor
were to take the position that the transfer of the Receivables from the
Transferor to the Trust should be characterized as a pledge of such Receivables,
then delays in distributions on the Certificates and possible reductions in such
distributions could result. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Insolvency."
In the event of a Servicer Default relating to the bankruptcy or insolvency
of the Servicer, and no Servicer Default other than such bankruptcy or
insolvency-related Servicer Default exists, the bankruptcy trustee or receiver
may have the power to prevent either the Trustee or the majority of the
Certificateholders from appointing a successor Servicer. If certain events occur
relating to the bankruptcy, conservatorship, receivership or insolvency of UCS
or the Transferor (any such event with respect to AT&T Universal Funding being
an "Insolvency Event"), new Principal Receivables would not be transferred by
the Transferor to the Trust. In the event of an Insolvency Event, the Trustee
would sell the Receivables (unless Holders (as defined herein) of Certificates
evidencing undivided interests aggregating more than 50% of the aggregate unpaid
principal amount of each Series (or with respect to any Series with two or more
Classes, 50% of the unpaid principal amount of each Class) and certain other
persons specified in the Supplement for a Series instruct otherwise and provided
that a trustee for the Transferor does not order a sale despite such
instructions not to sell), thereby causing early termination of the Trust. The
entire proceeds of such sale or liquidation will be treated as collections of
Receivables and allocated accordingly among Series. Upon the occurrence of a Pay
Out Event, if a trustee, receiver or conservator is appointed for the Transferor
and no Pay Out Event other than such insolvency of the Transferor exists, the
trustee may have the power to prevent the early sale, liquidation or disposition
of the Receivables and the commencement of the Early Amortization Period or
Early Accumulation Period and may be able to require that new Principal
Receivables be transferred to the Trust. In addition, the trustee, receiver or
conservator for the Transferor may have the power to cause early sale of the
Receivables and the early payment of the Certificates or to prohibit the
continued transfer of Receivables to the Trust. See "Certain Legal Aspects of
the Receivables -- Certain Matters Relating to Insolvency."
While UCS is the Servicer, cash collections held by UCS may, subject to
certain conditions, be commingled and used for the benefit of UCS prior to each
Transfer Date and, in the event of the bankruptcy, insolvency or receivership of
UCS or, in certain circumstances, the lapse of certain time periods, the Trust
may not have a perfected security interest in such collections. UCS will be
allowed to make monthly rather than daily deposits of collections to the
Collection Account if any of the following conditions are satisfied: (i) UCS
obtains a commercial paper rating of at least A-1 and P-1 (or its equivalent) by
the applicable
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Rating Agency, (ii) AT&T has a commercial paper rating of at least A-1 and P-1
(or its equivalent) by the applicable Rating Agency, UCS remains a direct or
indirect majority-owned AT&T subsidiary and certain other arrangements are made
satisfactory to each Rating Agency or (iii) any other arrangement that satisfies
the Rating Agency Condition. If none of the foregoing conditions are satisfied,
then UCS will, within five business days, commence the deposit of collections
directly into the Collection Account within two business days of the Date of
Processing.
In addition to the matters discussed above, if UCS were to become a debtor
in a bankruptcy case and a creditor or trustee-in-bankruptcy or UCS itself were
to request a bankruptcy court to order that the Transferor be substantively
consolidated with UCS, delays in and reductions in the amount of distributions
on the Certificates could occur. The Transferor has been structured such that
(i) the voluntary or involuntary application with respect to the Transferor for
relief under Title 11 of the United States Code (the "Bankruptcy Code") or
similar applicable state laws and (ii) the substantive consolidation of the
Transferor and UCS are unlikely. The Transferor is a separate, limited purpose
subsidiary, the certificate of incorporation of which contains limitations on
the nature of the Transferor's business and restrictions on the ability of the
Transferor to commence voluntary cases or proceedings under such laws without
the prior unanimous vote of all its directors. Further, the Transferor does not
intend to file, and UCS has agreed that it will not file, a voluntary petition
for relief under the Bankruptcy Code or any similar applicable state laws with
respect to the Transferor.
Consumer Protection Laws. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws which impose requirements on
the solicitation, making, enforcement and collection of consumer loans. Such
laws, as well as any new laws or rulings which may be adopted (including, but
not limited to, federal or state interest rate caps on credit cards), may
adversely affect the Servicer's ability to collect on the Receivables or
maintain the required level of periodic finance charges, annual membership fees
and other fees. In addition, failure by the Servicer to comply with such
requirements could adversely affect the Servicer's ability to enforce the
Accounts or Receivables.
Pursuant to the Pooling and Servicing Agreement, the Transferor makes
certain representations and warranties relating to the validity and
enforceability of the Accounts and the Receivables and pursuant to the Funding
Purchase Agreement, UCS makes similar representations and warranties with
respect to the Receivables. However, it is not anticipated that the Trustee will
make any examination of the 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 not complied with and such noncompliance
continues beyond the applicable cure period, is that the Receivables affected
thereby will be reassigned to the Transferor (for reassignment, in turn, to UCS
pursuant to the Funding Purchase Agreement) or assigned to the Servicer, as the
case may be. In addition, in the event of the breach of certain representations
and warranties, the Transferor may be obligated to accept the reassignment of
the entire Trust portfolio. See "The Pooling and Servicing Agreement
Generally -- Representations and Warranties" and "-- Servicer Covenants" 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 Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available pursuant to any applicable Credit Enhancement or other sources.
See "The Pooling and Servicing Agreement Generally -- Defaulted Receivables;
Rebates and Fraudulent Charges."
Proposed Legislation -- Limitation on Finance Charges. Congress and the
states may enact new laws and amendments to existing laws to regulate further
the credit card industry or to reduce finance charges or other fees or charges
applicable to credit card accounts. The potential effect of any such legislation
could be to reduce the yield on the Accounts. If such yield is reduced, a Pay
Out Event or Reinvestment Event could occur, and an Early Amortization Period or
Early Accumulation Period may commence. See "Description of the
Certificates -- Pay Out Events and Reinvestment Events."
Generation of Additional Receivables; Dependency on Cardmember
Repayments. The Receivables may be paid at any time and there is no assurance
that there will be additional Receivables created in the Accounts, that
Receivables will be added to the Trust from Additional Accounts designated to
the Trust, or that any
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particular pattern of cardmember repayments will occur. The commencement and
continuation of a Controlled Amortization Period or a Controlled Accumulation
Period will be dependent upon the continued generation of new Receivables to be
conveyed to the Trust. A significant decline in the amount of Receivables
generated could result in the occurrence of a Pay Out Event or Reinvestment
Event and the commencement of the Early Amortization Period or the Early
Accumulation Period. The full payment of the Invested Amount of a Series or
Class is dependent on cardmember repayments and will not be made if such
repayment amounts are insufficient to pay such Series or Class its Invested
Amount in full by the Series Termination Date. The Pooling and Servicing
Agreement provides that the Transferor will be required, and the Funding
Purchase Agreement provides that UCS will be required (subject to certain
conditions), to designate Additional Accounts, the Receivables of which will be
added to the Trust in the event that the amount of the Principal Receivables is
not maintained at the Required Minimum Principal Balance or if the Transferor
Amount is less than the Required Transferor Amount. If Additional Accounts are
not designated by the Transferor and UCS when required, a Pay Out Event or
Reinvestment Event may occur and result in the commencement of an Early
Amortization Period or Early Accumulation Period. In addition, a decrease in the
effective yield on the Receivables due to, among other things, a change in the
annual percentage rates applicable to the Accounts, an increase in the level of
delinquencies or an increase in convenience use (i.e., where cardmembers pay
their Receivables early and thus avoid all finance charges on purchases) could
cause the commencement of an Early Amortization Period or Early Accumulation
Period as well as result in decreased protection to Certificateholders against
defaults under the Accounts.
Social, Legal, Economic and Other Factors. Changes in card use and payment
patterns by cardmembers result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels,
tax law changes and relative interest rates. The use of incentive programs
(e.g., gift awards for card usage) may also affect card use. The Transferor and
UCS are unable to determine and have no basis to predict whether or to what
extent legal, economic or social factors will affect card use or repayment
patterns. See "The Accounts."
Competition in the Credit Card Industry. The credit card industry is
highly competitive and operates in a legal and regulatory environment
increasingly focused on the cost of services charged for credit cards. As new
credit card issuers seek to enter the market and issuers seek to expand their
market share, there is increased use of advertising, target marketing and
pricing competition. Congress and the states may enact new laws and amendments
to existing laws to regulate further the credit card industry or to reduce
finance charges or other fees or charges applicable to credit card accounts. In
addition, certain credit card issuers assess annual percentage rates or other
fees or charges at rates lower than the rate currently being assessed on most of
the Accounts. If cardmembers choose to utilize competing sources of credit, the
rate at which new Receivables are generated in the Accounts may be reduced and
certain purchase and payment patterns with respect to Receivables may be
affected. The Trust will be dependent upon the continued ability of the Account
Owners and UCS to generate new Receivables. If the rate at which new Receivables
are generated declines significantly and the Account Owners do not designate
Additional Accounts, a Pay Out Event or Reinvestment Event could occur, in which
event an Early Amortization Period or Early Accumulation Period would commence.
In September 1994, the United States Court of Appeals for the Tenth Circuit
reversed a 1992 Utah federal court decision that the VISA association violated
antitrust laws when it denied membership in VISA to a subsidiary of Sears
Roebuck & Co., on the basis that another former Sears subsidiary at the time was
the issuer of the Discover credit card, a competitor of the VISA credit card. In
June 1995, the United States Supreme Court declined to review the decision of
the court of appeals. MasterCard has settled a similar lawsuit. This settlement
by MasterCard or a similar lawsuit against VISA could result in increased
competition among issuers of VISA and MasterCard credit cards and thereby have
adverse consequences for members of the MasterCard and VISA associations, such
as the Account Owners.
Ability of Account Owners and UCS to Change Terms of the Accounts; Decrease
in Finance Charges. Pursuant to the Pooling and Servicing Agreement, the
Transferor is not transferring to the Trust the Accounts but only the
Receivables arising in the Accounts. As owner of the Accounts, the Account
Owners have the right to determine the annual percentage rates and the fees
which are applicable from time to time to the Accounts, to alter the minimum
monthly payment required under the Accounts and to change various other
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terms with respect to the Accounts. Changes in Account terms by any Account
Owner can only be made with UCS's prior written consent. A decrease in the
annual percentage rates or a reduction in fees would decrease the effective
yield on the Accounts and could result in the occurrence of a Pay Out Event or
Reinvestment Event and the commencement of an Early Amortization Period or Early
Accumulation Period. An alteration of payment terms may result in fewer payments
on Receivables being made in any month. Under the applicable UCS Purchase
Agreement, each Account Owner agrees that, unless required by law or unless it
deems it necessary to maintain on a competitive basis its credit card business
or a program operated by such credit card business based on a good faith
assessment by it of the nature of the competition with respect to the credit
card business or such program, it will not take any action which would have the
effect of reducing the Portfolio Yield (as defined herein) to a level that could
reasonably be expected to cause any Series to experience a Pay Out Event or
Reinvestment Event based on the insufficiency of the Series adjusted Portfolio
Yield or any similar test or take any action that would have the effect of
reducing the Portfolio Yield to less than the highest Average Rate (as defined
herein) for any Group. "Portfolio Yield" means, with respect to the Trust as a
whole and, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction (a) the numerator of which is the aggregate of the sum
of the Series Allocable Finance Charge Collections (as defined herein) for all
Series during the immediately preceding Monthly Period calculated on a cash
basis after subtracting therefrom the Series Allocable Defaulted Amount (as
defined herein) for all Series for such Monthly Period and (b) the denominator
of which is the total amount of Principal Receivables as of the last day of such
immediately preceding Monthly Period. Unless otherwise provided in the
Prospectus Supplement with respect to any Series, "Average Rate" means, with
respect to any Group, the percentage equivalent of a decimal equal to the sum of
the amounts for each outstanding Series (or each Class within a Series
consisting of more than one Class) within such Group obtained by multiplying (a)
the certificate rate for such Series or Class (adjusted to take into account any
payments made pursuant to any interest rate agreements) and (b) a fraction, the
numerator of which is the aggregate unpaid principal amount of the Certificates
of such Series or Class and the denominator of which is the aggregate unpaid
principal amount of all Certificates within such Group. In addition, each
Account Owner also agrees that, unless required by law and except as provided
above, such Account Owner will take no action with respect to the applicable
credit card agreements or the applicable credit card guidelines that, at the
time of such action, such Account Owner reasonably believes will have a material
adverse effect on UCS, AT&T Universal Funding or the Certificateholders. In
servicing the Accounts, each of the Servicer and any successor servicer will be
required to exercise the same care and apply the same policies that it exercises
in handling similar matters for its own or other comparable accounts. Except as
specified above, there are no restrictions specified in the UCS Purchase
Agreement on the ability of an Account Owner to change the terms of its
Accounts.
There can be no assurances that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination by
an Account Owner and UCS to decrease customer finance charges or otherwise take
actions which would change other Account terms. Under certain circumstances, the
Transferor will have the right and may be required from time to time to require
UCS to designate Receivables from time to time existing in Additional Accounts
or Participation Interests for inclusion in the Trust. However, such Additional
Accounts or Participation Interests may not be of the same credit quality or
have the same characteristics as the Accounts, the Receivables of which have
been conveyed to the Trust. See "The Pooling and Servicing Agreement
Generally -- Additions of Accounts or Participation Interests."
Basis Risk. The Accounts generally have finance charges set at a variable
rate above the prime rate or other specified index. Any Class of Certificates
offered hereby may bear interest at a floating rate based on a different
floating rate index. If there is a decline in the Prime Rate or such other
specified index, the amount of collections of Finance Charge Receivables on the
Accounts may be reduced, whereas the amounts payable as interest with respect to
the Certificates and other amounts required to be funded out of collections of
Finance Charge Receivables may not be similarly reduced.
Risks of Swaps. The Trustee on behalf of the Trust may enter into interest
rate swaps and related caps, floors and collars to minimize the risk to
Certificateholders from adverse changes in interest rates. However, such
transactions will not eliminate fluctuations in the value of the Receivables or
prevent such losses if the value of the Receivables decline.
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The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps (as defined herein) depends on the
degree to which interest rate movements in the market generally correlate with
interest rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will depend
on the degree to which the Trust can identify acceptable counterparties (as
defined herein). There can be no assurance that acceptable counterparties will
be available for a specific Swap at any specific time.
The costs to the Trust of hedging transactions vary among the various
hedging techniques and also depend on such factors as market conditions and the
length of the contract. Furthermore the Trust's ability to engage in hedging
transactions may be limited by tax considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter environment,
many of the protections afforded to exchange participants are not available. For
example, there are no daily fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of time. Because
the performance of over-the-counter Swaps is not guaranteed by any settlement
agency, there is a risk of counterparty default.
The Trust may consider taking advantage of investment opportunities in
Swaps that are not presently contemplated for use by the Trust or that are not
currently available but that may be developed, to the extent such opportunities
are both consistent with the Trust's objectives and legally permissible
investments for the Trust. Such opportunities, if they arise, may involve risks
that differ from or exceed those involved in the activities described above and
will be more fully described in the applicable Prospectus Supplement.
Limited Nature of 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 Pooling and Servicing Agreement and the related Supplement and will be based
primarily on the value of the Receivables in the Trust and the availability of
any Credit Enhancement with respect to such Series or Class. Any such rating
will therefore generally address credit risk and 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 prepaid, paid on a
scheduled date or paid on any particular date before the applicable Series
Termination Date. In addition, any such rating will not address the possibility
of the occurrence of a Pay Out Event or Reinvestment 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. Further, the
available amount of any Credit Enhancement with respect to any such Series or
Class will be limited and will be subject to reduction from time to time as
described in the related Prospectus Supplement. In addition, the rating of any
Series or Class may be dependent upon the rating of any provider of Series
Enhancement for such Series or Class. The rating of the Certificates of a Class
or Series will not be a recommendation to purchase, hold or sell such
Certificates, 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.
Issuance of New Series. The Trust, as a master trust, is expected to issue
new Series from time to time. While the terms of any Series will be specified in
a Supplement, the provisions of a Supplement and, therefore, the terms of any
new Series, will not be subject to the prior review or consent of holders of the
Certificates of any previously issued Series. Such terms may include methods for
determining applicable investor percentages and allocating collections,
provisions creating different or additional security or other Series
Enhancements, provisions subordinating such Series to other Series or
subordinating other Series (if the Supplement relating to such Series so
permits) to such Series, and any other amendment or supplement to the Pooling
and Servicing Agreement which is made applicable only to such Series. The
obligation of the Trustee to issue any new Series is subject to the following
conditions, among others: (a) such issuance will not result in any Rating Agency
reducing or withdrawing its then existing rating of the Certificates of any
outstanding Series or Class with respect to which it is a Rating Agency (the
notification in writing by each Rating Agency to the Transferor, the Servicer
and the Trustee that any action will not result in such a reduction or
withdrawal is
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referred to herein as the "Rating Agency Condition") and (b) the Transferor
shall have delivered to the Trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of the Transferor, such issuance will
not (i) result in the occurrence of a Pay Out Event or Reinvestment Event or
(ii) materially adversely affect the timing or amount of payments to
Certificateholders of any Series or Class (any of the conditions referred to in
the preceding clauses (i) and (ii) are referred to herein as an "Adverse
Effect"). There can be no assurance, however, that the issuance of any other
Series, including any Series issued from time to time hereafter, might not have
an impact on the timing or amount of payments received by a Certificateholder.
In addition, the Supplements relating to Series which are part of a Group as
described herein may provide that collections of Receivables allocable to such
Series will be reallocated among all Series in the Group. Consequently, the
issuance of new Series in a Group may have the effect of reducing the amount of
collections of Receivables which are reallocated to the Certificates of existing
Series in such Group. For example, in a Reallocation Group, which will provide
for the reallocation of collections of Finance Charge Receivables allocable to a
Series among all Series in such Group, an additional Series which is issued with
a larger claim with respect to monthly interest than that of previously issued
Series in such Group (due to a higher certificate rate) will receive a
proportionately larger reallocation of collections of Finance Charge
Receivables. Such issuance will reduce the amount of collections of Finance
Charge Receivables which are reallocated to the existing Series in such Group.
Furthermore, there can be no assurance that, for any Series in a Group, the
Trust will issue any other Series in such Group. Accordingly, the anticipated
benefits of sharing or reallocation collections of Receivables may not be
realized. See "The Pooling and Servicing Agreement Generally -- Groups of
Series."
Addition of Trust Assets. The Transferor may from time to time designate
Participation Interests to be conveyed to the Trust or may designate Additional
Accounts, the Receivables in which will be conveyed to the Trust. In addition,
under certain circumstances, the Transferor will be obligated to designate
Aggregate Addition Accounts or, at the Transferor's option, Participation
Interests for inclusion in the Trust. "Aggregate Addition Accounts" means
revolving credit card accounts established pursuant to a credit card agreement
between an Account Owner and the person or persons obligated to make payments
thereunder, excluding any merchant, which is designated by the Transferor to be
included as an Account. Aggregate Addition Accounts may be subject to different
eligibility criteria than the Accounts, the Receivables of which are currently
included in the Trust, and may include accounts originated using criteria
different from those which were applied to the Accounts, the Receivables of
which were initially included in the Trust, because such accounts were
originated at a later date or were part of a portfolio of credit card accounts
which were not part of the Accounts or which were acquired from another credit
card issuer. Moreover, Aggregate Addition Accounts may not be accounts of the
same type previously included in the Trust. Consequently, there can be no
assurance that such Aggregate Addition Accounts will be of the same credit
quality as the Accounts, the Receivables of which were initially included in the
Trust. In addition, such Aggregate Addition Accounts may consist of credit card
accounts which have different terms than the Accounts, the Receivables of which
are now included in the Trust, including lower periodic finance charges, which
may have the effect of reducing the average yield on the portfolio of Accounts.
The designation of Aggregate Addition Accounts will be subject to the
satisfaction of certain conditions, including that (a) such addition will
satisfy the Rating Agency Condition and (b) the Transferor shall have delivered
to the Trustee a certificate of an authorized officer to the effect that, in the
reasonable belief of the Transferor, such addition will not have an Adverse
Effect. The Transferor expects to convey from time to time to the Trust the
Receivables arising in certain Aggregate Addition Accounts in accordance with
the provisions of the Pooling and Servicing Agreement.
After obtaining the consent of each Rating Agency, the Transferor may also,
from time to time, at its sole discretion, designate newly originated Eligible
Accounts to be included as Accounts ("New Accounts") subject to the limitations
and conditions specified in this paragraph. For purposes of the definition of
New Accounts, Eligible Accounts will be deemed to include only types of
revolving credit card accounts which are included as Initial Accounts or which
have previously been included in any Aggregate Addition if the assignment
related to such Aggregate Addition provides that such type of revolving credit
card account is permitted to be designated as a New Account. Until such time as
each applicable Rating Agency otherwise consents, the number of New Accounts may
be subject to certain restrictions. To the extent New Accounts are designated
for inclusion in the Trust, the Transferor will deliver to the Trustee, at least
semiannually, an opinion of counsel with respect to the New Accounts included as
Accounts confirming the validity and
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perfection of each transfer of such New Accounts. If such opinion of counsel
with respect to any New Accounts is not so received, all Receivables arising in
the New Accounts to which such failure relates will be removed from the Trust.
The Transferor will designate New Accounts subject to the following conditions,
among others: (a) the New Accounts will all be Eligible Accounts; (b) such
conveyance will not result in the occurrence of a Pay Out Event or Reinvestment
Event; and (c) such conveyance will not have been made in contemplation of an
insolvency event with respect to the Transferor, UCS or any Account Owner. New
Accounts and Aggregate Addition Accounts are collectively referred to herein as
"Additional Accounts."
Any Participation Interests to be included as Trust Assets or any Eligible
Accounts, other than New Accounts, to be included as Accounts after the Initial
Cut-Off Date, are collectively referred to herein as an "Aggregate Addition."
"Eligible Account" means a revolving credit card account owned by an Account
Owner and its successors and permitted assigns which, as of the respective date
of designation, is a revolving credit card account in existence and maintained
by an Account Owner or such successors or assignees, is payable in United States
dollars, has a cardmember whose address is in the United States or its
territories or possessions or a military address, except as provided below has a
cardmember who has not been identified by the Servicer in its computer files as
being involved in any voluntary or involuntary bankruptcy proceeding, has not
been identified as an account with respect to which the related card has been
lost or stolen, has not been sold or pledged to any other party except for any
other Account Owner that has either entered into a receivables purchase
agreement or is an Additional Transferor, does not have receivables which have
been sold or pledged by an Account Owner to any other party other than UCS, the
Transferor or any Additional Transferor, except as provided below does not have
receivables that are Defaulted Receivables, and does not have any receivables
that have been identified by the Servicer or the related cardmember as having
been incurred as a result of fraudulent use of any related credit card, and with
respect to Additional Accounts, certain other accounts which shall have
satisfied the Rating Agency Condition. Accounts which relate to bankrupt
obligors or certain charged-off receivables may be designated as Accounts
provided that the amount of Principal Receivables in any such Account is deemed
to be zero for purposes of all allocations under the Pooling and Servicing
Agreement.
Allocations. To the extent provided in any Supplement, or any amendment to
the Pooling and Servicing Agreement, portions of the Receivables or
Participation Interests conveyed to the Trust and all collections received with
respect thereto may be allocated to one or more Series or Groups as long as the
Rating Agency Condition shall have been satisfied with respect to such
allocation and the Servicer shall have delivered an officer's certificate to the
Trustee to the effect that the Servicer reasonably believes such allocation will
not have an Adverse Effect.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates of any Series offered
hereby, before the deduction of expenses, will be paid to the Transferor. Unless
otherwise specified in the related Prospectus Supplement, the Transferor will
use such proceeds to pay UCS the purchase price of the Receivables and UCS will
use such proceeds primarily for repayment of intercompany loans from AT&T or its
affiliates.
THE TRUST
The Trust was formed pursuant to the Pooling and Servicing Agreement. The
Trust does not and will not engage in any business activity other than acquiring
and holding the Receivables and the other assets of the Trust and proceeds
therefrom, issuing Certificates, the Transferor Certificate and any Supplemental
Certificate and making payments thereon and on any Series Enhancements and
related activities. As a consequence, the Trust does not and is not expected to
have any source of capital other than the Trust Assets. The Trust is
administered in accordance with the laws of the State of New York.
The Transferor conveyed to the Trust, without recourse, its interests in
all Receivables existing in the Initial Accounts at the close of business on the
Initial Cut-Off Date, and will convey to the Trust, without recourse, its
interest in all Receivables arising under such Accounts thereafter, in exchange
for the net cash proceeds from the sale of one or more Series of Certificates
plus the Transferor Certificate representing the
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Transferor's Interest. In addition, the Transferor may convey from time to time
to the Trust, without recourse, except as provided in the Pooling and Servicing
Agreement, its interests in all Receivables existing in certain Additional
Accounts and Participation Interests, if any, at the close of business on each
applicable date of designation thereof. The Trust Assets consist of the
Receivables and any Participation Interests conveyed to the Trust, all monies
due or to become due thereunder, the proceeds of the Receivables, all monies on
deposit in certain accounts maintained for the benefit of the
Certificateholders, and the right to receive Recoveries and Interchange
allocable to the Trust for the benefit of the Certificateholders. Pursuant to
the Funding Purchase Agreement, the Transferor has the right (subject to certain
limitations and conditions) and in some circumstances under the Pooling and
Servicing Agreement is obligated, to require UCS to designate from time to time
Additional Accounts to be included as Accounts and the Transferor will convey to
the Trust, pursuant to the Pooling and Servicing Agreement, its interests in all
Receivables of such Additional Accounts or Participation Interests. Under the
Pooling and Servicing Agreement, the Transferor may convey Participation
Interests to the Trust. See "The Pooling and Servicing Agreement
Generally -- Additions of Accounts or Participation Interests." In addition, the
Transferor may, but is not obligated to, designate from time to time
Participation Interests or Receivables from Accounts to be removed from the
Trust. See "The Pooling and Servicing Agreement Generally -- Removal of
Accounts."
THE CREDIT CARD BUSINESS OF AT&T UNIVERSAL CARD SERVICES CORP.
GENERAL
Pursuant to the Funding Purchase Agreement, UCS sold to the Transferor, and
the Transferor in turn transferred to the Trust pursuant to the Pooling and
Servicing Agreement, its respective ownership interest in the receivables which
have or will be generated from transactions made and cash advances obtained by
holders of certain credit card accounts originated and owned by Universal Bank
and CB&T under the AT&T Universal Card program (the "Accounts"). Universal Bank
and CB&T are collectively referred to herein as the "Banks."
The AT&T Universal Card is a combination credit card and AT&T calling card.
The credit card may be issued under the program of either VISA or MasterCard.
The AT&T calling card feature of the card allows cardmembers to charge local and
AT&T long distance (domestic and international) calls ("Calling Card
Transactions") to their Accounts.
The accounts in the AT&T Universal Portfolio (as defined herein) from which
the receivables serviced by UCS are generated are, or will be, principally
generated through the mailing of pre-approved applications directly to
prospective cardmembers. In addition, some accounts are generated through: (i)
unsolicited telephone requests for applications; (ii) requests for applications
generated by telemarketing efforts; (iii) requests for applications via the
Internet; (iv) applications or brochures provided to prospective cardmembers
through marketing efforts at various college campuses; (v) the mailing of
non-pre-approved applications directly to prospective cardmembers; (vi) the
substitution of credit cards for single purpose calling cards; and (vii)
alternative AT&T channels including AT&T WorldNet(SM).
Each of the Banks uses substantially similar account origination,
acquisition and servicing policies and procedures. The Banks use the Servicer
(which is an affiliate of Universal Bank) and third party vendors in the process
of originating and servicing the accounts. The Servicer performs account set-up,
telemarketing, issuance and encoding of credit cards, customer service,
collection activities, accounting and certain data processing services at its
credit card operations centers in Jacksonville, Florida and Salt Lake City,
Utah. The Servicer also operates a remittance processing center in Columbus,
Georgia.
Data processing services are performed on behalf of the Servicer by Total
System Services, Inc. ("Total System"), a Columbus, Georgia-based company which
is an affiliate of CB&T. Total System is responsible for processing credit slips
(drafts) and cash advances and authorizing accountholder purchases for
merchants. Additionally, it stores customer data files, updates master files
daily, and provides master file tapes monthly. Total System is also responsible
for making billing statement calculations, creating statement files, handling
the daily posting of transactions to the accounts and daily settlement with
MasterCard and VISA.
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THE ACCOUNTS
The accounts in the AT&T Universal Portfolio currently consist solely of
VISA and MasterCard credit card accounts originated under "The AT&T Universal
Card" program by Universal Bank or CB&T, as Account Owners. The accounts were
issued by Universal Bank or CB&T in accordance with the underwriting criteria
explained below.
Substantially all of the Banks' new accounts are generated through the
result of direct mail and telephone solicitations of potential cardmembers
conducted on a nationwide basis. The Servicer, on behalf of Universal Bank and
CB&T, obtains from one or more of the independent national bureaus lists of
certain individuals who satisfy certain credit criteria as these individuals
have been credit bureau scored to evaluate credit risk in accordance with the
Banks' established credit quality standards. Credit bureau scoring is intended
to provide a general indication, based on the information available, of an
individual's likelihood to repay his or her obligations. The credit bureau
scoring includes internal Servicer credit scoring models and an industry-
accepted credit scoring model that has been developed by an independent firm to
statistically evaluate the correlation of certain common characteristics with
credit risk. Internal Servicer scoring models predict the likelihood of
bankruptcy. The FICO scoring model, which was developed by Fair, Isaacs
Companies, predicts the likelihood of an account becoming 90 days past due in
the next 24 months.
Based on credit bureau scores, other credit characteristics and demographic
information, certain individuals are then selected for solicitation. The Banks
offer credit card accounts with different annual percentage rates and annual fee
combinations and enhanced special features such as discounts on long distance
telephone charges, extended warranties, travel assistance, travel accident
insurance, rewards programs, buyer protection and purchase security programs,
collision and loss damage insurance and automobile rental insurance. In
addition, the Banks offer cardmembers optional enhancements for a fee (for
example, annuities, payment protection, wallet security and life and health
insurance).
Individuals qualifying for pre-approved direct mail solicitation are
offered a credit card through the use of an acceptance certificate similar to
traditional pre-approved coupons which are standard in the industry. The
prospective cardmember is required to provide certain information to the
Servicer. Upon receipt of the requested information, the Servicer requests an
updated credit report. Prospective customers receive offers of credit lines up
to a pre-approved amount, but the initial credit line is not assigned until
after updated information has been obtained.
When the Servicer, on behalf of the Banks, receives an application for a
credit card that has not been pre-approved, it reviews such application for
completeness and obtains a credit report and credit bureau score on the
applicant from an independent national credit bureau. The Servicer, on behalf of
the Banks, may verify certain information regarding the applicant and request
additional information as deemed necessary to make a decision on the
creditworthiness of the applicant.
Credit limits are established for each prospective cardmember based on
credit bureau score, income and other credit characteristics. The accounts in
the AT&T Universal Portfolio generally have credit limits ranging from $2,000 to
$12,000. Some accounts may have a separate credit limit for cash advances which
would be a portion of the overall credit limit. The non-premium accounts
generally have initial credit limits in the $2,000 to $5,000 range, with the
average limit being between $2,500 and $3,000. The premium accounts are
generally assigned credit limits of $5,000 to $12,000 or more, with the average
limit being between $6,000 and $6,500. The Banks use the Triad behavioral
scoring system to review the accounts periodically for automatic credit line
adjustment. The accounts are scored based upon time since the last credit line
adjustment, account age, current limit, credit line utilization, payment history
and other relevant credit criteria. In addition, line increases may be granted
by credit analysts who manually review accounts upon request by the cardmember.
The amount by which an account may be allowed to exceed the established credit
limit is determined based on a behavioral score assigned to the account. Also,
further extension of credit may be suspended if the balance on an account
exceeds the assigned maximum credit limit.
ADDITIONAL ACCOUNTS
Receivables from Additional Accounts, if needed, will be added to the Trust
from accounts originated or acquired by Universal Bank, CB&T or another Account
Owner through pre-approved applications and other sources, as described above.
See "Risk Factors -- Addition of Trust Assets."
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BILLING AND PAYMENTS
General. Monthly billing statements for the accounts are prepared by the
Servicer based on transaction and collection data processed on behalf of the
Servicer by Total System. A statement is sent if the amount due on the account
totals at least $1.00 or if there are new charges for Calling Card Transactions
during the billing cycle. If the amount owed is less than $1.00 and there are no
charges for Calling Card Transactions, the charges are included on a statement
in a subsequent billing cycle.
The accounts, which primarily have variable annual percentage rates, are
governed by various cardmember agreements and disclosure statements and have
different billing and payment structures, including varying fees, depending on
the type of account. Each cardmember agreement provides that, subject to
applicable law, Universal Bank or CB&T, as the case may be, may change the terms
and conditions of that agreement at any time, including, but not limited to,
those terms pertaining to minimum payments, the rate or amount of finance
charges, fees or other charges and the method of computing the balance upon
which finance charges are assessed. If required by applicable law, Universal
Bank or CB&T, as the case may be, will provide prior written notice before
implementation of any such change to the terms and conditions of a cardmember's
agreement. There can be no assurance that the finance charges, fees and other
charges discussed herein (including minimum daily periodic rates and minimum
monthly payments) will remain at current levels in the future.
Monthly billing statements for the accounts are sent to the cardmember at
the end of each billing cycle, generally within two business days after the
cycle date assigned to such account by the Servicer. Currently, the Servicer has
28 billing cycles within each calendar month. The monthly billing statement
reflects all purchases, cash advances, administrative charges, if applicable
(such as overlimit charges, late charges, and returned payment charges), annual
fees, if any, credit insurance charges and finance charges incurred by the
account during the billing cycle or a prior billing cycle and reported to the
Servicer, all payments or credits applicable to the account and the outstanding
balance of the account as of the cycle date, including the available credit
thereunder.
Minimum Payments. Each holder of an account is required under most of the
cardmember agreements (unless a payment holiday is granted by Universal Bank or
CB&T) to make at least the minimum payment shown on each monthly statement by
the due date to avoid delinquency. The minimum monthly payment in each billing
cycle is the greater of (a) 2.1% of the new balance (or 2.5% in the case of
certain accounts generated in the college market) reflected on the monthly
statement (excluding charges for Calling Card Transactions) rounded to the
nearest whole dollar, plus all Calling Card Transactions posted to the account
in the billing cycle, plus any unpaid minimum payment from prior statements and
any amounts which exceed the credit line, or (b) $10 (or the amount of the new
balance if less than $10), plus any charges for Calling Card Transactions.
Universal Bank or CB&T may offer certain credit-qualified cardmembers the
option to enjoy a payment holiday or holidays (i.e., the opportunity to withhold
the remittance of any minimum payment on the account) for a particular billing
cycle. Either Bank may make similar offers or increase the frequency of this
program in the future. Daily periodic finance charges in connection with a
payment holiday continue to accrue, and the amount of the next minimum monthly
payment is determined as described herein, based on the account balance at the
end of the next billing cycle. The effect of a payment holiday would be to
increase the yield on the Receivables on a billed basis and to decrease the rate
of payments of Finance Charge Receivables and Principal Receivables during the
billing cycles to which the offer applies.
Finance Charges. Finance charges on the accounts are the sum of (a)
periodic finance charges assessed on purchases of merchandise or services or
cash advances allocable to the account and (b) cash advance fee finance charges.
Finance charges on accounts are calculated separately for purchases and cash
advances. Finance charges for purchases are determined by applying a daily
periodic rate (the Annual Percentage Rate divided by 365 days) to the daily
balance of purchases, and adding together any such finance charges for each day
in the billing cycle. Finance charges for cash advances are determined by
applying the daily periodic rate to the daily balance of cash advances, and
adding together any such finance charges for each day in the billing cycle, plus
any applicable cash advance fee(s).
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The daily balance for purchases is determined by adding each day (i) the
beginning balance of purchases on the account, (ii) any new purchases, (iii) any
unpaid finance charges on purchases, (iv) any charges for credit insurance, (v)
any other charges posted to the account, and (vi) any unpaid charges for Calling
Card Transactions from prior billing cycles, and subtracting from that sum any
payments and credits applied to purchases that day.
The daily balance for cash advances is determined by adding each day (i)
the beginning balance of cash advances on the account, (ii) any new cash
advances and (iii) any unpaid finance charges on cash advances, and then
subtracting from that sum any payments and credits applied to cash advances that
day. A finance charge is imposed on a cash advance (including convenience
checks), or a portion of it, from the date the cash advance is included in the
daily balance, until the date payment is made in full.
A finance charge is imposed on a purchase from the date purchase is
included in the daily balance until the date payment in full is received. No
finance charge is imposed on new purchases in the billing cycle in which they
are posted to the account if in the prior billing cycle there was no new balance
or if the entire new balance on the account was paid by the payment due date
indicated on the monthly statement. However, finance charges accrue from the
date of posting on certain balance transfers generated by certain promotional
offers. The payment due date is no less than 25 days after the closing date of
the previous billing cycle. No finance charge is imposed on Calling Card
Transactions in the billing cycle in which they are posted to the account. Any
charge for Calling Card Transactions that is not paid by the payment due date on
the monthly statement in which it is billed is added to the daily balance of
purchases on the first day of the next billing cycle.
The periodic finance charges are computed by taking the sum of (i) the
daily balances for cash advances multiplied by the daily periodic rate
applicable to the account, and (ii) the daily balances for purchases multiplied
by the daily periodic rate applicable to the account and adding together any
such finance charges for each day in the billing cycle. For most accounts, the
periodic rate is a variable rate that changes quarterly and is calculated by
taking the highest rate among the prime rates published in the Wall Street
Journal (rounded to the nearest 1/10 of a percent) (the "Prime Rate") on
specified days during each calendar quarter and adding a specified margin to
that rate. On some accounts, the periodic rate is adjusted monthly. The Banks
have and may again offer special fixed promotional rates that revert in time to
a variable rate or may offer accounts with variable rates tied to other
financial indices. Finance charges on the accounts are compounded daily.
If an account becomes delinquent, the rate payable on the account
(including any promotional rate payable on the entire balance) may be increased
to 11.9% over the Prime Rate or 16% over a designated commercial paper rate. A
cardmember may again qualify for the lower variable annual percentage rate on
new purchases and cash advances, as well as existing balances, after the account
has been in good standing for up to 12 months.
Any change in the periodic rate will go into effect on the first day of the
billing cycle starting after the first day of the next calendar month or
quarter, as the case may be, and may result in an increase or decrease in the
finance charge imposed on the account. There will be a minimum finance charge of
50 cents in any billing cycle in which a finance charge at a periodic rate is
charged.
Accounts are also typically assessed a fee for each cash advance posted to
the account, including withdrawals of cash from ATMs, cash advances provided by
banks or other institutions, and convenience checks. The cash advance fee
applicable to an account will be the greater of $2.00 or 2% of each cash
advance, up to a maximum of $20.00. The cash advance fee is part of the finance
charge. Currently, cash advances are not entitled to any grace period and are
assessed finance charges from the date of the transaction in the case of cash
advances from banks and ATMs and from the date of posting in the case of
convenience checks.
Fees and Charges. Universal Bank began issuing the AT&T Universal Card in
March 1990. Cardmembers who acquired AT&T Universal Cards during the first year
of the program were considered charter members. All charter members received a
VISA or MasterCard credit card which carries no annual fee for life. Beginning
in March 1991, the Banks began issuing cards with non-refundable membership fees
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ranging from $20 to $60 on certain accounts. However, most of the accounts
currently do not carry an annual fee.
Accounts may be assessed administrative charges which may include (a) late
charges of $15 if the required minimum payment on the account is not received by
the payment due date shown on the monthly billing statement, (b) returned
payment charges of $15 ($20 beginning June 1, 1997) the first time a payment on
the account is returned unsatisfied by the bank or other financial institution
on which the payment was drawn, (c) overlimit charges of $15 ($20 beginning June
1, 1997) if the new balance on the account exceeds the credit line on the
account in any billing cycle and (d) beginning June 1, 1997, a fee of $20 for
returned convenience checks. No late fee is assessed if the balance is less than
$50.
Payments. Payments to the Banks by holders of the accounts are processed
by the Servicer and generally are allocated to the outstanding balance in the
following order: (i) to calling card charges on the most recent billing
statement, (ii) to finance charges at promotional rates, (iii) to purchase
finance charges, (iv) to cash advance/convenience check finance charges, (v) to
miscellaneous charges (e.g., late fees, overlimit fees), (vi) to balance charges
at promotional rates, (vii) to cash advances/convenience check balances two or
more cycles old, (viii) to cash advances/convenience checks made in previous
cycle, (ix) to purchase balances two or more cycles old, (x) to purchase
balances made in the previous billing cycle, (xi) to Calling Card Transactions
made since the last billing statement, (xii) to purchases made since the last
billing statement and (xiii) to cash advances/convenience checks made since the
last billing statement. Any excess is credited to the account as an overpayment
amount applied to purchases.
COLLECTION OF DELINQUENT ACCOUNTS
Each account is billed monthly on or about the same day of the month.
Minimum scheduled payments under the accounts are due no less than 25 days after
the closing date of the previous billing cycle. An account is considered
delinquent (or one payment past due) if the minimum payment indicated on the
cardmember's billing statement is not received by the Servicer by the next
statement cycle date. Interest generally is not assessed on purchases unless
payment in full has not been received before the next statement cycle date,
which is generally five days after the payment due date.
The Servicer uses the Triad System to create a behavioral score for all
accounts. The Triad System is an independently developed scoring model that uses
payment behavior, the age of the account, credit bureau scores, credit balance,
credit line utilization and other factors to predict the probability of an
account becoming 90 days past due in the next six months. Based on the
behavioral score and the account balance, the Servicer structures the timing of
the collection activity to be implemented for the account. The Servicer believes
that the use of behavioral scoring enables it to manage at an early stage
accounts that have a greater probability of experiencing a loss in order to
reduce exposure to loss.
Efforts to collect delinquent credit card receivables are made principally
by the personnel of the Servicer, supplemented by collection agencies and
attorneys retained by the Servicer when deemed necessary. Collection activities
include statement messages, formal collection letters and telephone calls. The
intensity with which collection activity is pursued depends on the risk profile
of the account. The risk profile is determined based on a combination of
factors, including the dollar amount deemed to be at risk, the degree of account
delinquency and the age of the account. Currently, collection activity may begin
with telephone contact with the cardmember as quickly as one day after the date
the account becomes delinquent. Follow-up continues until contact with the
cardmember is made. In the event the collector is unable to establish telephone
contact with the cardmember, the collector sends a series of collection letters
to that person until the matter is resolved. The current policy of the Banks is
to charge-off an account when that account becomes 181 days delinquent. However,
if fraud has occurred with respect to an account, such account will be charged
off when it becomes 91 days delinquent. If bankruptcy or death has occurred,
such account generally will be charged off immediately upon notification.
Depending on the behavioral score established by the Servicer, extension of
credit to an account that is delinquent may be restricted as early as one day
after the date that account becomes delinquent. Typically, the Banks will not
extend credit to any account with a history of delinquency. Although such
arrangements are made infrequently, the Servicer, on behalf of the Banks, may,
in its sole discretion, enter into arrangements with delinquent cardmembers to
extend or otherwise modify payment schedules; provided, however, that in no
event will any such extension or modification result in
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negative amortization to the account. The risk evaluation, servicing, charge-off
policies and collection practices discussed herein are constantly being reviewed
and may change over time in accordance with the business judgment of the Banks
and the Servicer, and with applicable law and guidelines established by
governing regulatory authorities.
Information regarding the delinquency and loss experience on the accounts
in the AT&T Universal Portfolio, including charts setting forth such
information, is contained in the Prospectus Supplement.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
certain fees ("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 cardmember charges for merchandise and services
is passed from banks which clear the transactions for merchants to banks that
issue credit cards. In respect of Interchange attributed to the cardmember
charges for merchandise and services in the Accounts, collections of Finance
Charge Receivables with respect to any Monthly Period will be deemed to include
Interchange or the equivalent thereof as calculated pursuant to the related
Series Supplement for any Series. Interchange ranges from approximately 1% to 2%
of the transaction amount. UCS is required, pursuant to the terms of the Funding
Purchase Agreement to sell to the Transferor, and the Transferor is required,
pursuant to the terms of the Pooling and Servicing Agreement, to transfer to the
Trust, Interchange attributed to cardmember charges for merchandise and services
in the Accounts. Interchange will be allocated to the Trust as may be reasonably
determined or estimated by the Servicer. VISA and MasterCard may from time to
time change the amount of Interchange reimbursed to banks issuing credit cards
under their programs.
AT&T UNIVERSAL CARD SERVICES CORP.
AT&T Universal Card Services Corp. is a Delaware corporation. Its principal
executive office is located at 8787 Baypine Road, Jacksonville, Florida 32256,
and its telephone number is (904) 954-7500. The Servicer is a wholly owned
subsidiary of AT&T. The Prospectus Supplement for each Series will provide
additional information relating to the Servicer.
AT&T UNIVERSAL FUNDING CORP.
AT&T Universal Funding Corp. was incorporated under the laws of the State
of Delaware on June 20, 1995 and is a special purpose wholly owned subsidiary of
UCS. Its principal office is currently located at 5201 Amelia Earhart Drive,
Suite 1001, Salt Lake City, Utah 84116, and its telephone number is (801)
578-0619. The Transferor was organized for the limited purposes of facilitating
the type of transactions described herein, purchasing, holding, owning and
selling receivables, and any activities incidental to and necessary or
convenient for the accomplishment of such purposes. Neither UCS nor the
Transferor's board of directors intends to change the business purpose of the
Transferor.
UNIVERSAL BANK, N.A.
Universal Bank, N.A. was chartered under the laws of the State of Georgia
as Universal Bank and was a wholly owned operating subsidiary of Synovus
Financial Corp. On January 1, 1995, UCS acquired all of the stock of Universal
Bank and converted its charter to a national association. Universal Bank
continues to be a wholly owned subsidiary of UCS. Universal Bank is a credit
card bank engaged in offering unsecured consumer credit card loans nationwide,
principally through direct mail and telemarketing. Although Universal Bank is a
member of both the VISA and MasterCard associations, historically it has issued
primarily MasterCard credit cards. The principal executive office of Universal
Bank is located at 200 Brookstone Centre, Suite 110, Columbus, Georgia 31904,
and its telephone number is (706) 562-2200. Universal Bank is subject to
comprehensive regulation, examination and supervision by the Office of the
Comptroller of the Currency.
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COLUMBUS BANK AND TRUST COMPANY
Columbus Bank and Trust Company is a state bank chartered under the laws of
the State of Georgia. CB&T is a wholly owned subsidiary of Synovus Financial
Corp. Its executive offices are located at 1148 Broadway, Columbus, Georgia
31901, and its telephone number is (706) 649-2311. CB&T is a full-service
commercial bank whose business includes both commercial and consumer lending. It
conducts a nationwide credit card business that includes but is not limited to
accounts originated under the AT&T Universal Card program. It issues credit
cards under the AT&T Universal Card program pursuant to an Affinity Group
Agreement dated as of December 30, 1994, among UCS, Universal Bank and CB&T.
CB&T is a member of both the VISA and MasterCard associations, but the accounts
issued under the Affinity Group Agreement are primarily VISA accounts. Only the
accounts originated under the Affinity Group Agreement are included in the Trust
Portfolio. CB&T is subject to comprehensive regulation, examination and
supervision by the FDIC and the Department of Banking and Finance of the State
of Georgia.
THE ACCOUNTS
The Receivables arise in certain credit card accounts (the "Trust
Portfolio") that have been selected from the total portfolio of MasterCard and
VISA accounts serviced by UCS (the "AT&T Universal Portfolio") on the basis of
criteria set forth in the Pooling and Servicing Agreement. An account in the
AT&T Universal Portfolio must be an Eligible Account to be selected for
inclusion in the Trust Portfolio, and the Trust Portfolio represents a selection
of such Eligible Accounts.
Pursuant to the Funding Purchase Agreement and the Pooling and Servicing
Agreement, the Transferor has the right or is obligated (subject to certain
limitations and conditions) to require and UCS is obligated (subject to certain
limitations and conditions) to designate, from time to time, additional
qualifying VISA and MasterCard consumer revolving credit card accounts to be
included as Accounts and to convey to the Transferor for ultimate conveyance to
the Trust all Receivables of such Additional Accounts, whether such Receivables
are then existing or thereafter created. Those Accounts must meet the
eligibility criteria set forth in the Pooling and Servicing Agreement as of the
date UCS designates such Accounts as Additional Accounts. UCS will convey the
Receivables then existing or thereafter created under such Additional Accounts
to the Transferor which in turn will convey such Receivables to the Trust. Under
the Pooling and Servicing Agreement, the Transferor also has the right to convey
Participation Interests to the Trust subject to the conditions described in the
Pooling and Servicing Agreement. See "The Pooling and Servicing Agreement
Generally -- Additions of Accounts or Participation Interests."
As of each date with respect to which Additional Accounts are designated,
UCS will represent and warrant to the Transferor that the Receivables generated
under the Additional Accounts meet the eligibility requirements set forth in the
Funding Purchase Agreement and the Transferor will represent and warrant to the
Trust that such Receivables or Participation Interests, if any, meet the
eligibility requirements set forth in the Pooling and Servicing Agreement. See
"The Pooling and Servicing Agreement Generally -- Conveyance of Receivables."
Because the Initial Accounts were designated as of the Initial Cut-Off Date and
subsequent Aggregate Addition Accounts may be designated from time to time,
there can be no assurance that all of such Accounts will continue to meet the
eligibility requirements as of any Series Closing Date.
Subject to certain limitations and restrictions, the Transferor may also
designate certain Accounts or Participation Interests, if any, for removal from
the Trust, in which case such Participation Interests or the Receivables of the
Removed Accounts will be reassigned to the Transferor. Throughout the term of
the Trust, the Receivables in the Trust will consist of Receivables generated
under the Accounts, Participation Interests, if any, and the Receivables
generated under Additional Accounts, but will not include the Receivables
generated under Removed Accounts or removed Participation Interests.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified. Such information
will include 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 lines of the Accounts and the average thereof, the
range of ages of the Accounts and the
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average thereof, information with respect to the geographic distribution of the
Accounts, the types of Accounts and delinquency statistics relating to the
Accounts.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and the related Supplement substantially in the forms filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
Trustee will provide a copy of the Pooling and Servicing Agreement and the
related Supplement (without exhibits or schedules) to Certificateholders on
written request. The following summary describes certain terms of the Pooling
and Servicing Agreement and the related Supplement and is qualified in its
entirety by reference to the Pooling and Servicing Agreement and the related
Supplement.
The Certificates will evidence undivided beneficial interests in the Trust
Assets allocated to such Certificates, representing the right to receive from
such Trust Assets funds up to (but not in excess of) the amounts required to
make payments of interest and principal in the manner described below.
The Certificates will initially be represented by one or more Certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository"), except as set forth
below. Unless otherwise stated in the related Prospectus Supplement, the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form. The Transferor has been
informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). Accordingly,
Cede is expected to be the holder of record of the Certificates. Except under
the limited circumstances described herein, no Certificateholder will be
entitled to receive a Certificate in fully registered, certificated form
("Definitive Certificates") representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued 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 herein), and all references herein to
distributions, notices, reports and statements to Certificateholders shall refer
to distributions, notices, reports and statements to Cede, as the registered
holder of the Certificates, for distribution to the beneficial owners of the
Certificates in accordance with DTC procedures. See "-- Book-Entry Registration"
and "-- Definitive Certificates."
Payments of interest and principal will be made on each related Interest
Payment Date to the Certificateholders in whose names the Certificates were
registered on the last day of the calendar month preceding such Interest Payment
Date, unless otherwise specified in the related Prospectus Supplement (each, a
"Record Date").
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
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 which are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificate or Certificates.
Cedel and Euroclear will hold omnibus positions on behalf of their participants
through customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective Depositaries (as defined herein) which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC. Citibank, N.A. will act as depositary for Cedel and Morgan
Guaranty Trust Company of New York will act as depositary for Euroclear (in such
capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
underwriters,
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securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants (as defined herein) and Euroclear
Participants (as defined herein) will occur in accordance with their respective
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 systems by its Depositary. Cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participants 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 Participant will be received with value on the DTC settlement
date but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC. For information with respect
to tax documentation procedures relating to the Certificates, see "Tax
Matters -- Federal Income Tax Consequences -- Non-United States Investors."
Certificateholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificateholders will receive all distributions of principal and
interest on the Certificates from the Trustee through DTC and its Participants.
Under a book-entry format, Certificateholders will receive payments after the
related Distribution Date, as the case may be, because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants, which thereafter will be
required to forward them to Indirect Participants or holders of beneficial
interests in the Certificates. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC, and that holders of
beneficial interests in the Certificates will not be recognized by the Trustee
as Certificateholders under the Pooling and Servicing Agreement. Holders of
beneficial interests in the Certificates will only be permitted to exercise the
rights of Certificateholders under the Pooling and Servicing Agreement
indirectly through DTC and its Participants who in turn will exercise their
rights through DTC. The Trustee, the Transferor, the Servicer and any paying
agent, transfer agent or registrar may treat the registered holder in whose name
any Certificate is registered (expected to be Cede) as the absolute owner
thereof (whether or not such Certificate shall be overdue and notwithstanding
any notice of ownership or writing thereon or any notice to the contrary) for
the purpose of making payment and for all other purposes.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which holders of
beneficial interests in the Certificates have accounts similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
these respective holders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Certificates to pledge Certificates to
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persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such Certificates, may be limited due to the lack of a
Definitive Certificate for such Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement and the
related Supplement only at the direction of one or more Participants to whose
account with DTC the Certificates are credited. Additionally, DTC has advised
the Transferor that it may take actions with respect to the Certificateholders'
Interest that conflict with other of its actions with respect thereto.
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 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. 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.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("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 29 currencies, including United
States dollars. Euroclear 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. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems 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 Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), underwriters, securities brokers and
dealers and other professional financial intermediaries. Indirect access to
Euroclear 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 "Euroclear Provisions"). The Euroclear Provisions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Euroclear Provisions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Tax Matters -- Federal Income Tax Consequences -- Non-United States
Investors." Cedel or the Euroclear Operator, as the case may be, will
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take any other action permitted to be taken by a Certificateholder under the
Pooling and Servicing Agreement and the related Supplement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
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 Transferor advises the Trustee 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 Transferor is unable to locate a qualified successor, (ii) the Transferor,
at its option, elects to terminate the book-entry system through DTC or (iii)
after the occurrence of a Servicer Default, Certificate Owners evidencing not
less than 50% of the aggregate unpaid principal amount of the Certificates,
advise the Trustee and DTC through Participants in writing that the continuation
of a book-entry system through DTC (or a successor thereto) is no longer in the
best interests of the 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 certificates representing the Certificates and instructions for
reregistration, the Trustee will issue the Certificates in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as Certificateholders under the Pooling and
Servicing Agreement and the related Supplement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders in accordance with the procedures set forth
herein and in the Pooling and Servicing Agreement and the related Prospectus
Supplement. Interest payments and principal payments 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
Certificates registered in the name of Cede), however, will be made only upon
presentation and surrender of such Certificate on the final payment date at such
office or agency as is specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of the final
distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which will 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.
INTEREST
Interest will accrue on the Certificates of a Series or Class offered
hereby at the per annum rate either specified in or determined in the manner
specified in the related Prospectus Supplement. Except as otherwise provided
herein, collections of Finance Charge Receivables and certain other amounts
allocable to the Certificateholders' Interest of a Series or Class offered
hereby will generally be used to make interest payments to Certificateholders of
such Series or Class on each Interest Payment Date specified in the related
Prospectus Supplement; provided that after the commencement of an Early
Amortization Period with respect to such Series, interest will be distributed to
such Certificateholders monthly on each Special Payment Date. If the Interest
Payment Dates for a Series or Class occur less frequently than monthly, such
collections or other amounts (or the portion thereof allocable to such Class)
will be deposited in one or more Interest Funding Accounts and used to make
interest payments to Certificateholders of such Series or Class on the following
Interest Payment Date. If a Series has more than one Class of Certificates, each
such Class may
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have a separate Interest Funding Account. Funds on deposit in an Interest
Funding Account will be invested in Eligible Investments. Any earnings (net of
losses and investment expenses) on funds in an Interest Funding Account will be
paid to, or at the direction of, the Transferor except as otherwise specified in
any Supplement. Interest with respect to the Certificates of each Series offered
hereby will accrue and be calculated on the basis described in the related
Prospectus Supplement.
PRINCIPAL
The Certificates of each Series will have a Revolving Period during which
collections of Principal Receivables and certain other amounts otherwise
allocable to the Invested Amount of such Series will, (x) if such Series is a
Principal Sharing Series, be treated as Shared Principal Collections and will be
distributed to, or for the benefit of, the Certificateholders of other Series in
such Group or, if not required for such purpose, the holders of the Transferor
Certificates or deposited into the Special Funding Account or (y) if such Series
is not a Principal Sharing Series, paid to the holders of the Transferor
Certificates or deposited into the Special Funding Account, as more fully
described in the related Prospectus Supplement. Unless an Early Amortization
Period or Early Accumulation Period commences with respect to a Series,
following the Revolving Period with respect to such Series, such Series will
have either a Controlled Accumulation Period or a Controlled Amortization
Period.
During the Controlled Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be deposited on each
Distribution Date in a Principal Funding Account and used to make principal
distributions to the Certificateholders of such Series or any Class thereof when
due. If so specified in the related Prospectus Supplement, the amount to be
deposited in a Principal Funding Account for any Series offered hereby on any
Distribution Date may, but will not necessarily, be limited to an amount equal
to a Controlled Accumulation Amount specified in such Prospectus Supplement plus
any existing deficit controlled accumulation amount arising from prior
Distribution Dates. If the Prospectus Supplement for a Series so specifies, the
amount to be deposited in the Principal Funding Account on a Distribution Date
may be a variable amount. 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.
During the Controlled Amortization Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be used on each Distribution
Date to make principal distributions to any Class of Certificateholders then
scheduled to receive such distributions. If so specified in the related
Prospectus Supplement, the amount to be distributed to Certificateholders of any
Series offered hereby on any Distribution Date may be limited to an amount equal
to the Controlled Amortization Amount specified in such Prospectus Supplement
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.
During the Early Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocated to such Series) will be deposited on each
Distribution Date in a Principal Funding Account and used to make distributions
of principal to the Certificateholders of such Series or Class on the Expected
Final Payment Date. The amount to be deposited in the Principal Funding Account
will not be limited to any Controlled Deposit Amount. See "Series
Provisions -- Pay Out Events and Reinvestment Events" or "-- Pay Out Events" in
the related Prospectus Supplement for a discussion of the events that might lead
to the commencement of the Early Accumulation Period with respect to a Series.
During the Early Amortization Period with respect to a Series, collections
of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as principal
payments to the applicable
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Certificateholders monthly on each Distribution Date beginning with the first
Special Payment Date. During the Early Amortization Period with respect to a
Series, distributions of principal to Certificateholders of such Series will not
be subject to any Controlled Deposit Amount or Controlled Distribution Amount.
In addition, upon the commencement of the Early Amortization Period, any funds
on deposit in a Principal Funding Account with respect to such Series will be
paid to the Certificateholders of the relevant Class or Series on the first
Special Payment Date. See "Series Provisions -- Pay Out Events and Reinvestment
Events" or "-- Pay Out Events" in the related Prospectus Supplement for a
discussion of the events that might lead to the commencement of the Early
Amortization Period with respect to a Series.
Funds on deposit in any Principal Funding Account established with respect
to a Class or Series offered hereby will be invested in Eligible Investments and
may be subject to a guarantee or guaranteed investment contract or a deposit
account or other mechanism specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such funds. In
order to enhance the likelihood of the payment in full of the principal amount
of a Class of Certificates offered hereby at the end of a Controlled
Accumulation Period or Early Accumulation Period with respect thereto, such
Class may be subject to a maturity liquidity facility or a deposit account or
other similar mechanism specified in the relevant Prospectus Supplement.
PAY OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period with respect to a Series will continue through the
date specified in the applicable Prospectus Supplement and the Controlled
Amortization Period or Controlled Accumulation Period will begin at such time,
unless a Pay Out Event or Reinvestment Event occurs. The Early Amortization
Period with respect to such Series will commence when a Pay Out Event occurs or
is deemed to occur and the Early Accumulation Period will occur when a
Reinvestment Event occurs or is deemed to occur. A "Pay Out Event" may occur
with respect to any specific Series upon the occurrence of any event specified
in the related Prospectus Supplement. Such events may include, but are not
required to include nor are they limited to, (i) certain events of bankruptcy or
insolvency, relating to the Transferor and UCS, (ii) the Trust becoming subject
to regulation as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, (iii) the failure by the Transferor to make any
payment or deposit required under the Pooling and Servicing Agreement within a
specified period of the date such payment or deposit is required to be made,
(iv) the breach of certain other covenants, representations or warranties
contained in the Pooling and Servicing Agreement, after any applicable notice
and cure period (and, if so specified in the related Prospectus Supplement, only
to the extent such breach has a material adverse effect on the related
Certificateholders), (v) the failure by the Transferor to make a required
designation of Additional Accounts for the Trust within a specified time after
the date such addition is required to be made, (vi) a reduction in the Series
adjusted Portfolio Yield below the rates, and for the period, specified in the
related Prospectus Supplement and (vii) the occurrence of a Servicer Default.
The Early Amortization Period with respect to a Series will commence on the day
on which a Pay Out Event occurs or is deemed to occur with respect thereto. If
an Early Amortization Period commences, monthly distributions of principal to
the Certificateholders of such Series will begin on the Distribution Date in the
Monthly Period following the Monthly Period in which such Pay Out Event occurs
(such Distribution Date and each following Distribution Date with respect to
such Series, a "Special Payment Date"). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account with respect to such Series at
such time will be distributed on such first Special Payment Date to the
Certificateholders of such Series. If, because of the occurrence of a Pay Out
Event, the Early Amortization Period begins earlier than the scheduled
commencement of a Controlled Amortization Period or prior to an Expected Final
Payment Date, Certificateholders will begin receiving distributions of principal
earlier than they otherwise would have and such distributions will not be
subject to the Controlled Deposit Amount or the Controlled Distribution Amount.
As a result, the average life of the Certificates may be reduced or increased.
If a Series has more than one Class of Certificates, each Class may have
different Pay Out Events which, in the case of any Series of Certificates
offered hereby, will be described in the related Prospectus Supplement.
A particular Series may have no Pay Out Events or only limited Pay Out
Events, but may have in lieu thereof specified events ("Reinvestment Events")
that end the reinvestment of the Trust in new Receivables and apply available
collections of Principal Receivables to the purchase of Eligible Investments. A
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Reinvestment Event may include all or some of the events that constitute Pay Out
Events for other Series. The Early Accumulation Period with respect to a Series
will commence on the day on which a Reinvestment Event occurs or is deemed to
occur with respect thereto. If a Series has more than one Class of Certificates,
each Class may have different Reinvestment Events (or may have only Pay Out
Events) which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event or Reinvestment Event
discussed above, if an Insolvency Event shall occur, immediately on the day of
such event the Transferor will cease to transfer Principal Receivables to the
Trust and promptly give notice to the Trustee of such event. Under the terms of
the Pooling and Servicing Agreement, as soon as possible but in any event within
15 days, the Trustee will publish a notice of the occurrence of the Insolvency
Event stating that the Trustee intends to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner unless
instructions otherwise are received within a specified period from
Certificateholders holding Certificates evidencing more than 50% of the Invested
Amount of each Series of Certificates issued and outstanding (or, with respect
to any Series with two or more Classes, 50% of the Invested Amount of each
Class) and each Enhancement Invested Amount and possibly the vote of other
persons specified in the Supplement for a Series and, for a Series offered
hereby, the related Prospectus Supplement to the effect that such
Certificateholders disapprove of the liquidation of Receivables and wish to
continue having Principal Receivables transferred to the Trust as before such
Insolvency Event. 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 on the Receivables and applied as provided above
and in each Prospectus Supplement.
If the only Pay Out Event or Reinvestment Event to occur with respect to
any Series is the bankruptcy of the Transferor, the Trustee may not be permitted
to suspend transfers of Receivables to the Trust, and the instructions to sell
the Receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the "Servicing Fee"). The Servicing
Fee will be allocated among the Transferor's Interest (the "Transferor Servicing
Fee"), and Certificateholders of each Series. The portion of the Servicing Fee
allocable to each Series of Certificates on any Distribution Date (the "Monthly
Servicing Fee") will generally be equal to one-twelfth of the product of (a) the
applicable servicing fee percentage with respect to such Series and (b) the
Invested Amount (as it may be adjusted in accordance with the related
Supplement) of such Series with respect to the related Monthly Period. A portion
of the Monthly Servicing Fee with respect to a particular Series may be payable
from Interchange allocated to such Series as specified in the related Supplement
and, for a Series offered hereby, the related Prospectus Supplement.
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, paying agent,
transfer agent and registrar and independent accountants and other fees which
are not expressly stated in the Pooling and Servicing Agreement to be payable by
the Trust or the Transferor other than federal, state and local income and
franchise taxes, if any, of the Trust.
THE POOLING AND SERVICING AGREEMENT GENERALLY
CONVEYANCE OF RECEIVABLES
On the initial Series Closing Date, the Account Owners sold and assigned to
UCS, and UCS, in turn, sold and assigned to the Transferor for assignment to the
Trust their respective interest in all Receivables in the Accounts existing as
of the Initial Cut-Off Date, all Receivables thereafter created under the
Accounts, all Recoveries and Interchange allocable to the Trust, and the
proceeds of all of the foregoing. The Account Owners may also sell and assign
from time to time to UCS who, in turn, may sell and assign from time to time to
the Transferor for conveyance to the Trust Receivables in designated Additional
Accounts, and the
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Transferor may from time to time sell and assign to the Trust its interest in
Participation Interests, all Recoveries and Interchange allocable to the Trust
and the proceeds of all of the foregoing.
On each Series Closing Date, the Trustee will authenticate and deliver one
or more certificates representing the Series or Class of Certificates, in each
case against payment to the Transferor of the net proceeds of the sale of the
Certificates. In the case of the initial Series Closing Date, the Trustee also
delivered to the Transferor the Transferor Certificate, representing the
Transferor's Interest.
In connection with the transfer of the Receivables to the Trust, each
Account Owner will indicate in its computer records that the Receivables have
been conveyed from such Account Owner to UCS and each of UCS and the Transferor
will indicate in its respective records that the Receivables have been conveyed
from the Transferor to the Trust. In addition, the Transferor will provide or
cause to be provided to the Trustee a computer file or a microfiche list
containing a true and complete list showing for each Account, as of the
applicable date of designation, (i) its account number, (ii) the aggregate
amount outstanding in such Account and (iii) except in the case of New Accounts,
the aggregate amount of Principal Receivables in such Account. The Transferor
and UCS will retain and will not deliver to the Trustee any other records or
agreements relating to the Accounts or the Receivables. Except as set forth
above, the records and agreements relating to the Accounts and the Receivables
will not be segregated from those relating to other credit card accounts and
receivables, and the physical documentation relating to the Accounts or
Receivables will not be stamped or marked to reflect the transfer of Receivables
to UCS, the Transferor or the Trust. The Transferor will file UCC financing
statements with respect to the transfer of the Receivables from the Transferor
to the Trust meeting the requirements of applicable state law. See "Risk
Factors" and "Certain Legal Aspects of the Receivables."
As described below under "-- Additions of Accounts or Participation
Interests," the Transferor has the right (subject to certain limitations and
conditions), and in some circumstances is obligated, to require UCS to designate
from time to time Additional Accounts to be included as Accounts and to convey
to the Transferor (for conveyance by the Transferor to the Trust) all
Receivables in such Additional Accounts, whether such Receivables are then
existing or thereafter created. Each such Additional Account must be an Eligible
Account. In respect of any designation of Additional Accounts, the Transferor
and UCS will follow the procedures set forth in the preceding paragraph, except
the list will show information for such Additional Accounts as of the date such
Additional Accounts are identified and selected. Aggregate Addition Accounts
will be selected by UCS and the Transferor in a manner which they reasonably
believe will not be materially adverse to the Certificateholders. The Transferor
has the right (subject to certain conditions described under "-- Additions of
Accounts or Participation Interests") to convey Participation Interests to the
Trust. In addition, the Transferor may (under certain circumstances and subject
to certain limitations and conditions) remove the Participation Interests and
the Receivables in certain Accounts as described under "-- Removal of Accounts."
REPRESENTATIONS AND WARRANTIES
The Transferor makes representations and warranties to the Trust in the
Pooling and Servicing Agreement relating to the Accounts and the Receivables as
of each Series Closing Date (or as of the related addition date with respect to
Additional Accounts) to the effect, among other things, that as of each
applicable date of designation, (a) each Account was an Eligible Account, (b)
each of the Receivables then existing in the Initial Accounts or in the
Additional Accounts, as applicable, is an Eligible Receivable and (c)
thereafter, on the date of creation of any new Receivable, such Receivable is an
Eligible Receivable. If the Transferor breaches any representation and warranty
described in this paragraph in any material respect and such breach remains
uncured for 60 days, or such longer period as may be agreed to by the Trustee
and the Servicer, after the earlier to occur of the discovery of such breach by
the Transferor or receipt of written notice of such breach by the Transferor and
such breach has a material adverse effect on the Certificateholders' Interest in
such Receivable, all Receivables with respect to the Account affected
("Ineligible Receivables") will be reassigned to the Transferor on the terms and
conditions set forth below and such Account shall no longer be included as an
Account. If there is an Additional Transferor, the obligation to accept
reassignment of the Receivables will be several and not joint with respect to
the Receivables transferred by each Transferor to the Trust.
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"Eligible Receivable" means each receivable, or interest therein as
contemplated by the UCS Purchase Agreements, (a) which has arisen under an
Eligible Account, (b) which was created in compliance in all material respects
with all requirements of law and pursuant to a credit card agreement which
complies in all material respects with all requirements of law applicable to the
Account Owner, (c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with, any
governmental authority required to be obtained, effected or given in connection
with the creation of such Receivable or the execution, delivery, creation and
performance by the Account Owner of the related credit card agreements pursuant
to which such Receivable was created have been duly obtained or given and are in
full force and effect, (d) as to which at the time of its transfer to the Trust,
the Transferor or the Trust will have good and marketable title, free and clear
of all liens, encumbrances, charges and security interests, (e) which has been
the subject of either a valid transfer and assignment from the Transferor to the
Trust of all the Transferor's right, title and interest therein (and in the
proceeds thereof), or the grant of a first priority perfected security interest
therein (and in the proceeds thereof), effective until the termination of the
Trust, (f) which will at all times be the legal, valid and binding payment
obligation of the related cardmember enforceable against such cardmember in
accordance with its terms, subject to certain bankruptcy or insolvency related
exceptions, (g) which at the time of its transfer to the Trust, has not been
waived or modified except as permitted under the Pooling and Servicing
Agreement, (h) which is not at the time of its transfer to the Trust subject to
any right of rescission, setoff, counterclaim or defense (including the defense
of usury), other than certain bankruptcy and insolvency related defenses, (i) as
to which the related Account Owner has satisfied all obligations to be fulfilled
at the time it is transferred to the Trust, (j) as to which, at the time of its
transfer to the Trust, none of the related Account Owner, UCS or the Transferor
has taken any action which would impair or failed to take any action the result
of which would impair the rights of the Trust or the Certificateholders therein
and (k) which constitutes either an "account" or a "general intangible" under
the applicable UCC as then in effect.
An Ineligible Receivable will be reassigned to the Transferor on or before
the end of the Monthly Period in which such reassignment obligation arises by
the Transferor directing the Servicer to deduct the portion of such Ineligible
Receivable which is a Principal Receivable from the aggregate amount of the
Principal Receivables used to calculate the Transferor Amount. In the event that
the exclusion of the principal portion of an Ineligible Receivable from the
calculation of the Transferor Amount would cause the Transferor Amount to be
less than the Required Transferor Amount, on the Distribution Date following the
Monthly Period in which such reassignment obligation arises the Transferor will
make a deposit into the Special Funding Account in immediately available funds
in an amount equal to the amount by which the Transferor Amount would be reduced
below the Required Transferor Amount. The reassignment of any Ineligible
Receivable to the Transferor, and the obligation of the Transferor to make any
deposits into the Special Funding Account as described in this paragraph, is the
sole remedy respecting any breach of the representations and warranties
described in the preceding paragraph with respect to such Receivable available
to the Certificateholders or the Trustee on behalf of Certificateholders. UCS
has agreed, in the Funding Purchase Agreement, to repurchase from the Transferor
any Ineligible Receivables reassigned to the Transferor and to provide the
Transferor any amounts necessary to enable the Transferor to make the deposit
referred to above. The term "Transferor Amount" means at any time of
determination, an amount equal to the sum of (i) total aggregate amount of
Principal Receivables in the Trust and (ii) the amount on deposit in the Special
Funding Account at such time minus the aggregate Invested Amounts for all
outstanding Series at such time.
The Transferor also makes representations and warranties to the Trust to
the effect, among other things, that as of each Series Closing Date it is a
corporation validly existing under the laws of the State of Delaware, it has the
authority to consummate the transactions contemplated by the Pooling and
Servicing Agreement and each Supplement and will further represent to the Trust
on each Series Closing Date and, with respect to the Additional Accounts, as of
each addition date (a) the Pooling and Servicing Agreement and each Supplement
constitutes a valid, binding and enforceable agreement of the Transferor and (b)
the Pooling and Servicing Agreement and each Supplement constitutes either a
valid sale, transfer and assignment to the Trust of all right, title and
interest of the Transferor in the Receivables, whether then existing or
thereafter created and the proceeds thereof (including proceeds in any of the
accounts established for the benefit of the Certificateholders) and in
Recoveries and Interchange allocable to the Trust or the grant of a first
priority perfected security interest under the applicable UCC in such
Receivables and the proceeds thereof (including
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proceeds in any of the accounts established for the benefit of the
Certificateholders) and in Recoveries and Interchange allocable to the Trust,
which is effective as to each Receivable then existing on such date. In the
event of a material breach of any of the representations and warranties
described in this paragraph that has a material adverse effect on the
Certificateholders' Interest in the Receivables or the availability of the
proceeds thereof to the Trust (which determination will be made without regard
to whether funds are then available pursuant to any Series Enhancement), either
the Trustee or Certificateholders holding Certificates evidencing not less than
50% of the aggregate unpaid principal amount of all outstanding Certificates, by
written notice to the Transferor and the Servicer (and to the Trustee if given
by the Certificateholders), may direct the Transferor to accept the reassignment
of the Receivables in the Trust within 60 days of such notice, or within such
longer period specified in such notice. The Transferor will be obligated to
accept the reassignment of such Receivables on the Distribution Date following
the Monthly Period in which such reassignment obligation arises. Such
reassignment will not be required to be made, however, if at the end of such
applicable period, the representations and warranties shall then be true and
correct in all material respects and any material adverse effect caused by such
breach shall have been cured. The price for such reassignment will be an amount
equal to the sum of the amounts specified therefor with respect to each Series
in the related Supplement. The payment of such reassignment price in immediately
available funds, will be considered a payment in full of the Certificateholders'
Interest and such funds will be distributed upon presentation and surrender of
the Certificates. If the Trustee or Certificateholders give a notice as provided
above, the obligation of the Transferor to make any such deposit will constitute
the sole remedy respecting a breach of the representations and warranties
available to Certificateholders or the Trustee on behalf of Certificateholders.
If there is an Additional Transferor, the obligation to accept reassignment of
the Receivables will be several and not joint with respect to the Receivables
transferred by each Transferor to the Trust. Under the Funding Purchase
Agreement, UCS will repurchase from the Transferor Receivables purchased by the
Transferor in accordance with this paragraph if UCS breaches certain of its
similar representations and warranties under the Funding Purchase Agreement. See
"Description of the Purchase Agreements -- Funding Purchase
Agreement -- Representations and Warranties."
It is not 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 UCS' and the Transferor's representations and warranties or for
any other purpose. In addition, it is not anticipated or required that the
Trustee will make any initial or periodic general examination of the Servicer
for the purpose of establishing the compliance by the Servicer with its
representations or warranties or the performance by the Servicer of its
obligations under the Pooling and Servicing Agreement, any Supplement or for any
other purpose. The Servicer, however, will deliver to the Trustee on or before
March 31 of each calendar year an opinion of counsel with respect to the
validity of the interest of the Trust in and to the Receivables and certain
other components of the Trust.
THE TRANSFEROR CERTIFICATES; ADDITIONAL TRANSFERORS
The Pooling and Servicing Agreement provides that the Transferor may
exchange a portion of the Transferor Certificate for one or more additional
certificates (each, a "Supplemental Certificate") for transfer or assignment to
a person designated by the Transferor upon the execution and delivery of a
supplement to the Pooling and Servicing Agreement (which supplement shall be
subject to the amendment section of the Pooling and Servicing Agreement to the
extent that it amends any of the terms of the Pooling and Servicing Agreement;
see "-- Amendments"); provided, that (a) the Rating Agency Condition is
satisfied for such exchange, (b) such exchange will not result in any Adverse
Effect and the Transferor shall have delivered to the Trustee an officer's
certificate to the effect that the Transferor reasonably believes that such
exchange will not, based on the facts known to such officer at the time of such
certification, have an Adverse Effect, (c) the Transferor shall have delivered
to the Trustee a Tax Opinion (as defined herein) with respect to such exchange
and (d) the aggregate amount of Principal Receivables in the Trust as of the
date of such exchange will be greater than the Required Minimum Principal
Balance as of such date. Any transfer or assignment of a Supplemental
Certificate is subject to the condition set forth in clause (c) above.
The Transferor may designate affiliates of the Transferor to be included as
a "Transferor" ("Additional Transferors") under the Pooling and Servicing
Agreement (by means of an amendment to the Pooling and
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Servicing that will not require the consent of any Certificateholder; see
"-- Amendments") and, in connection with the designation of an Additional
Transferor, the Transferor will surrender the Transferor Certificate to the
Trustee in exchange for a newly issued Transferor Certificate modified to
reflect such Additional Transferor's interest in the Transferor's Interest;
provided, however, that (i) the conditions set forth in clauses (a) and (c) in
the preceding paragraph with respect to a transfer of a Supplemental Certificate
shall have been satisfied with respect to such designation and transfer and (ii)
any applicable conditions described in "-- Additions of Accounts or
Participation Interests" shall have been satisfied with respect to the transfer
of Receivables or Participation Interests by any Additional Transferor to the
Trust. Following the inclusion of an Additional Transferor, the Additional
Transferor will be treated in the same manner as a Transferor and each
Additional Transferor generally will have the same obligations and rights as a
Transferor described herein.
ADDITIONS OF ACCOUNTS OR PARTICIPATION INTERESTS
The Transferor has the right under the Funding Purchase Agreement to
require UCS to designate from time to time Additional Accounts to be included as
Accounts. UCS will convey to the Transferor, which in turn will convey to the
Trust, its interest in all Receivables arising from such Additional Accounts,
whether such Receivables are then existing or thereafter created, subject to the
following conditions, among others: (i) each such Additional Account must be an
Eligible Account; and (ii) except for the addition of New Accounts (a) the
selection of the Aggregate Addition Accounts is done in a manner which it
reasonably believes will not result in an Adverse Effect; and (b) except for the
addition of New Accounts, the Rating Agency Condition shall have been satisfied.
"Adverse Effect" means any action that will result in the occurrence of a Pay
Out Event or Reinvestment Event or materially adversely affect the amount or
timing of distributions to the Certificateholders of any Series or Class. The
Transferor will be obligated to require UCS to designate Additional Accounts (to
the extent available) if the aggregate amount of Principal Receivables in the
Trust on the last business day of any calendar month is less than the Required
Minimum Principal Balance as of such last day. In lieu of adding Additional
Accounts, the Transferor may convey Participation Interests to the Trust.
"Required Minimum Principal Balance" as of any date of determination means the
sum of the Series Invested Amounts for all outstanding Series plus the sum of
the Series Required Transferor Amounts (as defined herein) for each such Series
minus the amount on deposit in the Special Funding Account. The "Series Invested
Amount" for a Series will be the amount set forth in the related Supplement and,
for each Series offered hereby, in the related Prospectus Supplement for such
Series, but will generally equal the initial Invested Amount for a Series.
Each Additional Account must be an Eligible Account at the time of its
designation. However, since Additional Accounts or Participation Interests
created after the Initial Cut-Off Date may not have been a part of the portfolio
of accounts of the Account Owners as of the Initial Cut-Off Date, they may not
be of the same credit quality as the Initial Accounts because such Additional
Accounts or Participation Interests may have been originated at a later date
using credit criteria different from those which were applied to the Initial
Accounts or may have been acquired from another credit card issuer or entity who
had different credit criteria. Consequently, the performance of such Additional
Accounts or Participation Interests may be better or worse than the performance
of the Initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, the
Transferor may on any day of any Monthly Period, but shall not be obligated to,
acquire all Receivables and proceeds thereof with respect to Removed Accounts
and Participation Interests. The Transferor is permitted to designate and
require reassignment to it of the Receivables from Removed Accounts and
Participation Interests only upon satisfaction of the following conditions: (i)
the Transferor shall have delivered to the Trustee a computer file or microfiche
list containing a true and complete list of all Removed Accounts, such Accounts
to be identified by, among other things, account number and their aggregate
amount of Principal Receivables; (ii) the Transferor shall have delivered an
officer's certificate to the Trustee to the effect that (a) no selection
procedure reasonably believed by the Transferor to be materially adverse to the
interests of the Certificateholders or the Transferor was utilized in removing
the Removed Accounts from among any pool of Accounts of a similar type and (b)
in the reasonable belief of Transferor such removal will not have an Adverse
Effect;
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and (iii) the Transferor shall have delivered prior written notice of the
removal to each Rating Agency, the Trustee and the Servicer and prior to the
date on which such Receivables are to be removed the Rating Agency Condition
shall have been satisfied with respect to such removal.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferor may at any
time and from time to time, but without any obligation to do so, designate a
specified fixed or variable percentage based on a formula (the "Discount
Percentage") of the amount of Receivables arising in all or any specified
portion of the Accounts on and after the date such designation becomes effective
that otherwise would have been treated as Principal Receivables to be treated as
Finance Charge Receivables (the "Discount Option Receivables"). Although there
can be no assurance that the Transferor will do so, such designation may occur
because the Transferor determines that the exercise of the discount option is
needed to provide a sufficient yield on the Receivables to cover interest and
other amounts due and payable from collections of Finance Charge Receivables or
to avoid the occurrence of a Pay Out Event or Reinvestment Event relating to the
reduction of the average yield on the portfolio of Accounts in the Trust, if the
related Supplement provides for such a Pay Out Event or Reinvestment Event.
After any such designation, pursuant to the Pooling and Servicing Agreement, the
Transferor may, without notice to or consent of the Certificateholders, from
time to time reduce or withdraw the Discount Percentage; provided, however, that
such reduction or withdrawal will occur only if the Transferor delivers to the
Trustee and, in connection with certain Series, providers of Series Enhancement
a certificate of an authorized representative to the effect that, in the
reasonable belief of the Transferor, such reduction or withdrawal would not have
adverse regulatory or other accounting implications for the Transferor. The
Transferor must provide 30 days prior written notice to the Servicer, the
Trustee, each Rating Agency and, in connection with certain Series, providers of
Series Enhancement of any such designation or reduction or withdrawal, and such
designation or reduction or withdrawal will become effective on the date
specified therein only if (a) the Transferor has delivered to the Trustee and
any such providers of Series Enhancement a certificate of an authorized
representative to the effect that, based on the facts known to such
representative at the time, the Transferor reasonably believes that such
designation or reduction or withdrawal will not at the time of its occurrence
cause a Pay Out Event or Reinvestment Event or an event that, with notice or the
lapse of time or both, would constitute a Pay Out Event or Reinvestment Event,
to occur with respect to any Series and (b) the Transferor has received written
notice from each Rating Agency that such designation or reduction or withdrawal
will satisfy the Rating Agency Condition. On the Date of Processing of any
collections on or after the date the exercise of the discount option takes
effect, the product of (i) a fraction the numerator of which is the amount of
Discount Option Receivables and the denominator of which is the amount of all of
the Principal Receivables (including Discount Option Receivables) at the end of
the prior Monthly Period and (ii) 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. Any such designation would result in an
increase in the amount of collections of Finance Charge Receivables, a reduction
in the balance of Principal Receivables and a reduction in the Transferor
Amount.
PREMIUM OPTION
The Pooling and Servicing Agreement provides that the Transferor may at any
time and from time to time, but without any obligation to do so, designate a
specified fixed or variable percentage based on a formula as specified in the
related Prospectus Supplement (the "Premium Percentage") of the amount of
Receivables arising in all or any specified portion of the Accounts on and after
the date such designation becomes effective that otherwise would have been
treated as Finance Charge Receivables to be treated as Principal Receivables
(the "Premium Option Receivables"). After any such designation, pursuant to the
Pooling and Servicing Agreement, the Transferor may, without notice to or
consent of the Certificateholders, from time to time reduce or withdraw the
Premium Percentage; provided, however, that such reduction or withdrawal will
occur only if the Transferor delivers to the Trustee and, in connection with
certain Series, providers of Series Enhancement a certificate of an authorized
representative to the effect that, in the reasonable belief of the Transferor,
such reduction or withdrawal would not have adverse regulatory or other
accounting implications
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for the Transferor. The Transferor must provide 30 days prior written notice to
the Servicer, the Trustee, each Rating Agency and any such provider of Series
Enhancement of any such designation or reduction or withdrawal, and such
designation or reduction or withdrawal will become effective on the date
specified therein only if (a) the Transferor has delivered to the Trustee and
any such providers of Series Enhancement a certificate of an authorized
representative to the effect that, based on the facts known to such
representative at the time, the Transferor reasonably believes that such
designation or reduction or withdrawal will not at the time of its occurrence
cause a Pay Out Event or Reinvestment Event or an event that, with notice or the
lapse of time or both, would constitute a Pay Out Event or Reinvestment Event,
to occur with respect to any Series and (b) the Transferor has received written
notice from each Rating Agency that such designation or reduction or withdrawal
will satisfy the Rating Agency Condition. On the Date of Processing of any
collections on or after the date the exercise of the premium option takes
effect, the product of (i) a fraction the numerator of which is the amount of
Premium Option Receivables and the denominator of which is the amount of all of
the Finance Charge Receivables (including Premium Option Receivables) at the end
of the prior Monthly Period and (ii) collections of Receivables that arise in
the Accounts on such day on or after the date such option is exercised that
otherwise would be Finance Charge Receivables will be deemed collections of
Principal Receivables and will be applied accordingly, unless otherwise provided
in the related Prospectus Supplement. Any such designation would result in an
increase in the amount of collections of Principal Receivables and a lower
portfolio yield with respect to collections of Finance Charge Receivables than
would otherwise occur.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of certain of the
Servicer's actions or omissions with respect to the Trust pursuant to the
Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement, AT&T Universal Funding, in its
capacity as a Transferor, has agreed to be liable directly to an injured party
for the entire amount of any liabilities of the Trust (other than those incurred
by a Certificateholder in the capacity of an investor in the Certificates of any
Series) arising out of or based on the arrangement created by the Pooling and
Servicing Agreement or the actions of the Servicer taken pursuant thereto as
though the Pooling and Servicing Agreement created a partnership under the New
York Uniform Partnership Act in which the Transferor was a general partner.
Except as provided in the preceding two paragraphs, the Pooling and
Servicing Agreement provides that neither the Transferor nor the Servicer nor
any of their respective directors, officers, employees or agents will be under
any other liability to the Trust, the Trustee, the Certificateholders, any
Credit Enhancer or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the Pooling and Servicing
Agreement. However, neither the Transferor nor the Servicer will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer or
any such person in the performance of their duties or by reason of reckless
disregard of their obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides that the Servicer
is not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the Pooling and
Servicing Agreement. The Servicer may, in its sole discretion, undertake any
such legal action which it may deem necessary or desirable for the benefit of
Certificateholders with respect to the Pooling and Servicing Agreement and the
rights and duties of the parties thereto and the interests of the
Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing
credit card receivables, but in any event at least comparable with the policies
and procedures and the degree of skill and care applied or exercised with
respect to any other credit card receivables it, or its affiliates, service.
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Pursuant to the UCS Purchase Agreement, except as otherwise required by any
requirement of law or as is deemed by the applicable Account Owner (or any
successor to such Account Owner under such agreement) to be necessary in order
for it to maintain its credit card business or a program operated by such credit
card business on a competitive basis based on a good faith assessment by it of
the nature of the competition in the credit card business or such program, an
Account Owner will not take any action that will have the effect of reducing the
Portfolio Yield to a level that could reasonably be expected to cause any Series
to experience a Pay Out Event or Reinvestment Event based on the insufficiency
of the Series adjusted Portfolio Yield or take any action that would have the
effect of reducing the Portfolio Yield to less than the highest Average Rate for
any Group. The related Account Owner also covenants that unless required by law
and except as provided above, such Account Owner will take no action with
respect to the applicable credit card agreements or the applicable credit card
guidelines that, at the time of such action, such Account Owner reasonably
believes will have a material adverse effect on UCS, AT&T Universal Funding or
the Certificateholders.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with cardmembers, investigating payment
delinquencies, evaluating the increase of credit limits and the issuance of
credit cards, providing billing and tax records to cardmembers and maintaining
internal records with respect to each Account. Managerial and custodial services
performed by the Servicer on behalf of the Trust include providing assistance in
any inspections of the documents and records relating to the Accounts and
Receivables by the Trustee pursuant to the Pooling and Servicing Agreement,
maintaining the agreements, documents and files relating to the Accounts and
Receivables as custodian for the Trust and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee.
The Pooling and Servicing Agreement provides that the Servicer may delegate
its duties under that agreement to any entity that agrees to conduct such duties
in accordance with the Pooling and Servicing Agreement and the credit card
guidelines. Notwithstanding any such delegation the Servicer will continue to be
liable for all of its obligations under the Pooling and Servicing Agreement.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any one or
more Supplements, the Transferor may direct the Trustee to authenticate from
time to time new Series subject to the conditions described below (each such
issuance, a "New Issuance"). Each New Issuance will have the effect of
decreasing the Transferor Amount to the extent of the initial Invested Amount of
such new Series. Under the Pooling and Servicing Agreement, the Transferor may
designate, with respect to any newly issued Series: (a) its name or designation;
(b) its initial principal amount (or method for calculating such amount) and its
invested amount in the Trust (the "Invested Amount"), which is generally based
on the aggregate amount of Principal Receivables in the Trust allocated to such
Series, and its Series Invested Amount; (c) its certificate rate (or formula for
the determination thereof); (d) the interest payment date or dates (each, an
"Interest Payment Date") and the date or dates from which interest shall accrue;
(e) the method for allocating collections to Certificateholders of such Series;
(f) any bank accounts to be used by such Series and the terms governing the
operation of any such bank accounts; (g) the percentage used to calculate the
Monthly Servicing Fees; (h) the provider and terms of any form of Series
Enhancement with respect thereto; (i) the terms on which the Certificates of
such Series may be repurchased; (j) the Series Termination Date; (k) the number
of Classes of Certificates of such Series, and if such Series consists of more
than one Class, the rights and priorities of each such Class; (l) the extent to
which the Certificates of such Series will be issuable in temporary or permanent
global form (and, in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate or certificates may be exchanged, in whole or in part, for
definitive certificates, and the manner in which any interest payable on such
global certificate or certificates will be paid); (m) whether the Certificates
of such Series may be issued in bearer form and any limitations imposed thereon;
(n) the priority of such Series with respect to any other Series; (o) the Group,
if any, in which such Series will be included; and (p) any other relevant terms
(all such terms, the "Principal Terms" of such Series). None of the Transferor,
the Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder of any outstanding Series to issue any
additional Series. The Transferor may offer any Series to the public under a
Prospectus Supplement or other Disclosure Document in transactions either
registered under the Securities Act or exempt from registration
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thereunder, directly, through one or more underwriters or placement agents, in
fixed-price offerings or in negotiated transactions or otherwise. See "Plan of
Distribution." Any such Series may be issued in fully registered or book-entry
form in minimum denominations determined by the Transferor. The Transferor
intends to offer, from time to time, additional Series.
The Pooling and Servicing Agreement provides that the Transferor may
designate Principal Terms such that each Series has a Controlled Accumulation
Period or a Controlled Amortization Period that may have a different length and
begin on a different date than such periods for any other Series. Further, one
or more Series may be in their Controlled Accumulation Period or Controlled
Amortization Period while other Series are not. Moreover, each Series may have
the benefits of Series Enhancement issued by enhancement providers different
from the providers of Series Enhancement with respect to any other Series. Under
the Pooling and Servicing Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Certificateholders of the Series to which such
Series Enhancement relates. With respect to each such Series Enhancement, the
Transferor may deliver a different form of Series Enhancement agreement. The
Transferor also has the option under the Pooling and Servicing Agreement to vary
among Series the terms upon which a Series may be repurchased by the Transferor.
There is no limit to the number of New Issuances the Transferor may cause under
the Pooling and Servicing Agreement. The Trust will terminate only as provided
in the Pooling and Servicing Agreement. There can be no assurance that the terms
of any Series might not have an impact on the timing and amount of payments
received by a Certificateholder of another Series.
Under the Pooling and Servicing Agreement and pursuant to a Supplement, a
New Issuance may only occur upon the satisfaction of certain conditions provided
in the Pooling and Servicing Agreement. The obligation of the Trustee to
authenticate the Certificates of such new Series and to execute and deliver the
related Supplement is subject to the satisfaction of the following conditions:
(a) on or before the fifth day immediately preceding the date upon which the New
Issuance is to occur, the Transferor shall have given the Trustee, the Servicer
and each Rating Agency written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Transferor shall have delivered to
the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling and Servicing Agreement other than the
Trustee; (c) the Transferor shall have delivered to the Trustee any related
Series Enhancement agreement executed by each of the parties to such agreement;
(d) the Trustee shall have received confirmation from each Rating Agency that
such New Issuance will satisfy the Rating Agency Condition; (e) the Transferor
shall have delivered to the Trustee and certain providers of Series Enhancement
a certificate of an authorized representative, dated the date upon which the New
Issuance is to occur, to the effect that the Transferor reasonably believes that
such issuance will not, based on the facts known to such representative at the
time of such certification, have an Adverse Effect; (f) the Transferor shall
have delivered to the Trustee, each Rating Agency and certain providers of
Series Enhancement an opinion of counsel acceptable to the Trustee that for
federal income tax purposes: (i) following such New Issuance the Trust will not
be deemed to be an association (or publicly traded partnership) taxable as a
corporation; (ii) such New 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; (iii) such New
Issuance will not cause or constitute an event in which gain or loss would be
recognized by any Certificateholders; and (iv) except as is otherwise provided
in a Supplement with respect to any Series, the Certificates of such Series will
be properly characterized as debt (an opinion of counsel to the effect referred
to in clauses (i), (ii) (iii) with respect to any action is referred to herein
as a "Tax Opinion"); (g) the aggregate amount of Principal Receivables plus the
principal amount of any Participation Interest shall be greater than the
Required Minimum Principal Balance as of the date upon which the New Issuance is
to occur after giving effect to such issuance; and any other conditions
specified in any Supplement. Upon satisfaction of the above conditions, the
Trustee shall execute the Supplement and issue to the Transferor the
Certificates of such new Series for execution and redelivery to the Trustee for
authentication.
COLLECTION ACCOUNT
The Servicer has established and maintains, or has caused to be established
and maintains, for the benefit of the Certificateholders in the name of the
Trustee, on behalf of the Trust, an account (the "Collection Account") with an
Eligible Institution. "Eligible Institution" means any depository institution
(which may be
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the 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
acceptable to each Rating Agency or a long-term unsecured debt rating acceptable
to each Rating Agency, except that no such rating will be required of an
institution which maintains a trust fund in a fully segregated trust account
with the corporate trust department of such institution as long as such
institution maintains the credit rating of the Rating Agency in one of its
generic credit rating categories which signifies investment grade and is a
member of the FDIC. Notwithstanding the preceding sentence, any institution the
appointment of which satisfies the Rating Agency Condition will be an Eligible
Institution. Funds in the Collection Account generally will be invested 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 incorporated under the laws of the United States of America or
any state thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided the short-term debt
rating of such depository institution or trust company shall be in the highest
rating category of the applicable Rating Agency, (iii) commercial paper having,
at the time of the Trust's investment or a contractual commitment to invest, a
rating in the highest rating category of the applicable Rating Agency, (iv)
demand deposits, time deposits or certificates of deposit which are fully
insured by the FDIC having, at the time of the Trust's investment therein, a
rating in the highest rating category of the applicable Rating Agency, (v)
bankers' acceptances issued by any depository institution or trust company
described in (ii) above, (vi) money market funds having, at the time of the
Trust's investment therein, a rating in the highest rating category of the
applicable Rating Agency, (vii) time deposits, other than as referred to in (iv)
above (having maturities not later than the succeeding Distribution Date), with
an entity, the commercial paper of such entity having a credit rating in the
highest rating category of the applicable Rating Agency, and (viii) any other
investment if the Rating Agency Condition has been satisfied (collectively,
"Eligible Investments"). Any earnings (net of losses and investment expenses) on
funds in the Collection Account will be paid to the Transferor. The Servicer has
the revocable power to withdraw funds from the Collection Account and to
instruct the Trustee to make withdrawals and payments from the Collection
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement and any Supplement.
ALLOCATIONS
Pursuant to the Pooling and Servicing Agreement, during each Monthly Period
the Servicer will allocate to each outstanding Series its Series Allocable
Finance Charge Collections, Series Allocable Principal Collections and Series
Allocable Defaulted Amount.
"Series Adjusted Invested Amount" means, with respect to any Series and for
any Monthly Period, the Series Invested Amount for such Series for such Monthly
Period, less the excess, if any, of the cumulative amount (calculated in
accordance with the terms of the related Supplement and, with respect to any
Series offered hereby, the related Prospectus Supplement) of investor
charge-offs allocable to the Invested Amount for such Series as of the last day
of the immediately preceding Monthly Period over the aggregate reimbursement of
such investor charge-offs as of such last day, or such lesser amount as may be
provided in the Supplement for such Series and, with respect to any Series
offered hereby, the related Prospectus Supplement.
"Series Allocable Finance Charge Collections," "Series Allocable Principal
Collections" and "Series Allocable Defaulted Amount" mean, with respect to any
Series and for any Monthly Period, the product of (a) the Series Allocation
Percentage and (b) the amount of collections of Finance Charge Receivables
deposited in the Collection Account, the amount of collections of Principal
Receivables deposited in the Collection Account and the amount of all Defaulted
Amounts with respect to such Monthly Period, respectively.
"Series Allocation Percentage" means, with respect to any Series and for
any Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the Series Adjusted Invested Amount as of the last day of the
immediately preceding Monthly Period plus the Series Required Transferor Amount
as of the last day of the immediately preceding Monthly Period and the
denominator of which is the Trust Adjusted Invested Amount plus the sum of all
Series Required Transferor Amounts as of such last day.
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"Series Required Transferor Amount" means for any Series an amount
specified in the Supplement for such Series and, for any Series offered hereby,
the related Prospectus Supplement.
"Trust Adjusted Invested Amount" means, with respect to any Monthly Period,
the sum of the Series Adjusted Invested Amounts (as adjusted in any Supplement)
for all outstanding Series.
The Servicer will then allocate amounts initially allocated to a particular
Series between the Certificateholders' Interest and the Transferor's Interest
for such Monthly Period as follows:
(a) the Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount will at all times be allocated to the Invested
Amount of a Series based on the Floating Allocation Percentage of such
Series; and
(b) the Series Allocable Principal Collections will at all times be
allocated to the Invested Amount of such Series based on the Principal
Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in the
related Supplement and, with respect to each Series offered hereby, in the
related Prospectus Supplement. Amounts not allocated to the Invested Amount of
any Series as described above will be allocated to the Transferor's Interest.
GROUPS OF SERIES
If so specified in the related Prospectus Supplement, the Certificates of a
Series may be included in a Reallocation Group, which is a Group of Series
subject to reallocations of collections of Finance Charge Receivables and other
amounts or obligations among Series in such Group in the manner described below
under "-- Reallocations Among Certificates of Different Series within a
Reallocation Group." Collections of Finance Charge Receivables allocable to each
Series in a Reallocation Group will be aggregated and made available for certain
required payments for all Series in such Group. Consequently, the issuance of
new Series in such Group may have the effect of reducing or increasing the
amount of collections of Finance Charge Receivables allocable to the
Certificates of other Series in such Group. See "Risk Factors -- Issuance of New
Series." The Prospectus Supplement with respect to a Series offered hereby will
specify whether such Series will be included in a Reallocation Group or another
type of Group, whether any previously issued Series have been included in such a
Group and whether any such Series or any previously issued Series may be removed
from such a Group.
REALLOCATIONS AMONG CERTIFICATES OF DIFFERENT SERIES WITHIN A REALLOCATION GROUP
Group Investor Finance Charge Collections. Any Series offered hereby may,
if so specified in the related Prospectus Supplement, be included in a
Reallocation Group. Other Series issued in the future may also be included in
such Group.
The Servicer will calculate for each Monthly Period Group Investor Finance
Charge Collections (as defined herein) for a particular Reallocation Group and
on the following Distribution Date will allocate such amount among the
Certificateholders' Interest (including any Enhancement Invested Amount) for all
Series in such Group in the following priority:
(i) Group Investor Monthly Interest (as defined herein);
(ii) Group Investor Default Amounts (as defined herein);
(iii) Group Investor Monthly Fees (as defined herein);
(iv) Group Investor Additional Amounts (as defined herein); and
(v) the balance pro rata among each Series in such Group based on the
current Invested Amount of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of Group
Investor Finance Charge Collections is not sufficient to cover each such amount
in full, the amount available will be allocated among the Series in such Group
pro rata, based on the claim that each Series has under the applicable clause.
This
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means, for example, that if the amount of Group Investor Finance Charge
Collections is not sufficient to cover Group Investor Monthly Interest, each
Series in such Group will share such amount pro rata, and any Series in such
Group with a claim with respect to monthly interest, overdue monthly interest
and interest on such overdue monthly interest, if applicable, which is larger
than the claim for such amounts for any other Series in such Group (due to a
higher certificate rate) will receive a proportionately larger allocation than
such other Series.
The amount of Group Investor Finance Charge Collections allocated to the
Certificateholders' Interest (including any Enhancement Invested Amount) for a
particular Series offered hereby as described above is referred to herein as
"Reallocated Investor Finance Charge Collections."
"Group Investor Additional Amounts" means for any Distribution Date the sum
of the amounts determined with respect to each Series in such Group equal to (a)
an amount equal to the amount by which the Invested Amount of any Class of
Certificates or any Enhancement Invested Amounts have been reduced as a result
of investor charge-offs, subordination of principal collections and funding the
investor default amount for any other Class of Certificates or Enhancement
Invested Amounts of such Series and (b) if the related Supplement so provides,
the amount of interest at the applicable certificate rate that has accrued on
the amount described in the preceding clause (a).
"Group Investor Default Amount" means for any Distribution Date the sum of
the amounts determined with respect to each Series in such Group equal to the
product of the Series Allocable Defaulted Amount for such Distribution Date and
the applicable Floating Allocation Percentage for such Distribution Date.
"Group Investor Finance Charge Collections" means for any Distribution Date
the aggregate amount of Investor Finance Charge Collections for such
Distribution Date for all Series in such Group.
"Group Investor Monthly Fees" means for any Distribution Date the Monthly
Servicing Fee for each Series in such Group, any Series Enhancement fees and any
other similar fees which are paid out of Reallocated Investor Finance Charge
Collections for such Series pursuant to the applicable Supplement.
"Group Investor Monthly Interest" means for any Distribution Date the sum
of the aggregate amount of monthly interest, including overdue monthly interest
and interest on such overdue monthly interest, if applicable, for all Series in
such Group for such Distribution Date.
The chart below demonstrates the manner in which collections of Finance
Charge Receivables are allocated and reallocated among Series in such a Group.
The chart assumes that the Trust has issued three Series (Series 1, 2 and 3),
and that each such Series is in its Revolving Period.
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AT&T UNIVERSAL CARD MASTER TRUST
FINANCE CHARGE COLLECTIONS
STEP 1
Series 1
Series Allocable Finance
Charge Collections
(based upon the Series
Allocation Percentage)
Series 2
Series Allocable Finance
Charge Collections
(based upon the Series
Allocation Percentage)
Series 3
Series Allocable Finance
Charge Collections
(based upon the Series
Allocation Percentage)
STEP 2
Transferor's
Finance
Charge
Collections
Investor Finance
Charge Collections
(based upon the
Floating Allocation
Percentage)
Transferor's
Finance
Charge
Collections
Investor Finance
Charge Collections
(based upon the
Floating Allocation
Percentage)
Transferor's
Finance
Charge
Collections
Investor Finance
Charge Collections
(based upon the
Floating Allocation
Percentage)
STEP 3
Group
Investor Finance Charge Collections
STEP 4
Series 1
Investor Monthly Interest
Series 2
Investor Monthly Interest
Series 3
Investor Monthly Interest
Series 1
Investor Default Amount
Series 2
Investor Default Amount
Series 3
Investor Default Amount
Series 1
Investor Monthly Fees
Series 2
Investor Monthly Fees
Series 3
Investor Monthly Fees
Series 1
Investor Additional
Amounts
Series 2
Investor Additional
Amounts
Series 3
Investor Additional
Amounts
Series 1
Balance based upon
Invested Amount
Series 2
Balance based upon
Invested Amount
Series 3
Balance based upon
Invested Amount
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In Step 1, total collections of Finance Charge Receivables are allocated
among the three Series based on the Series Allocation Percentage for each
Series. The amounts allocated to each Series pursuant to Step 1 are referred to
as "Series Allocable Finance Charge Collections." See "-- Allocations" above.
In Step 2, the amount of collections of Finance Charge Receivables
allocable to the Invested Amount (including any Enhancement Invested Amount) of
a Series (the "Investor Finance Charge Collections") is determined by
multiplying Series Allocable Finance Charge Collections for each Series by the
applicable Floating Allocation Percentages. See "-- Allocations" above.
Investor Finance Charge Collections for all Series in a particular
Reallocation Group (or Group Investor Finance Charge Collections) are pooled as
shown above in Step 3 for reallocation to each such Series as shown in Step 4.
In Step 4 Group Investor Finance Charge Collections are reallocated to each
Series in such Group as described above based on the Series' respective claim
with respect to interest payable on the Certificates or Enhancement Invested
Amount (if any) of such Series, the Defaulted Amount allocable to the
Certificateholders' Interest of such Series and the Monthly Servicing Fee and
certain other amounts in respect to such Series. The excess is allocated pro
rata among the Series in such Group based on their respective Invested Amounts.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AMONG EXCESS ALLOCATION SERIES
Any Series offered hereby may be designated as an Excess Allocation Series
(including a Series in a Reallocation Group or other type of Group). Collections
of Finance Charge Receivables and certain other amounts allocable to the
Certificateholders' Interest of any Excess Allocation Series in excess of the
amounts necessary to make required payments with respect to such Series
(including payments to the provider of any related Series Enhancement) that are
payable out of collections of Finance Charge Receivables (any such excess, the
"Excess Finance Charge Collections") may be applied to cover any shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to any other Excess Allocation Series, pro rata based upon the amount
of the shortfall, if any, with respect to each other Excess Allocation Series;
provided, however, that the sharing of Excess Finance Charge Collections among
Excess Allocation Series will cease if the Transferor shall deliver to the
Trustee a certificate of an authorized representative to the effect that, in the
reasonable belief of the Transferor, the continued sharing of Excess Finance
Charge Collections among Excess Allocation Series would have adverse regulatory
implications with respect to the Transferor, UCS or any Account Owner. Following
the delivery by the Transferor of any such certificate to the Trustee there will
not be any further sharing of Excess Finance Charge Collections among such
Series in any such Group. In all cases, any Excess Finance Charge Collections
remaining after covering shortfalls with respect to all outstanding Excess
Allocation Series will be paid to the holders of the Transferor Certificates.
While any Series offered hereby may be designated as an Excess Allocation
Series, there can be no assurance that (a) any other Series will be designated
as an Excess Allocation Series, (b) there will be any Excess Finance Charge
Collections with respect to any such other Series for any Monthly Period, (c)
any agreement relating to any Series Enhancement will not be amended in such a
manner as to increase payments to the providers of Series Enhancement and
thereby decrease the amount of Excess Finance Charge Collections available from
such Series or (d) the Transferor will not at any time deliver a certificate as
described above. While the Transferor believes that, based upon applicable rules
and regulations as currently in effect, the sharing of Excess Finance Charge
Collections among Excess Allocation Series will not have adverse regulatory
implications for it, UCS or any Account Owner, there can be no assurance that
this will continue to be true in the future.
SHARED PRINCIPAL COLLECTIONS
If the Prospectus Supplement for the related Series provides that such
Series is a Principal Sharing Series, collections of Principal Receivables for
any Monthly Period allocated to the Certificateholders' Interest of any such
Series will first be used to cover certain amounts described in the related
Prospectus Supplement (including any required deposits into a Principal Funding
Account or required distributions to Certificateholders of such Series in
respect of principal). The Servicer will determine the amount of collections of
Principal Receivables for any Monthly Period (plus certain other amounts
described in the related Prospectus Supplement) allocated to such Series
remaining after covering such required deposits and distributions and
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<PAGE> 102
any similar amount remaining for any other Principal Sharing Series
(collectively, "Shared Principal Collections"). The Servicer will allocate the
Shared Principal Collections to cover any principal distributions to
Certificateholders and deposits to Principal Funding Accounts for any Principal
Sharing Series that are either scheduled or permitted and that have not been
covered out of collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (collectively,
"Principal Shortfalls"). If Principal Shortfalls exceed Shared Principal
Collections for any Monthly Period, Shared Principal Collections will be
allocated pro rata among the applicable Series based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be allocated to the holders of the
Transferor Certificates, provided that (a) such Shared Principal Collections
will be distributed to the holders of the Transferor Certificates only to the
extent that the Transferor Amount is greater than the Required Transferor Amount
and (b) in certain circumstances described below under "-- Special Funding
Account," such Shared Principal Collections will be deposited in the Special
Funding Account. Any such reallocation of collections of Principal Receivables
will not result in a reduction in the Invested Amount of the Series to which
such collections were initially allocated. There can be no assurance that there
will be any Shared Principal Collections with respect to any Monthly Period or
that any Series will be designated as Principal Sharing Series.
PAIRED SERIES
If so provided in the related Supplement, a Prior Series may be paired with
a Paired Series issued by the Trust at or after the commencement of the
Controlled Amortization Period or Controlled Accumulation Period for such Prior
Series. As the Invested Amount of the Prior Series is reduced, the Invested
Amount in the Trust of the Paired Series will increase by an equal amount. Upon
payment in full of the Prior Series, the Invested Amount of such Paired Series
will be equal to the Invested Amount paid to Certificateholders of such Prior
Series. If a Pay Out Event or Reinvestment Event occurs with respect to the
Prior Series or with respect to the Paired Series when the Prior Series is in a
Controlled Amortization Period or Controlled Accumulation Period, the Series
Allocation Percentage and the Principal Allocation Percentage for the Prior
Series and the Series Allocation Percentage and the Principal Allocation
Percentage for the Paired Series will be reset as provided in the related
Supplement and the Early Amortization Period or Early Accumulation Period for
such Series could be lengthened.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the
Required Transferor Amount, the Servicer shall not distribute to the holders of
the Transferor Certificates any collections of Principal Receivables allocable
to a Series or a Group that otherwise would be distributed to such holders, but
shall deposit such funds in an account with an Eligible Institution established
and maintained by the Servicer for the benefit of the Certificateholders of each
Series, in the name of the Trustee, on behalf of the Trust, and bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders of each Series (the "Special Funding
Account"). Funds on deposit in the Special Funding Account will be withdrawn and
paid to the holders of the Transferor Certificates on any Distribution Date to
the extent that, after giving effect to such payment, the Transferor Amount
exceeds the Required Transferor Amount on such date; provided, however, that if
a Controlled Accumulation Period, Early Accumulation Period, Controlled
Amortization Period or Early Amortization Period commences with respect to any
Series, any funds on deposit in the Special Funding Account will be released
from the Special Funding Account, deposited in the Collection Account and
treated as collections of Principal Receivables to the extent needed to make
principal payments due to or for the benefit of the Certificateholders of such
Series.
Funds on deposit in the Special Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Special Funding Account during any Monthly Period will be withdrawn from the
Special Funding Account and treated as collections of Finance Charge Receivables
with respect to such Monthly Period.
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<PAGE> 103
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 Invested Amounts of other Series issued by the
Trust. The related Prospectus Supplement will specify the initial Invested
Amount with respect to such Series, the Full Invested Amount and the date by
which the Invested Amount is expected to equal the Full Invested Amount. The
Invested Amount will increase as Receivables are delivered to the Trust or as
the Invested Amounts of other Series of the Trust are reduced. The Invested
Amount may also decrease due to 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 Transferor to the
extent of any increases in the Invested Amount. If the Invested Amount does not
for any reason equal the Full Invested Amount 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, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for such Monthly Period minus (b) the
amount of any Defaulted Receivables the assignment or reassignment of which the
Transferor or the Servicer becomes obligated to accept during such Monthly
Period (unless an event relating to bankruptcy, receivership or insolvency has
occurred with respect to the Transferor or the Servicer, in which event the
amount of such Defaulted Receivables will not be added to the sum so
subtracted). Receivables in any Account will be charged-off as uncollectible in
accordance with the credit card guidelines and the Servicer's customary and
usual policies and procedures for servicing revolving credit card and other
revolving credit account receivables comparable to the Receivables. The current
policy of the Account Owners is to charge-off the receivables in an account when
that account becomes 181 days delinquent (or sooner in the event of receipt of
notice of death or bankruptcy of the cardmember), but such policy may change in
the future to conform with regulatory requirements and applicable law.
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables that have been, or are to be, reassigned to
the Transferor) because of a rebate, refund, counterclaim, defense, error,
fraudulent charge or counterfeit charge to a cardmember, or such Principal
Receivable was created in respect of merchandise that was refused or returned by
a cardmember or if the Servicer otherwise adjusts downward the amount of any
Principal Receivable without receiving collections therefor or charging off such
amount as uncollectible, the amount of the Principal Receivables in the Trust
with respect to the Monthly Period in which such adjustment takes place will be
reduced by the amount of the adjustment. Furthermore, in the event that the
exclusion of any such Receivables would cause the Transferor Amount at such time
to be less than the Required Transferor Amount, the Transferor will be required
to pay an amount equal to such deficiency into the Special Funding Account.
CREDIT ENHANCEMENT
General. For any Series, Credit Enhancement may be provided with respect
to one or more Classes thereof. Credit Enhancement with respect to one or more
Classes of a Series offered hereby may include a
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<PAGE> 104
letter of credit, a cash collateral account, a spread account, a collateral
interest, a surety bond, an insurance policy or any other form of credit
enhancement described in the related Prospectus Supplement, or any combination
of the foregoing. Credit Enhancement may also be provided to a Class or Classes
of a Series or to a Series by subordination provisions that require
distributions of principal or interest to be made with respect to the
Certificates of such Class or Classes or such Series before distributions are
made to one or more Classes of such Series or to another Series (if the
Supplement for such Series so provides). If so specified in the related
Prospectus Supplement, any form of Credit Enhancement may be available to more
than one Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is intended to
enhance the likelihood of receipt by Certificateholders of such Class of the
full amount of principal and interest with respect thereto and to decrease the
likelihood that such Certificateholders will experience losses. However, unless
otherwise specified in the related Prospectus Supplement, the Credit
Enhancement, if any, with respect thereto will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal
balance of the Certificates and interest thereon. If losses occur that exceed
the amount covered by the Credit Enhancement or that are not covered by the
Credit Enhancement, Certificateholders will bear their allocable share of such
losses. In addition, if specific Credit Enhancement is provided for the benefit
of more than one Class or Series, Certificateholders of any such Class or Series
will be subject to the risk that such Credit Enhancement will be exhausted by
the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
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 provisions of any
agreement relating to such Credit Enhancement material to the Certificateholders
of such Series. Additionally, in certain cases, the related Prospectus
Supplement may set forth certain information with respect to the provider of any
third-party Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation or the jurisdiction under which it is chartered
or licensed to do business, (iii) if applicable, the identity of regulatory
agencies that exercise primary jurisdiction over the conduct of its business and
(iv) its total assets, and its stockholders' or policyholders' surplus, if
applicable, as of a date specified in the Prospectus Supplement. If so described
in the related Prospectus Supplement, Credit Enhancement with respect to a
Series offered hereby may be available to pay principal of the Certificates of
such Series following the occurrence of certain Pay Out Events or Reinvestment
Events with respect to such Series. In such event, the Credit Enhancer will have
an interest in certain cash flows in respect of the Receivables to the extent
described in such Prospectus Supplement (an "Enhancement Invested Amount") and
may be entitled to the benefit of the Trustee's security interest in the
Receivables, in each case subordinated to the interest of the Certificateholders
of such Series.
Subordination. If so specified in the related Prospectus Supplement, one
or more Classes of a Series offered hereby may be subordinated to one or more
other Classes of such Series or a Series may be subordinated to another Series.
If so specified in the related Prospectus Supplement, the rights of the holders
of the subordinated Certificates to receive distributions of principal or
interest on any payment date will be subordinated to such rights of the holders
of the Certificates that are senior to such subordinated Certificates to the
extent set forth in the related Prospectus Supplement. The related Prospectus
Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of subordinated Certificates in a Series or
of the subordinated Certificates of another Series, the circumstances in which
such subordination will be applicable, the manner, if any, in which the amount
of subordination will decrease over time, and the conditions under which amounts
available from payments that would otherwise be made to holders of such
subordinated Certificates will be distributed to holders of Certificates that
are senior to such subordinated Certificates. The amount of subordination will
decrease whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates that are senior to such
subordinated Certificates.
Letter of Credit. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the
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<PAGE> 105
related Prospectus Supplement (the "L/C Issuer"). Subject to the terms and
conditions specified in the related Prospectus Supplement, the L/C Issuer will
be obligated to honor drawings under a letter of credit in an aggregate dollar
amount (which may be fixed or may be reduced as described in the related
Prospectus Supplement), net of unreimbursed payments thereunder, equal to the
amount described in the related Prospectus Supplement. The amount available
under a letter of credit will be reduced to the extent of the unreimbursed
payments thereunder.
Cash Collateral Account. If so specified in the related Prospectus
Supplement, the Certificates of any Class or Series offered hereby may have the
benefit of a cash collateral account. A cash collateral account with respect to
a Class or Series may be fully or partially funded on the Series Closing Date
with respect thereto and the funds on deposit therein will be invested in
Eligible Investments. The amount available to be withdrawn from a cash
collateral account will be the lesser of 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
such withdrawals will be made from the cash collateral account.
Collateral Interest. If so specified in the related Prospectus Supplement,
support for a Series of Certificates or one or more Classes thereof may be
provided initially by an uncertificated, subordinated interest in the Trust (the
"Collateral Interest") in an amount initially equal to a percentage of the
Certificates of such Series specified in the Prospectus Supplement. References
to Enhancement Invested Amounts herein include Collateral Interests, if any.
Surety Bond or Insurance Policy. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates offered
hereby may be provided by one or more insurance companies. Such insurance will
guarantee, with respect to one or more Classes of the related Series,
distributions of interest or principal in the manner and amount specified in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of Certificates
offered hereby to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in the
related Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from the
Trust Assets into a spread account intended to assure the subsequent
distributions of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
INTEREST RATE SWAPS AND RELATED CAPS, FLOORS AND COLLARS
The Trustee on behalf of the Trust may enter into interest rate swaps and
related caps, floors and collars to minimize the risk to Certificateholders from
adverse changes in interest rates (collectively, "Swaps").
An interest rate Swap is an agreement between two parties
("counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is exchanged
between the counterparties to an interest rate Swap. In the typical Swap, one
party agrees to pay a fixed rate on a notional principal amount, while the
counterparty pays a floating rate based on one or more reference interest rates
such as the London Interbank Offered Rate ("LIBOR"), a specified bank's prime
rate, or U.S. Treasury Bill rates. Interest rate Swaps also permit
counterparties to exchange a floating rate obligation based upon one reference
interest rate (such as LIBOR) for a floating rate obligation based upon another
referenced interest rate (such as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a significant
number of banks and financial service firms acting both as principals and as
agents utilizing standardized Swap documentation. Caps, floors and collars are
more recent innovations, and they are less liquid than other Swaps. There can be
no assurance that the Trust will be able to enter into or offset Swaps at any
specific time or at prices or on other terms that are advantageous. In addition,
although the terms of Swaps may provide for termination under certain
circumstances, there can be no assurance that the Trust will be able to
terminate or offset a Swap on favorable terms.
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SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has agreed as to each
Receivable and related Account that it will: (a) duly fulfill all obligations on
its part to be fulfilled under or in connection with the Receivables or the
related Accounts, and will maintain in effect all qualifications required and
comply in all material respects with all requirements of law in order to service
the Receivables and Accounts, the failure to maintain or comply with which would
have a material adverse effect on the Certificateholders; (b) not permit any
rescission or cancellation of the Receivables except as ordered by a court of
competent jurisdiction or other governmental authority; (c) do nothing to impair
the rights of the Certificateholders in the Receivables or the related Accounts;
and (d) not reschedule, revise or defer payments due on the Receivables except
in accordance with its guidelines for servicing receivables.
Under the terms of the Pooling and Servicing Agreement, all Receivables in
an Account will be assigned and transferred to the Servicer and such Account
will no longer be included as an Account if the Servicer discovers, or receives
written notice from the Trustee, that any covenant of the Servicer set forth
above has not been complied with in all material respects and such noncompliance
has not been cured within 60 days (or such longer period as may be agreed to by
the Trustee and the Transferor) thereafter and has a material adverse effect on
the Certificateholders' Interest in such Receivables. Such assignment and
transfer will be made when the Servicer deposits an amount equal to the amount
of such Receivables in the Collection Account on the business day preceding the
Distribution Date following the Monthly Period during which such obligation
arises. This transfer and assignment to the Servicer constitutes the sole remedy
available to the Certificateholders if such covenant or warranty of the Servicer
is not satisfied and the Trust's interest in any such assigned Receivables will
be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except (i) upon determination that the
performance of such duties is no longer permissible under applicable law or (ii)
if such obligations and duties are assumed by any entity that has satisfied the
Rating Agency Condition. No such resignation will become effective until the
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Pooling and Servicing Agreement.
Notwithstanding the foregoing, UCS may assign part or all of its obligations and
duties as Servicer under the Pooling and Servicing Agreement to an affiliate of
UCS as long as UCS shall have fully guaranteed the performance of such
obligations and duties under the Pooling and Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Transferor or the Servicer may be merged or consolidated or any
person resulting from any merger or consolidation to which the Transferor or the
Servicer is a party, or any person succeeding to the business of the Transferor
or the Servicer, will be the successor to the Transferor or the Servicer, as the
case may be, under the Pooling and Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all Certificates, by written notice to the
Servicer (and to the Trustee if given by the Certificateholders) (a "Termination
Notice"), may terminate all of the rights and obligations of the Servicer, as
Servicer, under the Pooling and Servicing Agreement and in and to the
Receivables and the proceeds thereof and the Trustee will appoint a new Servicer
(a "Service Transfer"). The rights and interest of the Transferor under the
Pooling and Servicing Agreement in the Transferor's Interest will not be
affected by any Termination Notice or Service Transfer. If within 60 days of
receipt of a Termination Notice the Trustee does not receive any bids from
eligible servicers to act as successor Servicer and receives an officer's
certificate from the Transferor to the effect that the Servicer cannot in good
faith cure the Servicer Default which gave rise to the Termination Notice, the
Trustee shall grant a right of first refusal to the Transferor which would
permit the Transferor at its option to purchase the Certificateholders' Interest
on the Distribution Date in the next calendar month. The purchase price for the
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Certificateholders' Interest shall be equal to the sum of the amounts specified
therefor with respect to each outstanding Series in the related Supplement, and
for any Certificates offered hereby, in the Prospectus Supplement.
The Trustee will as promptly as possible, after the giving of a Termination
Notice, appoint a successor Servicer and if no successor Servicer has been
appointed by the Trustee and has accepted such appointment by the time the
Servicer ceases to act as Servicer, all rights, authority, power and obligations
of the Servicer under the Pooling and Servicing Agreement will be vested in the
Trustee. Prior to any Service Transfer, the Trustee will seek to obtain bids
from potential servicers meeting certain eligibility requirements set forth in
the Pooling and Servicing Agreement to serve as a successor Servicer for
servicing compensation not in excess of the Servicing Fee plus any amounts
payable to the Transferor pursuant to the Pooling and Servicing Agreement.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make any payment, transfer or
deposit, on the date the Servicer is required to do so under the Pooling
and Servicing Agreement or any Supplement, which is not cured within a five
business day grace period;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer in
the Pooling and Servicing Agreement or any Supplement which has an Adverse
Effect and which continues unremedied for a period of 60 days after written
notice, or the Servicer assigns its duties under the Pooling and Servicing
Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement, any Supplement or in any
certificate delivered pursuant to the Pooling and Servicing Agreement or
any Supplement proves to have been incorrect in any material respect when
made, which has an Adverse Effect on the rights of the Certificateholders
of any Series, and which Adverse Effect continues for a period of 60 days
after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of ten business days after the
applicable grace period or referred to under clauses (b) or (c) for a period of
60 business days after the applicable grace period, will 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 will not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and the Servicer must provide the Trustee, the Transferor
and any provider of Series Enhancement prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before March 31 of
each calendar year, the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor and any affiliates thereof) to furnish a report to
the effect that such firm has applied certain procedures agreed upon with the
Servicer and examined certain documents and records relating to the servicing of
the Accounts and that, on the basis of such agreed-upon procedures, nothing has
come to the attention of such firm that caused them to believe that such
servicing was not conducted in compliance with the Pooling and Servicing
Agreement and applicable provisions of each Supplement 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. Such report will set forth
the agreed-upon procedures performed.
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The Pooling and Servicing Agreement provides for delivery to the Trustee on
or before March 31 of each calendar year of a statement signed by an officer of
the Servicer to the effect that the Servicer has, or has caused to be, fully
performed its obligations in all material respects under the Pooling and
Servicing 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.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be amended from
time to time (including in connection with the issuance of a Supplemental
Certificate, addition of a Participation Interest, allocation of assets in the
Trust to a Series or Group, the designation of an Additional Transferor, or to
change the definition of Monthly Period, Determination Date or Distribution
Date) by the Servicer, the Transferor and the Trustee, and without the consent
of the Certificateholders of any Series, provided that (i) an opinion of counsel
for the Transferor is addressed and delivered to the Trustee to the effect that
the conditions precedent to any such amendment have been satisfied, (ii) the
Transferor shall have delivered to the Trustee a certificate of an officer of
the Transferor to the effect that the Transferor reasonably believes that such
amendment will not have an Adverse Effect and (iii) the Rating Agency Condition
shall have been satisfied with respect thereto.
The Pooling and Servicing Agreement or any Supplement may be amended by the
Transferor, the Servicer and the Trustee with the consent of the
Certificateholders evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of all affected Series for which the
Transferor has not delivered an officer's certificate stating that there will be
no Adverse Effect, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or any Supplement or of modifying in any manner the rights of
Certificateholders. No such amendment, however, may (a) reduce in any manner the
amount of, or delay the timing of, deposits or distributions on any Certificate
without the consent of each Certificateholder, (b) (i) change the definition or
the manner of calculating the Certificateholders' Interest or the Invested
Amount or (ii) reduce the aforesaid percentage of the aggregate unpaid principal
amount of the Certificates the holders of which are required to consent to any
such amendment, in each case without the consent of each Certificateholder or
(c) adversely affect the rating of any Series or Class by the Rating Agency
without the consent of the holders of Certificates of such Series or Class
evidencing not less than 66 2/3% of the aggregate unpaid principal amount of the
Certificates of such Series or Class. Promptly following the execution of any
amendment to the Pooling and Servicing Agreement (other than an amendment
described in the preceding paragraph), the Trustee will furnish written notice
of the substance of such amendment to each Certificateholder. Notwithstanding
the foregoing, any Supplement executed in connection with the issuance of one or
more new Series of Certificates will not be considered an amendment to the
Pooling and Servicing Agreement.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Holder or group of Holders of Certificates of
any Series or of all outstanding Series of record holding Certificates
evidencing not less than 10% of the aggregate unpaid principal amount of the
Certificates of such Series or all Series, as applicable, the Trustee will
afford such Holder or Holders of Certificates access during business hours to
the current list of Certificateholders of such Series or of all outstanding
Series, as the case may be, for purposes of communicating with other Holders of
Certificates with respect to their rights under the Pooling and Servicing
Agreement. See "Description of the Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
The Pooling and Servicing Agreement does not provide for any annual or
other meetings of Certificateholders.
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THE TRUSTEE
Bankers Trust Company now acts as trustee under the Pooling and Servicing
Agreement. The Corporate Trust Department of Bankers Trust Company is located at
Four Albany Street, New York, New York 10006. The Transferor and 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 or
the Transferor may hold Certificates in their own names; however, any
Certificates so held shall not be entitled to participate in any decisions made
or instructions given to the Trustee by the Certificateholders as a group. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations shall be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or, in
any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee, who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
DESCRIPTION OF THE PURCHASE AGREEMENTS
The Receivables transferred to the Trust by the Transferor are acquired by
the Transferor from UCS pursuant to the Funding Purchase Agreement entered into
between the Transferor, as purchaser of the Receivables, and UCS, as seller. The
Receivables transferred to the Transferor from UCS are originally acquired by
UCS from CB&T and Universal Bank pursuant to separate UCS Purchase Agreements
entered into between CB&T and Universal Bank, respectively, as sellers, and UCS
as purchaser of the Receivables. Pursuant to the Pooling and Servicing
Agreement, all such Receivables are transferred by the Transferor to the Trust.
The following summary relating to such ongoing sales is qualified in its
entirety by reference to the UCS Purchase Agreements and to the Funding Purchase
Agreement, forms of which are filed as an exhibit to the Registration Statement
of which this Prospectus is a part and which is incorporated by reference
herein.
FUNDING PURCHASE AGREEMENT
Sale of Receivables. Pursuant to the Funding Purchase Agreement, UCS sells
to the Transferor all its right, title and interest in and to (i) all of the
Receivables in the Accounts and all of the Receivables created in such Accounts
and (ii) the Receivables in each Additional Account designated from time to time
for inclusion as an Account as of the date of such designation, whether such
Receivables shall then be existing or shall thereafter be created.
In connection with such sale of the Receivables to the Transferor, each
Account Owner will indicate in its computer records that the Receivables have
been sold to UCS by such Account Owner and UCS will indicate in its files that
the Receivables have been sold to the Transferor by UCS and that such
Receivables will be sold or transferred by the Transferor to the Trust. In
addition, UCS will provide or cause to be provided to the Transferor a computer
file or a microfiche list containing a true and complete list showing each
Account, identified by account number and by total outstanding balance of
Receivables on the applicable Series date of designation or addition date for
Additional Accounts, as the case may be. The records and agreements relating to
the Accounts and Receivables may not be segregated by UCS from other documents
and agreements relating to other credit card accounts and receivables and may
not be stamped or marked to reflect the sale or transfer of the Receivables to
the Transferor, but the records of UCS and the Account Owners will be marked to
evidence such sale or transfer. UCS as debtor/seller will file UCC financing
statements meeting the requirements of applicable state law in each of the
jurisdictions in which the books and records relating to the Accounts are
maintained with respect to the Receivables in the initial Accounts and UCS will
similarly file with respect to the Receivables in Additional Accounts. See "Risk
Factors -- Characteristics as a Sale; Insolvency and Receivership Risks" and
"Certain Legal Aspects of the Receivables."
Pursuant to the Funding Purchase Agreement, UCS will, subject to certain
conditions, if the Transferor is required to cause UCS to designate Additional
Accounts under the Pooling and Servicing Agreement, designate Additional
Accounts to be included as Accounts under the Funding Purchase Agreement. See
"The Pooling and Servicing Agreement Generally -- Additions of Accounts or
Participation Interests."
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Representations and Warranties. In the Funding Purchase Agreement, UCS
represents and warrants to the Transferor to the effect that, among other
things, (a) as of the date of the Funding Purchase Agreement and as of each date
of designation of Additional Accounts under the Funding Purchase Agreement, it
is duly organized and in good standing and that it has the authority to
consummate the transactions contemplated by the Funding Purchase Agreement, (b)
as of the Initial Cut-Off Date and as of each date of designation of Additional
Accounts under the Funding Purchase Agreement, each Additional Account will be
an Eligible Account and (c) as of the Initial Cut-Off Date and as of each date
of designation of Additional Accounts under the Funding Purchase Agreement, each
Receivable generated thereunder is, on such date of designation, an Eligible
Receivable. In the event of a breach of any representation and warranty set
forth in the Funding Purchase Agreement which results in the requirement that
the Transferor accept retransfer of an Ineligible Receivable, then UCS shall
repurchase such Ineligible Receivable under the Pooling and Servicing Agreement
from the Transferor on the date of such retransfer. The purchase price for such
Ineligible Receivables shall be the principal amount thereof plus applicable
finance charges.
UCS also represents and warrants to the Transferor that, among other
things, as of the date of the Funding Purchase Agreement and as of each date of
designation of Additional Accounts under the Funding Purchase Agreement (a) the
Funding Purchase Agreement constitutes a valid and binding obligation of UCS and
(b) the Funding Purchase Agreement constitutes a valid sale to the Transferor of
all right, title and interest of UCS in and to the Receivables then existing and
thereafter created in the Accounts and in the proceeds thereof. If the breach of
any of the representations and warranties described in this paragraph results in
the obligation of the Transferor under the Pooling and Servicing Agreement to
accept retransfer of the Receivables, UCS will repurchase the Receivables
retransferred to the Transferor for an amount of cash at least equal to the
amount of cash the Transferor is required to deposit under the Pooling and
Servicing Agreement in connection with such retransfer.
Certain Covenants. UCS covenants that it will enforce the covenants of
each Account Owner under the applicable UCS Purchase Agreements to the effect
that (x) except as required by law or as such Account Owner shall deem necessary
in order for such Account Owner to maintain its credit card business or a
program operated by such credit card business on a competitive basis based on a
good faith assessment by such Account Owner of the nature of its competition
with respect to its credit card business or such program, such Account Owner
will not take any action which will have the effect of reducing the Portfolio
Yield to a level that could reasonably be expected to cause any Series to
experience a Pay Out Event or Reinvestment Event based on the insufficiency of
the Series adjusted Portfolio Yield and (y) except as required by law, such
Account Owner will not take any action that would have the effect of reducing
the Portfolio Yield to less than the highest Average Rate for any Group. The
Transferor has agreed in the Pooling and Servicing Agreement to enforce the
covenants and agreements of UCS in the Funding Purchase Agreement.
Amendments. The Funding Purchase Agreement may be amended by the
Transferor and UCS without the consent of the Certificateholders. No such
amendment, however, may have an Adverse Effect and no such amendment may change,
modify, delete or add any other obligation of UCS or the Transferor unless the
Rating Agency Condition has been satisfied with respect to such amendment.
Termination. The Funding Purchase Agreement will terminate immediately
after the Trust terminates. In addition, if a bankruptcy trustee or receiver is
appointed for UCS or certain other liquidation events occur, UCS will
immediately cease to sell Receivables to the Transferor and promptly give notice
of such event to the Transferor and the Trustee, unless the bankruptcy trustee
or receiver instructs otherwise.
UCS PURCHASE AGREEMENTS
Sale of Receivables. Pursuant to the applicable UCS Purchase Agreement,
each Bank sells to UCS all its right, title and interest in and to the
Receivables created in the Accounts.
In connection with such sale of the Receivables to UCS, each Bank will
indicate in its computer files that the Receivables have been sold to UCS by
such Bank. In addition, each Bank will provide to UCS a computer file or a
microfiche list showing each Account. The records and agreements relating to the
Accounts and Receivables may not be segregated by the Banks from other documents
and agreements relating to other credit card accounts and receivables and may
not be stamped or marked to reflect the sale or transfer of the
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Receivables to UCS. Each Bank as debtor/seller will file UCC financing
statements meeting the requirements of applicable state law and in each of the
jurisdictions in which the books and records relating to the Accounts are
maintained with respect to the Receivables. See "Risk Factors -- Characteristics
as a Sale; Insolvency and Receivership Risks."
Representations and Warranties. In the applicable UCS Purchase Agreements,
each Bank represents and warrants to UCS to the effect that, among other things,
(a) as of the date of the applicable UCS Purchase Agreement, it is duly
organized and in good standing and that it has the authority to consummate the
transactions contemplated by the UCS Purchase Agreement, (b) the applicable UCS
Purchase Agreement constitutes a valid and binding obligation of such Bank and
(c) the applicable UCS Purchase Agreement constitutes a valid sale to UCS of all
right, title and interest of such Bank in and to the Receivables then existing
and thereafter created in the Accounts and in the proceeds thereof.
Certain Covenants. Each Bank covenants that (x) except as required by law
or as such Bank shall deem necessary in order for such Bank to maintain its
credit card business or a program operated by such credit card business on a
competitive basis based on a good faith assessment by such Bank of the nature of
its competition with respect to its credit card business or such program, such
Bank will not take any action which will have the effect of reducing the
Portfolio Yield to a level that could reasonably be expected to cause any Series
to experience a Pay Out Event or Reinvestment Event based on the insufficiency
of the Series adjusted Portfolio Yield and (y) except as required by law, such
Bank will not take any action that would have the effect of reducing the
Portfolio Yield to less than the highest Average Rate for any Group. UCS has
agreed in the Funding Purchase Agreement to enforce the covenants and agreements
of the Banks in the UCS Purchase Agreements.
Amendments. The UCS Purchase Agreements may be amended by each Bank and
UCS without the consent of the Transferor or the Certificateholders. No such
amendment, however, may adversely affect in any material respect the interests
of the Trustee or the Certificateholders unless the Trustee shall consent to
such amendment and no amendment that changes, modifies, deletes or adds any
other obligation of UCS or the applicable Bank will be effective unless UCS and
such Bank have been notified in writing that the Rating Agency Condition has
been satisfied.
Termination. The UCS Purchase Agreements will terminate immediately after
the Trust terminates. In addition, if a conservator or receiver is appointed for
a Bank or certain other liquidation events occur with respect to a Bank, such
Bank will immediately cease to sell Receivables to UCS and promptly give notice
of such event to UCS and the Trustee, unless the conservator or receiver
instructs otherwise.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Under the UCS Purchase Agreements, the Account Owners sell the Receivables
to UCS, UCS simultaneously sells the Receivables to the Transferor and the
Transferor, in turn, transfers the Receivables to the Trust. Each Account Owner,
UCS and the Transferor represents and warrants that its respective transfers
constitute valid sales and assignments of all of its respective right, title and
interest in and to the Receivables. The Transferor also represents and warrants
that, if the transfer of Receivables by the Transferor to the Trust is deemed to
create a security interest under the UCC, there exists a valid, subsisting and
enforceable first priority perfected security interest in the Receivables in
existence at the time of the formation of the Trust or at the date of
designation of any Additional Accounts, as the case may be, in favor of the
Trust and a valid, subsisting and enforceable first priority perfected security
interest in the Receivables created thereafter in favor of the Trust on and
after their creation, in each case until termination of the Trust. For a
discussion of the Trust's rights arising from these representations and
warranties not being satisfied, see "The Pooling and Servicing Agreement
Generally -- Representations and Warranties."
Each Account Owner, UCS and the Transferor represents that the Receivables
are "accounts" or "general intangibles" for purposes of the UCC. Both the sale
of accounts and the transfer of accounts as security for an obligation are
treated under the UCC as creating a security interest therein and are subject to
its provisions and the filing of an appropriate financing statement or
statements is required to perfect the
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interest of the Trust in the Receivables. If a transfer of general intangibles
is deemed to create a security interest, the UCC applies and filing an
appropriate financing statement or statements is also required in order to
perfect the Trust's security interest. Financing statements covering the
Receivables will be filed under the UCC to protect UCS, the Transferor and the
Trust if any of the transfers by an Account Owner, UCS or the Transferor is
deemed to be subject to the UCC. If a transfer of general intangibles is deemed
to be a sale, then the UCC is not applicable and no further action under the UCC
is required to protect the Trust's interest from third parties.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after a Series
Closing Date could have an interest in such Receivables with priority over the
Trust's interest. A tax or other government lien or other nonconsensual lien on
property of UCS, the Transferor or an Account Owner arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivable. Furthermore, if the FDIC were appointed as a
conservator or receiver of an Account Owner, the conservator's or receiver's
administrative expenses may also have priority over the interest of the Trust in
such related Receivables. Under the UCS Purchase Agreement, however, each
Account Owner warrants that it has transferred the Receivables to UCS free and
clear of the lien of any third party. In addition, each Account Owner covenants
that it will not sell, pledge, assign, transfer or grant any lien on any
Receivable (or any interest therein) other than to UCS. Similarly, under the
Funding Purchase Agreement UCS warrants that it has transferred the Receivables
to the Transferor free and clear of the lien of any third party and it covenants
that it will not sell, pledge, assign, transfer or grant any lien on any
Receivable (or any interest therein) other than to the Transferor.
CERTAIN MATTERS RELATING TO INSOLVENCY
Each Account Owner and UCS have arranged for the transfer of Receivables
pursuant to the UCS Purchase Agreement to be a sale of the Receivables by such
Account Owner to UCS. However, in the event of an insolvency, receivership or
conservatorship of an Account Owner it is possible that a receiver or
conservator could attempt to recharacterize the transaction between such Account
Owner and UCS as a pledge of the Receivables rather than a true sale. The
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act ("FIRREA"), sets forth certain powers that a
conservator or receiver for an Account Owner could exercise if it were appointed
as a conservator or receiver of an Account Owner. Positions taken by the FDIC
before the passage of FIRREA do not suggest that a conservator or receiver for
an Account Owner would interfere with the timely transfer to UCS (or by either
UCS to the Transferor or the Transferor to the Trust) of payments collected on
the Receivables. If, however, a conservator or receiver for an Account Owner
were to assert a contrary position, or were to require UCS to establish its
right to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, or the conservator or receiver were
to request a stay of proceedings with respect to such Account Owner as provided
under FIRREA, delays in payments on the Certificates and possible reductions in
the amount of those payments could occur. In addition, the FDIC, if appointed as
conservator or receiver for an Account Owner, has the power under the FDIA to
repudiate contracts, including secured contracts of such Account Owner. 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 an Account Owner and were to
repudiate the applicable UCS Purchase Agreement, then the amount payable out of
available collections on Receivables by the Transferor to the Trust could be
lower than the outstanding principal and accrued interest on the Certificates.
In addition, if a conservator or receiver is appointed for an Account Owner and
no Pay Out Event other than such conservatorship or receivership or insolvency
of the relevant Account Owner exists, the conservator or receiver may have the
power to prevent the early sale, liquidation or disposition of Receivables.
UCS and the Transferor have arranged for the transfer of Receivables
pursuant to the Funding Purchase Agreement to be a sale of the Receivables by
UCS to the Transferor. Nevertheless, a tax or government lien or other
nonconsensual lien on property of UCS arising prior to the time a Receivable is
sold to UCS may have priority over the ownership interest of the Transferor in
such property. In addition, if UCS were to become a debtor in a bankruptcy case
and a creditor or bankruptcy trustee of UCS or UCS itself were to take the
position that the sale of Receivables from UCS to the Transferor should be
recharacterized as a pledge of
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such Receivables to secure a borrowing from UCS, then delays in payments of
collections of Receivables to the Transferor (and therefore to the Trust and the
Certificateholders) could occur and possible reductions in the amount of such
payments could result.
In a recent case decided by the U.S. Court of Appeals for the Tenth
Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts," as defined under the UCC, and which could include the Receivables,
may properly be included in the bankruptcy estate of a transferor regardless of
whether the transfer of such Receivables is treated as a sale or a secured loan.
The circumstances under which the Octagon ruling would apply are not fully known
and the extent to which the Octagon decision will be followed in other courts or
outside of the Tenth Circuit is not certain. UCS has a credit card operation
center, and AT&T Universal Funding has its principal place of business in, Salt
Lake City, Utah, which is inside the geographic area subject to the jurisdiction
of the Tenth Circuit. If the findings in the Octagon case were applied in a UCS
bankruptcy, the Receivables would be part of its bankruptcy estate, would be
subject to claims of certain creditors and would be subject to the potential
delays and reductions in payments to the Transferor and the Certificateholders
described in the preceding paragraph even if the transfer is treated as a sale.
In addition, if UCS were to become a debtor in a bankruptcy case and a
creditor or bankruptcy trustee of UCS or UCS itself were to request a court to
order that UCS should be substantively consolidated with the Transferor, delays
in payments on the Certificates and possible reductions in such payments could
result.
The Transferor will take all actions that are required under the UCC to
perfect the Trust's interest in the Receivables and the Transferor has warranted
to the Trust that the Trust will have a first priority security interest therein
and, with certain exceptions, in the proceeds thereof. Nevertheless, a tax or
government lien or other nonconsensual lien on property of the Transferor
arising prior to the time a Receivable is conveyed to the Trust may have
priority over the interest of the Trust in such Receivable. The Transferor has
been structured such that (i) the voluntary or involuntary application for
relief under the Bankruptcy Code or similar applicable state laws, and (ii) the
substantive consolidation of the Transferor and UCS are unlikely. The Transferor
is a separate, limited purpose subsidiary, the certificate of incorporation of
which provides that it shall not file a voluntary petition for relief under the
Bankruptcy Code without the unanimous affirmative vote of all of its directors.
Pursuant to the Pooling and Servicing Agreement, the Trustee covenants that it
will not at any time institute against the Transferor any bankruptcy,
reorganization or other proceedings under any federal or state bankruptcy or
similar law. In addition, certain other steps will be taken to avoid the
Transferor's becoming a debtor in a bankruptcy case. Notwithstanding such steps,
if the Transferor were to become a debtor in a bankruptcy case, and a bankruptcy
trustee for the Transferor or a creditor of the Transferor or the Transferor
itself were to take the position that the transfer of the Receivables from the
Transferor to the Trust should be recharacterized as a pledge of such
Receivables, then delays in payments on the Certificates and possible reductions
in the amount of such payments could result.
Upon the appointment of a bankruptcy trustee, receiver or conservator or
upon the commencement of a bankruptcy, receivership, conservatorship or similar
proceeding with respect to AT&T Universal Funding, AT&T Universal Funding will
promptly give notice thereof to the Trustee and a Pay Out Event or Reinvestment
Event may occur with respect to a Series (or all of the Series). Pursuant to the
Pooling and Servicing Agreement, newly created Receivables will not be
transferred to the Trust on and after any such appointment or voluntary
liquidation. In the event of an Insolvency Event, the Trustee will proceed to
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms, unless within a
specified period of time Certificateholders representing undivided interests
aggregating more than 50% of the Invested Amount of each Series of Certificates
issued and outstanding (or, with respect to any Series with two or more Classes,
50% of the Invested Amount of each Class) and possibly certain other persons
specified in the Supplement for a Series instruct otherwise (assuming that the
bankruptcy trustee, conservator or receiver does not order such a sale despite
such instructions). The proceeds from the sale of the Receivables would be
treated as collections of the Receivables and deposited into the Collection
Account and after distribution of such amounts the Trust will terminate. This
procedure could be delayed, as described above. In addition, upon the occurrence
of a Pay Out Event or Reinvestment Event, if a trustee in bankruptcy, a
conservator or receiver is appointed for the Transferor and no Pay Out Event or
Reinvestment Event other than such conservatorship or receivership or bankruptcy
or insolvency of the
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Transferor exists, the bankruptcy trustee, conservator or receiver may have the
power to prevent the early sale, liquidation or disposition of the Receivables
and the commencement of the Early Amortization Period or Early Accumulation
Period and may be able to require that new Principal Receivables be transferred
to the Trust. In addition, the trustee, receiver or conservator for the
Transferor may have the power to cause early sale of the Receivables and the
early payment of the Certificates or to prohibit the continued transfer of
Receivables to the Trust. See "Description of the Certificates -- Pay Out Events
and Reinvestment Events."
While UCS is the Servicer, cash collections held by UCS may, subject to
certain conditions, be commingled and used for the benefit of UCS prior to each
Distribution Date and, in the event of the bankruptcy, insolvency or
receivership of UCS or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected interest in such collections and
accordingly, be entitled to such collections. UCS will be allowed to make
monthly rather than daily deposits of collections to the Collection Account if
any of the following conditions are satisfied: (i) UCS obtains a commercial
paper rating of at least A-1 and P-1 (or its equivalent) by the applicable
Rating Agency, (ii) AT&T has a commercial paper rating of at least A-1 and P-1
(or its equivalent) by the applicable Rating Agency, UCS remains a direct or
indirect majority-owned AT&T subsidiary and certain other arrangements are made
satisfactory to each Rating Agency or (iii) any other arrangement that satisfies
the Rating Agency Condition. If none of the foregoing conditions are satisfied,
then UCS will, within five business days, commence the deposit of collections
directly into the Collection Account within two business days of the Date of
Processing.
In the event of a Servicer Default relating to the bankruptcy or insolvency
of the Servicer, and no Servicer Default other than such bankruptcy or
insolvency related Servicer Default exists, the bankruptcy trustee, conservator
or receiver may have the power to prevent either the Trustee or the
Certificateholders from appointing a successor Servicer. See "The Pooling and
Servicing Agreement Generally -- Servicer Default."
CONSUMER PROTECTION LAWS
The relationship of the cardmember and credit card issuer is extensively
regulated by federal and state consumer protection laws. With respect to credit
cards issued by CB&T and Universal Bank, the most significant federal laws
include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting and Fair Debt Collection Practices Acts. These statutes impose various
disclosure requirements either before or when an Account is opened, or both, and
at the end of monthly billing cycles, and, in addition, limit cardmember
liability for unauthorized use, prohibit certain discriminatory practices in
extending credit, and regulate practices followed in collections. In addition,
cardmembers are entitled under these laws to have payments and credits applied
to the credit card account promptly and to request prompt resolution of billing
errors. Congress and the states may enact new laws and amendments to existing
laws to regulate further the credit card industry. The Trust may be liable for
certain violations of consumer protection laws that apply to the Receivables,
either as assignee from the Transferor (as UCS's assignee) with respect to
obligations arising before transfer of the Receivables to the Trust or as the
party directly responsible for obligations arising after the transfer. In
addition, a cardmember may be entitled to assert such violations by way of
set-off against the obligation to pay the amount of Receivables owing. All
Receivables that were not created in compliance in all material respects with
the requirements of such laws (if such noncompliance has a material adverse
effect on the Certificateholders' interest therein) will be reassigned to the
Transferor and ultimately back to UCS. The Servicer has also agreed in the
Pooling and Servicing Agreement to indemnify the Trust, among other things, for
any liability arising from such violations. For a discussion of the Trust's
rights if the Receivables were not created in compliance in all material
respects with applicable laws, see "The Pooling and Servicing Agreement
Generally -- Representations and Warranties."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
Receivables being charged off as uncollectible. See "The Pooling and Servicing
Agreement Generally -- Defaulted Receivables; Rebates and Fraudulent Charges."
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PROPOSED LEGISLATION
Congress and the states may enact new laws and amendments to existing laws
to regulate further the credit card industry or to reduce finance charges or
other fees or charges applicable to credit card accounts. The potential effect
of any such legislation could be to reduce the yield on the Accounts. If such
yield is reduced, a Pay Out Event or Reinvestment Event could occur, and the
Early Amortization Period or Early Accumulation Period would commence. See
"Description of the Certificates -- Pay Out Events and Reinvestment Events."
RECENT LITIGATION
Since October 1991, a number of lawsuits and administrative actions have
been filed in several states against out-of-state banks (both federally-insured
state-chartered banks and federally-insured national banks) which issue credit
cards. These actions challenge various fees and charges (such as late fees,
over-the-limit fees, returned check charges and annual membership fees) assessed
against residents of the states in which such suits were filed, based on
restrictions or prohibitions under such states' laws alleged to be applicable to
the out-of-state credit card issuers. The Supreme Courts of California, Colorado
and New Jersey have recently issued decisions in such actions. The California
and Colorado Supreme Courts opined that federal law governed late fees and found
for the respective defendant banks, while the New Jersey Supreme Court found
that late payment fees are not interest and that, therefore, state law is not
preempted by federal law with respect to such late fees. On June 3, 1996, the
United States Supreme Court upheld the decision of the California Supreme Court,
holding that the late payment fees in question were "interest" and as such were
governed by federal law, which authorizes national banks to charge out-of-state
customers an interest rate allowed by the bank's home state.
TAX MATTERS
FEDERAL INCOME TAX CONSEQUENCES -- GENERAL
Set forth below is a discussion of the federal income tax consequences to
holders of the Certificates. This discussion does not deal with all aspects of
federal income taxation that may be relevant to holders of the Certificates in
light of their personal investment circumstances, nor to certain types of
holders subject to special treatment under the federal income tax laws (for
example, banks, thrifts, regulated investment companies, real estate investment
trusts, dealers in securities or currencies, tax-exempt investors, life
insurance companies, tax-exempt organizations and investors that have a
functional currency other than the U.S. dollar or that hold their certificates
as part of a hedge, straddle or conversion transaction). Prospective investors
are advised to consult their own tax advisors with regard to the federal income
tax consequences of holding and disposing of Certificates, as well as the tax
consequences arising under the laws of any state, foreign country or other
jurisdiction. This discussion is based upon present provisions of the Internal
Revenue Code of 1986 (the "Code"), the regulations promulgated thereunder, and
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. No ruling on any of the issues discussed below will be
sought from the Internal Revenue Service (the "IRS").
The discussion assumes that a Certificate is issued in registered form, has
all payments denominated in U.S. dollars and has a term that exceeds one year.
Moreover, the discussion assumes that the interest formula for the Certificate
meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID regulations") relating to original issue discount ("OID"),
and that any OID on the Certificate arising from any excess of the principal
amount of the Certificate over its issue price is de minimis (i.e., is less than
1/4% of its principal amount multiplied by the number of full years until its
maturity date), all within the meaning of the OID regulations. Moreover, the
discussion assumes that the Certificates are a type for which counsel will give
an opinion that the Certificates are debt for federal income tax purposes. If
those conditions are not satisfied, additional tax considerations will be
disclosed in the applicable Prospectus Supplement.
Treatment of the Certificates as Indebtedness. The Transferor and
Certificateholders have expressed in the Pooling and Servicing Agreement the
intent that for federal, state and local income and franchise tax purposes, the
Certificates will be indebtedness of the Transferor secured by the Receivables.
The Transferor,
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by entering into the Pooling and Servicing Agreement, and each investor, by the
acceptance of a Certificate, will agree to treat the Certificates as
indebtedness of the Transferor for federal, state and local income and franchise
tax purposes. However, because different criteria are used in determining the
nontax accounting treatment of the transaction, the Transferor will treat the
transfer of Receivables under the Pooling and Servicing Agreement, for certain
nontax accounting purposes, as a transfer of an ownership interest in the
Receivables and not as creating a debt obligation of the Transferor.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines the tax consequences. The characterization
for nontax purposes 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 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
nontax 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 Transferor has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary factors 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. Based upon its analysis of such factors,
Cravath, Swaine & Moore, special federal tax counsel to the Transferor and the
Trust ("Tax Counsel"), has concluded that holders of Certificates (through their
ownership of the Certificates) are not the owners of the Receivables for federal
income tax purposes. As a result, in the opinion of Tax Counsel, the
Certificates will properly be characterized for federal income tax purposes as
indebtedness.
Treatment of the Trust. The Trust could be viewed for federal income tax
purposes either as (i) a collateral arrangement for debt issued directly by the
Transferor and other holders of the Transferor Certificate or (ii) as a separate
entity issuing its own debt. However, in the opinion of Tax Counsel, in the
former event the Trust will be disregarded for federal income tax purposes and
in the latter event the Trust under current law would be a partnership, rather
than an association (or publicly traded partnership) taxable as a corporation.
Therefore, in the opinion of Tax Counsel, under current law the Trust will not
be subject to federal income tax.
In addition, recently enacted tax legislation will permit the Trust, on or
after September 1, 1997, to make an election to be a Financial Asset
Securitization Investment Trust ("FASIT"). The Trust is permitted to make such
an election if, prior to making such election, the Transferor delivers an
opinion of counsel acceptable to the Trustee that (1) following such election
the Trust will not be an association (or publicly traded partnership) taxable as
a corporation, and (2) the election will not have a significant adverse effect
on the federal income tax treatment of holders of any then-outstanding investor
certificates. Prospective investors should consult their own tax advisors
regarding the effect, if any, on them of any such potential election.
If the Trust were considered to be a partnership as described in the second
preceding paragraph, and if any of its interests properly treated as equity for
federal income tax purposes were considered to be publicly traded, it might be
treated as a publicly traded partnership taxable as a corporation even though
all its publicly offered Certificates are properly treated as debt for federal
income tax purposes. The Transferor intends to take measures to reduce the risk
that the Trust would in the future be considered to have publicly traded equity
and thus to be a publicly traded partnership. It is expected that such measures
will be successful, but no assurance can be given in this regard.
FEDERAL INCOME TAX CONSEQUENCES -- UNITED STATES INVESTORS
Interest Income to Certificateholders. Assuming the Certificates are debt
obligations for federal income tax purposes, it is believed that they should not
be considered issued with more than de minimis OID (except as discussed in the
following paragraph or the Prospectus Supplement). Under this interpretation,
interest thereon will be taxable as ordinary interest income when received or
accrued by holders utilizing the cash or accrual methods of accounting,
respectively. Moreover, a holder of a Certificate issued with a de minimis
amount of OID must include such OID in income, on a pro rata basis, as principal
payments are made on the
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Certificate. A purchaser who buys a Certificate for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
However, if any interest payable on a Series or Class of Certificates is
not paid in full on its scheduled payment date, the Certificates of that Series
or Class will thereafter be considered to be issued with OID. Moreover, even
before that time, the Certificates of a Series or Class would be considered to
have OID unless, at the time of issuance, the likelihood of a late payment or
nonpayment of interest on such Series or Class was considered a "remote
contingency" under applicable Treasury regulations. The Transferor intends to
take the position, based on the exception for remote contingencies, that OID
does not arise on a Series or Class of Certificates unless and until a late
payment or nonpayment of interest in fact occurs.
If the Certificates of a Series or Class were considered to have OID
(either initially or following a late payment or nonpayment of interest), there
would not be a significant effect on holders of the Certificates. However, cash
basis holders would in effect be required to report interest income as it
accrues rather than when it is paid. Moreover, all holders would be required to
accrue any de minimis discount into income over the life of the Certificates
rather than when principal is paid.
Market Discount and Premium. A holder of a Certificate that 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. A holder of a
Certificate may instead elect to accrue market discount into income on a current
basis. Unless such an election is made, interest deductions will be deferred
with respect to debt incurred to purchase or carry a Certificate that has market
discount.
A Certificateholder who purchases an interest in a Certificate at a price
in excess of its principal amount 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. If all interest on a Certificate is
treated as OID, the same result would apply without the need for an election.
Under section 1272(a)(6) of the Code, special provisions apply to OID,
market discount and premium on 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.
Sale or Exchange of Certificates. Upon a sale or exchange of a
Certificate, a holder generally will recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and the
Certificateholder's adjusted basis in its interest in the Certificate. The
adjusted basis in the interest in the Certificate will equal its cost, increased
by any OID or market discount includable 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.
Tax Reporting. The paying agent will be required to report annually to the
IRS, and to each Certificateholder of record, the amount of interest paid or OID
accrued on Certificates (and the amount of interest withheld for federal income
taxes, if any) for each calendar year, except as to exempt holders (generally,
holders that are corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident aliens who
provide certification as to their status as nonresidents). As long as the only
"Certificateholder" of record is Cede, as nominee for DTC, Certificateholders
and the IRS will receive tax and other information only from Participants and
Indirect Participants rather than the paying agent. Accordingly, each nonexempt
Certificateholder will be required to provide, under penalties of perjury, a
certificate on IRS Form W-9 containing the holder's name, address, correct
federal taxpayer identification number and a statement that such holder is not
subject to backup withholding. If a nonexempt Certificateholder fails to provide
the required certification, the paying agent (or the Participants or Indirect
Participants) will be required to withhold (or cause to be withheld) 31% of the
interest (and principal)
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otherwise payable to the holder, and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability.
Possible Classification of the Certificates as Interests in a Partnership
or Association. Although, as described above, it is the opinion of Tax Counsel
that all Investor Certificates will properly be characterized as debt for
federal income tax purposes, such opinion is not binding on the IRS and thus no
assurance can be given that such a characterization will prevail. If the IRS
were to contend successfully that some or all of the Certificates were not debt
obligations for federal income tax purposes, the arrangement among the
Transferor, any other holders of the Transferor Certificate, the holders of such
Certificates and any other holders of other Certificates might be classified as
a partnership for federal income tax purposes, as an association taxable as a
corporation or as a "publicly traded partnership" taxable as a corporation.
If some or all of the Certificates are treated as equity interests in a
partnership, the partnership would in all likelihood be treated as a "publicly
traded partnership." A publicly traded partnership is, in general, taxable as a
corporation. If the partnership were nevertheless not taxable as a corporation
(because of an exception for an entity whose income is interest income that is
not derived in the conduct of a financial business) it would not be subject to
federal income tax. Rather, each item of income, gain, loss, deduction and
credit generated through the ownership of the Receivables by the partnership
would be passed through to the partners in such a partnership (including holders
of Certificates that are treated as equity interests in the partnership)
according to their respective interests therein.
The timing and character of income reportable by Certificateholders as
partners in such a partnership could differ from the timing and character of
income reportable by Certificateholders as holders of debt. For example, a cash
basis Certificateholder treated as a partner might be required to report income
when it accrues to the partnership rather than when it is received by the
Certificateholder; however, the aggregate amount of income recognized over time
generally would be substantially the same, although an individual
Certificateholder's share of expenses of the partnership would be miscellaneous
itemized deductions that might not be deductible in whole or in part, meaning
that the holder might be taxed on a greater amount of income than the stated
interest on the Certificates. Finally, if any Certificates are treated as equity
interests in a partnership in which other Certificates are debt, all or part of
a tax-exempt investor's share of income from the Certificates that are treated
as equity would be treated as unrelated debt-financed income under the Code
taxable to the investor.
If, alternatively, some or all of the Certificates were treated as equity
interests in an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, the resulting entity would be subject to
federal income taxes at corporate tax rates on its taxable income generated by
ownership of the Receivables. Moreover, distributions by the entity on such
Certificates and the Transferor's Certificate would probably not be deductible
in computing the entity's taxable income and distributions to such
Certificateholders would probably be treated as dividend income to such holders
(and such holders may not be entitled to any dividends received deduction in
respect of such income). Such an entity-level tax could result in reduced
distributions to all Certificateholders, and the holders of Certificates that
are treated as equity could also be liable for a share of such a tax.
Since the Transferor will treat the Certificates as indebtedness for
federal income tax purposes, the Paying Agent (and Participants and Indirect
Participants) will not comply with the information reporting and other tax
requirements that would apply under those alternative characterizations of the
Certificates.
FEDERAL INCOME TAX CONSEQUENCES -- NON-UNITED STATES INVESTORS
Tax Counsel has given its opinion that the Certificates will properly be
classified as debt for federal income tax purposes. If the Certificates are
treated as debt:
(a) interest or OID paid to a nonresident alien or foreign corporation
or partnership would be exempt from U.S. withholding taxes (including
backup withholding taxes), provided the holder complies with applicable
identification requirements (and does not actually or constructively own
10% or more of the voting stock of AT&T, is not a controlled foreign
corporation with respect to AT&T, and does not bear certain relationships
to holders of the Transferor Certificate other than the Transferor).
Applicable
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identification requirements will be satisfied if there is delivered to a
securities clearing organization (or bank or other financial institution
that holds Certificates on behalf of the customer in the ordinary course of
its trade or business) (i) IRS Form W-8 signed under penalties of perjury
by the beneficial owner of the Certificates stating that the holder is not
a U.S. person and providing such holder's name and address, (ii) IRS Form
1001 signed by the beneficial owner of the Certificates or such owner's
agent claiming exemption from withholding under an applicable tax treaty,
or (iii) IRS Form 4224 signed by the beneficial owner of the Certificates
or such owner's agent claiming exemption from withholding of tax on income
connected with the conduct of a trade or business in the United States;
provided that in any such case (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that the holder is a U.S.
person or that any certification on the form is false;
(b) a holder of a Certificate who is a nonresident alien or foreign
corporation will not be subject to United States federal income tax on gain
on the sale, exchange or redemption of such Certificate, provided that (i)
such gain is not effectively connected to a trade or business carried on by
the holder in the United States, (ii) in the case of a holder that is an
individual, such holder is not present in the United States for 183 days or
more during the taxable year in which such sale, exchange or redemption
occurs, and (iii) in the case of gain representing accrued interest or OID,
the conditions described in clause (a) are satisfied; and
(c) a Certificate held by an individual who at the time of death is a
nonresident alien will not be subject to United States federal estate tax
as a result of such individual's death if, immediately before his death,
(i) the individual did not actually or constructively own 10% or more of
the voting stock of AT&T, and does not bear certain relationships to
holders of the Transferor Certificate other than the Transferor and (ii)
the holding of such Certificate was not effectively connected with the
conduct by the decedent of a trade or business in the United States.
The IRS has recently proposed new regulations that 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.
If the IRS were to contend successfully that some or all of the
Certificates are equity interests in a partnership (not taxable as a
corporation), a holder of such a Certificate that is a nonresident alien or
foreign corporation might (i) be subject to tax on the gross amount of interest
on the Receivables allocable to it (and subject to withholding) at the rate of
30% unless such rate were reduced by an applicable treaty or (ii) be required to
file a U.S. individual or corporate income tax return and pay tax on its share
of partnership income at regular U.S. rates, including in the case of a
corporation the branch profits tax (and would be subject to withholding tax on
its share of partnership income). If some or all of the Certificates are
recharacterized as equity interests in an association taxable as a corporation
or a "publicly traded partnership" taxable as a corporation, to the extent
distributions on such Certificates were treated as dividends, a nonresident
alien individual or foreign corporation would generally be taxed on the gross
amount of such dividends (and subject to withholding) at the rate of 30% unless
such rate were reduced by an applicable treaty.
STATE AND LOCAL TAX CONSEQUENCES
Because each state's income tax laws vary, it is impossible to predict the
income tax consequences to the Trust and the Certificateholders in all of the
state taxing jurisdictions in which they may be subject to tax.
Certificateholders are urged to consult their own tax advisors with respect to
state and local income and franchise taxes.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to the plan. A violation
of these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and the Code for such persons. For example,
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a prohibited transaction would arise, unless an exemption were available, if a
Certificate were viewed as debt of the Transferor and such Transferor were a
disqualified person or a party in interest with respect to a plan that acquired
the Certificate.
Moreover, additional prohibited transactions could arise if the Trust
Assets were deemed to constitute assets of any plan that owned Certificates. The
Department of Labor ("DOL") has issued a final regulation (the "Final
Regulation") concerning the definition of what constitutes "plan assets" of an
employee benefit plan subject to ERISA or the Code, or an individual retirement
account ("IRA") (collectively referred to as "Benefit Plans"). Under the Final
Regulation, the assets and properties of corporations, partnerships and certain
other entities in which a Benefit Plan makes an investment in "an equity
interest" could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if Benefit Plans (or other entities whose assets
include plan assets) purchase Certificates, the Trust could be deemed to hold
plan assets unless one of the exceptions under the Final Regulation is
applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that a Certificate is an equity
interest, the Final Regulation contains an exception that provides that if a
Benefit Plan (or an entity whose assets include plan assets) acquires a
"publicly-offered security," the issuer of the security is not deemed to hold
plan assets. A publicly-offered security is a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another at the conclusion of the
initial offering and (iii) either is (A) part of a class of securities
registered under Section 12(b) or 12(g) of the Exchange Act, or (B) sold to the
Benefit 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. Each Class of a Series must be tested
separately for this purpose.
There are no restrictions imposed on the transfer of the Certificates
offered hereby, and the Certificates offered hereby will be sold as part of an
offering pursuant to an effective registration statement under the Securities
Act and then will be timely registered under the Exchange Act. Based on
information provided by any underwriter, agent or dealer involved in the
distribution of the Certificates offered hereby, the Transferor will notify the
Trustee as to whether or not the Certificates of any Series (or if there is more
than one Class in a Series each Class) will be expected to be held by at least
100 separately named persons at the conclusion of the offering. The Transferor
will not, however, determine whether there will, in fact, be at least 100
separately named persons or whether the 100-investor requirement of the
exception for publicly offered securities is satisfied as to the Certificates of
such Series (or Class). Prospective purchasers may obtain a copy of the
notification described in the second preceding sentence from the Trustee at its
Corporate Trust Department.
If the Certificates of a Series (or Class) fail to meet the criteria of
publicly-offered securities and the Trust Assets are deemed to include plan
assets, transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to such plans might be prohibited under
Section 406 of ERISA and Section 4975 of the Code unless an exemption is
applicable. Thus, for example, if a participant in any Benefit Plan holding
Certificates of such Series (or Class) is a cardmember of one of the Accounts,
under a DOL interpretation the purchase of such Certificates by such plan could
constitute a prohibited transaction. There are five class exemptions issued by
the DOL that could apply in such event: DOL Prohibited Transaction Exemption
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). There is no assurance that these exemptions, even
if all of the conditions specified therein are satisfied, will apply to all
transactions involving the Trust Assets.
Moreover, as discussed above, while (unless provided otherwise in the
Prospectus Supplement) Tax Counsel has given its opinion that the Certificates
will properly be treated as debt for federal income tax purposes, if any
Certificates are treated as equity interests in a partnership in which other
Certificates are debt,
70
<PAGE> 121
all or part of a tax-exempt investor's share of income from the Certificates
that are treated as equity would be treated as unrelated debt-financed income
under the Code taxable to the investor.
In light of the foregoing, fiduciaries of Benefit Plans (or other entities
whose assets include plan assets) considering the purchase of Certificates
should consult their own counsel as to whether the acquisition of such
Certificates would be a prohibited transaction, whether Trust Assets which are
represented by such Certificates would be considered plan assets, the
consequences that would apply if the Trust Assets were considered plan assets,
the applicability of exemptive relief from the prohibited transaction rules and
the applicability of the tax on unrelated business income and unrelated
debt-financed income.
In addition, based on the reasoning of the United States Supreme Court's
decision in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S.
86, under certain circumstances assets in the general account of an insurance
company may be deemed to be plan assets for certain purposes, and under such
reasoning a purchase of Certificates with assets of an insurance company's
general account might be subject to the prohibited transaction rules described
above. Insurance companies investing assets of their general accounts should
also consider the potential effects of the recent enactment of section 401(c) of
ERISA.
Unless otherwise provided in the applicable Prospectus Supplement, if the
Transferor does not notify the Trustee, as described above, that the
Certificates of any particular Series (or Class) will be expected to be held by
at least 100 separately named persons or independent investors, the Certificates
of such Series (or Class) may not be acquired by any Benefit Plan or by any
entity investing assets that are treated as assets of a Benefit Plan.
Furthermore, in that case, the Pooling and Servicing Agreement, the Supplement
and each such Certificate provide that each holder of such Certificate shall be
deemed to have represented and warranted that it is not a Benefit Plan and is
not purchasing such Certificate on behalf of a Benefit Plan or with assets that
are treated as assets of a Benefit Plan.
PLAN OF DISTRIBUTION
The Transferor may sell Certificates (a) through underwriters or dealers,
(b) directly to one or more purchasers, or (c) through agents. The related
Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferor from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the related Prospectus
Supplement, the obligations of the underwriters to purchase such Certificates
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Certificates if any of such Certificates are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Certificates may also be sold directly by the Transferor or through agents
designated by the Transferor from time to time. Any agent involved in the offer
or sale of Certificates will be named, and any commissions payable by the
Transferor to such agent will be set forth, in the related Prospectus
Supplement. Unless otherwise indicated in the related Prospectus Supplement, any
such agent will act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Transferor
and UCS to indemnification by the Transferor and UCS against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that the agents or underwriters may be required to make
in respect
71
<PAGE> 122
thereof. Agents and underwriters may be affiliates or customers of, engage in
transactions with, or perform services for, the Transferor and UCS or their
affiliates in the ordinary course of business.
FOR FLORIDA RESIDENTS
AT&T provides telecommunications services between the United States and
Cuba jointly with Empresa de Telecomunicaciones Internacionales de Cuba
("EMTELCUBA"), the Cuban telephone company, pursuant to all applicable U.S. laws
and regulations. All payments due EMTELCUBA are handled in accordance with the
provisions of the Cuban Assets Control Regulations and the Cuban Democracy Act
of 1992 and specific licenses issued thereunder. AT&T is the sole owner of the
Cuban American Telephone and Telegraph Company ("CATT"), a Cuban corporation.
CATT owns cable facilities between the United States and Cuba that were
activated on November 25, 1994.
This information is accurate as of the date hereof. Current information
concerning AT&T's business dealings with the government of Cuba or with any
person or affiliate located in Cuba may be obtained from the Division of
Securities and Investor Protection of the Florida Department of Banking and
Finance, the Capitol, Tallahassee, Florida 32399-0350, telephone number (904)
488-9805.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Transferor and the Trust by Orrick, Herrington & Sutcliffe LLP, New York,
New York. Certain legal matters will be passed upon for the Underwriters by the
counsel named in the Prospectus Supplement. Certain legal matters relating to
the federal tax consequences of the issuance of the Certificates and certain
other matters relating thereto will be passed upon for the Transferor by
Cravath, Swaine & Moore, New York, New York.
72
<PAGE> 123
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------------------------------------------------------- --------
<S> <C>
Account Owner Retained Interest.................................................... 6
Account Owners..................................................................... 3
Accounts........................................................................... 1, 25
Additional Accounts................................................................ 24
Additional Transferors............................................................. 42
Adverse Effect..................................................................... 23, 42
Aggregate Addition................................................................. 24
Aggregate Addition Accounts........................................................ 23
AT&T............................................................................... 3
AT&T Universal Funding............................................................. 1, 3
AT&T Universal Portfolio........................................................... 31
Average Rate....................................................................... 21
Bankruptcy Code.................................................................... 19
Banks.............................................................................. 25
Benefit Plans...................................................................... 70
Calling Card Transactions.......................................................... 25
CATT............................................................................... 72
CB&T............................................................................... 1, 3
Cede............................................................................... 2, 32
Cedel.............................................................................. 8
Cedel Participants................................................................. 34
Certificate Owners................................................................. 2
Certificateholder.................................................................. 33
Certificateholders' Interest....................................................... 4
Certificates....................................................................... 1
Class.............................................................................. 1
Code............................................................................... 65
Collateral Interest................................................................ 55
Collection Account................................................................. 47
Commission......................................................................... 2
Controlled Accumulation Amount..................................................... 10
Controlled Accumulation Period..................................................... 10
Controlled Amortization Amount..................................................... 11
Controlled Amortization Period..................................................... 11
Controlled Deposit Amount.......................................................... 10
Controlled Distribution Amount..................................................... 11
Cooperative........................................................................ 34
Counterparties..................................................................... 55
Credit Enhancement................................................................. 14
Credit Enhancer.................................................................... 54
Date of Processing................................................................. 15
Defaulted Amount................................................................... 53
Defaulted Receivables.............................................................. 53
Definitive Certificates............................................................ 32
Depositaries....................................................................... 32
Depository......................................................................... 32
Determination Date................................................................. 15
</TABLE>
73
<PAGE> 124
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------------------------------------------------------- --------
<S> <C>
Disclosure Document................................................................ 5
Discount Option Receivables........................................................ 43
Discount Percentage................................................................ 43
Distribution Date.................................................................. 15
DOL................................................................................ 70
DTC................................................................................ 2
Early Accumulation Period.......................................................... 10
Early Amortization Period.......................................................... 11
Eligible Account................................................................... 24
Eligible Institution............................................................... 47
Eligible Investments............................................................... 47
Eligible Receivable................................................................ 40
EMTELCUBA.......................................................................... 72
Enhancement Invested Amount........................................................ 4, 54
ERISA.............................................................................. 69
Euroclear.......................................................................... 8
Euroclear Operator................................................................. 34
Euroclear Participants............................................................. 34
Euroclear Provisions............................................................... 34
Excess Allocation Series........................................................... 12
Excess Finance Charge Collections.................................................. 51
Exchange Act....................................................................... 2
Excluded Receivables............................................................... 6
Expected Final Payment Date........................................................ 9
FASIT.............................................................................. 66
FDIA............................................................................... 17
FDIC............................................................................... 17
Final Regulation................................................................... 70
Finance Charge Receivables......................................................... 8
FIRREA............................................................................. 17, 62
Floating Allocation Percentage..................................................... 48
Full Invested Amount............................................................... 14
Funding Period..................................................................... 14
Funding Purchase Agreement......................................................... 7
Group.............................................................................. 4
Group Investor Additional Amounts.................................................. 49
Group Investor Default Amount...................................................... 49
Group Investor Finance Charge Collections.......................................... 49
Group Investor Monthly Fees........................................................ 49
Group Investor Monthly Interest.................................................... 49
Holders............................................................................ 35
Indirect Participants.............................................................. 33
Ineligible Receivables............................................................. 40
Initial Accounts................................................................... 7
Initial Cut-Off Date............................................................... 7
Insolvency Event................................................................... 18
Interchange........................................................................ 30
Interest Funding Account........................................................... 8
Interest Payment Date.............................................................. 45
</TABLE>
74
<PAGE> 125
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------------------------------------------------------- --------
<S> <C>
Invested Amount.................................................................... 45
Investor Finance Charge Collections................................................ 51
IRA................................................................................ 70
IRS................................................................................ 65
L/C Issuer......................................................................... 55
LIBOR.............................................................................. 55
MasterCard......................................................................... 6
Monthly Period..................................................................... 5
Monthly Servicing Fee.............................................................. 38
New Accounts....................................................................... 23
New Issuance....................................................................... 45
OID................................................................................ 65
OID regulations.................................................................... 65
Paired Series...................................................................... 13
Participants....................................................................... 33
Participation Interests............................................................ 4
Pay Out Event...................................................................... 37
Pooling and Servicing Agreement.................................................... 1
Portfolio Yield.................................................................... 21
Pre-Funding Account................................................................ 14
Pre-Funding Amount................................................................. 14
Premium Option Receivables......................................................... 44
Premium Percentage................................................................. 44
Prime Rate......................................................................... 28
Principal Allocation Percentage.................................................... 13, 48
Principal Commencement Date........................................................ 9
Principal Funding Account.......................................................... 10
Principal Receivables.............................................................. 8
Principal Sharing Series........................................................... 12
Principal Shortfalls............................................................... 52
Principal Terms.................................................................... 46
Prior Series....................................................................... 13
Prospectus Supplement.............................................................. 1
Rating Agency...................................................................... 16
Rating Agency Condition............................................................ 23
Reallocated Investor Finance Charge Collections.................................... 49
Reallocation Group................................................................. 13
Receivables........................................................................ 1, 3, 7
Record Date........................................................................ 32
Recoveries......................................................................... 8
Reinvestment Events................................................................ 38
Removed Accounts................................................................... 8
Required Minimum Principal Balance................................................. 42
Required Transferor Amount......................................................... 5
Revolving Period................................................................... 9
Securities Act..................................................................... 2
Series............................................................................. 1, 3
Series Adjusted Invested Amount.................................................... 47
Series Allocable Defaulted Amount.................................................. 48
</TABLE>
75
<PAGE> 126
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------------------------------------------------------- --------
<S> <C>
Series Allocable Finance Charge Collections........................................ 48, 51
Series Allocable Principal Collections............................................. 48
Series Allocation Percentage....................................................... 48
Series Closing Date................................................................ 9
Series Cut-Off Date................................................................ 9
Series Enhancement................................................................. 4
Series Invested Amount............................................................. 42
Series Required Transferor Amount.................................................. 48
Series Termination Date............................................................ 10
Service Transfer................................................................... 56
Servicer........................................................................... 1, 3
Servicer Default................................................................... 57
Servicing Fee...................................................................... 38
Shared Principal Collections....................................................... 52
Special Funding Account............................................................ 52
Special Payment Date............................................................... 37
Supplement......................................................................... 5
Supplemental Certificate........................................................... 41
Supplemental Certificates.......................................................... 5
Swaps.............................................................................. 55
Tax Counsel........................................................................ 66
Tax Opinion........................................................................ 47
Termination Notice................................................................. 56
Total System....................................................................... 25
Transfer Date...................................................................... 15
Transferor......................................................................... 1, 3, 42
Transferor Amount.................................................................. 5, 40
Transferor Certificate............................................................. 5
Transferor Certificates............................................................ 5
Transferor Servicing Fee........................................................... 38
Transferor's Interest.............................................................. 4
Trust.............................................................................. 1, 3
Trust Adjusted Invested Amount..................................................... 48
Trust Assets....................................................................... 3
Trust Portfolio.................................................................... 31
Trustee............................................................................ 1, 3
UCC................................................................................ 17
UCS................................................................................ 1, 3
UCS Purchase Agreement............................................................. 6
Universal Bank..................................................................... 1, 3
VISA............................................................................... 6
</TABLE>
76
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=========================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus Supplement or
the accompanying Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Transferor. Neither this Prospectus Supplement nor the accompanying Prospectus
constitutes an offer or a solicitation by anyone in any state in which such
offer or solicitation is not qualified or to anyone to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus
Supplement or the accompanying Prospectus, nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Transferor since the date hereof or thereof or that the
information contained or incorporated by reference herein or therein is correct
as of any time subsequent to its date.
---------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary of Series Terms..................... S-3
Risk Factors................................ S-14
Maturity Considerations..................... S-14
The AT&T Universal Portfolio................ S-16
The Receivables............................. S-19
Use of Proceeds............................. S-21
The Account Owners.......................... S-21
The Servicer................................ S-21
Series Provisions........................... S-21
Underwriting................................ S-40
Legal Matters............................... S-41
Index of Defined Terms...................... S-42
Annex I -- Other Series..................... A-1
PROSPECTUS
Prospectus Supplement....................... 2
Reports to Certificateholders............... 2
Available Information....................... 2
Incorporation of Certain Documents by 2
Reference.................................
Prospectus Summary.......................... 3
Risk Factors................................ 17
Use of Proceeds............................. 24
The Trust................................... 24
The Credit Card Business of AT&T Universal 25
Card Services Corp........................
AT&T Universal Card Services Corp........... 30
AT&T Universal Funding Corp................. 30
Universal Bank, N.A......................... 30
Columbus Bank and Trust Company............. 31
The Accounts................................ 31
Description of the Certificates............. 32
The Pooling and Servicing Agreement 38
Generally.................................
Description of the Purchase Agreements...... 59
Certain Legal Aspects of the Receivables.... 61
Tax Matters................................. 65
ERISA Considerations........................ 69
Plan of Distribution........................ 71
For Florida Residents....................... 72
Legal Matters............................... 72
Index of Defined Terms...................... 73
</TABLE>
UNTIL AUGUST 5, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SERIES 1997-1 CERTIFICATES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================
=========================================================
AT&T UNIVERSAL
CARD MASTER TRUST
$850,000,000 CLASS A
SERIES 1997-1 FLOATING RATE
ASSET BACKED CERTIFICATES
$80,000,000 CLASS B
SERIES 1997-1 FLOATING RATE
ASSET BACKED CERTIFICATES
AT&T UNIVERSAL
FUNDING CORP.
TRANSFEROR
AT&T UNIVERSAL
CARD SERVICES CORP.
SERVICER
---------------------------
PROSPECTUS SUPPLEMENT
MAY 7, 1997
---------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
LEHMAN BROTHERS
J.P. MORGAN & CO.
=========================================================
