As filed with the Securities and Exchange Commission on July 5, 2001
Registration Nos. 333-60418-00
333-60418-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WORLD FINANCIAL NETWORK CREDIT CARD MASTER NOTE TRUST
(Issuer of the Notes)
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
(Issuer of the Collateral Certificate)
(Exact name of registrant as specified in its charter)
WFN CREDIT COMPANY, LLC
(Transferor to each of the trusts)
(Exact name of registrant as specified in its charter)
Delaware 31-1772814
(State of Formation) (I.R.S. Employer
Identification No.)
800 TECHCENTER DRIVE
GAHANNA, OHIO 43230
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DANIEL T. GROOMES
WORLD FINANCIAL NETWORK NATIONAL BANK
800 TECHCENTER DRIVE
GAHANNA, OHIO 43230
(614) 729-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
ROBERT F. HUGI CAROLYN S. MELVIN MICHAEL H. MITCHELL
MAYER, BROWN & PLATT WORLD FINANCIAL NETWORK NATIONAL BANK ORRICK, HERRINGTON & SUTCLIFFE LLP
190 SOUTH LASALLE STREET 800 TECHCENTER DRIVE WASHINGTON HARBOUR
CHICAGO, ILLINOIS 60603-3441 GAHANNA, OHIO 43230 3050 K STREET, N.W.
(312) 782-0600 (614) 729-4000 WASHINGTON, D.C. 20007
(202) 339-8400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
/ /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit(1) Offering Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------------------
Asset Backed Notes ...... $2,000,000,000 100% $2,000,000,000 $500,000(3)
Collateral Certificate(2) $2,000,000,000 -- -- --
================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) No additional consideration will be paid by the purchasers of the Asset
Backed Notes for the Collateral Certificate, which is pledged as security
for the Asset Backed Notes and issued by World Financial Network Credit
Card Master Trust.
(3) $250 was previously paid.
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Introductory Note
This registration statement includes:
- a representative form of prospectus supplement to the base prospectus
relating to the offering by World Financial Network Credit Card Master
Note Trust of a single issuance series of asset-backed notes;
- a representative form of prospectus supplement to the base prospectus
relating to the offering by World Financial Network Credit Card Master
Note Trust of a multiple issuance series of asset-backed notes; and
- a base prospectus relating to asset-backed notes of the World
Financial Network Credit Card Master Note Trust.
The information in this prospectus supplement and the accompanying prospectus is
not complete and may be amended. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus supplement and the accompanying prospectus are not an
offer to sell and are not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
REPRESENTATIVE FORM OF PROSPECTUS
SUPPLEMENT FOR A SINGLE ISSUANCE SERIES
SUBJECT TO COMPLETION, DATED _________ __, 2001
Prospectus Supplement to Prospectus dated _________ __, 2001
WORLD FINANCIAL NETWORK CREDIT CARD MASTER NOTE TRUST
Issuer
WFN CREDIT COMPANY, LLC WORLD FINANCIAL NETWORK NATIONAL BANK
Transferor Servicer
SERIES 2001- ASSET BACKED NOTES
CLASS A NOTES CLASS B NOTES CLASS C NOTES
------------- ------------- -------------
Principal amount $ $ $
Interest rate [One-month LIBOR [One-month LIBOR [One-month LIBOR
plus] [ ]% per year plus] [ ]% per year plus] [ ]% per year
Interest payment dates monthly on the 15th, monthly on the 15th, monthly on the 15th,
beginning ____ ___, 200_ beginning ______ ___, 200_ beginning ______ ___, 200_
Expected principal
payment date 200 200 200
Final maturity date 200 200 200
Price to public $ (or %) $ (or %) $ (or %)
Underwriting discount $ (or %) $ (or %) $ (or %)
Proceeds to issuer $ (or %) $ (or %) $ (or %)
The notes will be paid from the issuer's assets consisting primarily of an
interest in receivables in a portfolio of private label revolving credit card
accounts owned by World Financial Network National Bank.
We expect to issue your series of notes in book-entry form on or about ,
2001.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-11 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 3 IN THE PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of World Financial Network Credit Card Master Note
Trust only and are not obligations of WFN Credit Company, LLC,World Financial
Network National Bank or any other person.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS A NOTES
UNDERWRITERS OF THE CLASS B NOTES
UNDERWRITERS OF THE CLASS C NOTES
, 2001
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We (WFN Credit Company, LLC) provide information to you about the notes
in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to your series of notes, and
(b) this prospectus supplement, which describes the specific terms of your
series of notes.
Whenever the information in this prospectus supplement is more specific
than the information in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
TABLE OF CONTENTS
PAGE
Summary of Terms.........................................................1
Series 2001-__...........................................................1
Offered Notes............................................................2
Structural Summary.......................................................3
The Issuer............................................................3
Collateral for the Notes..............................................3
World Financial Network Credit Card Master Trust......................3
Other Claims on the Receivables.......................................4
Other Series of Notes.........................................4
Outstanding Series of Investor Certificates...................4
The Transferor Interest.......................................4
Allocations of Collections and Losses.................................4
Funding Period........................................................5
Application of Finance Charge Collections.............................5
Application of Principal Collections..................................6
Revolving Period..............................................6
Controlled Accumulation Period................................6
Early Amortization Period.....................................6
Reallocation of Principal Collections.........................6
Extra Principal Collections...................................6
Credit Enhancement....................................................7
Subordination.................................................7
Cash Collateral Account.......................................7
Spread Account................................................7
Early Amortization Events.............................................7
Events of Default.....................................................8
Optional Redemption...................................................9
Tax Status............................................................9
ERISA Considerations..................................................9
Risk Factors..........................................................9
Ratings...............................................................9
[Exchange Listing....................................................10
WFN Credit Company, LLC..............................................10
Risk Factors............................................................11
Receivables Performance.................................................12
Delinquency and Loss Experience......................................12
Revenue Experience...................................................14
The Trust Portfolio.....................................................16
Maturity Considerations.................................................20
Controlled Accumulation Period.......................................20
Early Amortization Period............................................20
Payment Rates........................................................21
Paired Series........................................................22
Description of Series Provisions........................................22
General..............................................................22
Collateral Amount....................................................22
Allocation Percentages...............................................23
Interest Payments....................................................24
Pre-funding..........................................................25
Principal Payments...................................................25
Controlled Accumulation Period.......................................25
Early Amortization Period............................................26
Subordination........................................................27
Application of Finance Charge Collections............................27
Reallocation of Principal Collections................................29
Investor Charge-Offs.................................................29
Sharing Provisions...................................................30
Principal Accumulation Account.......................................30
Cash Collateral Account: Required Enhancement Amount.................31
Reserve Account......................................................32
Spread Account.......................................................34
Spread Account Distributions.........................................35
Paired Series........................................................35
Early Amortization Events............................................36
Events of Default....................................................37
Servicing Compensation and Payment of Expenses.......................38
Underwriting............................................................39
Legal Matters...........................................................41
Glossary of Terms for Prospectus Supplement.............................42
Other Securities Issued and Outstanding.................................44
-i-
SUMMARY OF TERMS
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ISSUER: World Financial Network Credit Card Master Note Trust
TRANSFEROR: WFN Credit Company, LLC
SERVICER: World Financial Network National Bank
INDENTURE TRUSTEE: BNY Midwest Trust Company
OWNER TRUSTEE: Chase Manhattan Bank USA, National Association
EXPECTED CLOSING DATE: 2001
CLEARANCE AND SETTLEMENT: DTC/Clearstream/Euroclear
MINIMUM DENOMINATIONS: $1,000
SERVICING FEE RATE: 2% per annum
INITIAL COLLATERAL AMOUNT:
PRE-FUNDED AMOUNT:
OFFERED NOTES:
INITIAL CASH COLLATERAL
ACCOUNT BALANCE: $____________________ (___% of the collateral amount)
PRIMARY ASSETS OF THE ISSUER: An interest in receivables originated in private label revolving
credit card accounts owned by World Financial Network National Bank
- ---------------------------------------------------------------------------------------------------------
SERIES 2001-__
Class Amount % of Series 2001-_ Notes
----- ------ ------------------------
Class A notes $
Class B notes
Class C notes
Total $ 100%
===== ===
S-1
OFFERED NOTES
CLASS A CLASS B CLASS C
PRINCIPAL AMOUNT: $ $ $
ANTICIPATED RATINGS:(1)
(Moody's/Standard &
Poor's/Fitch)
CREDIT ENHANCEMENT: subordination of subordination of spread account and
Class B and Class C Class C and cash cash collateral
and cash collateral collateral account account
account
INTEREST RATE: [One-month LIBOR plus] [One-month LIBOR [One-month LIBOR plus]
[ ]% per year plus] [ ]% per year
[ ]% per year
INTEREST ACCRUAL METHOD: [30] [actual]/360 [30] [actual]/360 [30] [actual]/360
INTEREST DISTRIBUTION DATES: monthly (15th), monthly (15th) , monthly (15th) ,
beginning _____ __, beginning _____ __, beginning _____ __,
200_ 200_ 200_
[INTEREST RATE INDEX RESET DATE:] [2 London business [2 London business [2 London business
days before each days before each days before each
interest payment date] interest payment date] interest payment date]
COMMENCEMENT OF ACCUMULATION PERIOD
(SUBJECT TO ADJUSTMENT): , 200_ , 200_ , 200_
EXPECTED PRINCIPAL PAYMENT DATE: , 200_ , 200_ , 200_
FINAL MATURITY DATE: , 200_ , 200_ , 200_
ERISA ELIGIBILITY: Yes, subject to important considerations described under "ERISA
CONSIDERATIONS" in the accompanying prospectus.
DEBT FOR UNITED STATES FEDERAL INCOME TAX Yes, subject to important considerations described under "FEDERAL
PURPOSES: INCOME TAX CONSEQUENCES" in the accompanying prospectus.
- --------
1 It is a condition to issuance that one of these ratings be obtained and that
the collateral certificate be rated investment grade.
S-2
STRUCTURAL SUMMARY
This summary is a simplified presentation of the major structural components of
Series 2001-_. It does not contain all of the information that you need to
consider in making your investment decision. You should carefully read this
entire document and the accompanying prospectus before you purchase any notes.
World
World Financial World
Financial WFN Network Financial
Network Receivables Credit Receivables Credit Collateral Network Notes
National Company, Card Certificate Credit Card
Bank LLC Master Master Note
Trust Trust
THE ISSUER
The notes will be issued by World Financial Network Credit Card Master Note
Trust, a Delaware statutory business trust, under an indenture supplement to an
indenture, each between the issuer and the indenture trustee.
The indenture trustee is BNY Midwest Trust Company.
COLLATERAL FOR THE NOTES
The notes are secured by a beneficial interest in a pool of receivables that
arise under World Financial Network National Bank's private label revolving
credit card accounts.
The bank has designated all eligible accounts from a number of merchant
programs in its portfolio of private label credit card accounts and has
transferred the receivables in those accounts either directly to World
Financial Network Credit Card Master Trust or to us. We have, in turn,
transferred the receivables sold to us by the bank to World Financial Network
Credit Card Master Trust. We refer to the accounts that have been designated
as trust accounts as the trust portfolio. World Financial Network Credit Card
Master Trust has issued a collateral certificate representing an interest in
the receivables and the other assets of World Financial Network Credit Card
Master Trust to us. We have transferred that collateral certificate to the
issuer and that collateral certificate serves as collateral for the notes.
The receivables in World Financial Network Credit Card Master Trust as of
_______ __, 2001 were approximately as follows:
o total receivables: $____________________
o principal receivables: $____________________
o finance charge receivables: $____________________
o total accounts designated to World Financial Network Credit Card Master Trust:
____________________
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
World Financial Network Credit Card Master Trust is a common law trust formed by
the bank in 1996 under a pooling and servicing agreement that has been amended
and may in the future be amended from time to time. The [__________, 2001]
S-3
amendment, among other things, designated us as transferor in replacement of
World Financial Network National Bank. The bank has transferred some of the
private label credit card receivables directly to World Financial Network Credit
Card Master Trust under the pooling and servicing agreement prior to its
amendment and we have transferred the receivables sold to us by the bank under a
receivables purchase agreement to World Financial Network Credit Card Master
Trust under that pooling and servicing agreement.
The trustee for World Financial Network Credit Card Master Trust is BNY Midwest
Trust Company, successor to the corporate trust administration of Harris Trust
and Savings Bank, successor to The Bank of New York.
After all outstanding series of investor certificates that have been issued by
World Financial Network Credit Card Master Trust have been retired, other than
the collateral certificate held by the issuer, we may cause World Financial
Network Credit Card Master Trust to terminate, at which time the receivables
will be transferred to the issuer and held directly by the issuer as collateral
for the notes. We refer to the entity -- either World Financial Network Credit
Card Master Trust or the issuer -- that holds the receivables at any given time
as the trust.
OTHER CLAIMS ON THE RECEIVABLES
OTHER SERIES OF NOTES
Series 2001- is the [ ] series of notes issued by the issuer. The issuer may
issue other series of notes from time to time in the future. [A summary of the
outstanding series of notes is in "ANNEX I: OTHER SECURITIES ISSUED AND
OUTSTANDING" included at the end of this prospectus supplement.] Neither you nor
any other noteholder will have the right to consent to the issuance of future
series of notes.
OUTSTANDING SERIES OF INVESTOR CERTIFICATES
In addition to the collateral certificate, there will be three series of
investor certificates issued by World Financial Network Credit Card Master
Trust that remain outstanding on the closing date [, excluding a fourth series
that will be retired with the proceeds from the issuance of the notes].
Each series of investor certificates represents a beneficial interest in
the receivables and the other trust assets. A summary of the outstanding
series of investor certificates is in "ANNEX I: OTHER SECURITIES ISSUED AND
OUTSTANDING" included at the end of this prospectus supplement. Neither you
nor any other noteholder will have the right to consent to the issuance of
future series of investor certificates.
THE TRANSFEROR INTEREST
We own the interest, called the transferor interest, in the receivables and
the other assets of the trust not supporting your series or any other series
of notes. The transferor interest does not provide credit enhancement for
your series or any other series.
ALLOCATIONS OF COLLECTIONS AND LOSSES
Your notes represent the right to payments from a portion of the collections on
the receivables. The servicer will also allocate to your series a portion of
defaulted receivables and would also allocate a portion of the dilution on the
receivables to your series if the servicer failed to comply with its obligation
to compensate the trust for dilution and the dilution was not absorbed
S-4
by the transferor's interest. Dilution means any reduction to the principal
balances of receivables made by the servicer because of merchandise returns or
any other reason except losses or payments.
The portion of collections, defaulted receivables and uncovered dilution
allocated to your series will be based mainly upon the ratio of the amount of
collateral for your series to the sum of the total amount of principal
receivables in the trust. The way this ratio is calculated will vary during each
of three periods that may apply to your notes:
o The REVOLVING PERIOD, which will begin on the closing date and end when
either of the other two periods begins.
o The CONTROLLED ACCUMULATION PERIOD, which is scheduled to begin on _______,
200_, but which may begin later, and end when the notes have been paid in
full. However, if an early amortization event occurs before the controlled
accumulation period begins, there will be no controlled accumulation period
and an early amortization period will begin. If an early amortization event
occurs during the controlled accumulation period, the controlled accumulation
period will end, and an early amortization period will begin.
o The EARLY AMORTIZATION PERIOD, which will only occur if one or more adverse
events, known as early amortization events, occurs.
For most purposes, the collateral amount used in determining these ratios will
be reset no less frequently than at the end of each month. However, for
allocations of principal collections during the controlled accumulation period
or the early amortization period, the collateral amount at the end of the
revolving period will be used, unless an early amortization event occurs for a
series paired with Series 2001- , in which case the collateral amount may be
further reduced.
The initial collateral amount for your series will equal $[______], PLUS any
increases in the initial collateral amount resulting from the release of
funds in the pre-funding account.
The collateral amount for your series is:
o the initial collateral amount, MINUS
o principal payments on the notes (other than principal payments made from
funds on deposit in the spread account) and the balance held in the principal
accumulation account for principal payments, MINUS
o the amount of any principal collections reallocated to cover interest and
servicing payments for your series, MINUS
o your series' share of defaults and uncovered dilution to the extent not
reimbursed from finance charge collections and investment earnings allocated
to your series.
A reduction to the collateral amount because of reallocated principal
collections, defaults or uncovered dilution will be reversed to the extent that
your series has available finance charge collections and investment earnings in
future periods.
FUNDING PERIOD
On the closing date, we will deposit [$______] into a pre-funding
account established by the servicer. The funding period will commence on the
closing date and end of the first to occur of (1) the date on which the
initial collateral amount equals the initial principal balance of the notes,
(2) the commencement of an early amortization period and (3) [______, 200__].
The indenture trustee will invest funds on deposit in the pre-funding account
in eligible investments at the direction of the servicer. Investment earnings
on amounts on deposit in the pre-funding account will be treated as finance
charge collections.
During the funding period, the initial collateral amount will
increase on each distribution date, to reflect any increase in the amount of
principal receivables in the trust to the extent that the Transferor Amount
exceeds the Minimum Transferor Amount, but may not increase by an amount
greater than the funds on deposit in the prefunding account on that date. On
any distribution date on which the initial collateral amount is so increased,
the indenture trustee will withdraw funds on deposit in the pre-funding
account in an amount equal to the increase and pay those amounts over to us.
You will have no further rights to the funds on deposit in the pre-funding
account once they are released to us. Should the amount on deposit in the
pre-funding account be greater than zero at the end of the funding period,
the remaining amounts will be payable as principal on a pro rata basis to the
Class A noteholders, Class B noteholders and Class C noteholders based upon
their respectiave outstanding note balances.
APPLICATION OF FINANCE CHARGE COLLECTIONS
The issuer will apply your series' share of collections of finance charge
receivables, recoveries and investment earnings each month in the following
order of priority:
o to pay interest on the Class A notes;
o to pay interest on the Class B notes;
o to pay the servicing fee for your series (to the extent not retained by
the servicer during the month);
o to pay interest on the Class C notes;
S-5
o to cover your series' share of defaults and uncovered dilution;
o to cover reductions in your series' collateral amount resulting from defaults
and uncovered dilution allocated to your series and from reallocated
principal collections, in each case that have not been reimbursed;
o to make a deposit, if needed, to the cash collateral account up to the
required cash collateral amount;
o to fund, in limited circumstances, a reserve account to cover interest
payment shortfalls for the Series 2001- notes during the controlled
accumulation period;
o to make a deposit, if needed, to the spread account for the Class C notes up
to the required spread account amount; and
o to other series that share excess finance charge collections with Series
2001-__, to make any required deposits to the excess funding account or to us
or our assigns.
APPLICATION OF PRINCIPAL COLLECTIONS
The issuer will apply your series' share of collections of principal receivables
each month as follows:
REVOLVING PERIOD
During the revolving period, no principal will be paid or accumulated in a trust
account for you.
CONTROLLED ACCUMULATION PERIOD
During the controlled accumulation period, your series' share of principal
collections will be deposited in a trust account, up to a specified deposit
amount on each distribution date. On the expected principal payment date,
amounts on deposit in that account will be paid first to the Class A
noteholders, then to the Class B noteholders and then to the Class C
noteholders, in each case until the specified class of notes is paid in full or
the amounts available are depleted.
EARLY AMORTIZATION PERIOD
An early amortization period for your series will start if an early
amortization event occurs. The early amortization events for your series are
described below in this summary and under "DESCRIPTION OF SERIES PROVISIONS
- -- EARLY AMORTIZATION EVENTS" in this prospectus supplement. During the early
amortization period, your series' share of principal collections will be paid
monthly first to the Class A noteholders, then to the Class B noteholders and
then to the Class C noteholders, in each case until the specified class of
notes is paid in full.
REALLOCATION OF PRINCIPAL COLLECTIONS
During any of the above periods, principal collections allocated to your
series may be reallocated, if necessary, to make required payments of
interest on the Class A notes, the Class B notes and the Class C notes and
monthly servicing fee payments not made from your series' share of finance
charge collections and other amounts treated as finance charge collections,
investment earnings and excess finance charge collections available from
other series that share with your series. This reallocation is one of the
ways that the more senior classes of notes obtain the benefit of
subordination, as described in the next section of this summary. The amount
of reallocated principal collections is limited by the amount of available
subordination.
EXTRA PRINCIPAL COLLECTIONS
At all times, collections of principal receivables allocated to your series that
are
S-6
not needed for payments on your series will first be made available to other
series, second, deposited in the excess funding account and third, paid to us
or our assigns.
CREDIT ENHANCEMENT
Credit enhancement for your series includes subordination, a cash collateral
account and a spread account, all as described below.
Credit enhancement for your series is for your series' benefit only, and you are
not entitled to the benefits of credit enhancement available to other series.
SUBORDINATION
Credit enhancement for the Class A notes includes the subordination of the Class
B notes and the Class C notes.
Credit enhancement for the Class B notes includes the subordination of the Class
C notes.
Subordination serves as credit enhancement. The more subordinated, or junior,
classes of notes will not receive payment of interest or principal until
required payments have been made to the more senior classes. As a result,
subordinated classes will absorb any shortfalls in collections or deterioration
in the collateral for the notes prior to senior classes.
CASH COLLATERAL ACCOUNT
A cash collateral account will provide additional credit enhancement for your
series. On the closing date, we will deposit [$__________] into the cash
collateral account, which amount represents [___]% of the initial principal
amount of the notes. The cash collateral account will be used to make payments
on the notes if collections of finance charge receivables allocated to this
series are insufficient to make required payments.
SPREAD ACCOUNT
A spread account will provide credit enhancement for your series, primarily
for the Class C notes. The spread account initially will not be funded. After
the Series 2001- notes are issued, deposits into the spread account will be
made each month from finance charge collections allocated to your series and
excess finance charge collections available from other series up to the
required spread account amount. The required spread account amount is
primarily a function of the relationship between your series share of finance
charge collecitons and the expenses payable from those collecitons, as
described in this prospectus supplement under "DESCRIPTION OF SERIES
PROVISIONS -- SPREAD ACCOUNT." The spread account will be used to make
payments on the Class C notes if collections of receivables available to the
Class C notes are insufficient to make required payments.
On any day following an event of default and an acceleration of the Series
2001-notes, funds available in the spread account will be used to fund any
shortfalls in amounts owed on the Class C notes, the Class A notes and the
Class B notes, in that order of priority.
EARLY AMORTIZATION EVENTS
The issuer will begin to repay the principal of the notes before the expected
principal payment date if an early amortization event occurs. An early
amortization event will occur if the finance charge collections on the
receivables are too low or if defaults are too high. The minimum amount that
must be available for payments to your series in any month, referred to as the
base rate, is the sum of the interest payable on the Series 2001- notes for the
related interest period, plus your series' share of the servicing fee for the
related calendar month divided by the collateral amount PLUS amounts on
deposit in the principal accumulation account, each as of the last day of
S-7
that period. If the average net yield for the trust portfolio, after deducting
defaulted receivables net of recoveries, for any three consecutive calendar
months is less than the average base rate for the same three consecutive
calendar months, an early amortization event will occur.
The other early amortization events are:
o Our failure to make required payments or deposits or material failure to
perform other obligations, subject to applicable grace periods;
o Material inaccuracies in our representations and warranties subject to
applicable grace periods;
o The Series 2001- notes are not paid in full on the expected principal payment
date;
o Bankruptcy, insolvency or similar events relating to us or the bank;
o We are unable to transfer receivables to the trust when required;
o We do not transfer receivables in additional accounts or participations to the
trust when required;
o Material defaults of the servicer;
o World Financial Network Credit Card Master Trust or the issuer becomes subject
to regulation as an "investment company" under the Investment Company Act of
1940; or
o An event of default occurs for the Series 2001- notes and their maturity date
is accelerated.
EVENTS OF DEFAULT
The Series 2001- notes are subject to events of default described under "THE
INDENTURE -- EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in the
accompanying prospectus. These include, among other things, the failure to pay
interest for 35 days after it is due or to pay principal when it is due on the
final maturity date.
In the case of an event of default involving bankruptcy, insolvency or similar
events relating to the issuer, the principal amount of the Series 2001- notes
automatically will become immediately due and payable. If any other event of
default occurs and continues with respect to the Series 2001- notes, the
indenture trustee or holders of more than 50% of the then-outstanding principal
balance of the Series 2001- notes may declare the principal amount of the Series
2001- notes to be immediately due and payable. These declarations may be
rescinded by holders of more than 50% of the then-outstanding principal balance
of the Series 2001- notes if the related event of default has been cured,
subject to the conditions described under "THE INDENTURE -- EVENTS OF DEFAULT;
RIGHTS UPON EVENT OF DEFAULT" in the accompanying prospectus.
After an event of default and the acceleration of the Series 2001- notes, funds
allocated to Series 2001- and on deposit in the collection account, the excess
funding account and the other trust accounts will be applied to pay principal of
and interest on the Series 2001- notes to the extent permitted by law. Principal
collections and finance charge collections allocated to Series 2001- will be
applied to make monthly principal and interest payments on the Series 2001-
notes until the earlier of the date those notes are paid in full or the final
maturity date of those notes.
S-8
If the Series 2001- notes are accelerated or the issuer fails to pay the
principal of the Series 2001- notes on the final maturity date, subject to the
conditions described in the prospectus under "THE INDENTURE -- EVENTS OF
DEFAULT; RIGHTS UPON EVENT OF DEFAULT", the indenture trustee may, if legally
permitted, cause the trust to sell principal receivables in an amount equal to
the collateral amount for Series 2001- and the related finance charge
receivables.
OPTIONAL REDEMPTION
The servicer has the option to purchase your notes when the outstanding
principal amount for your series has been reduced to 5% or less of the initial
principal amount. See "DESCRIPTION OF THE NOTES -- FINAL PAYMENT OF PRINCIPAL"
in the accompanying prospectus.
TAX STATUS
Subject to important considerations described under "FEDERAL INCOME TAX
CONSEQUENCES" in the accompanying prospectus, Mayer, Brown & Platt as tax
counsel to the issuer, is of the opinion that under existing law your Series
2001- notes will be characterized as debt for federal income tax purposes and
that neither World Financial Network Credit Card Master Trust nor the issuer
will be classified as an association or constitute a publicly traded
partnership taxable as a corporation for U.S. federal income tax purposes. By
your acceptance of a Series 2001- note, you will agree to treat your Series
2001- notes as debt for federal, state and local income and franchise tax
purposes. See "FEDERAL INCOME TAX CONSEQUENCES" in the accompanying
prospectus for additional information concerning the application of federal
income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA CONSIDERATIONS" in
the accompanying prospectus, the Series 2001- notes are eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts. If you are contemplating purchasing the Series 2001- notes on behalf
of or with plan assets of any plan or account, we suggest that you consult with
counsel regarding whether the purchase or holding of the Series 2001- notes
could give rise to a transaction prohibited or not otherwise permissible under
ERISA or Section 4975 of the Internal Revenue Code.
RISK FACTORS
There are material risks associated with an investment in the Series 2001-
notes, and you should consider the matters set forth under "RISK FACTORS"
beginning on page S-11 below and on page 3 of the accompanying prospectus.
RATINGS
It is a condition to the issuance of your notes that one of the ratings set
forth for each class of Series 2001- notes in the "SUMMARY OF TERMS" above be
obtained.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest and principal required to be made under the
terms of the series and will be based primarily on the value of the receivables
in the trust and the credit enhancement provided. The rating is not a
recommendation to purchase, hold or sell any notes. The rating does not
constitute a comment as to the marketability of any notes, any market price or
suitability for a
S-9
particular investor. Any rating can be changed or withdrawn by a rating agency
at any time.
[EXCHANGE LISTING
We will apply to list the Series 2001- notes on the Luxembourg Stock Exchange.
We cannot guarantee that the application for the listing will be accepted.]
WFN CREDIT COMPANY, LLC
Our address is 800 Techcenter Drive, Gahanna, Ohio 43230. Our phone number is
(614) 729-4000.
S-10
This prospectus supplement uses defined terms. You can find a glossary
of terms under the caption "GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT"
beginning on page S-42 in this prospectus supplement and under the caption
"Glossary of Terms for Prospectus" beginning on page 87 in the accompanying
prospectus.
RISK FACTORS
IN ADDITION TO THE RISK FACTORS DESCRIBED IN THE PROSPECTUS, YOU SHOULD
CONSIDER THE FOLLOWING.
[Insert any additional risk factors applicable for this series]
S-11
RECEIVABLES PERFORMANCE
The tables below contain performance information for the receivables in
the current portfolio of private label credit cards for each of the periods
shown. The composition of the credit card portfolio is expected to change over
time. The actual performance of the receivables in the current portfolio may be
different from that set forth below.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the aggregate delinquency and loss
experience for cardholder payments on the credit card accounts in the current
portfolio for each of the dates or periods shown. All data set forth in the
tables is reported on a collected basis, except that data for some acquired
portfolios is reported on a billed basis for the period before the bank acquired
them. Average receivables outstanding is the average of the receivables balances
at the beginning of each month in the period indicated. Fees include late fees
and return check fees (which are, under the terms of the pooling agreement,
allocated to the trust).
[Discussion of any relevant changes in loss and delinquency
performance]
We cannot assure you that the future delinquency and loss experience
for the receivables will be similar to the historical experience set forth
below.
DELINQUENCY EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS ENDED _________, __,
-------------------------------------------------------------------------
2001 2000
---------------------------------- ----------------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------- ------------- ------------- --------------
Receivables Outstanding...........
Receivables Delinquent............
31-60 Days...................
61-90 Days...................
91 or More Days..............
Total.................... % %
S-12
DECEMBER 31,
----------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- -----------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------- ------------- ------------- ------------- ------------- -------------
Receivables %
Outstanding............
Receivables
Delinquent.............
31-60 Days..........
61-90 Days..........
91 or More
Days..............
Total...........
JANUARY 31,
-------------------------------------------------------------------
1998 1997
------------------------------- -------------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------- ------------- ------------- -------------
Receivables Outstanding.. $1,842,021 100% $1,837,839 100%
Receivables Delinquent...
31-60 Days.......... 60,091 3.26 63,926 3.48
61-90 Days.......... 32,498 1.77 32,566 1.77
91 or More
Days.............. 57,341 3.11 59,070 3.21
Total........... $ 149,930 8.14% $ 155,562 8.46%
Prior to 1998, the bank's fiscal year ended on the Saturday closest to
January 31 of each calendar year and a fiscal year was designated by the
calendar year in which it began; beginning with fiscal years ended after 1998
the bank has adopted a calendar year as its fiscal year.
S-13
LOSS EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS
ENDED _______, __
--------------------------------
2001 2000
--------------- ---------------
Average Receivables Outstanding............
Gross Charge-Offs..........................
Recoveries.................................
Net Charge-Offs............................
Net Charge-Offs as a percentage of Average
Receivables Outstanding (annualized).....
FISCAL YEAR
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Average Receivables
Outstanding.............. $1,749,508 $1,748,577 $1,765,377
Gross Charge-Offs.......... 158,284 185,141 146,581
Recoveries 27,342 21,716 12,970
Net Charge-Offs............ 130,942 163,425 133,611
Net Charge-Offs as a
percentage of Average
Receivables Outstanding
(annualized)............. 8.17% 9.35% 7.57%
Due to the change in the bank's fiscal year in 1998, this fiscal year
included only eleven months. If not for the change, the bank's 1998 fiscal year
would have ended on January 30, 1999. For the period from February 1, 1998 to
January 30, 1999 (which would have been the bank's 1998 fiscal year if not for
the change), the Average Receivables Outstanding, Gross Charge-Offs, Recoveries,
Net Charge-Offs and Net Charge-Offs as a percentage of Average Receivables
Outstanding (annualized) were $1,764,292, $172,475, $29,559, $142,916 and 8.10%,
respectively.
REVENUE EXPERIENCE
The gross revenues from finance charges and fees related to accounts in
the current portfolio for each of the periods shown are set forth in the
following table. The figures reflected in the following table represent balances
before deductions for charge-offs, returned merchandise, and customer disputes
or other expenses and reductions due to fraud.
S-14
REVENUE EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS
ENDED _______, __
--------------------------------
2001 2000
--------------- ---------------
Average Receivables Outstanding.....
Total Finance Charges and Fees......
Total Finance Charges and Fees as a
percentage of Average Receivables
Outstanding (annualized)..........
FISCAL YEAR
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Average Receivables
Outstanding............. $1,749,508 $1,748,577 $1,765,377
Total Finance Charges
and Fees................ 372,710 394,805 392,579
Total Finance Charges and
Fees as a percentage of
Average Receivables
Outstanding
(annualized)............ 23.24% 22.58% 22.24%
For the period from February 1, 1998 to January 30, 1999 (which would have been
the bank's 1998 fiscal year if not for the change to a calendar year as its
fiscal year), the Average Receivables Outstanding (annualized) were $1,764,292,
$408,352 and 23.15%, respectively.
S-15
THE TRUST PORTFOLIO
The receivables to be conveyed to the trust have been or will be
generated from transactions made by holders of credit card accounts included in
the trust portfolio. A description of the bank's credit card business is
contained in the prospectus under the heading "THE BANK'S PRIVATE LABEL CREDIT
CARD ACTIVITIES--WORLD FINANCIAL NETWORK NATIONAL BANK CREDIT CARDS."
As of the beginning of the day on _________, 2001:
o The receivables in the trust portfolio included $________ of
principal receivables and $_________ of finance charge
receivables.
o The accounts designated for the trust portfolio had an average
principal receivable balance of $___________ and an average
credit limit of $__________.
o The percentage of the aggregate total receivable balance to the
aggregate total credit limit was _____%.
o The average age of the accounts was approximately _____ months.
o Cardholders whose accounts are designated for the trust
portfolio had billing addresses in all 50 states and the
District of Columbia [except for __% of the aggregate total
receivable balance for which cardholders had billing addresses
located outside of the United States or the District of
Columbia].
The following table sets forth the number of fixed and floating rate
credit cards contained in the trust portfolio as of ___________ __, 2001:
DISTRIBUTION OF TRUST PORTFOLIO
BY FIXED/FLOATING APR(1)
(DOLLARS IN MILLIONS)
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------- ------------- ----------- -------------
Total Fixed.................................
Total Variable..............................
- --------
(1) Dollars are in millions and accounts are in thousands.
S-16
The following tables summarize the trust portfolio by various criteria
as of the beginning of the day on _________ __, 2001. Because the future
composition of the trust portfolio will change over time, these tables are not
indicative of the composition of the trust portfolio at any subsequent time. In
addition, except as otherwise indicated, these tables exclude accounts that were
flagged by the bank as a bankruptcy, fraud, deceased write-off or contractual
write-off after the applicable billing cycle end date.
COMPOSITION BY RETAILER TYPE
TRUST PORTFOLIO
PERCENT OF
RECEIVABLES
RETAILER TYPE OUTSTANDING
- ------------- -----------
Softgoods.......................................................................
Building Materials..............................................................
Furniture.......................................................................
Jewelry.........................................................................
Other...........................................................................
The credit card programs, or group of credit card programs for
affiliated companies of the Limited and Brylane, including each of their
respective affiliates as of the beginning of the day on ________ __, 2001
accounted for more than 10% of the receivables in the trust portfolio. As of
that date there were ___ other credit card programs included in the trust
portfolio.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- --------------------- --------- ------------- ----------- -------------
Credit Balance...................................
No Balance.......................................
$.01-$100.00.....................................
$100.01-$250.00..................................
$250.01-$350.00..................................
$350.01-$500.00..................................
$500.01-$750.00..................................
$750.01-$1000.00.................................
$1,000.01-$1,250.00..............................
$1,250.01-$1,500.00..............................
$1,500.01-$2,000.00..............................
$2,000.01-$2,500.00..............................
$2,500.01 or more................................
Total....................................... 100.00% 100.00%
S-17
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- -------------------- --------- ------------- ----------- -------------
$0
$.01-$100.00.....................................
$100.01-$250.00..................................
$250.01-$350.00..................................
$350.01-$500.00..................................
$500.01-$750.00..................................
$750.01-$1000.00.................................
$1,000.01-$1,250.00..............................
$1,250.01-$1,500.00..............................
$1,500.01-$2,000.00..............................
$2,000.01-$2,500.00..............................
$2,500.01 or more................................
Total....................................... 100.00% 100.00%
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- --- --------- ------------- ----------- -------------
Not More than 12 Months..........................
Over 12 Months to 24 Months......................
Over 24 Months to 36 Months......................
Over 36 Months to 48 Months......................
Over 48 Months to 60 Months......................
Over 60 Months...................................
Total....................................... 100.00% 100.00%
Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia [except for __%
of the aggregate total receivable balance for which cardholders had billing
addresses located outside of the United States or the District of Columbia].
Except for the four states listed below, no state accounted for more than 5% of
the number of accounts or 5% of the total receivables balances as of __________
__, 2001.
S-18
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
[CALIFORNIA] [ILLINOIS] [NEW YORK] [TEXAS]
------------ ---------- ---------- -------
% of total number of accounts....................
% of total receivable balance....................
S-19
MATURITY CONSIDERATIONS
Series [_______-_____] will always be in one of three periods--the
revolving period, the controlled accumulation period or the early amortization
period. Unless an early amortization event occurs, each class of notes will not
receive payments of principal until the expected principal payment date for that
class. The expected principal payment dates for the Class A notes, the Class B
notes and the Class C notes will be the distribution dates in ___________, 200
,__________, 200_ and ___________, 200 , respectively. We expect the issuer to
have sufficient funds to pay the full principal amount of each class of Series
2001- notes on its expected principal payment date. However, if an early
amortization event occurs, principal payments for any class may begin prior to
the expected principal payment date for that class.
CONTROLLED ACCUMULATION PERIOD
During the controlled accumulation period, principal allocated to the
Series 2001- noteholders will accumulate in the principal accumulation account
in an amount calculated to pay the Class A notes, the Class B notes and the
Class C notes in full on their expected principal payment dates. We expect, but
cannot assure you, that the amounts available in the principal accumulation
account on the expected principal payment date for any class of notes will be
sufficient to pay in full the outstanding principal amount of the class. If
there are not sufficient funds on deposit in the principal accumulation account
to pay any class of notes in full on the expected principal payment date for
that class, an early amortization event will occur and the early amortization
period will begin.
EARLY AMORTIZATION PERIOD
If an early amortization event occurs during either the revolving
period or the controlled accumulation period, the early amortization period will
begin. If an early amortization event occurs during the controlled accumulation
period, on the next distribution date any amount on deposit in the principal
accumulation account will be paid:
o first to Class A noteholders, up to the outstanding principal
balance of the Class A notes;
o then to Class B noteholders, up to the outstanding principal
balance of the Class B notes; and
o then to Class C noteholders, up to the outstanding principal
balance of the Class C notes.
In addition, if the outstanding principal balance of the notes has not
been paid in full, the issuer will continue to pay principal in the priority
noted above to the noteholders on each distribution date during the early
amortization period until the Series 2001- final maturity date, which is the
_____________, 200__ distribution date.
S-20
PAYMENT RATES
The payment rate on the receivables is the most important factor that
will determine the size of principal payments during an early amortization
period and whether the issuer has funds available to repay the notes on their
[respective] expected principal payment date[s]. The following table sets forth
the highest and lowest cardholder monthly payment rates on the credit card
accounts during any month in the periods shown and the average cardholder
monthly payment rates for all months in the periods shown, in each case
calculated as a percentage of average total receivables for each month during
the periods shown. Payment rates shown in the table are based on amounts which
would be deemed payments of principal receivables and finance charge receivables
with respect to the accounts.
Although we have provided historical data concerning the payment rates
on the receivables, because of the factors described in the prospectus under
"RISK FACTORS," we cannot provide you with any assurance that the levels and
timing of payments on receivables in the trust portfolio from time to time will
be similar to the historical experience described in the following table or that
deposits into the principal accumulation account or the distribution account, as
applicable, will be in accordance with the applicable controlled accumulation
amount. The servicer may shorten the controlled accumulation period and, in that
event, we cannot provide any assurance that there will be sufficient time to
accumulate all amounts necessary to pay the outstanding principal amounts on
their expected principal payment dates.
CARDHOLDER MONTHLY PAYMENT RATES
TRUST PORTFOLIO
___ CALENDAR MONTHS
ENDED ________,___
---------------------------
2001 2000
------- --------
Lowest Month...............
Highest Month..............
Monthly Average............
FISCAL YEAR
---------------------------------------------------
2000 1999 1998 1997 1996
--------- ------- ------- ------- --------
Lowest Month............... 15.80% 15.92% 16.53%
Highest Month.............. 20.33% 19.10% 19.01%
Monthly Average............ 17.79% 17.56% 17.78%
For the period from February 1, 1998 to January 30, 1999 (which would
have been the bank's 1998 fiscal year if not for the change to a calendar year
as its fiscal year), the Lowest Month, Highest Month and Monthly Average were
15.80%, 20.33% and 17.80%, respectively.
We cannot assure you that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders.
S-21
PAIRED SERIES
The issuer may issue another series of notes as a paired series for
Series 2001- . If issued, a paired series may have terms that are different than
the terms of Series 2001- and other series. For example, the early amortization
events for the paired series may vary from the early amortization events for
Series 2001- and may include early amortization events that are unrelated to the
status of the issuer or the servicer, such as early amortization events related
to the continued availability and rating of the providers of credit enhancement
for the paired series. If an early amortization event occurs with respect to the
paired series prior to the payment in full of the Series 2001- notes, the
allocation percentage used to determine your series' share of principal
collections may be reduced, which may delay the final payment of principal for
your series. See "DESCRIPTION OF SERIES PROVISIONS--PAIRED SERIES" in this
prospectus supplement.
DESCRIPTION OF SERIES PROVISIONS
We have summarized the material terms of the Series 2001- notes below
and under "DESCRIPTION OF THE NOTES" in the accompanying prospectus.
GENERAL
The Class A notes, the Class B notes and the Class C notes comprise the
Series 2001- notes and will be issued under the indenture, as supplemented by
the Series 2001- indenture supplement, in each case between the issuer and the
indenture trustee.
The Series 2001- notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. See "DESCRIPTION OF THE
NOTES -- GENERAL," "-- BOOK-ENTRY REGISTRATION" and "-- DEFINITIVE NOTES" in the
accompanying prospectus. Payments of interest and principal will be made on each
distribution date on which those amounts are due to the noteholders in whose
names the Series 2001- notes were registered on the related record date, which
will be the last day of the calendar month preceding that distribution date.
[We will apply to list the notes on the Luxembourg Stock Exchange;
however, we cannot assure you that the listing will be obtained. You should
consult with the Luxembourg listing agent for the notes, [Address] Luxembourg,
phone number ( ) , for the status of the listing].
COLLATERAL AMOUNT
Your notes are secured by collateral consisting of an interest in the
receivables. The initial collateral amount for your series will equal
$ [______], PLUS any increases in the initial collateral amount resulting from
the releases of funds in the pre-funding account. At any time, the amount of
the collateral for your notes, which we call the collateral amount, is
calculated as follows:
o the initial collateral amount, LESS
o all previous principal payments made on your series (other than
principal payments made from funds on deposit in the spread
account) and the balance held in the principal accumulation
account for such payments, LESS
S-22
o all unreimbursed reductions to the collateral amount as a result of
defaulted receivables or uncovered dilution allocated to your
series or reallocations of principal collections to cover interest
or the servicing fee for your series.
The collateral amount will also be reduced if we purchase and cancel
notes in your series. We are not permitted to do this if it would reduce the
proportional amount of credit enhancement available for any class of notes. The
collateral amount cannot be less than zero.
ALLOCATION PERCENTAGES
The servicer will allocate among your series, other series of notes
issued and outstanding, outstanding series of investor certificates issued by
World Financial Network Credit Card Master Trust and our unpledged interest in
the trust the following items: collections of finance charge receivables and
principal receivables; defaulted receivables; and any dilution amounts that are
not absorbed by our interest in the trust or reimbursed by the servicer. On any
day, the allocation percentage for your series will be the percentage
equivalent--which may not exceed 100%--of a fraction:
o the numerator of which is:
o for purposes of allocating finance charge collections and
defaulted receivables at all times and principal collections
during the revolving period, equal to the collateral amount as
measured at the end of the prior calendar month (or, in the
case of the month during which the closing date occurs, on the
closing date) after taking into account any deposits to be made
to the principal accumulation account and any reductions to be
made to the collateral amount on account of principal payments
for the next distribution date; and
o for purposes of allocating principal collections during the
controlled accumulation period and the early amortization
period, equal to the collateral amount as of the end of the
revolving period unless the numerator is reset in connection
with an early amortization event for a series paired with Series
2001-_ as described below; and
o the denominator of which is the greater of:
(a) the total amount of principal receivables in the trust after
excluding investment earnings measured as of a specified date;
and
(b) the sum of the numerators used to calculate the applicable
allocation percentages for all series of notes or investor
certificates outstanding as of the date of determination.
The denominator referred to above will initially be set as of the
closing date. The denominator will be reset for purposes of allocating principal
collections, finance charge collections and defaulted receivables at all times
as follows:
o at the end of each calendar month;
S-23
o on each date on which supplemental accounts are added to the trust;
o on each date on which accounts are removed from the trust in an
aggregate amount approximately equal to the initial collateral
amount of any series that has been paid in full;
o on each date on which there is an increase in the outstanding
balance of any variable interest issued by the trust; and
o on each date on which a new series or notes relating to a multiple
issuance series are issued.
The Series 2001- notes are subject to being paired with a future
series. If a subsequent series is paired with Series 2001- and an early
amortization period commences for the series paired with 2001- , we may, by
written notice delivered to the indenture trustee and the servicer, designate
a different numerator for allocating principal collections to your series,
provided that:
(1) the numerator is not less than the collateral amount as of the last
day of the revolving period for the series paired with Series
2001- ;
(2) each rating agency confirms that the designation will not impair
its rating of the Series 2001- notes; and
(3) we certify that in our reasonable belief, the designation will
not cause an early amortization event with respect to series
2001- .
Any reduction in the numerator made as described in the preceding paragraph will
also apply during any early amortization period that begins after the reduction
is made.
INTEREST PAYMENTS
The Class A notes will accrue interest from and including the closing
date through but excluding , 2001, and for each following interest period, at a
rate of % per year [above LIBOR for the related interest period.]
The Class B notes will accrue interest from and including the closing
date through but excluding , 2001, and for each following interest period, at a
rate of % per year [above LIBOR for the related interest period.]
The Class C notes will accrue interest from and including the closing
date through but excluding , 2001, and for each following interest
period, at a rate of % per year [above LIBOR for the related
interest period.]
Each interest period will begin on and include a distribution date and
end on but exclude the next distribution date. However, the first interest
period will begin on and include the closing date.
[For purposes of determining the interest rates applicable to each
interest period, LIBOR will be determined two London business days before that
interest period begins and will equal the rate for deposits in United States
dollars for a one-month period which appears on the display page currently
designated as "Telerate Page 3750" on the Bridge Telerate Capital Markets
S-24
Report, or any other page as may replace that page on that service for the
purpose of displaying comparable rates or price as of 11:00 a.m., London time,
on that date. If that rate does not appear on that display page, the rate for
that date will be determined based on the rates at which deposits in United
States dollars are offered by four major banks, selected by the servicer, at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a one-month period. The indenture trustee will request the
principal London office of each of those banks to provide a quotation of its
rate. If at least two quotations are provided, the rate for that date will be
the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that date will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the servicer, at approximately
11:00 a.m., New York City time, on that day for loans in United States dollars
to leading European banks for a one-month period.]
[The interest rates applicable to the then current and immediately
preceding interest period may be obtained by telephoning the indenture trustee
at its corporate trust office at [____________].]
Interest on the notes will be calculated on the basis of the [actual
number of days in the related interest period and] a 360-day year [of twelve
30-day months].
If the issuer does not pay interest as calculated above to any class
when due on a distribution date, the amount not paid will be due on the next
distribution date, together with interest on the overdue amount of regular
monthly interest at [2% plus] the interest rate payable on the notes for the
applicable class.
PRE-FUNDING
On the closing date, we will deposit [$_______] into a pre-funding
account established by the servicer. The pre-funding account will be a
Qualified Account held in the name of the indenture trustee for the benefit
of noteholders. Funds on deposit in this account may only be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture and indenture supplement of the series.
Investment earnings on amounts on deposit in the pre-funding account will be
treated as finance charge collections.
The funding period will commence on the closing date and end on the
first to occur of (1) the date on which the initial collateral amount equals
the initial principal blance of the notes, (2) the commencement of an early
amortization period and (3) [______ __, 200__].
During the funding period, the initial collateral amount will
increase on each distribution date, to reflect any increase in the amount of
principal receivables in the trust to the extent that the Transferor Amount
exceeds the Minimum Transferor Amount, but may not increase by an amount
greater than the funds on deposit in the pre-funding account on that date. On
any distribution date on wich the initial collateral amount is so increased,
the indenture trustee will withdraw funds on deposit in the pre-funding
account in an amount equal to the increase and pay those amounts over to us.
You will have no further rights to the funds on deposit in the funding
account once they are released to us. Should the amount on deposit in the
funding account be greater than zero at the end of the pre-funding period,
the remaining amounts will be payable as principal on a pro rata basis to the
Class A noteholders, Class B noteholders and Class C hoteholders based upon
their respective outstanding note balances.
PRINCIPAL PAYMENTS
During the revolving period, no principal payments will be made on your
notes. During the controlled accumulation period and the early amortization
period, deposits to the principal accumulation account and principal payments on
the Series 2001- notes will be made on each distribution date from the following
sources:
(a) principal collections allocated to your series based on your
allocation percentage and retained in the collection account during
the prior calendar month, less any amounts required to be
reallocated to cover interest payments on the Series 2001- notes or
servicing fees payments; PLUS
(b) any finance charge collections or other amounts required to be
treated as principal collections in order to cover the share of
defaulted receivables and uncovered dilution amounts allocated to
your series or to reinstate prior reductions to the collateral
amount; PLUS
(c) any principal collections from other series that are shared with
your series.
CONTROLLED ACCUMULATION PERIOD
The controlled accumulation period is scheduled to commence on , 200_
and to last [ ] months. However, the servicer may elect to extend the revolving
period and postpone the controlled accumulation period, subject to the
conditions described under
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"DESCRIPTION OF THE NOTES--SUSPENSION AND POSTPONEMENT OF CONTROLLED
ACCUMULATION PERIOD" in the accompanying prospectus. The servicer may elect to
postpone the controlled accumulation period only if the number of months needed
to fund the principal accumulation account is less than [ ] months. In no event
will the servicer postpone the beginning of the controlled accumulation period
to later than [ ], 200 .
The servicer may also elect to suspend the controlled accumulation
period, subject to the conditions described under "DESCRIPTION OF THE
NOTES--SUSPENSION AND POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD" in the
accompanying prospectus.
On each distribution date relating to the controlled accumulation
period, the indenture trustee will deposit in the principal accumulation account
an amount equal to the least of:
(1) funds available for this purpose for your series with respect to
that distribution date;
(2) $________ or, if the commencement of the controlled accumulation is
postponed, any higher deposit amount as the servicer may determine
is necessary to fully fund the principal accumulation account, PLUS
any amounts required to be deposited to the principal accumulation
account on prior distribution dates that have not yet been
deposited;
(3) an amount equal to the outstanding principal amount of the notes,
MINUS the amount on deposit in the principal accumulation account
prior to any deposits on that date; and
(4) the collateral amount.
If the early amortization period has not commenced, amounts in the
principal accumulation account will be paid to the Class A noteholders on the
expected principal payment date for Class A. Any remaining amounts, up to the
outstanding principal balance of the Class B notes, will be paid to the Class B
noteholders on the expected principal payment date for Class B. Any further
remaining amounts, up to the outstanding principal balance of the Class C notes,
will be paid to the Class C noteholders on the expected principal payment date
for Class C.
During the controlled accumulation period, the portion of funds
available but not required to be deposited in the principal accumulation account
on a distribution date will be made available to investors in other series as
shared principal collections.
EARLY AMORTIZATION PERIOD
On each distribution date relating to the early amortization period,
the Class A noteholders will be entitled to receive funds available for
principal payments for Series 2001- for the related calendar month in an amount
up to the outstanding principal balance of the Class A notes.
After payment in full of the outstanding principal balance of the Class
A notes, the Class B noteholders will be entitled to receive, on each
distribution date relating to the early
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amortization period, the remaining available funds for Series 2001- for the
related calendar month in an amount up to the outstanding principal balance of
the Class B notes.
After payment in full of the outstanding principal balance of the Class
B notes, the Class C noteholders will be entitled to receive on each
distribution date relating to the early amortization period, the remaining
available funds for Series 2001- for the related calendar month in an amount up
to the outstanding principal balance of the Class C notes.
See "-- EARLY AMORTIZATION EVENTS" below for a discussion of events
that might lead to the commencement of the early amortization period.
SUBORDINATION
The Class B notes are subordinated to the Class A notes. The Class C
notes are subordinated to the Class A notes and the Class B notes. Interest
payments will be made on the Class A notes prior to being made on the Class B
notes and the Class C notes. Interest payments will be made on the Class B notes
prior to being made on the Class C notes.
Principal payments on the Class B notes will not begin until the Class
A notes have been paid in full. Principal payments on the Class C notes will not
begin until the Class A notes and the Class B notes have been paid in full.
The collateral amount for your series will be reduced as the
collateral is applied for the benefit of your series, for instance as
principal payments are made on your series (other than principal payments
made from funds on deposit in the spread account). In addition, the
collateral amount can be applied for the benefit of your series in two other
ways:
o by reallocating principal collections to make interest payments and
pay the servicing fee for your series, when finance charge
collections and investment earnings are not sufficient to make
these payments; and
o to absorb your series' share of defaulted receivables and any
uncovered dilution amounts, when finance charge collections and
investment earnings are not sufficient to cover these amounts.
If the total amount of these latter two types of reductions exceeds the
principal amount of the Class C Notes, then the Class B Notes may not be repaid
in full. If the total exceeds the sum of principal amounts of the Class C and
Class B notes, then the Class A notes may not be repaid in full.
If receivables are sold after an event of default, the net proceeds of
that sale would be paid first to the Class A notes, then to the Class B notes
and finally to the Class C notes, in each case until the outstanding principal
amount of the specified class and all accrued and unpaid interest payable to
that class have been paid in full.
APPLICATION OF FINANCE CHARGE COLLECTIONS
We refer to your series' share of finance charge collections --
including net investment proceeds transferred from the principal accumulation
account and amounts withdrawn from the
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reserve account -- and any available excess finance charge collections from
other series, collectively, as finance charge collections. On each distribution
date, the servicer will direct the indenture trustee to apply your series' share
of finance charge collections for the prior month in the following order:
(1) to pay interest on the Class A notes, including any overdue
interest and additional interest on the overdue interest;
(2) to pay interest on the Class B notes, including any overdue
interest and additional interest on the overdue interest;
(3) to pay the servicing fee for your series for the prior calendar
month and any overdue servicing fee (to the extent not retained
by the servicer during the month);
(4) to pay interest on the Class C notes, including any overdue
interest and additional interest on the overdue interest;
(5) an amount equal to your series' share of the defaulted receivables
and uncovered dilution, if any, for the related calendar month,
will be treated as principal collections for the prior calendar
month;
(6) an amount equal to any previously unreimbursed reductions to the
collateral amount on account of defaulted receivables, uncovered
dilution or reallocations of principal collections will be treated
as principal collections for the prior calendar month;
(7) an amount equal to the excess, if any, of the required cash
collateral amount over the amount then on deposit in the cash
collateral account will be deposited into the cash collateral
account;
(8) on and after the reserve account funding date, an amount equal to
the excess, if any, of the required reserve account amount over the
amount then on deposit in the reserve account will be deposited
into the reserve account;
(9) an amount equal to the excess, if any, of the required spread
account amount over the amount then on deposit in the spread
account will be deposited into the spread account; and
(10) all remaining amounts will constitute excess finance charge
collections and will be available to cover any shortfalls in
finance charge collections for other outstanding series in group
one, second deposited into the excess funding account so that
the Transferor Amount is not less that the Specified Transferor,
Amount and, third, the remaining amount will be paid to us or our
assigns.
If your series' share of finance charge collections for any calendar
month is insufficient to pay interest on the Class C notes--including any
overdue interest and additional interest on the overdue interest--when due, a
draw will be made from amounts available in the spread account and will be paid
to the Class C noteholders on the related distribution date.
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REALLOCATION OF PRINCIPAL COLLECTIONS
If your series' share of finance charge collections is not sufficient
to pay the aggregate amount of interest on the Class A notes, the Class B notes,
the Class C notes and the servicing fee for your series, then principal
collections will be reallocated to cover these amounts. Any reallocation of
principal collections is a use of the collateral for your notes. Consequently,
these uses will reduce the remaining collateral amount by a corresponding
amount. The amount of principal collections that will be reallocated on any
distribution date will not exceed:
o the lower of:
o the excess of the amounts needed to pay current, overdue and
additional interest on the Class A notes OVER the amount of
finance charge collections allocated to your series and
available to cover these amounts; and
o the greater of (1)(a) [ ]% of the initial collateral amount
MINUS (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous
distribution date and (2) zero; PLUS
o the lower of:
o the excess of the sum of the amounts needed to pay current,
overdue and additional interest on the Class B notes and the
current and past due servicing fee for your series OVER the
amount of finance charge collections allocated to your series
and available to cover these amounts; and
o the greater of (1)(a) [ ]% of the initial collateral amount
MINUS (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous
distribution date and after giving effect to the reallocation
of principal collections to make required interest payments for
Class A on the then-current distribution date and (2) zero.
INVESTOR CHARGE-OFFS
The servicer will allocate a portion of defaulted receivables for each
calendar month to your series based on the allocation percentage for your
series. The allocation percentage is described under "--ALLOCATION PERCENTAGES"
above.
Dilution will also be allocated to your series in the circumstances
described in "DESCRIPTION OF THE NOTES -- DEFAULTED RECEIVABLES; DILUTION;
INVESTOR CHARGE-OFFS" in the accompanying prospectus. If dilution is allocated
among series, your series' share of dilution will also be based upon the
allocation percentage.
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On each distribution date, if the sum of the defaulted receivables and
any remaining uncovered dilution allocated to your series is greater than
finance charge collections used to cover those amounts, then the collateral
amount will be reduced by the amount of the excess. Any reductions in the
collateral amount on account of defaulted receivables and uncovered dilution
will be reinstated to the extent that finance charge collections are available
for that purpose on any subsequent distribution date.
SHARING PROVISIONS
Your series is in group one for purposes of sharing excess finance
charge collections. Your series will share excess finance charge collections
with other series of notes in group one and other series of investor
certificates in group one for World Financial Network Credit Card Master Trust.
See "DESCRIPTION OF THE NOTES -- SHARED EXCESS FINANCE CHARGE COLLECTIONS" in
the accompanying prospectus.
Your series is a principal sharing series. See "DESCRIPTION OF THE
NOTES -- SHARED PRINCIPAL COLLECTIONS; -- EXCESS FUNDING ACCOUNT" in the
accompanying prospectus.
PRINCIPAL ACCUMULATION ACCOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the principal
accumulation account. During the controlled accumulation period, the indenture
trustee at the direction of the servicer will make deposits to the principal
accumulation account as described under "-- PRINCIPAL PAYMENTS" in this
prospectus supplement.
Funds on deposit in the principal accumulation account will be invested
to the following distribution date by the indenture trustee at the direction of
the servicer in highly rated liquid investments that meet the criteria described
in the indenture supplement. Investment earnings, net of investment losses and
expenses, on funds on deposit in the principal accumulation account will be
deposited in the collection account and treated as finance charge collections
available to your series for the related interest period. If, for any
distribution date, these net investment earnings are less than the sum of:
(a) the product of (1) the balance of the principal accumulation
account, up to the outstanding principal balance of the Class A
notes, on the record date immediately preceding that distribution
date, (2) the Class A note interest rate for the related interest
period and (3) the number of days in the related interest period
divided by 360, PLUS
(b) the product of (1) the balance of the principal accumulation
account in excess of the outstanding principal balance of the Class
A notes, up to the outstanding principal balance of the Class B
notes, in each case on the record date immediately preceding that
distribution date, (2) the Class B note interest rate for the
related interest period and (3) the number of days in the related
interest period divided by 360,
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(c) the product of (1) the balance of the principal accumulation
account in excess of the outstanding principal balance of the Class
A notes and Class B notes, up to the outstanding principal balance
of the Class C notes, in each case on the record date immediately
preceding that distribution date, (2) the Class C note interest
rate for the related interest period and (3) the number of days in
the related interest period divided by 360,
then the indenture trustee will withdraw the shortfall, to the extent required
and available, from the reserve account and deposit it in the collection account
for use as finance charge collections that are available to your series.
CASH COLLATERAL ACCOUNT: REQUIRED ENHANCEMENT AMOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the cash collateral
account. The interest of the Class B noteholders in the cash collateral account
will be subordinated to the interests of the Class A noteholders as described in
this prospectus supplement. The interest of the Class C noteholders in the cash
collateral account will be subordinated to the interests of the Class A and
Class B noteholders.
All amounts on deposit in the cash collateral account will be invested
by the indenture trustee, at the direction of the servicer, in highly rated
liquid investments that meet the criteria described in the indenture supplement.
The interest and other investment income, net of losses and investment expenses,
earned on these investments will be treated as collections of finance charge
receivables. For purposes of determining the availability of funds or the
balance of the cash collateral account, all investment earnings will be deemed
not to be available or on deposit.
On each transfer date, the servicer will calculate for each monthly
period the required draw amount, required enhancement amount and the required
cash collateral amount for the related distribution date. The transfer date,
is the day prior to each distribution date. The required draw amount will be
equal to the shortfall, if any, in interest payable on the notes and any
servicing fees due, after the application of amounts available from finance
charge collections. See "-- APPLICATION OF FINANCE CHARGE COLLECTIONS." The
available enhancement amount for any transfer date will equal the amount on
deposit in the cash collateral account on that date prior to giving effect to
any deposits or withdrawals for that date and the required enhancement amount.
The required enhancement amount for any transfer date will be an amount
equal to the greater of:
o [__]% of the outstanding principal blance of the notes, after
taking into account and payments to be made on
that distribution date; or
o [$____________].
HOWEVER,
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the required enhancement amount will never exceed the sum of the aggregate
outstanding principal balance of the notes LESS any amounts on deposit in the
principal accumulation account, each as of the last day of the monthly
period preceding that transfer date after taking into account deposits into
the principal accumulation account on that transfer date and the payments to
be made on the related distribution date.
We may designate a lesser amount for the required enhancement amount if
each rating agency confirms that the designation will not impair its rating of
any outstanding series or class.
The required cash collateral amount will be equal to the excess, if
any, of the required enhancement amount over the Class C collateral amount
after giving effect to any reducitons to occur on the related transfer date.
The Class C collateral amount is an amount equal to the excess of the
collateral amount over the sum of the outstanding principal balance of the
Class A and Class B notes after giving effect to any reductions to occur on
the related transfer date or related distribution date.
If on any transfer date, the required draw amount is greater than
zero, the indenture trustee will withdraw, to fund the deficiency in the
finance charge collections, the lesser of (1) the required draw amount and
(2) the amount on deposit in the cash collateral account on that date prior
to giving effect to any deposits or withdrawals for that date and the
required enhancement amount.
If on any transfer date, the available cash collateral amount
exceeds the required cash collateral amount, the indenture trustee will
withdraw the excess amount from the cash collateral account and apply the
excess under the terms of the indenture supplement.
RESERVE ACCOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the reserve account.
The reserve account is established to assist with the distribution of interest
on the notes during the controlled accumulation period and
on the first distribution date with respect to the early amortization period. On
each distribution date from and after the reserve account funding date, but
prior to the termination of the reserve account, the indenture trustee, will
apply finance charge collections allocated to your series to increase the amount
on deposit in the reserve account to the extent the amount on deposit in the
reserve account is less than the required reserve account amount.
The reserve account funding date will be the distribution date with
respect to the calendar month which commences [_____] months prior to the
commencement of the controlled accumulation period, or an earlier date as the
servicer may determine.
The required reserve account amount for any distribution date on or
after the reserve account funding date will be equal to (a) [___]% of the
outstanding principal balance of the notes or (b) any other amount designated by
us. We may only designate a lesser amount if each rating
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agency confirms that the designation will not impair its rating of any
outstanding series or class and we will certify to the indenture trustee that,
based on the facts known to the certifying officer at the time, in our
reasonable belief, the designation will not cause an early amortization event to
occur for Series 2001- .
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 that
distribution date, the indenture 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, will deposit the excess in the
spread account to the extent that funds available in the spread account are less
than the required spread account amount and will distribute any remaining excess
to us or our assigns. Any amounts withdrawn from the reserve account and
distributed to us or our assigns will not be available for distribution to the
noteholders.
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 that distribution date--will be invested to the following
distribution date by the indenture trustee, at the direction of the servicer, in
highly rated liquid investments that meet the criteria described in the
indenture supplement. The interest and other investment income, net of losses
and investment expenses, earned on these investments will be either retained in
the reserve account to the extent the amount on deposit is less than the
required reserve account amount or deposited in the collection account and
treated as finance charge collections available to your series.
On or before each distribution date with respect to the controlled
accumulation period and on or before the first distribution date with respect to
the early amortization period, the indenture trustee will withdraw from the
reserve account and deposit in the collection account an amount equal to the
least of:
(1) the amount then on deposit in the reserve account with respect to
that distribution date; and
(2) the amount of the shortfall described under "--PRINCIPAL
ACCUMULATION ACCOUNT" above.
Amounts withdrawn from the reserve account on any distribution date will be
included as finance charge collections available to your series for that
distribution date.
The reserve account will be terminated upon the earliest to occur of:
(1) the first distribution date for the early amortization period;
(2) the expected principal payment date for the Class C notes; and
(3) the termination of the trust.
Upon the termination of the reserve account, all amounts on deposit in
the reserve account, after giving effect to any withdrawal from the reserve
account on that date, will be
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distributed to us or our assigns. Any amounts withdrawn from the reserve account
and distributed to us or our assigns will not be available for distribution to
the noteholders.
SPREAD ACCOUNT
The indenture trustee will establish and maintain as a segregated
account held as security primarily for the benefit of the Class C noteholders to
serve as the spread account. Amounts on deposit in the spread account will be
used as described below under "--SPREAD ACCOUNT DISTRIBUTIONS."
The spread account initially will not be funded, but will be funded up
to the required spread account amount on each distribution date from finance
charge collections allocated to your series to the extent available for that
purpose.
The required spread account amount will be determined on each
distribution date as the product of:
(a) the spread account percentage determined in accordance with the
table below for that date of determination; and
(b) (1) during the revolving period or the controlled accumulation
period, the collateral amount; or
(2) during the early amortization period, the collateral
amount as of the last day before the beginning of the
early amortization period, LESS amounts on deposit in the
cash collateral account on that date (after taking into
account any deposits to be made into or withdrawals from
the cash collateral account on the date); but not to
exceed the outstanding balnace of the Class C notes (after
taking into account any payments to be made on that
distribution date).
The spread account percentage will be determined as follows:
If the Quarterly Excess Spread Percentage is then, the spread account
greater than or equal to: and less than: Percentage will equal:
------------------------ ---------- -------------------------
[__]% -- 0
[__]% [__]% [__]%
[__]% [__]% [__]%
[__]% [__]% [__]%
[__]% [__]% [__]%
If an early amortization event with respect to Series 2001- has occurred, the
spread account percentage will equal [___]% and may not be subsequently
reduced.
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Funds on deposit in the spread account will be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture supplement. Investment earnings, net of
losses and investment expenses, will, except as otherwise indicated in this
prospectus supplement, not be deposited into the spread account and will be paid
to the transferor interest. However, after an event of default relating to your
series of notes, these investment earnings will be available for payment to
holders of the Class C notes.
SPREAD ACCOUNT DISTRIBUTIONS
On each distribution date, funds on deposit in the spread account,
including investment earnings, will be applied to cover the following items in
the following order of priority, to the extent not covered by finance charge
collections:
(1) if the interest to be paid on the Class C notes exceeds the amount
allocated to pay that interest, to fund any shortfall in the
payment of interest on the Class C notes; and
(2) to reimburse any prior reductions in the collateral amount that
have not been reimbursed.
On the earlier of the Series 2001- final maturity date and payment
in full of the Class A notes and the Class B notes, funds available in the
spread account, after giving effect to any withdrawals to be made as
discussed in the preceding paragraph, will be used to fund any shortfall in
the payment of the outstanding principal balance of the Class C notes. On any
day following an event of default and an acceleration of the notes, funds
available in the spread account will be used to fund any shortfalls in
amounts owed on the Class C notes, the Class A notes and the Class B notes,
in that order of priority.
Funds on deposit in the spread account on any distribution date, after
giving effect to all withdrawals from and deposits to the spread account, in
excess of the required spread account amount will be paid to us or our assigns.
On the date on which all amounts due to the noteholders from the spread account
have been paid in full, all amounts, if any, then remaining in the spread
account will be distributed to us or our assigns.
PAIRED SERIES
Your series may be paired with one or more other series issued at a
later time once the controlled accumulation period for your series begins. We
call each of these later issued series a paired series. See "DESCRIPTION OF THE
NOTES -- PAIRED SERIES" in the accompanying prospectus. The issuance of the
paired series will be subject to the conditions described under "DESCRIPTION OF
THE NOTES -- NEW ISSUANCES OF NOTES" in the accompanying prospectus.
We cannot guarantee that the terms of any paired series will not have
an impact on the calculation of the allocation percentage used to allocate
principal collections to your series or the
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timing or amount of payments received by you as a Series 2001- noteholder. In
particular, the numerator for the allocation percentage used to allocate
principal collections to your series may be reduced upon the occurrence of an
early amortization event for a paired series, but not below the collateral
amount as of the last day of the revolving period for the paired series. The
extent to which the timing or amount of payments received by you may be affected
will depend on many factors, only one of which is a change in the calculation of
the allocation percentage.
EARLY AMORTIZATION EVENTS
An early amortization event will occur for the Series 2001- notes upon
the occurrence of any of the following events:
(a) failure of the transferor under the pooling and servicing
agreement or the transfer and servicing agreement (1) to make
any payment or deposit on the date required to be made under the
pooling and servicing agreement, the collateral series
supplement, the transfer and servicing agreement, the indenture or
the Series 2001-indenture supplement within the applicable grace
period which shall not exceed 5 days or (2) to observe or perform
in any material respect any of its other covenants or agreements
set forth in the pooling and servicing agreement, the transfer
and servicing agreement, the indenture or the Series 2001-
indenture supplement, which failure has a material adverse effect
on the Series 2001-noteholders and which continues unremedied for
a period of 60 days after written notice of the failure, requiring
the same to be remedied;
(b) any representation or warranty made by transferor under the
pooling and servicing agreement or the transfer and servicing
agreement, in the transfer and servicing agreement or the
pooling and servicing agreement or any information required to
be given by it to identify the accounts proves to have been
incorrect in any material respect when made or delivered and
which continues to be incorrect in any material respect for a
period of 60 days after written notice of the failure, requiring
the same to be remedied, and as a result of which the interests
of the noteholders are materially and adversely affected and
continue to be materially and adversely affected for the
designated period; except that an early amortization event
described in this subparagraph (b) will not occur if we have
accepted reassignment of the related receivable or all related
receivables, if applicable, within the designated period;
(c) transferor's failure to convey receivables in additional accounts
or participations to the trust when required to do so;
(d) any servicer default occurs;
(e) the average of the Portfolio Yields for any 3 consecutive calendar
months is less than the average of the Base Rates for the same
calendar months;
(f) sufficient funds are not available to pay in full the outstanding
principal balance of the Class A notes, the Class B notes or the
Class C notes on their expected principal payment dates;
(g) specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us or the bank;
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(h) we are unable for any reason to transfer receivables to the trust;
(i) World Financial Network Credit Card Master Trust or the issuer
becomes subject to regulation as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended; or
(j) an event of default for Series 2001- and an acceleration of the
maturity of the Series 2001- notes occurs under the indenture.
In the case of any event described in clause (a), (b) or (d) above, an
early amortization event will be deemed to have occurred with respect to the
notes only if, after any applicable grace period, either the indenture trustee
or the Series 2001- noteholders evidencing interests aggregating more than 50%
of the aggregate unpaid principal amount of the Series 2001- notes, by written
notice to us, the servicer and, if notice is given by the Series 2001-
noteholders, the indenture trustee, declare that an early amortization event has
occurred with respect to the Series 2001- notes as of the date of the notice.
In the case of any event described in clause (g), (h) or (i), an early
amortization event with respect to all series then outstanding, and in the case
of any event described in clause (c), (e), (f) or (j), an early amortization
event with respect to only the Series 2001- notes, will occur without any notice
or other action on the part of the indenture trustee or the Series 2001-
noteholders immediately upon the occurrence of the event.
On the business day immediately before the date on which an early
amortization event is deemed to have occurred, the early amortization period
will begin.
See "DESCRIPTION OF THE NOTES -- EARLY AMORTIZATION EVENTS" in the
accompanying prospectus for an additional discussion of the consequences of
insolvency, conservatorship or receivership events related to us and the bank.
EVENTS OF DEFAULT
The events of default for Series 2001- , as well as the rights and
remedies available to the indenture trustee and the Series 2001- noteholders
when an event of default occurs, are described under "THE INDENTURE--EVENTS OF
DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in the accompanying prospectus.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2001-
notes automatically will be deemed to be immediately due and payable. If any
other event of default for Series 2001- occurs, the indenture trustee or the
holders of a majority of the then-outstanding principal balance of the Series
2001- notes may declare the Series 2001- notes to be immediately due and
payable. If the Series 2001- notes are accelerated, you may receive principal
prior to the expected principal payment date for your class of notes.
S-37
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing fee rate for your series is 2% per annum. Your series'
share of the servicing fee for each month will be calculated as described under
"DESCRIPTION OF THE NOTES--SERVICING COMPENSATION AND PAYMENT OF EXPENSES" in
the accompanying prospectus. However, the monthly servicing fee allocable to
your series for the first distribution date will equal $[ ].
S-38
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement between us and the underwriters named below, we have agreed to sell to
the underwriters, and each of the underwriters has severally agreed to purchase,
the principal amount of the notes set forth opposite its name:
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITERS CLASS A NOTES
--------------------
Total........................ $
-----
............................. $
=====
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITERS CLASS B NOTES
--------------------
Total........................ $
-----
$
=====
PRINCIPAL AMOUNT OF
CLASS C UNDERWRITERS CLASS C NOTES
--------------------
Total........................ $
-----
$
=====
In the underwriting agreement, the underwriters of each class of notes
have agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the notes in that class offered by this prospectus supplement if
any of the notes in that class are purchased.
The underwriters of each class of notes have advised us that they
propose initially to offer the notes in that class to the public at the prices
set forth in this prospectus supplement, and to dealers chosen by the
underwriters at the prices set forth in this prospectus supplement less a
concession not in excess of the percentages set forth in the following table.
The underwriters of each class of notes and those dealers may reallow a
concession not in excess of the percentages set forth in the following table.
After the initial public offering of the notes, the public offering prices and
the concessions referred to in this paragraph may be changed. Additional
offering expenses are estimated to be $[ ].
CLASS A CLASS B CLASS C
NOTES NOTES NOTES
---------- -------- ---------
Concessions......... % % %
Reallowances........ % % %
The underwriters will be compensated as set forth in the following table:
S-39
UNDERWRITERS' AMOUNT
DISCOUNTS AND PER $1,000
COMMISSIONS OF PRINCIPAL TOTAL AMOUNT
--------------- ------------ -------------
Class A Notes % $ $
Class B Notes % $ $
Class C Notes % $ $
Total Class A, Class B
and Class C Notes $
============
Each underwriter has represented and agreed that:
o 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 notes in, from or otherwise
involving the United Kingdom;
o it has only issued or passed on and will only issue or pass on
in the United Kingdom any document received by it in connection
with the issue or sale of the notes 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 that document may otherwise lawfully be issued
or passed on;
o if it is an authorized person under Chapter III of part I of
the Financial Services Act 1986, it has only promoted and will
only promote (as that term is defined in Regulation 1.02(2) of
the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991) to any person in the United Kingdom the
scheme described in this prospectus supplement and the
accompanying prospectus if that person is of a kind described
either in Section 76(2) of the Financial Services Act 1986 or
in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991; and
o it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996.
We will indemnify the underwriters against the liabilities specified in
the underwriting agreement, including liabilities under the Securities Act, or
will contribute to payments the underwriters may be required to make in
connection with those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional notes in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase notes in the
open market. A naked short position is more likely to be created if the
S-40
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that would adversely affect investors
who purchase in the offering. Stabilizing transactions permit bids to purchase
the notes so long as the stabilizing bids do not exceed a specified maximum.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by that syndicate member are
purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist
in the open market. Neither we nor the underwriters represent that the
underwriters will engage in any of these transactions or that those
transactions, once commenced, will not be discontinued without notice at any
time.
In the ordinary course of their respective businesses, the underwriters
and their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with us and our
affiliates.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 2001-
notes will be passed upon for us by Mayer, Brown & Platt as special counsel for
us. Certain legal matters relating to the federal tax consequences of the
issuance of the Series 2001- notes will be passed upon for us by Mayer, Brown &
Platt. Certain legal matters relating to the issuance of the Series 2001- notes
will be passed upon for the underwriters by Orrick, Herrington & Sutcliffe LLP.
S-41
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"ADDITIONAL MINIMUM TRANSFEROR AMOUNT" means,
(1) as of any date of determination falling in November, December and
January of each calendar year, an amount calculated as follows:
(a) 2% TIMES (b) (i) Aggregate Principal Balance
PLUS
(ii) if on such date of
determination, World
Financial Network Credit
Card Master Trust has not
been terminated, amounts
on deposit in the excess
funding account
(2) for any other date of determination; zero.
"BASE RATE" means, with respect to any calendar month, the annualized percentage
equivalent of a fraction:
o the NUMERATOR of which is the sum of (a) the interest due on the
Series 2001- notes and (b) the product of (i) the monthly servicing
fee rate for your series; and
o the DENOMINATOR of which is the collateral amount, plus amounts
on deposit in the principal accumulation account, each as of the
last day of that calendar month.
"EXCESS SPREAD PERCENTAGE" means, for any distribution date, the
amount, if any, by which the Portfolio Yield for the prior calendar month
exceeds the Base Rate for the prior calendar month. However, the Excess Spread
Percentage may never be less than zero and for the first distribution date will
be
S-42
calculated for the period from the closing date through the end of the calendar
month preceding the first distribution date.
"MINIMUM TRANSFEROR AMOUNT" will be calculated as follows:
(a)(i) Aggregate Principal (ii) 4%, or if less, the highest of
Balance TIMES the required retained transferor
percentages specified in the
prospectus supplement for each
series
PLUS
(b) any Additional Minimum
Transferor Amount
"PORTFOLIO YIELD" means, with respect to any calendar month, the
annualized percentage equivalent of a fraction:
o the NUMERATOR of which is the amount of finance charge collections
allocated to your series, MINUS the amount of defaulted receivables
allocated to your series for that calendar month; and
o the DENOMINATOR of which is the collateral amount plus amounts
on deposit in the principal accumulation account, each as of the
last day of that calendar month.
["SPECIFIED MINIMUM TRANSFEROR AMOUNT" means ________________.]
"QUARTERLY AVERAGE EXCESS SPREAD PERCENTAGE" means, for any
distribution date, the percentage determined as follows:
For the [Month 1]
2001 The Excess Spread Percentage for the
distribution date: [Month 1] 2001 distribution date
For the [Month 2] The sume of the Excess Spread Percentage for
2001 the [Month 1]2001 distribution date, plus the
distribution date: Excess Sperad Percentage for the [Month 2]2001
distribution date
-----------------------------------------------
2
For each following The sum of the Excess Spread Percentage for the
distribution date: then-current distribution date and the two prior
distribution dates
------------------------------------------------
3
S-43
Annex I
OTHER SECURITIES ISSUED AND OUTSTANDING
The principal characteristics of the other outstanding series of notes
previously issued by the issuer and the outstanding series of investor
certificates issued by World Financial Network Credit Card Master Trust are set
forth in Part A and Part B, respectively, of the table below. All of the
outstanding series of notes and investor certificates are in group [___]. For
more specific information with respect to any series of notes or investor
certificates, any prospective investor should contact us at (614) 729-4000.
PART A
[I. SERIES 2001-
Series 2001-initial note principal amount........................$
Initial Class A note principal amount............................$
Initial Class B note principal amount............................$
Initial Class C note principal amount............................$
Initial cash collateral account balance..........................$
Class A interest rate...............................one-month LIBOR plus] % per annum
Class B interest rate..............................one-month LIBOR plus] % per annum
Class C interest rate...............................one-month LIBOR plus] % per annum
[Controlled accumulation amount.................................................................$ ]
[Expected principal payment date.............................................[ ] distribution date]
Annual servicing fee percentage......................................................2.0% per annum
[Enhancement for the Class A notes......................subordination of Class B and Class C notes and cash collateral account]
[Enhancement for the Class B notes..................................subordination of Class C notes and cash collateral account]
[Enhancement for the Class C notes..................................................spread account and cash collateral account]
Series 2001- termination date.................................................[ ] distribution date
Group......................................................................................[ ]
Series issuance date........................................................... , 2001]
Required retained transferor percentage for 2001-............................................ [ -- ]%
PART B
SERIES 1996-A
Series 1996-A initial invested amount..................................................$550,000,000
Class A initial invested amount........................................................$445,500,000
Class B initial invested amount.........................................................$46,750,000
Initial collateral interest.............................................................$57,750,000
Initial cash collateral balance.........................................................$13,750,000
Series servicing fee rate......................................................................2.0%
Class A interest rate.........................................................................6.70%
Class B interest rate.........................................................................7.00%
Maximum collateral interest rate......................................................LIBOR & 1.10%
Class A expected principal payment date...................March 2001 to July 2001 distribution date
Class B expected final payment date...................................August 2001 distribution date
Series 1996-A termination date......................................February 2004 distribution date
Group...........................................................................................One
Series issuance date....................................................................May 9, 1996
Required retained transferor percentage for 1996-A...............................................4%
SERIES 1996-B
Series 1996-B initial invested amount..................................................$350,000,000
Class A initial invested amount........................................................$283,500,000
Class B initial invested amount.........................................................$29,750,000
Initial collateral interest.............................................................$36,750,000
Initial cash collateral account balance..................................................$8,750,000
Series servicing fee rate......................................................................2.0%
Class A interest rate.........................................................................6.95%
Class B interest rate.........................................................................7.20%
Maximum collateral rate...............................................................LIBOR & 1.10%
Class A expected final payment date......................................May 2003 distribution date
Class B expected final payment date.....................................June 2003 distribution date
Series 1996-B termination date.........................................April 2006 distribution date
Group...........................................................................................One
Series issuance date....................................................................May 9, 1996
Required retained transferor percentage for 1996-B...............................................4%
SERIES 1996-VFC
The trust has also issued Series 1996-VFC which is a series of variable funding
certificates, meaning that the aggregate outstanding principal amount of Series
1996-VFC certificates and the collateral interest may be increased or decreased
from time to time subject to a maximum amount. The maximum amount for Series
1996-VFC is currently $678,000,000. The maximum amount for Series 1996-VFC
may be increased or decreased from time to time, subject to certain
conditions, including the mutual agreement of the transferor and the holders
of Series 1996-VFC certificates. Series 1996-VFC is in an extendable
revolving period (unless an early amortization event occurs prior to that
date). That revolving period may be extended by mutual agreement of the
transferor and the holders of Series 1996-VFC certificates.
SERIES 1999-A
Series 1999-A initial invested amount...............................................$615,000,000
Class A initial invested amount.....................................................$473,400,000
Class B initial invested amount......................................................$51,600,000
Class C initial invested amount......................................................$75,000,000
Initial cash collateral account balance..............................................$15,000,000
Class A interest rate................................................................LIBOR+0.33%
Class B interest rate................................................................LIBOR+0.80%
Class C interest rate................................................................LIBOR+1.275%
Scheduled pay out commencement date.............................September 2002 Distribution Date
Annual servicing fee percentage...................................................2.0% per annum
Enhancement for the Class A certificates........subordination of Class B and Class C certificate
Enhancement for the Class B certificates...................subordination of Class C certificate
Series 1999-A termination date.......................................July 2006 distribution date
Group........................................................................................One
Series issuance date..........................................................September 17, 1999
Required retained transferor percentage for 1999-A............................................4%
SERIES 2001-VFC
The trust has also issued Series 2001-VFC which is a series of variable funding
certificates, meaning that the aggregate outstanding principal amount of Series
2001-VFC certificates may be increased or decreased from time to time subject to
a maximum amount. The maximum amount for Series 2001-VFC is currently
$492,250,000. The maximum amount for Series 2001-VFC may be increased or
decreased from time to time, subject to certain conditions, including the mutual
agreement of the transferor and the holders of Series 2001-VFC certificates.
Series 2001-VFC is in a revolving period until October 1, 2001 (unless an early
amortization event occurs prior to that date). That revolving period may be
extended by mutual agreement of the transferor and the holders of Series
2001-VFC certificates.
WORLD FINANCIAL NETWORK CREDIT CARD MASTER NOTE TRUST
Issuer
WFN CREDIT COMPANY, LLC WORLD FINANCIAL NETWORK NATIONAL BANK
Transferor Servicer
SERIES 2001-
$
CLASS A [FLOATING RATE] [___%] ASSET BACKED NOTES
$
CLASS B [FLOATING RATE] [___%] ASSET BACKED NOTES
$
CLASS C [FLOATING RATE] [___%] ASSET BACKED NOTES
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
Underwriters of the Class A notes
Underwriters of the Class B notes
Underwriters of the Class C notes
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus. We have not authorized anyone to provide you with different
information.
We are not offering the notes in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than
the dates stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriters of the notes and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the notes
will deliver a prospectus supplement and prospectus until , 2001.
The information in this prospectus supplement and the accompanying prospectus is
not complete and may be amended. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus supplement and the accompanying prospectus are not an
offer to sell and are not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
REPRESENTATIVE FORM OF PROSPECTUS
SUPPLEMENT FOR A MULTIPLE
ISSUANCE SERIES
SUBJECT TO COMPLETION, DATED , 2001
--------------- ----
Prospectus Supplement to Prospectus dated , 2001
------------------ -----
WORLD FINANCIAL NETWORK CREDIT CARD MASTER NOTE TRUST
Issuer
WFN CREDIT COMPANY, LLC WORLD FINANCIAL NETWORK NATIONAL BANK
Transferor Servicer
SERIES 2001- ASSET BACKED NOTES
CLASS C NOTES
Principal amount $
Interest rate [One-month LIBOR
plus] [ ]% per year
Interest payment dates monthly on the 15th,
beginning ______ ___,
200___
Expected principal payment
date 200
Final maturity date 200
Price to public $ (or %)
Underwriting discount $ (or %)
Proceeds to issuer $ (or %)
The Class C notes will be paid from the issuer's assets consisting primarily of
an interest in receivables in a portfolio of private label revolving credit card
accounts owned by World Financial Network National Bank.
We expect to issue your Class C notes in book-entry form on or about ,
2001.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-11 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 3 IN THE PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of World Financial Network Credit Card Master Note
Trust only and are not obligations of WFN Credit Company, LLC,World Financial
Network National Bank or any other person.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE CLASS C NOTES
, 2001
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We (WFN Credit Company, LLC) provide information to you about the notes in
two separate documents: (a) the accompanying prospectus, which provides general
information, some of which may not apply to your series of notes, and (b) this
prospectus supplement, which describes the specific terms of your series of
notes.
Whenever the information in this prospectus supplement is more specific
than the information in the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
TABLE OF CONTENTS
PAGE
Summary of Terms ........................................................ 1
Offered Notes ........................................................... 2
Structural Summary ...................................................... 3
The Issuer ......................................................... 3
Collateral for the Notes ........................................... 3
World Financial Network Credit Card Master Trust ................... 3
Multiple Issuance Series ........................................... 4
Other Claims on the Receivables .................................... 4
Other Series of Notes ......................................... 4
Outstanding Series of Investor Certificates ................... 4
The Transferor Interest ....................................... 5
Allocations of Collections and Losses .............................. 5
Application of Finance Charge Collections .......................... 6
Application of Principal Collections ............................... 6
Revolving Period .............................................. 6
Controlled Accumulation Period ................................ 6
Early Amortization Period ..................................... 6
Reallocation of Principal Collections ......................... 7
Extra Principal Collections ................................... 7
Credit Enhancement ................................................. 7
Subordination ................................................. 7
Cash Collateral Account ....................................... 7
Spread Account ................................................ 7
Early Amortization Events .......................................... 8
Events of Default .................................................. 8
Optional Redemption ................................................ 9
Tax Status ......................................................... 9
ERISA Considerations ............................................... 9
Risk Factors ....................................................... 10
Ratings ............................................................ 10
[Exchange Listing .................................................. 10
WFN Credit Company, LLC ............................................ 10
Risk Factors ............................................................ 11
Receivables Performance ................................................. 12
Delinquency and Loss Experience .................................... 12
Revenue Experience ................................................. 14
The Trust Portfolio ..................................................... 16
Maturity Considerations ................................................. 20
Controlled Accumulation Period ..................................... 20
Early Amortization Period .......................................... 20
Payment Rates ...................................................... 20
Paired Series ...................................................... 21
Description of Series Provisions ........................................ 22
General ............................................................ 22
Collateral Amount .................................................. 22
Allocation Percentages ............................................. 23
Interest Payments .................................................. 24
Principal Payments ................................................. 25
Controlled Accumulation Period ..................................... 25
Early Amortization Period .......................................... 26
Subordination ...................................................... 27
Application of Finance Charge Collections .......................... 27
Reallocation of Principal Collections .............................. 28
Investor Charge-Offs ............................................... 29
Sharing Provisions ................................................. 30
Principal Accumulation Account ..................................... 30
Cash Collateral Account: Required Enhancement Amount ............... 31
Reserve Account .................................................... 32
Spread Account ..................................................... 34
Spread Account Distributions ....................................... 35
Paired Series ...................................................... 35
Early Amortization Events .......................................... 36
Events of Default .................................................. 37
Servicing Compensation and Payment of Expenses ..................... 38
Underwriting ............................................................ 39
Legal Matters ........................................................... 41
Glossary of Terms for Prospectus Supplement ............................. 42
Other Securities Issued and Outstanding ................................. 44
-i-
SUMMARY OF TERMS
- --------------------------------------------------------------------------------
ISSUER: World Financial Network Credit Card Master
Note Trust
TRANSFEROR: WFN Credit Company, LLC
SERVICER: World Financial Network National Bank
INDENTURE TRUSTEE: BNY Midwest Trust Company
OWNER TRUSTEE: Chase Manhattan Bank USA, National Association
EXPECTED CLOSING DATE: _________ ___, 2001
CLEARANCE AND SETTLEMENT: DTC/Clearstream/Euroclear
MINIMUM DENOMINATIONS: $1,000
SERVICING FEE RATE: 2% per annum
CLASS C NOTES: $____________ principal amount
INITIAL CASH COLLATERAL ACCOUNT
BALANCE: $____________________________ (___% of the
collateral amount)
PRIMARY ASSETS OF THE ISSUER: An interest in receivables originated in
private label revolving credit card accounts
owned by World Financial Network National
Bank
- --------------------------------------------------------------------------------
S-1
OFFERED NOTES
CLASS C
PRINCIPAL AMOUNT $
PERCENTAGE OF COLLATERAL AMOUNT %
ANTICIPATED RATINGS:(1)
(Moody's/Standard &
Poor's/Fitch)
CREDIT ENHANCEMENT: spread account and
cash collateral
account
INTEREST RATE: [One-month LIBOR plus]
[ ]% per year
INTEREST ACCRUAL METHOD: [30] [actual]/360
INTEREST DISTRIBUTION DATES: monthly (15th),
beginning ______ ___,
200___
[INTEREST RATE INDEX RESET DATE:] [2 London business
days before each
interest payment date]
COMMENCEMENT OF ACCUMULATION PERIOD
(SUBJECT TO ADJUSTMENT): , 200_
EXPECTED PRINCIPAL PAYMENT DATE: , 200_
FINAL MATURITY DATE: , 200_
ERISA ELIGIBILITY: Yes, subject to important
considerations described
under "ERISA CONSIDERATIONS" in the
accompanying prospectus.
DEBT FOR UNITED STATES FEDERAL Yes, subject to important
INCOME TAX PURPOSES: considerations described under
"FEDERAL INCOME TAX CONSEQUENCES"
in the accompanying prospectus.
- ----------
1 It is a condition to issuance that one of these ratings be obtained and
that the collateral certificate be rated investment grade.
S-2
STRUCTURAL SUMMARY
This summary is a simplified presentation of the major structural components of
Series 2001-_. It does not contain all of the information that you need to
consider in making your investment decision. You should carefully read this
entire document and the accompanying prospectus before you purchase any notes.
World World
World WFN Financial Financial
Financial Credit Network Collateral Network
Network Receivables --> Company, Receivables --> Credit Certificate --> Credit Notes -->
National LLC Card Card
Bank Master Master
Trust Note
Trust
THE ISSUER
The notes will be issued by World Financial Network Credit Card Master Note
Trust, a Delaware statutory business trust, under an indenture supplement to an
indenture, each between the issuer and the indenture trustee.
The indenture trustee is BNY Midwest Trust Company.
COLLATERAL FOR THE NOTES
The notes are secured by a beneficial interest in a pool of receivables that
arise under World Financial Network National Bank's private label revolving
credit card accounts.
The bank has designated all eligible accounts from a number of merchant
programs in its portfolio of private label credit card accounts and has
transferred the receivables in those accounts either directly to World
Financial Network Credit Card Master Trust or to us. We have, in turn,
transferred the receivables sold to us by the bank to World Financial Network
Credit Card Master Trust. We refer to the accounts that have been designated
as trust accounts as the trust portfolio. World Financial Network Credit Card
Master Trust has issued a collateral certificate representing an interest in
the receivables and the other assets of World Financial Network Credit Card
Master Trust to us. We have transferred that collateral certificate to the
issuer and that collateral certificate serves as collateral for the notes.
The receivables in World Financial Network Credit Card Master Trust as of
_______ __, 2001 were approximately as follows:
- - total receivables: $__________
- - principal receivables: $__________
- - finance charge receivables: $__________
- - total accounts designated to World Financial Network Credit Card Master
Trust: __________
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
World Financial Network Credit Card Master Trust is a common law trust formed by
the bank in 1996 under a pooling and servicing agreement that has been amended
and may in the future be amended from time to time. The [__________, 2001]
S-3
amendment, among other things, designated us as transferor in replacement of
World Financial Network National Bank. The bank has transferred some of the
private label credit card receivables directly to World Financial Network Credit
Card Master Trust under the pooling and servicing agreement prior to its
amendment and we have transferred the receivables sold to us by the bank under a
receivables purchase agreement to World Financial Network Credit Card Master
Trust under that pooling and servicing agreement.
The trustee for World Financial Network Credit Card Master Trust is BNY Midwest
Trust Company, successor to the corporate trust administration of Harris Trust
and Savings Bank, successor to The Bank of New York.
After all outstanding series of investor certificates that have been issued by
World Financial Network Credit Card Master Trust have been retired, other than
the collateral certificate held by the issuer, we may cause World Financial
Network Credit Card Master Trust to terminate, at which time the receivables
will be transferred to the issuer and held directly by the issuer as collateral
for the notes. We refer to the entity -- either World Financial Network Credit
Card Master Trust or the issuer -- that holds the receivables at any given time
as the trust.
MULTIPLE ISSUANCE SERIES
The Class C notes are part of a multiple issuance series of notes called the
2001- series. As part of the multiple issuance series, we expect the issuer to
issue Class A notes and Class B notes in addition to the Class C notes offered
by this prospectus supplement. Those other classes of notes will have different
interest rates, expected principal payment dates, final maturity dates and other
characteristics. In addition, the issuer may issue additional Class C notes
under this series at a later date with the same terms and conditions as the
Class C notes offered by this prospectus supplement.
The issuer may issue notes of any class for the 2001- series on any date so long
as it has received confirmation from the rating agencies then rating any
outstanding notes of the 2001- series that the issuance will not impair its
rating and the other conditions of issuance set forth in the indenture are met.
For the 2001- series, all of the Class C notes are subordinated to the Class A
and Class B notes, regardless of whether the subordinated notes are issued
before, at the same time as, or after the senior notes of this series. Neither
you nor any other noteholder will have the right to consent to the issuance of
future notes of your multiple issuance series.
OTHER CLAIMS ON THE RECEIVABLES
OTHER SERIES OF NOTES
Series 2001- is the [ ] series of notes issued by the issuer. The issuer may
issue other series of notes from time to time in the future. [A summary of the
outstanding series of notes is in "ANNEX I: OTHER SECURITIES ISSUED AND
OUTSTANDING" included at the end of this prospectus supplement.] Neither you nor
any other noteholder will have the right to consent to the issuance of future
series of notes.
OUTSTANDING SERIES OF INVESTOR CERTIFICATES
In addition to the collateral certificate, there will be three series of
S-4
investor certificates issued by World Financial Network Credit Card Master
Trust that remain outstanding on the closing date[, excluding a fourth series
that will be retired with the proceeds from the issuance of the notes].
Each series of investor certificates represents a beneficial interest in
the receivables and the other trust assets. A summary of the outstanding
series of investor certificates is in "ANNEX I: OTHER SECURITIES ISSUED AND
Outstanding" included at the end of this prospectus supplement. Neither you
nor any other noteholder will have the right to consent to the issuance of
future series of investor certificates.
THE TRANSFEROR INTEREST
We own the interest, called the transferor interest, in the receivables and
the other assets of the trust not supporting your series or any other series
of notes. The transferor interest does not provide credit enhancement for
your series or any other series.
ALLOCATIONS OF COLLECTIONS AND LOSSES
Your notes represent the right to payments from a portion of the collections on
the receivables. The servicer will also allocate to your series a portion of
defaulted receivables and would also allocate a portion of the dilution on the
receivables to your series if the servicer failed to comply with its obligation
to compensate the trust for dilution and the dilution was not absorbed by the
transferor's interest. Dilution means any reduction to the principal balances of
receivables made by the servicer because of merchandise returns or any other
reason except losses or payments.
The portion of collections, defaulted receivables and uncovered dilution
allocated to your series will be based mainly upon the ratio of the amount of
collateral for your series to the sum of the total amount of principal
receivables in the trust. The way this ratio is calculated will vary during each
of three periods that will or may apply to your notes:
- - The REVOLVING PERIOD, which will begin on the closing date and end when
either of the other two periods begins.
- - The CONTROLLED ACCUMULATION PERIOD, which is scheduled to begin on _______,
200_, but which may begin later, and end when the notes have been paid in
full. However, if an early amortization event occurs before the controlled
accumulation period begins, there will be no controlled accumulation period
and an early amortization period will begin. If an early amortization event
occurs during the controlled accumulation period, the controlled
accumulation period will end, and an early amortization period will begin.
- - The EARLY AMORTIZATION PERIOD, which will only occur if one or more adverse
events, known as early amortization events, occurs.
For most purposes, the collateral amount used in determining these ratios will
be reset no less frequently than at the end of each month. However, for
allocations of principal collections during the controlled accumulation period
or the early amortization period, the collateral amount at the end of the
revolving period will be used, unless an early amortization event occurs for a
series paired with Series 2001- , in which case the collateral amount may be
further reduced.
The collateral amount for your series at any time is:
- - the original principal amount of the notes in your series issued prior to
that time, MINUS
S-5
- - principal payments on the notes (other than principal payments made from
funds on deposit in the spread account) and the balance held in the
principal accumulation account for principal payments, MINUS
- - the amount of any principal collections reallocated to cover interest and
servicing payments for your series, MINUS
- - your series' share of defaults and uncovered dilution to the extent not
reimbursed from finance charge collections and investment earnings
allocated to your series.
A reduction to the collateral amount because of reallocated principal
collections, defaults or uncovered dilution will be reversed to the extent that
your series has available finance charge collections and investment earnings in
future periods.
APPLICATION OF FINANCE CHARGE COLLECTIONS
The issuer will apply your series' share of collections of finance charge
receivables, recoveries and investment earnings each month in the following
order of priority:
- - to pay interest on the Class A notes;
- - to pay interest on the Class B notes;
- - to pay the servicing fee for your series
(to the extent not retained by the
servicer during the month);
- - to pay interest on the Class C notes;
- - to cover your series' share of defaults and uncovered dilution;
- - to cover reductions in your series' collateral amount resulting from
defaults and uncovered dilution allocated to your series and from
reallocated principal collections, in each case that have not been
reimbursed;
- - to make a deposit, if needed, to the cash collateral account up to the
required cash collateral amount;
- - to fund, in limited circumstances, a reserve account to cover interest
payment shortfalls for the Series 2001- notes during the controlled
accumulation period;
- - to make a deposit, if needed, to the spread account for the Class C notes
up to the required spread account amount; and
- - to other series that share excess finance charge collections with Series
2001-__, to make any required deposits to the excess funding account or to
us or our assigns.
APPLICATION OF PRINCIPAL COLLECTIONS
The issuer will apply your series' share of collections of principal receivables
each month as follows:
REVOLVING PERIOD
During the revolving period, no principal will be paid or accumulated in a trust
account for you.
CONTROLLED ACCUMULATION PERIOD
During the controlled accumulation period, your series' share of principal
collections will be deposited in a trust account, up to a specified deposit
amount on each distribution date. On the expected principal payment date,
amounts on deposit in that account will be paid first to the Class A
noteholders, then to the Class B noteholders and then to the Class C
noteholders, in each case until the specified class of notes is paid in full or
the amounts available are depleted.
S-6
EARLY AMORTIZATION PERIOD
An early amortization period for your series will start if an early amortization
event occurs. The early amortization events for your series are described below
in this summary and under "DESCRIPTION OF SERIES PROVISIONS -- EARLY
AMORTIZATION EVENTS" in this prospectus supplement. During the early
amortization period, your series' share of principal collections will be paid
monthly first to the Class A noteholders, then to the Class B noteholders and
then to the Class C noteholders, in each case until the specified class of notes
is paid in full.
REALLOCATION OF PRINCIPAL COLLECTIONS
During any of the above periods, principal collections allocated to your
series may be reallocated, if necessary, to make required payments of
interest on the Class A notes, the Class B notes and the Class C notes and
monthly servicing fee payments not made from your series' share of finance
charge collections and other amounts treated as finance charge collections,
investment earnings and excess finance charge collections available from
other series that share with your series. This reallocation is one of the
ways that the more senior classes of notes obtain the benefit of
subordination, as described in the next section of this summary. The amount
of reallocated principal collections is limited by the amount of available
subordination.
EXTRA PRINCIPAL COLLECTIONS
At all times, collections of principal receivables allocated to your series that
are not needed for payments on your series will first be made available to other
series, second, deposited in the excess funding account and third, paid to us
or our assigns.
CREDIT ENHANCEMENT
Credit enhancement for your series includes subordination, a cash collateral
account and a spread account, all as described below.
Credit enhancement for your series is for your series' benefit only, and you are
not entitled to the benefits of credit enhancement available to other series.
SUBORDINATION
Credit enhancement for the Class A notes includes the subordination of the Class
B notes and the Class C notes.
Credit enhancement for the Class B notes includes the subordination of the Class
C notes.
Subordination serves as credit enhancement. The more subordinated, or junior,
classes of notes will not receive payment of interest or principal until
required payments have been made to the more senior classes. As a result,
subordinated classes will absorb any shortfalls in collections or deterioration
in the collateral for the notes prior to senior classes.
CASH COLLATERAL ACCOUNT
A cash collateral account will provide additional credit enhancement for your
series. On the closing date, we will deposit [$__________] into the cash
collateral account, which amount represents [___]% of the initial principal
amount of the notes. The cash collateral account will be used to make payments
on the notes if collections of finance charge receivables allocated to this
series are insufficient to make required payments.
S-7
SPREAD ACCOUNT
A spread account will provide credit enhancement for your series, primarily
for the Class C notes. The spread account initially will not be funded. After
the issuance of any class of Series 2001- notes, deposits into the spread
account will be made each month from finance charge collections allocated to
your series and excess finance charge collections available from other series
up to the required spread account amount. The required spread account amount
is primarily a function of the relationship between your series share of
finance charge collections and the expenses payable from those collecitons,
as described in this prospectus supplement under "DESCRIPTION OF SERIES
PROVISIONS -- SPREAD ACCOUNT." The spread account will be used to make
payments on the Class C notes if collections of receivables available to the
Class C notes are insufficient to make required payments.
On any day following an event of default and an acceleration of the Series 2001-
notes, funds available in the spread account will be used to fund any shortfalls
in amounts owed on the Class C notes, the Class A notes and the Class B notes,
in that order of priority.
EARLY AMORTIZATION EVENTS
The issuer will begin to repay the principal of the notes before the expected
principal payment date if an early amortization event occurs. An early
amortization event will occur if the finance charge collections on the
receivables are too low or if defaults are too high. The minimum amount that
must be available for payments to your series in any month, referred to as
the base rate, is the sum of the interest payable on the Series 2001- notes
for the related interest period, plus your series' share of the servicing fee
for the related calendar month divided by the collateral amount PLUS amounts
on deposit in the principal accumulation account, each as of the last day of
that period. If the average net yield for the trust portfolio, after
deducting defaulted receivables net of recoveries, for any three consecutive
calendar months is less than the average base rate for the same three
consecutive calendar months, an early amortization event will occur.
The other early amortization events are:
- - Our failure to make required payments or deposits or material failure to
perform other obligations, subject to applicable grace periods;
- - Material inaccuracies in our representations and warranties subject to
applicable grace periods;
- - The Series 2001- notes are not paid in full on the expected principal
payment date;
- - Bankruptcy, insolvency or similar events relating to us or the bank;
- - We are unable to transfer receivables to the trust when required;
- - We do not transfer receivables in additional accounts or participations to
the trust when required;
- - Material defaults of the servicer;
- - World Financial Network Credit Card Master Trust or the issuer becomes
subject to regulation as an "investment company" under the Investment
Company Act of 1940; or
- - An event of default occurs for the Series 2001- notes and their maturity
date is accelerated.
EVENTS OF DEFAULT
The Series 2001- notes are subject to events of default described under "THE
INDENTURE -- EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in the
accompanying
S-8
prospectus. These include, among other things, the failure to pay interest for
35 days after it is due or to pay principal when it is due on the final maturity
date.
In the case of an event of default involving bankruptcy, insolvency or similar
events relating to the issuer, the principal amount of the Series 2001- notes
automatically will become immediately due and payable. If any other event of
default occurs and continues with respect to the Series 2001- notes, the
indenture trustee or holders of more than 50% of the then-outstanding principal
balance of the Series 2001- notes may declare the principal amount of the Series
2001- notes to be immediately due and payable. These declarations may be
rescinded by holders of more than 50% of the then-outstanding principal balance
of the Series 2001- notes if the related event of default has been cured,
subject to the conditions described under "THE INDENTURE -- EVENTS OF DEFAULT;
RIGHTS UPON EVENT OF DEFAULT" in the accompanying prospectus.
After an event of default and the acceleration of the Series 2001- notes, funds
allocated to Series 2001- and on deposit in the collection account, the excess
funding account and the other trust accounts will be applied to pay principal of
and interest on the Series 2001- notes to the extent permitted by law. Principal
collections and finance charge collections allocated to Series 2001- will be
applied to make monthly principal and interest payments on the Series 2001-
notes until the earlier of the date those notes are paid in full or the final
maturity date of those notes.
If the Series 2001- notes are accelerated or the issuer fails to pay the
principal of the Series 2001- notes on the final maturity date, subject to the
conditions described in the prospectus under "THE INDENTURE -- EVENTS OF
DEFAULT; RIGHTS UPON EVENT OF DEFAULT", the indenture trustee may, if legally
permitted, cause the trust to sell principal receivables in an amount equal to
the collateral amount for Series 2001- and the related finance charge
receivables.
OPTIONAL REDEMPTION
The servicer has the option to purchase your notes when the outstanding
principal amount for your series has been reduced to 5% or less of the initial
principal amount. See "DESCRIPTION OF THE NOTES -- FINAL PAYMENT OF Principal"
in the accompanying prospectus.
TAX STATUS
Subject to important considerations described under "FEDERAL INCOME TAX
CONSEQUENCES" in the accompanying prospectus, Mayer, Brown & Platt as tax
counsel to the issuer, is of the opinion that under existing law your Class C
notes will be characterized as debt for federal income tax purposes and that
neither World Financial Network Credit Card Master Trust nor the issuer will
be classified as an association or constitute a publicly traded partnership
taxable as a corporation for U.S. federal income tax purposes. By your
acceptance of a Class C note, you will agree to treat your Class C notes as
debt for federal, state and local income and franchise tax purposes. See
"FEDERAL INCOME TAX CONSEQUENCES" in the accompanying prospectus for
additional information concerning the application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA CONSIDERATIONS" in
the accompanying prospectus, the Class C notes are eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts. If you are
S-9
contemplating purchasing the Class C notes on behalf of or with plan assets of
any plan or account, we suggest that you consult with counsel regarding whether
the purchase or holding of the Class C notes could give rise to a transaction
prohibited or not otherwise permissible under ERISA or Section 4975 of the
Internal Revenue Code.
RISK FACTORS
There are material risks associated with an investment in the Class C notes, and
you should consider the matters set forth under "RISK FACTORS" beginning on page
S-11 below and on page 3 of the accompanying prospectus.
RATINGS
It is a condition to the issuance of your notes that one of the ratings set
forth for the Class C notes in the "SUMMARY OF TERMS" above be obtained.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest and principal required to be made under the
terms of the series and will be based primarily on the value of the receivables
in the trust and the credit enhancement provided. The rating is not a
recommendation to purchase, hold or sell any notes. The rating does not
constitute a comment as to the marketability of any notes, any market price or
suitability for a particular investor. Any rating can be changed or withdrawn by
a rating agency at any time.
[EXCHANGE LISTING
We will apply to list the Series 2001- notes on the Luxembourg Stock Exchange.
We cannot guarantee that the application for the listing will be accepted.]
WFN CREDIT COMPANY, LLC
Our address is 800 Techcenter Drive, Gahanna, Ohio 43230. Our phone number is
(614) 729-4000.
S-10
This prospectus supplement uses defined terms. You can find a glossary of
terms under the caption "GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT" beginning
on page S-42 in this prospectus supplement and under the caption "Glossary of
Terms for Prospectus" beginning on page 87 in the accompanying prospectus.
RISK FACTORS
IN ADDITION TO THE RISK FACTORS DESCRIBED IN THE PROSPECTUS, YOU SHOULD
CONSIDER THE FOLLOWING
THE ISSUER WILL ISSUE THE CLASS A AND THE CLASS B NOTES OF
THIS SERIES SOMETIME AFTER THE CURRENT ISSUANCE OF THE CLASS
C NOTES, WHICH MAY IMPACT THE TIMING AND AMOUNT OF PAYMENTS
TO YOU.
The issuer expects to issue the Class A notes and Class
B notes for this series sometime after the current issuance
of the Class C notes. The Class A notes and the Class B
notes may be issued without notice to existing noteholders
and without their consent. In addition, we do not currently
know what the terms of the Class A notes and the Class B
notes will be, including their initial principal amounts,
interest rates, expected principal payment dates and final
maturity dates, and these terms are likely to be different
from those of the Class C notes. For a description of the
conditions that must be met before the issuer can issue new
notes, see "THE NOTES--MULTIPLE ISSUANCE SERIES" AND "--NEW
ISSUANCES OF NOTES".
The issuance of the Class A notes and the Class B notes
could adversely affect the timing and amount of payments on
the Class C notes. For example, if the Class A notes and the
Class B notes are issued at a higher interest rate than your
notes, this could result in a reduction in the amount of
finance charge collections available to pay interest on your
notes.
[Insert any additional risk factors applicable for this series]
S-11
RECEIVABLES PERFORMANCE
The tables below contain performance information for the receivables in the
current portfolio of private label credit cards for each of the periods shown.
The composition of the credit card portfolio is expected to change over time.
The actual performance of the receivables in the current portfolio may be
different from that set forth below.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the aggregate delinquency and loss
experience for cardholder payments on the credit card accounts in the current
portfolio for each of the dates or periods shown. All data set forth in the
tables is reported on a collected basis, except that data for some acquired
portfolios is reported on a billed basis for the period before the bank acquired
them. Average receivables outstanding is the average of the receivables balances
at the beginning of each month in the period indicated. Fees include late fees
and return check fees (which are, under the terms of the pooling agreement,
allocated to the trust).
[Discussion of any relevant changes in loss and delinquency performance]
We cannot assure you that the future delinquency and loss experience for
the receivables will be similar to the historical experience set forth below.
DELINQUENCY EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS ENDED _________, __,
--------------------------------------------------------
2001 2000
-------------------------- --------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- -----------
Receivables Outstanding ..............
Receivables Delinquent ...............
31-60 Days ......................
61-90 Days ......................
91 or More Days .................
Total ...................... % %
S-12
DECEMBER 31,
--------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- --------------------------- ---------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------------------------- ---------------------------- ---------------------------
Receivables %
Outstanding............
Receivables
Delinquent.............
31-60 Days..........
61-90 Days..........
91 or More
Days..............
Total...........
JANUARY 31,
------------------------------------------------------------------
1998 1997
------------------------------ -----------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------- ----------- ----------- -----------
Receivables Outstanding.. $1,842,021 100% $1,837,839 100%
Receivables Delinquent...
31-60 Days.......... 60,091 3.26 63,926 3.48
61-90 Days.......... 32,498 1.77 32,566 1.77
91 or More
Days.............. 57,341 3.11 59,070 3.21
Total........... $ 149,930 8.14% $ 155,562 8.46%
Prior to 1998, the bank's fiscal year ended on the Saturday closest to
January 31 of each calendar year and a fiscal year was designated by the
calendar year in which it began; beginning with fiscal years ended after 1998
the bank has adopted a calendar year as its fiscal year.
S-13
LOSS EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS
ENDED _______, __
---------------------------------------
2001 2000
--------------- -------------
Average Receivables Outstanding............
Gross Charge-Offs..........................
Recoveries.................................
Net Charge-Offs............................
Net Charge-Offs as a percentage of Average
Receivables Outstanding (annualized).....
FISCAL YEAR
------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ------------ ---------- ----------
Average Receivables
Outstanding.............. $1,749,508 $1,748,577 $1,765,377
Gross Charge-Offs.......... 158,284 185,141 146,581
Recoveries 27,342 21,716 12,970
Net Charge-Offs............ 130,942 163,425 133,611
Net Charge-Offs as a
percentage of Average
Receivables Outstanding
(annualized)............. 8.17% 9.35% 7.57%
Due to the change in the bank's fiscal year in 1998, this fiscal year
included only eleven months. If not for the change, the bank's 1998 fiscal year
would have ended on January 30, 1999. For the period from February 1, 1998 to
January 30, 1999 (which would have been the bank's 1998 fiscal year if not for
the change), the Average Receivables Outstanding, Gross Charge-Offs, Recoveries,
Net Charge-Offs and Net Charge-Offs as a percentage of Average Receivables
Outstanding (annualized) were $1,764,292, $172,475, $29,559, $142,916 and 8.10%,
respectively.
REVENUE EXPERIENCE
The gross revenues from finance charges and fees related to accounts in
the current portfolio for each of the periods shown are set forth in the
following table. The figures reflected in the following table represent balances
before deductions for charge-offs, returned merchandise, and customer disputes
or other expenses and reductions due to fraud.
S-14
REVENUE EXPERIENCE
TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
___ CALENDAR MONTHS
ENDED _______, __
----------------------
2001 2000
------- ------
Average Receivables Outstanding.....
Total Finance Charges and Fees......
Total Finance Charges and Fees as a
percentage of Average Receivables
Outstanding (annualized)..........
FISCAL YEAR
--------------------------------------------------------------
2000 1999 1998 1997 1996
------- -------- ---------- ---------- ----------
Average Receivables Outstanding..... $1,749,508 $1,748,577 $1,765,377
Total Finance Charges and Fees...... 372,710 394,805 392,579
Total Finance Charges and Fees as a
percentage of Average Receivables
Outstanding (annualized).......... 23.24% 22.58% 22.24%
For the period from February 1, 1998 to January 30, 1999 (which would have been
the bank's 1998 fiscal year if not for the change to a calendar year as its
fiscal year), the Average Receivables Outstanding (annualized) were $1,764,292,
$408,352 and 23.15%, respectively.
S-15
THE TRUST PORTFOLIO
The receivables to be conveyed to the trust have been or will be
generated from transactions made by holders of credit card accounts included in
the trust portfolio. A description of the bank's credit card business is
contained in the prospectus under the heading "THE BANK'S PRIVATE LABEL CREDIT
CARD ACTIVITIES--WORLD FINANCIAL NETWORK NATIONAL BANK CREDIT CARDS."
As of the beginning of the day on _________, 2001:
o The receivables in the trust portfolio included $________ of
principal receivables and $_________ of finance charge receivables.
o The accounts designated for the trust portfolio had an average
principal receivable balance of $___________ and an average credit
limit of $__________.
o The percentage of the aggregate total receivable balance to the
aggregate total credit limit was _____%.
o The average age of the accounts was approximately _____ months.
o Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia
[except for __% of the aggregate total receivable balance for which
cardholders had billing addresses located outside of the United
States or the District of Columbia].
The following table sets forth the number of fixed and floating rate
credit cards contained in the trust portfolio as of ___________ __, 2001:
DISTRIBUTION OF TRUST PORTFOLIO
BY FIXED/FLOATING APR(1)
(DOLLARS IN MILLIONS)
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
------------ ------------- ----------- -------------
Total Fixed.................................
Total Variable..............................
(1) Dollars are in millions and accounts are in thousands.
S-16
The following tables summarize the trust portfolio by various criteria
as of the beginning of the day on _________ __, 2001. Because the future
composition of the trust portfolio will change over time, these tables are not
indicative of the composition of the trust portfolio at any subsequent time. In
addition, except as otherwise indicated, these tables exclude accounts that were
flagged by the bank as a bankruptcy, fraud, deceased write-off or contractual
write-off after the applicable billing cycle end date.
COMPOSITION BY RETAILER TYPE
TRUST PORTFOLIO
PERCENT OF
RECEIVABLES
RETAILER TYPE OUTSTANDING
- ------------- -----------
Softgoods..........................................................................................
Building Materials.................................................................................
Furniture..........................................................................................
Jewelry............................................................................................
Other..............................................................................................
The credit card programs, or group of credit card programs for
affiliated companies of the Limited and Brylane, including each of their
respective affiliates as of the beginning of the day on ________ __, 2001
accounted for more than 10% of the receivables in the trust portfolio. As of
that date there were ___ other credit card programs included in the trust
portfolio.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- --------------------- --------- ------------- ----------- -------------
Credit Balance...................................
No Balance.......................................
$.01-$100.00.....................................
$100.01-$250.00..................................
$250.01-$350.00..................................
$350.01-$500.00..................................
$500.01-$750.00..................................
$750.01-$1000.00.................................
$1,000.01-$1,250.00..............................
$1,250.01-$1,500.00..............................
$1,500.01-$2,000.00..............................
$2,000.01-$2,500.00..............................
$2,500.01 or more................................
Total....................................... 100.00% 100.00%
S-17
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- -------------------- --------- ------------- ----------- -------------
$0
$.01-$100.00.....................................
$100.01-$250.00..................................
$250.01-$350.00..................................
$350.01-$500.00..................................
$500.01-$750.00..................................
$750.01-$1000.00.................................
$1,000.01-$1,250.00..............................
$1,250.01-$1,500.00..............................
$1,500.01-$2,000.00..............................
$2,000.01-$2,500.00..............................
$2,500.01 or more................................
Total....................................... 100.00% 100.00%
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- --- --------- ------------- ----------- -------------
Not More than 12 Months..........................
Over 12 Months to 24 Months......................
Over 24 Months to 36 Months......................
Over 36 Months to 48 Months......................
Over 48 Months to 60 Months......................
Over 60 Months...................................
Total....................................... 100.00% 100.00%
Cardholders whose accounts are designated for the trust portfolio had
billing addresses in all 50 states and the District of Columbia [except for __%
of the aggregate total receivable balance for which cardholders had billing
addresses located outside of the United States or the District of Columbia].
Except for the four states listed below, no state accounted for more than 5% of
the number of accounts or 5% of the total receivables balances as of __________
__, 2001.
S-18
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
[CALIFORNIA] [ILLINOIS] [NEW YORK] [TEXAS]
------------ ---------- ---------- -------
% of total number of accounts....................
% of total receivable balance....................
S-19
MATURITY CONSIDERATIONS
Series [_______-_____] will always be in one of three periods--the
revolving period, the controlled accumulation period or the early amortization
period. Unless an early amortization event occurs, each class of notes will not
receive payments of principal until the expected principal payment date for that
class. The expected principal payment date for the Class C notes will be the
distribution date in ___________. We expect the issuer to have sufficient funds
to pay the full principal amount of each class of Series 2001- notes on its
expected principal payment date. However, if an early amortization event occurs,
principal payments for any class may begin prior to the expected principal
payment date for that class.
CONTROLLED ACCUMULATION PERIOD
During the controlled accumulation period, principal allocated to the
Series 2001- noteholders will accumulate in the principal accumulation account
in an amount calculated to pay the Class A notes, the Class B notes and the
Class C notes in full on their expected principal payment dates. We expect, but
cannot assure you, that the amounts available in the principal accumulation
account on the expected principal payment date for any class of notes will be
sufficient to pay in full the outstanding principal amount of the class. If
there are not sufficient funds on deposit in the principal accumulation account
to pay any class of notes in full on the expected principal payment date for
that class, an early amortization event will occur and the early amortization
period will begin.
EARLY AMORTIZATION PERIOD
If an early amortization event occurs during either the revolving
period or the controlled accumulation period, the early amortization period will
begin. If an early amortization event occurs during the controlled accumulation
period, on the next distribution date any amount on deposit in the principal
accumulation account will be paid:
o first to Class A noteholders, up to the outstanding principal balance
of the Class A notes;
o then to Class B noteholders, up to the outstanding principal balance
of the Class B notes; and
o then to Class C noteholders, up to the outstanding principal balance
of the Class C notes.
In addition, if the outstanding principal balance of the notes has not
been paid in full, the issuer will continue to pay principal in the priority
noted above to the noteholders on each distribution date during the early
amortization period until the Series 2001- final maturity date, which is the
_____________, 200__ distribution date.
PAYMENT RATES
The payment rate on the receivables is the most important factor that
will determine the size of principal payments during an early amortization
period and whether the issuer has funds
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available to repay the notes on their [respective] expected principal payment
date[s]. The following table sets forth the highest and lowest cardholder
monthly payment rates on the credit card accounts during any month in the
periods shown and the average cardholder monthly payment rates for all months in
the periods shown, in each case calculated as a percentage of average total
receivables for each month during the periods shown. Payment rates shown in the
table are based on amounts which would be deemed payments of principal
receivables and finance charge receivables with respect to the accounts.
Although we have provided historical data concerning the payment rates
on the receivables, because of the factors described in the prospectus under
"RISK FACTORS," we cannot provide you with any assurance that the levels and
timing of payments on receivables in the trust portfolio from time to time will
be similar to the historical experience described in the following table or that
deposits into the principal accumulation account or the distribution account, as
applicable, will be in accordance with the applicable controlled accumulation
amount. The servicer may shorten the controlled accumulation period and, in that
event, we cannot provide any assurance that there will be sufficient time to
accumulate all amounts necessary to pay the outstanding principal amounts on
their expected principal payment dates.
CARDHOLDER MONTHLY PAYMENT RATES
TRUST PORTFOLIO
___ CALENDAR MONTHS
ENDED________, __
-------------------------
2001 2000
---------- ---------
Lowest Month......................
Highest Month.....................
Monthly Average...................
FISCAL YEAR
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- -------
Lowest Month..................... 15.80% 15.92% 16.53%
Highest Month.................... 20.33% 19.10% 19.01%
Monthly Average.................. 17.79% 17.56% 17.78%
For the period from February 1, 1998 to January 30, 1999 (which would
have been the bank's 1998 fiscal year if not for the change to a calendar year
as its fiscal year), the Lowest Month, Highest Month and Monthly Average were
15.80%, 20.33% and 17.80%, respectively.
We cannot assure you that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders.
PAIRED SERIES
The issuer may issue another series of notes as a paired series for
Series 2001- . If issued, a paired series may have terms that are different than
the terms of Series 2001- and other
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series. For example, the early amortization events for the paired series may
vary from the early amortization events for Series 2001- and may include early
amortization events that are unrelated to the status of the issuer or the
servicer, such as early amortization events related to the continued
availability and rating of the providers of credit enhancement for the paired
series. If an early amortization event occurs with respect to the paired series
prior to the payment in full of the Series 2001- notes, the allocation
percentage used to determine your series' share of principal collections may be
reduced, which may delay the final payment of principal for your series. See
"DESCRIPTION OF SERIES PROVISIONS--PAIRED SERIES" in this prospectus supplement.
DESCRIPTION OF SERIES PROVISIONS
We have summarized the material terms of the Series 2001- notes below
and under "DESCRIPTION OF THE NOTES" in the accompanying prospectus.
GENERAL
The Class A notes, the Class B notes and the Class C notes comprise the
Series 2001- notes and will be issued under the indenture, as supplemented by
the Series 2001- indenture supplement, in each case between the issuer and the
indenture trustee. The Series 2001- notes are a multiple issuance series and
notes of any class may be issued on any date so long as the issuer has received
confirmation from the rating agencies then rating any outstanding notes of
Series 2001- that the issuance will not impair its rating and the other
conditions of issuance set forth in the indenture are met.
The Series 2001- notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. See "DESCRIPTION OF THE
NOTES -- GENERAL," "-- BOOK-ENTRY REGISTRATION" and "-- DEFINITIVE NOTES" in the
accompanying prospectus. Payments of interest and principal will be made on each
distribution date on which those amounts are due to the noteholders in whose
names the Series 2001- notes were registered on the related record date, which
will be the last day of the calendar month preceding that distribution date.
[We will apply to list the notes on the Luxembourg Stock Exchange;
however, we cannot assure you that the listing will be obtained. You should
consult with the Luxembourg listing agent for the notes, [Address] Luxembourg,
phone number ( ) , for the status of the listing].
COLLATERAL AMOUNT
Your notes are secured by collateral consisting of an interest in the
receivables. At any time, the amount of the collateral for your notes,
which we call the collateral amount, is calculated at any time as follows:
o the collateral amount, which equals the aggregate initial
principal amount of the notes in your series issued prior to the
time of calculation, LESS
o all previous principal payments made on your series (other than
principal payments made from funds on deposit in the spread account)
and the balance held in the principal accumulation account for such
payments, LESS
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o all unreimbursed reductions to the collateral amount as a result of
defaulted receivables or uncovered dilution allocated to your series
or reallocations of principal collections to cover interest or the
servicing fee for your series.
The collateral amount will also be reduced if we purchase and cancel
notes in your series. We are not permitted to do this if it would reduce the
proportional amount of credit enhancement available for any class of notes. The
collateral amount cannot be less than zero.
ALLOCATION PERCENTAGES
The servicer will allocate among your series, other series of notes
issued and outstanding, outstanding series of investor certificates issued by
World Financial Network Credit Card Master Trust and our unpledged interest in
the trust the following items: collections of finance charge receivables and
principal receivables; defaulted receivables; and any dilution amounts that are
not absorbed by our interest in the trust or reimbursed by the servicer. On any
day, the allocation percentage for your series will be the percentage
equivalent--which may not exceed 100%--of a fraction:
o the numerator of which is:
o for purposes of allocating finance charge collections and
defaulted receivables at all times and principal collections
during the revolving period, equal to the collateral amount
as measured at the end of the prior calendar month (or, in the
case of the month during which the closing date occurs, on the
closing date) after taking into account any deposits to be made
to the principal accumulation account and any reductions to be
made to the collateral amount on account of principal payments
for the next distribution date; and
o for purposes of allocating principal collections during the
controlled accumulation period and the early amortization
period, equal to the collateral amount as of the end of the
revolving period unless the numerator is reset in connection
with an early amortization event for a series paired with
Series 2001-_ as described below; and
o the denominator of which is the greater of:
(a) the total amount of principal receivables in the trust after
excluding investment earnings measured as of a specified
date; and
(b) the sum of the numerators used to calculate the applicable
allocation percentages for all series of notes or investor
certificates outstanding as of the date of determination.
The denominator referred to above will initially be set as of the
closing date. The denominator will be reset for purposes of allocating principal
collections, finance charge collections and defaulted receivables at all times
as follows:
o at the end of each calendar month;
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o on each date on which supplemental accounts are added to the trust;
o on each date on which accounts are removed from the trust in an
aggregate amount approximately equal to the initial collateral
amount of any series that has been paid in full;
o on each date on which there is an increase in the outstanding balance
of any variable interest issued by the trust; and
o on each date on which a new series or notes relating to a multiple
issuance series are issued.
The Series 2001- notes are subject to being paired with a future
series. If a subsequent series is paired with Series 2001- and an early
amortization period commences for the series paired with 2001- , we may, by
written notice delivered to the indenture trustee and the servicer, designate
a different numerator for allocating principal collections to your series,
provided that:
(1) the numerator is not less than the collateral amount as of the
last day of the revolving period for the series paired with
Series 2001- ;
(2) each rating agency confirms that the designation will not impair
its rating of the Series 2001- notes; and
(3) we certify that in our reasonable belief, the designation will
not casue an early amortization event with respect to Series
2001- .
Any reduction in the numerator made as described in the preceding paragraph will
also apply during any early amortization period that begins after the reduction
is made.
INTEREST PAYMENTS
The Class C notes will accrue interest from and including the closing
date through but excluding ___________, 2001, and for each following interest
period, at a rate of % per year [above LIBOR for the related interest period.]
Each interest period will begin on and include a distribution date and
end on but exclude the next distribution date. However, the first interest
period will begin on and include the closing date.
[For purposes of determining the interest rates applicable to each
interest period, LIBOR will be determined two London business days before that
interest period begins and will equal the rate for deposits in United States
dollars for a one-month period which appears on the display page currently
designated as "Telerate Page 3750" on the Bridge Telerate Capital Markets
Report, or any other page as may replace that page on that service for the
purpose of displaying comparable rates or price as of 11:00 a.m., London time,
on that date. If that rate does not appear on that display page, the rate for
that date will be determined based on the rates at which deposits in United
States dollars are offered by four major banks, selected by the servicer, at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a one-month period. The indenture trustee will request the
principal London office of each of those banks to provide a quotation of its
rate. If at least two quotations are provided, the rate for that date will be
the arithmetic mean of the quotations. If fewer than two quotations are
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provided, the rate for that date will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the servicer, at approximately
11:00 a.m., New York City time, on that day for loans in United States dollars
to leading European banks for a one-month period.]
[The interest rates applicable to the then current and immediately
preceding interest period may be obtained by telephoning the indenture trustee
at its corporate trust office at [____________].]
Interest on the notes will be calculated on the basis of the [actual
number of days in the related interest period and] a 360-day year [of twelve
30-day months].
If the issuer does not pay interest as calculated above to any class
when due on a distribution date, the amount not paid will be due on the next
distribution date, together with interest on the overdue amount of regular
monthly interest at [2% plus] the interest rate payable on the notes for the
applicable class.
PRINCIPAL PAYMENTS
During the revolving period, no principal payments will be made on your
notes. During the controlled accumulation period and the early amortization
period, deposits to the principal accumulation account and principal payments on
the Series 2001- notes will be made on each distribution date from the following
sources:
(a) principal collections allocated to your series based on your
allocation percentage and retained in the collection account
during the prior calendar month, less any amounts required to be
reallocated to cover interest payments on the Series 2001- notes or
servicing fees payments; PLUS
(b) any finance charge collections or other amounts required to be
treated as principal collections in order to cover the share of
defaulted receivables and uncovered dilution amounts allocated to
your series or to reinstate prior reductions to the collateral
amount; PLUS
(c) any principal collections from other series that are shared with
your series.
CONTROLLED ACCUMULATION PERIOD
The controlled accumulation period is scheduled to commence on , 200_
and to last [ ] months. However, the servicer may elect to extend the revolving
period and postpone the controlled accumulation period, subject to the
conditions described under "DESCRIPTION OF THE NOTES--SUSPENSION AND
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD" in the accompanying prospectus.
The servicer may elect to postpone the controlled accumulation period only if
the number of months needed to fund the principal accumulation account is less
than [ ] months. In no event will the servicer postpone the beginning of the
controlled accumulation period to later than [ ], 200 .
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The servicer may also elect to suspend the controlled accumulation
period, subject to the conditions described under "DESCRIPTION OF THE
NOTES--SUSPENSION AND POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD" in the
accompanying prospectus.
On each distribution date relating to the controlled accumulation
period, the indenture trustee will deposit in the principal accumulation account
an amount equal to the least of:
(1) funds available for this purpose for your series with respect to
that distribution date;
(2) $______________or, if the commencement of the controlled
accumulation is postponed, any higher deposit amount as the
servicer may determine is necessary to fully fund the principal
accumulation account, PLUS any amounts required to be deposited
to the principal accumulation account on prior distribution dates
that have not yet been deposited;
(3) an amount equal to the outstanding principal amount of the notes,
MINUS the amount on deposit in the principal accumulation account
prior to any deposits on that date; and
(4) the collateral amount.
If the early amortization period has not commenced, amounts in the
principal accumulation account will be paid to the Class A noteholders on the
expected principal payment date for Class A. Any remaining amounts, up to the
outstanding principal balance of the Class B notes, will be paid to the Class B
noteholders on the expected principal payment date for Class B. Any further
remaining amounts, up to the outstanding principal balance of the Class C notes,
will be paid to the Class C noteholders on the expected principal payment date
for Class C.
During the controlled accumulation period, the portion of funds
available but not required to be deposited in the principal accumulation account
on a distribution date will be made available to investors in other series as
shared principal collections.
EARLY AMORTIZATION PERIOD
On each distribution date relating to the early amortization period,
the Class A noteholders will be entitled to receive funds available for
principal payments for Series 2001- for the related calendar month in an amount
up to the outstanding principal balance of the Class A notes.
After payment in full of the outstanding principal balance of the Class
A notes, the Class B noteholders will be entitled to receive, on each
distribution date relating to the early amortization period, the remaining
available funds for Series 2001- for the related calendar month in an amount up
to the outstanding principal balance of the Class B notes.
After payment in full of the outstanding principal balance of the
Class B notes, the Class C noteholders will be entitled to receive on each
distribution date relating to the early
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amortization period, the remaining available funds for Series 2001- for the
related calendar month in an amount up to the outstanding principal balance of
the Class C notes.
See "-- EARLY AMORTIZATION EVENTS" below for a discussion of events
that might lead to the commencement of the early amortization period.
SUBORDINATION
The Class B notes are subordinated to the Class A notes. The Class C
notes are subordinated to the Class A notes and the Class B notes. Interest
payments will be made on the Class A notes prior to being made on the Class B
notes and the Class C notes. Interest payments will be made on the Class B notes
prior to being made on the Class C notes.
Principal payments on the Class B notes will not begin until the Class
A notes have been paid in full. Principal payments on the Class C notes will not
begin until the Class A notes and the Class B notes have been paid in full.
The collateral amount for your series will be reduced as the
collateral is applied for the benefit of your series, for instance as
principal payments are made on your series (other than principal payments
made from funds on deposit in the spread account). In addition, the
collateral amount can be applied for the benefit of your series in two other
ways:
o by reallocating principal collections to make interest payments and
pay the servicing fee for your series, when finance charge
collections and investment earnings are not sufficient to make these
payments; and
o to absorb your series' share of defaulted receivables and any
uncovered dilution amounts, when finance charge collections and
investment earnings are not sufficient to cover these amounts.
If the total amount of these latter two types of reductions exceeds the
principal amount of the Class C Notes, then the Class B Notes may not be repaid
in full. If the total exceeds the sum of principal amounts of the Class C and
Class B notes, then the Class A notes may not be repaid in full.
If receivables are sold after an event of default, the net proceeds of
that sale would be paid first to the Class A notes, then to the Class B notes
and finally to the Class C notes, in each case until the outstanding principal
amount of the specified class and all accrued and unpaid interest payable to
that class have been paid in full.
APPLICATION OF FINANCE CHARGE COLLECTIONS
We refer to your series' share of finance charge collections --
including net investment proceeds transferred from the principal accumulation
account and amounts withdrawn from the reserve account -- and any available
excess finance charge collections from other series, collectively, as finance
charge collections. On each distribution date, the servicer will direct the
indenture trustee to apply your series' share of finance charge collections for
the prior month in the following order:
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(1) to pay interest on the Class A notes, including any overdue
interest and additional interest on the overdue interest;
(2) to pay interest on the Class B notes, including any overdue
interest and additional interest on the overdue interest;
(3) to pay the servicing fee for your series for the prior calendar
month and any overdue servicing fee (to the extent not retained
by the servicer during the month);
(4) to pay interest on the Class C notes, including any overdue
interest and additional interest on the overdue interest;
(5) an amount equal to your series' share of the defaulted receivables
and uncovered dilution, if any, for the related calendar month,
will be treated as principal collections for the prior calendar
month;
(6) an amount equal to any previously unreimbursed reductions to the
collateral amount on account of defaulted receivables, uncovered
dilution or reallocations of principal collections will be treated
as principal collections for the prior calendar month;
(7) an amount equal to the excess, if any, of the required cash
collateral amount over the amount then on deposit in the cash
collateral account will be deposited into the cash collateral
account;
(8) on and after the reserve account funding date, an amount equal to
the excess, if any, of the required reserve account amount over the
amount then on deposit in the reserve account will be deposited
into the reserve account;
(9) an amount equal to the excess, if any, of the required spread
account amount over the amount then on deposit in the spread
account will be deposited into the spread account; and
(10) all remaining amounts will constitute excess finance charge
collections and will be available to cover any shortfalls in
finance charge collections for other outstanding series in group
one, second deposited into the excess funding accounts so that
the Transferor Amount is not less than the Specified Transferor
Amount and, third, the remaining amount will be paid to us or
our assigns.
If your series' share of finance charge collections for any calendar
month is insufficient to pay interest on the Class C notes--including any
overdue interest and additional interest on the overdue interest--when due, a
draw will be made from amounts available in the spread account and will be paid
to the Class C noteholders on the related distribution date.
REALLOCATION OF PRINCIPAL COLLECTIONS
If your series' share of finance charge collections is not sufficient
to pay the aggregate amount of interest on the Class A notes, the Class B notes,
the Class C notes and the servicing fee for your series, then principal
collections will be reallocated to cover these amounts. Any
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reallocation of principal collections is a use of the collateral for your notes.
Consequently, these uses will reduce the remaining collateral amount by a
corresponding amount. The amount of principal collections that will be
reallocated on any distribution date will not exceed:
o the lower of:
o the excess of the amounts needed to pay current, overdue and
additional interest on the Class A notes OVER the amount of
finance charge collections allocated to your series and
available to cover these amounts; and
o the greater of (1)(a) [ ]% of the initial collateral amount
MINUS (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for the
related calendar month and (ii) the amount of unreimbursed
reallocated principal collections as of the previous
distribution date and (2) zero; PLUS
o the lower of:
o the excess of the sum of the amounts needed to pay current,
overdue and additional interest on the Class B notes and the
current and past due servicing fee for your series OVER the
amount of finance charge collections allocated to your
series and available to cover these amounts; and
o the greater of (1)(a) [ ]% of the initial collateral amount
MINUS (b) the sum of (i) the amount of unreimbursed investor
charge-offs after giving effect to investor charge-offs for
the related calendar month and (ii) the amount of
unreimbursed reallocated principal collections as of the
previous distribution date and after giving effect to the
reallocation of principal collections to make required
interest payments for Class A on the then-current
distribution date and (2) zero.
INVESTOR CHARGE-OFFS
The servicer will allocate a portion of defaulted receivables for each
calendar month to your series based on the allocation percentage for your
series. The allocation percentage is described under "--ALLOCATION PERCENTAGES"
above.
Dilution will also be allocated to your series in the circumstances
described in "DESCRIPTION OF THE NOTES--DEFAULTED RECEIVABLES; DILUTION;
INVESTOR CHARGE-OFFS" in the accompanying prospectus. If dilution is allocated
among series, your series' share of dilution will also be based upon the
allocation percentage.
On each distribution date, if the sum of the defaulted receivables and
any remaining uncovered dilution allocated to your series is greater than
finance charge collections used to cover those amounts, then the collateral
amount will be reduced by the amount of the excess. Any reductions in the
collateral amount on account of defaulted receivables and uncovered
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dilution will be reinstated to the extent that finance charge collections are
available for that purpose on any subsequent distribution date.
SHARING PROVISIONS
Your series is in group one for purposes of sharing excess finance
charge collections. Your series will share excess finance charge collections
with other series of notes in group one and other series of investor
certificates in group one for World Financial Network Credit Card Master
Trust. See "DESCRIPTION OF THE NOTES -- SHARED EXCESS FINANCE CHARGE
COLLECTIONS" in the accompanying prospectus.
Your series is a principal sharing series. See "DESCRIPTION OF THE
NOTES -- SHARED PRINCIPAL COLLECTIONS; -- EXCESS FUNDING ACCOUNT" in the
accompanying prospectus.
PRINCIPAL ACCUMULATION ACCOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the principal
accumulation account. During the controlled accumulation period, the indenture
trustee at the direction of the servicer will make deposits to the principal
accumulation account as described under "-- PRINCIPAL PAYMENTS" in this
prospectus supplement.
Funds on deposit in the principal accumulation account will be invested
to the following distribution date by the indenture trustee at the direction of
the servicer in highly rated liquid investments that meet the criteria described
in the indenture supplement. Investment earnings, net of investment losses and
expenses, on funds on deposit in the principal accumulation account will be
deposited in the collection account and treated as finance charge collections
available to your series for the related interest period. If, for any
distribution date, these net investment earnings are less than the sum of:
(a) the product of (1) the balance of the principal accumulation
account, up to the outstanding principal balance of the Class A
notes, on the record date immediately preceding that distribution
date, (2) the Class A note interest rate for the related interest
period and (3) the number of days in the related interest period
divided by 360, PLUS
(b) the product of (1) the balance of the principal accumulation
account in excess of the outstanding principal balance of the
Class A notes, up to the outstanding principal balance of the
Class B notes, in each case on the record date immediately
preceding that distribution date, (2) the Class B note interest
rate for the related interest period and (3) the number of days in
the related interest period divided by 360,
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(c) the product of (1) the balance of the principal accumulation
account in excess of the outstanding principal balance of the
Class A notes and Class B notes, up to the outstanding principal
balance of the Class C notes, in each case on the record date
immediately preceding that distribution date, (2) the Class C note
interest rate for the related interest period and (3) the number of
days in the related interest period divided by 360,
then the indenture trustee will withdraw the shortfall, to the extent required
and available, from the reserve account and deposit it in the collection account
for use as finance charge collections that are available to your series.
CASH COLLATERAL ACCOUNT: REQUIRED ENHANCEMENT AMOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the cash collateral
account. The interest of the Class B noteholders in the cash collateral account
will be subordinated to the interests of the Class A noteholders as described in
this prospectus supplement. The interest of the Class C noteholders in the cash
collateral account will be subordinated to the interests of the Class A and
Class B noteholders.
All amounts on deposit in the cash collateral account will be invested
by the indenture trustee, at the direction of the servicer, in highly rated
liquid investments that meet the criteria described in the indenture supplement.
The interest and other investment income, net of losses and investment expenses,
earned on these investments will be treated as collections of finance charge
receivables. For purposes of determining the availability of funds or the
balance of the cash collateral account, all investment earnings will be deemed
not to be available or on deposit.
On each transfer date, the servicer will calculate for each monthly
period the required draw amount, required enhancement amount and the required
cash collateral amount for the related distribution date. The transfer date,
is the day prior to each distribution date. The required draw amount will be
equal to the shortfall, if any, in interest payable on the notes and any
servicing fees due, after the application of amounts available from finance
charge collections. See "--APPLICATION OF FINANCE CHARGE COLLECTIONS." The
available enhancement amount for any transfer date will equal the amount on
deposit in the cash collateral account on that date prior to giving effect to
any deposits or withdrawals for that date and the required enhancement amount.
The required enhancement amount for any transfer date will be an amount
equal to the greater of:
o [__]% of the outstanding principal balance of the notes, after taking
into account payments to be made on that distribution date; or
o [$____________].
HOWEVER,
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the required enhancement amount will never exceed the aggregate outstanding
principal balance of the notes LESS any amounts on deposit in the principal
accumulation account, each as of the last day of the monthly period preceding
that transfer date after taking into account deposits into the principal
accumulation account on that transfer date and the payments to be made on the
related distribution date.
We may designate a lesser amount for the required enhancement amount if
each rating agency confirms that the designation will not impair its rating of
any outstanding series or class.
The required cash collateral amount will be equal to the excess, if
any, of the required enhancement amount over the Class C collateral amount
after giving effect to any reductions to occur on the related transfer date.
The Class C collateral amount is an amount equal to the excess of the
collateral amount over the sum of the outstanding principal balances of the
Class A and Class B notes after giving effect to any reductions to occur on
the related transfer date or related distribution date.
If on any transfer date, the required draw amount is greater than zero,
the indenture trustee will withdraw, to fund the deficiency in the finance
charge collections, the lesser of (1) the required draw amount and (2) the
amount on deposit in the cash collateral account on that date prior to giving
effect to any deposits or withdrawals for that date and the required enhancement
amount.
If on any transfer date, the available cash collateral amount
exceeds the required cash collateral amount, the indenture trustee will
withdraw the excess amount from the cash collateral account and apply the
excess under the terms of the indenture supplement.
RESERVE ACCOUNT
The indenture trustee will establish and maintain a segregated trust
account held for the benefit of the noteholders to serve as the reserve
account. The reserve account is established to assist with the distribution
of interest on the notes during the controlled accumulation period and on the
first distribution date with respect to the early amortization period. On
each distribution date from and after the reserve account funding date, but
prior to the termination of the reserve account, the indenture trustee, will
apply finance charge collections allocated to your series to increase the
amount on deposit in the reserve account to the extent the amount on deposit
in the reserve account is less than the required reserve account amount.
The reserve account funding date will be the distribution date with
respect to the calendar month which commences [_____] months prior to the
commencement of the controlled accumulation period, or an earlier date as the
servicer may determine.
The required reserve account amount for any distribution date on or
after the reserve account funding date will be equal to (a) [___]% of the
outstanding principal balance of the notes or (b) any other amount designated by
us. We may only designate a lesser amount if each rating
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agency confirms that the designation will not impair its rating of any
outstanding series or class and we will certify to the indenture trustee that,
based on the facts known to the certifying officer at the time, in our
reasonable belief, the designation will not cause an early amortization event to
occur for Series 2001- .
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 that
distribution date, the indenture 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, will deposit the excess in the
spread account to the extent that funds available in the spread account are less
than the required spread account amount and will distribute any remaining excess
to us or our assigns. Any amounts withdrawn from the reserve account and
distributed to us or our assigns will not be available for distribution to the
noteholders.
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 that distribution date--will be invested to the following
distribution date by the indenture trustee, at the direction of the servicer, in
highly rated liquid investments that meet the criteria described in the
indenture supplement. The interest and other investment income, net of losses
and investment expenses, earned on these investments will be either retained in
the reserve account to the extent the amount on deposit is less than the
required reserve account amount or deposited in the collection account and
treated as finance charge collections available to your series.
On or before each distribution date with respect to the controlled
accumulation period and on or before the first distribution date with respect to
the early amortization period, the indenture trustee will withdraw from the
reserve account and deposit in the collection account an amount equal to the
least of:
(1) the amount then on deposit in the reserve account with respect to
that distribution date; and
(2) the amount of the shortfall described under "--PRINCIPAL
ACCUMULATION ACCOUNT" above.
Amounts withdrawn from the reserve account on any distribution date will be
included as finance charge collections available to your series for that
distribution date.
The reserve account will be terminated upon the earliest to occur of:
(1) the first distribution date for the early amortization period;
(2) the expected principal payment date for the Class C notes; and
(3) the termination of the trust.
Upon the termination of the reserve account, all amounts on deposit in
the reserve account, after giving effect to any withdrawal from the reserve
account on that date, will be
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distributed to us or our assigns. Any amounts withdrawn from the reserve account
and distributed to us or our assigns will not be available for distribution to
the noteholders.
SPREAD ACCOUNT
The indenture trustee will establish and maintain as a segregated
account held as security primarily for the benefit of the Class C noteholders to
serve as the spread account. Amounts on deposit in the spread account will be
used as described below under "--SPREAD ACCOUNT DISTRIBUTIONS."
The spread account initially will not be funded, but will be funded up
to the required spread account amount on each distribution date from finance
charge collections allocated to your series to the extent available for that
purpose.
The required spread account amount will be determined on each
distribution date as the product of:
(a) the spread account percentage determined in accordance with the
table below for that date of determinaiton; and
(b) (1) during the revolving period or the controlled accumulation
period, the collateral amount or
(2) during the early amortization period, the collateral amount
as of the last day before the beginning of the early
amortization period, LESS amounts on deposit in the cash
collateral account on that date (after taking into account
any deposits to be made into or withdrawals from the cash
collateral account on that date); but not to exceed the
outstanding balance of the Class C notes (after taking into
account any payments to be made on that distribution date).
The spread account percentage will be determined as follows:
If the Quarterly Excess Spread Percentage is then, the spread account
greater than or equal to: and less than: Percentage will equal:
------------------------ ---------- -------------------------
[__]% -- 0
[__]% [__]% [__]%
[__]% [__]% [__]%
[__]% [__]% [__]%
[__]% [__]% [__]%
If an early amortization event with respect to Series 2001- has occurred, the
spread account percentage will equal [__]% and may not be subsequently
reduced.
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Funds on deposit in the spread account will be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture supplement. Investment earnings, net of
losses and investment expenses, will, except as otherwise indicated in this
prospectus supplement, not be deposited into the spread account and will be paid
to the transferor interest. However, after an event of default relating to your
series of notes, these investment earnings will be available for payment to
holders of the Class C notes.
SPREAD ACCOUNT DISTRIBUTIONS
On each distribution date, funds on deposit in the spread account,
including investment earnings, will be applied to cover the following items in
the following order of priority, to the extent not covered by finance charge
collections:
(1) if the interest to be paid on the Class C notes exceeds the amount
allocated to pay that interest, to fund any shortfall in the
payment of interest on the Class C notes; and
(2) to reimburse any prior reductions in the collateral amount that
have not been reimbursed.
On the earlier of the Series 2001- final maturity date and
payment in full of the Class A notes and the Class B notes, funds available
in the spread account, after giving effect to any withdrawals to be made as
discussed in the preceding paragraph, will be used to fund any shortfall in
the payment of the outstanding principal balance of the Class C notes. On any
day following an event of default and an acceleration of the notes, funds
available in the spread account will be used to fund any shortfalls in
amounts owed on the Class C notes, the Class A notes and the Class B notes,
in that order of priority.
Funds on deposit in the spread account on any distribution date, after
giving effect to all withdrawals from and deposits to the spread account, in
excess of the required spread account amount will be paid to us or our assigns.
On the date on which all amounts due to the noteholders from the spread account
have been paid in full, all amounts, if any, then remaining in the spread
account will be distributed to us or our assigns.
PAIRED SERIES
Your series may be paired with one or more other series issued at a
later time once the controlled accumulation period for your series begins. We
call each of these later issued series a paired series. See "DESCRIPTION OF THE
NOTES -- PAIRED SERIES" in the accompanying prospectus. The issuance of the
paired series will be subject to the conditions described under "DESCRIPTION OF
THE NOTES -- NEW ISSUANCES OF NOTES" in the accompanying prospectus.
We cannot guarantee that the terms of any paired series will not have
an impact on the calculation of the allocation percentage used to allocate
principal collections to your series or the
S-35
timing or amount of payments received by you as a Series 2001- noteholder. In
particular, the numerator for the allocation percentage used to allocate
principal collections to your series may be reduced upon the occurrence of an
early amortization event for a paired series, but not below the collateral
amount as of the last day of the revolving period for the paired series. The
extent to which the timing or amount of payments received by you may be affected
will depend on many factors, only one of which is a change in the calculation of
the allocation percentage.
EARLY AMORTIZATION EVENTS
An early amortization event will occur for the Series 2001- notes upon
the occurrence of any of the following events:
(a) failure of the transferor under the pooling and servicing
agreement or the transfer and servicing agreement (1) to make
any payment or deposit on the date required to be made under the
pooling and servicing agreement, the collateral series supplement,
the transfer and servicing agreement, the indenture or the
Series 2001- indenture supplement within the applicable grace
period which shall not exceed 5 days or (2) to observe or perform
in any material respect any of its other covenants or agreements
set forth in the pooling and servicing agreement, the transfer and
servicing agreement, the indenture or the Series 2001- indenture
supplement, which failure has a material adverse effect on the
Series 2001- noteholders and which continues unremedied for a
period of 60 days after written notice of the failure, requiring
the same to be remedied;
(b) any representation or warranty made by transferor under the
pooling and servicing agreement or the transfer and servicing
agreement in the transfer and servicing agreement or the pooling
and servicing agreement or any information required to be given
by it to identify the accounts proves to have been incorrect in
any material respect when made or delivered and which continues
to be incorrect in any material respect for a period of 60 days
after written notice of the failure, requiring the same to be
remedied, and as a result of which the interests of the
noteholders are materially and adversely affected and continue
to be materially and adversely affected for the designated
period; except that an early amortization event described in
this subparagraph (b) will not occur if we have accepted
reassignment of the related receivable or all related
receivables, if applicable, within the designated period;
(c) transferor's failure to convey receivables in additional accounts
or participations to the trust when required to do so;
(d) any servicer default occurs;
(e) the average of the Portfolio Yields for any 3 consecutive calendar
months is less than the average of the Base Rates for the same
calendar months;
(f) sufficient funds are not available to pay in full the outstanding
principal balance of the Class A notes, the Class B notes or the
Class C notes on their expected principal payment dates;
(g) specified bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us or the bank;
S-36
(h) we are unable for any reason to transfer receivables to the trust;
(i) World Financial Network Credit Card Master Trust or the issuer
becomes subject to regulation as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended; or
(j) an event of default for Series 2001- and an acceleration of the
maturity of the Series 2001- notes occurs under the indenture.
In the case of any event described in clause (a), (b) or (d) above, an
early amortization event will be deemed to have occurred with respect to the
notes only if, after any applicable grace period, either the indenture trustee
or the Series 2001- noteholders evidencing interests aggregating more than 50%
of the aggregate unpaid principal amount of the Series 2001- notes, by written
notice to us, the servicer and, if notice is given by the Series 2001-
noteholders, the indenture trustee, declare that an early amortization event has
occurred with respect to the Series 2001- notes as of the date of the notice.
In the case of any event described in clause (g), (h) or (i), an early
amortization event with respect to all series then outstanding, and in the case
of any event described in clause (c), (e), (f) or (j), an early amortization
event with respect to only the Series 2001- notes, will occur without any notice
or other action on the part of the indenture trustee or the Series 2001-
noteholders immediately upon the occurrence of the event.
On the business day immediately before the date on which an early
amortization event is deemed to have occurred, the early amortization period
will begin.
See "DESCRIPTION OF THE NOTES -- EARLY AMORTIZATION EVENTS" in the
accompanying prospectus for an additional discussion of the consequences of
insolvency, conservatorship or receivership events related to us and the bank.
EVENTS OF DEFAULT
The events of default for Series 2001- , as well as the rights and
remedies available to the indenture trustee and the Series 2001- noteholders
when an event of default occurs, are described under "THE INDENTURE--EVENTS OF
DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in the accompanying prospectus.
In the case of an event of default involving bankruptcy, insolvency or
similar events relating to the issuer, the principal amount of the Series 2001-
notes automatically will be deemed to be immediately due and payable. If any
other event of default for Series 2001- occurs, the indenture trustee or the
holders of a majority of the then-outstanding principal balance of the Series
2001- notes may declare the Series 2001- notes to be immediately due and
payable. If the Series 2001- notes are accelerated, you may receive principal
prior to the expected principal payment date for your class of notes.
S-37
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing fee rate for your series is 2% per annum. Your series'
share of the servicing fee for each month will be calculated as described under
"DESCRIPTION OF THE NOTES--SERVICING COMPENSATION AND PAYMENT OF EXPENSES" in
the accompanying prospectus. However, the monthly servicing fee allocable to
your series for the first distribution date will equal $[ ].
S-38
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement between us and the underwriters named below, we have agreed to sell to
the underwriters, and each of the underwriters has severally agreed to purchase,
the principal amount of the notes set forth opposite its name:
PRINCIPAL AMOUNT OF
CLASS C UNDERWRITERS CLASS C NOTES
-------------------- -------------------
Total............................... $_____
.................................... $
======
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth in that agreement, to purchase all of the notes
offered by this prospectus supplement if any of the notes in that class are
purchased.
The underwriters have advised us that they propose initially to offer
the notes to the public at the prices set forth in this prospectus supplement,
and to dealers chosen by the underwriters at the prices set forth in this
prospectus supplement less a concession not in excess of the percentages set
forth in the following table. The underwriters and those dealers may reallow a
concession not in excess of the percentages set forth in the following table.
After the initial public offering of the notes, the public offering prices and
the concessions referred to in this paragraph may be changed. Additional
offering expenses are estimated to be $[ ].
CLASS C
NOTES
-----
Concessions........................ %
Reallowances....................... %
The underwriters will be compensated as set forth in the following table:
UNDERWRITERS' AMOUNT
DISCOUNTS AND PER $1,000
COMMISSIONS OF PRINCIPAL TOTAL AMOUNT
------------- ------------ ------------
Class C Notes % $ $
Each underwriter has represented and agreed that:
o 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 notes in, from or otherwise involving
the United Kingdom;
S-39
o it has only issued or passed on and will only issue or pass on
in the United Kingdom any document received by it in connection
with the issue or sale of the notes 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 that document may otherwise lawfully be issued or
passed on;
o if it is an authorized person under Chapter III of part I of
the Financial Services Act 1986, it has only promoted and will
only promote (as that term is defined in Regulation 1.02(2) of
the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991) to any person in the United Kingdom the
scheme described in this prospectus supplement and the
accompanying prospectus if that person is of a kind described
either in Section 76(2) of the Financial Services Act 1986 or
in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991; and
o it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996.
We will indemnify the underwriters against the liabilities specified in
the underwriting agreement, including liabilities under the Securities Act, or
will contribute to payments the underwriters may be required to make in
connection with those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. The underwriters do not have an
"overallotment" option to purchase additional notes in the offering, so
syndicate sales in excess of the offering size will result in a naked short
position. The underwriters must close out any naked short position through
syndicate covering transactions in which the underwriters purchase notes in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the notes in the open market after pricing that would adversely affect investors
who purchase in the offering. Stabilizing transactions permit bids to purchase
the notes so long as the stabilizing bids do not exceed a specified maximum.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by that syndicate member are
purchased in a syndicate covering transaction. Over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of the notes or
preventing or retarding a decline in the market price of the notes. As a result,
the price of the notes may be higher than the price that might otherwise exist
in the open market. Neither we nor the underwriters represent that the
underwriters will engage in any of these transactions or that those
transactions, once commenced, will not be discontinued without notice at any
time.
In the ordinary course of their respective businesses, the underwriters
and their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with us and our
affiliates.
S-40
LEGAL MATTERS
Certain legal matters relating to the issuance of the Class C notes
will be passed upon for us by Mayer, Brown & Platt as special counsel for us.
Certain legal matters relating to the federal tax consequences of the issuance
of the Class C notes will be passed upon for us by Mayer, Brown & Platt. Certain
legal matters relating to the issuance of the Class C notes will be passed upon
for the underwriters by Orrick, Herrington & Sutcliffe LLP.
S-41
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"ADDITIONAL MINIMUM TRANSFEROR AMOUNT" means,
(1) as of any date of determination falling in November, December
and January of each calendar year, an amount calculated as follows:
(a) 2% TIMES (b) (i) Aggregate Principal Balance
PLUS
(ii) if on such date of
determination, World
Financial Network Credit
Card Master Trust has not
been terminated, amounts on
deposit in the excess funding
account
(2) for any other date of determination; zero.
"BASE RATE" means, with respect to any calendar month, the annualized percentage
equivalent of a fraction:
o the NUMERATOR of which is the sum of (a) the interest due on the
Series 2001- notes and (b) the monthly servicing
fee rate for your series; and
o the DENOMINATOR of which is the collateral amount, plus amounts on
deposit in the principal accumulation account, each as of the last
day of that calendar month.
"EXCESS SPREAD PERCENTAGE" means, for any distribution date, the
amount, if any, by which the Portfolio Yield for the prior calendar month
exceeds the Base Rate for the prior calendar month. However, the Excess
Spread Percentage may never be less than zero and for the first distribution
date will be
S-42
calculated for the period from the closing date through the end of the calendar
month preceding the first distribution date.
"MINIMUM TRANSFEROR AMOUNT" will be calculated as follows:
(a) (i) Aggregate Principal (ii) 4%, or if less, the highest of
Balance TIMES the required retained
transferor percentages
specified in the prospectus
supplement for each series
PLUS
(b) any Additional Minimum
Transferor Amount
"PORTFOLIO YIELD" means, with respect to any calendar month, the
annualized percentage equivalent of a fraction:
o the NUMERATOR of which is the amount of finance charge collections
allocated to your series, MINUS the amount of defaulted receivables
allocated to your series for that calendar month; and
o the DENOMINATOR of which is the collateral amount plus amounts on
deposit in the principal accumulation account, each as of the last
day of that calendar month.
"QUARTERLY AVERAGE EXCESS SPREAD PERCENTAGE" means, for any distribution date,
the percentage determined as follows:
For the [Month 1]
2001 The Excess Spread Percentage for the
distribution date: [Month 1] 2001 distribution date
For the [Month 2] The sum of the Excess Spread Percentage for the [Month 1] 2001
2001 distribution date, plus the Excess Spread Percentage for the
distribution date: [Month 2] 2001 distribution date
--------------------------------------------------------------
2
For each following The sum of the Excess Spread Percentages for the then-current
distribution date: distribution date and the two prior distribution dates
--------------------------------------------------------------
3
["SPECIFIED MINIMUM TRANSFEROR AMOUNT" means ________________.]
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Annex I
OTHER SECURITIES ISSUED AND OUTSTANDING
The principal characteristics of the other outstanding series of notes
previously issued by the issuer and the outstanding series of investor
certificates issued by World Financial Network Credit Card Master Trust are set
forth in Part A and Part B, respectively, of the table below. All of the
outstanding series of notes and investor certificates are in group [___]. For
more specific information with respect to any series of notes or investor
certificates, any prospective investor should contact us at (614) 729-4000.
PART A
[I. SERIES 2001-
Series 2001- initial note principal amount..........................$
Initial Class A note principal amount...............................$
Initial Class B note principal amount...............................$
Initial Class C note principal amount...............................$
Initial cash collateral account balance.............................$
Class A interest rate..................................[one-month LIBOR plus] % per annum
Class B interest rate.................................[one-month LIBOR plus] % per annum
Class C interest rate..................................[one-month LIBOR plus] % per annum
[Controlled accumulation amount....................................................................................$ ]
[Expected principal payment date.................................................................[ ] distribution date]
Annual servicing fee percentage.................................................................................2.0% per annum
[Enhancement for the Class A notes.....................subordination of Class B and Class C notes and cash collateral account]
[Enhancement for the Class B notes.................................subordination of Class C notes and cash collateral account]
[Enhancement for the Class C notes.................................................spread account and cash collateral account]
Series 2001- termination date......................................................................[ ] distribution date
Group.................................................................................................................[ ]
Series issuance date................................................................................. , 2001]
Required retained transferor percentage for 2001-.....................................................................[ ]%
PART B
SERIES 1996-A
Series 1996-A initial invested amount.............................................................................$550,000,000
Class A initial invested amount...................................................................................$445,500,000
Class B initial invested amount....................................................................................$46,750,000
Initial collateral interest........................................................................................$57,750,000
Initial cash collateral account balance............................................................................$13,750,000
Series servicing fee rate.................................................................................................2.0%
Class A interest rate....................................................................................................6.70%
Class B interest rate....................................................................................................7.00%
Maximum collateral rate..........................................................................................LIBOR & 1.10%
Class A expected principal payment date..............................................March 2001 to July 2001 distribution date
Class B expected final payment date..............................................................August 2001 distribution date
Series 1996-A termination date.................................................................February 2004 distribution date
Group......................................................................................................................One
Series issuance date...............................................................................................May 9, 1996
Required retained transferor percentage for 1996-A..........................................................................4%
SERIES 1996-B
Series 1996-B initial invested amount................................................................$350,000,000
Class A initial invested amount......................................................................$283,500,000
Class B initial invested amount.......................................................................$29,750,000
Initial collateral interest...........................................................................$36,750,000
Initial cash collateral account balance................................................................$8,750,000
Series servicing fee rate....................................................................................2.0%
Class A interest rate.......................................................................................6.95%
Class B interest rate.......................................................................................7.20%
Maximum collateral rate.............................................................................LIBOR & 1.10%
Class A expected final payment date....................................................May 2003 distribution date
Class B expected final payment date...................................................June 2003 distribution date
Series 1996-B termination date.......................................................April 2006 distribution date
Group.........................................................................................................One
Series issuance date..................................................................................May 9, 1996
Required retained transferor percentage for 1996-B.............................................................4%
SERIES 1996-VFC
The trust has also issued Series 1996-VFC which is a series of variable
funding certificates, meaning that the aggregate outstanding principal amount
of Series 1996-VFC certificates and the collateral interest may be increased
or decreased from time to time subject to a maximum amount. The maximum
amount for Series 1996-VFC is currently $678,000,000. The maximum amount for
Series 1996-VFC may be increased or decreased from time to time, subject to
certain conditions, including the mutual agreement of the transferor and the
holders of Series 1996-VFC certificates. Series 1996-VFC is in an extendable
revolving period (unless an early amortization event occurs prior to that
date). That revolving period may be extended by mutual agreement of the
transferor and the holders of Series 1996-VFC certificates.
SERIES 1999-A
Series 1999-A initial invested amount................................................................$615,000,000
Class A initial invested amount......................................................................$473,400,000
Class B initial invested amount.......................................................................$51,600,000
Class C initial invested amount.......................................................................$75,000,000
Initial cash collateral account balance...............................................................$15,000,000
Class A interest rate.................................................................................LIBOR+0.33%
Class B interest rate.................................................................................LIBOR+0.80%
Class C interest rate................................................................................LIBOR+1.275%
Scheduled pay out commencement date..............................................September 2002 Distribution Date
Annual servicing fee percentage....................................................................2.0% per annum
Enhancement for the Class A certificates.........................subordination of Class B and Class C certificate
Enhancement for the Class B certificates....................................subordination of Class C certificate
Series 1999-A termination date........................................................July 2006 distribution date
Group.........................................................................................................One
Series issuance date...........................................................................September 17, 1999
Required retained transferor percentage for 1999-A.............................................................4%
SERIES 2001-VFC
The trust has also issued Series 2001-VFC which is a series of variable funding
certificates, meaning that the aggregate outstanding principal amount of Series
2001-VFC certificates may be increased or decreased from time to time subject to
a maximum amount. The maximum amount for Series 2001-VFC is currently
$492,250,000. The maximum amount for Series 2001-VFC may be increased or
decreased from time to time, subject to certain conditions, including the mutual
agreement of the transferor and the holders of Series 2001-VFC certificates.
Series 2001-VFC is in a revolving period until October 1, 2001 (unless an early
amortization event occurs prior to that date). That revolving period may be
extended by mutual agreement of the transferor and the holders of Series
2001-VFC certificates.
World Financial Network Credit Card Master Note Trust
Issuer
WFN Credit World Financial Network National Bank
Company, LLC
Transferor Servicer
SERIES 2001-
$
CLASS C [FLOATING RATE] [___%] ASSET BACKED NOTES
$
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
Underwriters of the Class C notes
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus. We have not authorized anyone to provide you with different
information.
We are not offering the notes in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than
the dates stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriters of the notes and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the notes
will deliver a prospectus supplement and prospectus until , 2001.
The information in this prospectus is not complete and may be amended. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED _______ __, 2001
PROSPECTUS
WORLD FINANCIAL NETWORK CREDIT CARD MASTER NOTE TRUST
Issuer
WFN CREDIT COMPANY, LLC WORLD FINANCIAL NETWORK NATIONAL BANK
Transferor Servicer
Asset Backed Notes
THE ISSUER --
o may periodically issue asset backed notes in one or more
series with one or more classes; and
o will have a direct or indirect interest in--
o receivables in a portfolio of private label revolving
credit card accounts owned by World Financial Network
National Bank;
o payments due on those receivables; and
o other property described in this prospectus and in
the accompanying prospectus supplement.
THE NOTES --
o will be paid only from the trust assets;
o offered with this prospectus will be rated in one of the four
highest rating categories by at least one nationally
recognized rating organization;
o may have one or more forms of credit enhancement; and
o will be issued as part of a designated series which may
include one or more classes of notes.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 3 IN THIS
PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of World Financial Network Credit Card Master Note
Trust only and are not obligations of WFN Credit Company, LLC, World Financial
Network National Bank or any other person.
This prospectus may be used to offer and sell notes of a series only if
accompanied by the prospectus supplement for that series.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_______ __, 2001
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We (WFN Credit Company, LLC) provide information to you about the notes
in two separate documents: (a) this prospectus, which provides general
information, some of which may not apply to your series of notes, and (b) the
accompanying prospectus supplement, which describes the specific terms of your
series of notes, including:
o the terms, including interest rates, for each class;
o the timing of interest and principal payments;
o information about the receivables;
o information about credit enhancement, if any, for each class;
o the ratings for each class being offered; and
o the method for selling the notes.
If the terms of your series of notes vary between this prospectus and
the accompanying prospectus supplement, you should rely on the information in
the prospectus supplement.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
TABLE OF CONTENTS
PAGE
Summary: Overview of Transactions.....................................1
Risk Factors...........................................................3
It may not be possible to find an investor to
purchase your notes...........................................3
Some liens would be given priority over your notes
which could cause delayed or reduced payments..................3
If a conservator or receiver were appointed for
World Financial Network National Bank
delays or reductions in payment of your notes
could occur...................................................3
The bank may change the terms and conditions of
the accounts in a way that reduces
collections...................................................5
Allocations of charged-off receivables or
uncovered dilution could reduce payments to
you...........................................................6
Current and proposed regulation and legislation
relating to consumer protection laws may
impede collection efforts or reduce
collections...................................................7
Limited remedies for breaches of representations
could reduce or delay payments................................7
Payment and origination patterns of receivables
and operations of retailers could reduce
collections...................................................8
The bank depends on its ability to sell and
securitize its credit card receivables to
fund new receivables..........................................9
The retail affiliates of The Limited are a
significant stockholder of the bank's parent,
and a change in ownership of these retailers
could affect the generation of receivables
and impact the return on your notes...........................10
Subordinated classes bear losses before senior
classes.......................................................11
Recharacterization of principal receivables would
reduce principal receivables and may require
the addition of new receivables...............................11
The note interest rate and the receivables
interest rate may re-set at different times,
resulting in reduced or early payments to you.................11
We may assign our obligations as transferor and
the bank may assign its obligations as
servicer......................................................12
Important Parties......................................................13
The Issuer........................................................13
WFN Credit Company, LLC...........................................13
World Financial Network Credit Card Master Trust..................13
World Financial Network National Bank.............................14
Alliance Data Systems.............................................15
The Bank's Private Label Credit Card Activities........................16
World Financial Network National Bank Credit
Cards.........................................................16
Marketing Programs and Account Origination........................16
Portfolio Acquisitions............................................18
Underwriting Process..............................................18
Servicing of Accounts.............................................18
Delinquency and Collections Procedures............................19
The Trust Portfolio....................................................20
Use of Proceeds........................................................22
Description of the Notes...............................................22
General...........................................................23
Book-Entry Registration...........................................24
Definitive Notes..................................................28
Interest Payments.................................................29
Principal Payments................................................29
Suspension and Postponement of Controlled
Accumulation Period...........................................30
Transfer and Assignment of Receivables............................32
Multiple Issuance Series..........................................33
New Issuances of Notes............................................33
Representations and Warranties....................................34
Addition of Trust Assets..........................................36
Removal of Accounts...............................................38
Collection and Other Servicing Procedures.........................39
Discount Option...................................................39
Trust Accounts....................................................39
Funding Period....................................................40
Application of Collections........................................41
Shared Excess Finance Charge Collections..........................42
Shared Principal Collections......................................42
Excess Funding Account............................................42
Defaulted Receivables; Dilution; Investor
Charge-Offs...................................................43
Defeasance........................................................43
Final Payment of Principal........................................44
Paired Series.....................................................44
Early Amortization Events.........................................45
Servicing Compensation and Payment of Expenses....................46
Matters Regarding the Transferor and the Servicer.................47
Servicer's Representations and Warranties.........................50
Servicer Default..................................................50
Reports to Noteholders............................................52
Evidence as to Compliance.........................................54
Amendments........................................................54
The Indenture..........................................................56
Events of Default; Rights upon Event of Default...................56
Covenants.........................................................60
Modification of the Indenture.....................................61
Annual Compliance Statement.......................................63
Indenture Trustee's Annual Report.................................63
List of Noteholders...............................................64
Satisfaction and Discharge of Indenture...........................64
The Indenture Trustee.............................................64
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Table of Contents
(continued)
PAGE
Matters Regarding the Administrator...............................65
Pooling and Servicing Agreement........................................65
New Issuances of Investor Certificates............................65
Amendments........................................................66
Credit Enhancement.....................................................67
General...........................................................67
Subordination.....................................................68
Letter of Credit..................................................68
Cash Collateral Guaranty, Cash Collateral Account
or Excess Collateral..........................................69
Surety Bond or Insurance Policy...................................69
Spread Account....................................................70
Reserve Account...................................................70
Description of the Receivables Purchase Agreement......................71
Sale of Receivables...............................................71
Representations and Warranties....................................71
Covenants.........................................................72
Amendments........................................................72
Termination.......................................................73
Note Ratings...........................................................73
Material Legal Aspects of the Receivables..............................74
Transfer of Receivables...........................................74
Conservatorship and Receivership..................................75
Consumer Protection Laws..........................................77
Federal Income Tax Consequences........................................77
General...........................................................77
Tax Classification of the Issuer and the Notes....................78
Consequences to Holders of the Offered Notes......................80
State and Local Tax Consequences..................................83
ERISA Considerations...................................................84
Plan of Distribution...................................................85
Reports to Noteholders.................................................86
Where You Can Find More Information....................................86
Glossary of Terms for Prospectus.......................................87
Global Clearance, Settlement and Tax Documentation
Procedures...........................................................91
Initial Settlement................................................91
Secondary Market Trading..........................................92
Certain U.S. Federal Income Tax Documentation
Requirements..................................................93
-ii-
SUMMARY: OVERVIEW OF TRANSACTIONS
World
World Financial World
Fincancial WFN Network Financial
Network Receivables Credit Receivables Credit Collateral Network Notes
National Company, Card Certificate Credit Card
Bank LLC Master Master Note
Trust Trust
Each series of notes will be issued by World Financial Network Credit Card
Master Note Trust and will include one or more classes of notes, representing
debt of the issuer. Each series and class may differ as to timing and priority
of distributions, allocations of losses, interest rates, amount of distributions
in respect of principal or interest and credit enhancement. We, WFN Credit
Company, LLC, will disclose the details of these timing, priority and other
matters in a prospectus supplement.
Initially, the primary asset of the issuer will be a collateral certificate
issued by World Financial Network Credit Card Master Trust to us and transferred
to the issuer under a transfer and servicing agreement. It represents a
beneficial interest in the assets of World Financial Network Credit Card Master
Trust. World Financial Network Credit Card Master Trust owns primarily credit
card receivables arising in private label revolving credit card accounts.
World Financial Network National Bank is the originator of the credit card
receivables. The receivables comprising the trust have been transferred either
directly by the bank to the trust or by the bank to us, and in turn, by us to
the trust. Under the pooling and servicing agreement entered into by the bank in
1996, the bank, in its capacity as transferor, designated all eligible accounts
from a number of merchant programs in its portfolio of private label credit card
accounts and transferred the receivables in those accounts to the trust. The
bank continued to transfer additional receivables generated in those accounts
and additional accounts to the trust until [_______ __] 2001, when the pooling
and servicing agreement was amended. The amendment, among other things,
designated us as the transferor replacing the bank. At the same time, we entered
into a receivables purchase agreement with the bank whereby the bank designated
all eligible accounts to us and transferred the receivables created after the
date of the agreement to us. Under the receivables purchase agreement, the bank
will, from time to time, designate additional accounts to us and transfer
additional receivables to us. Under the amended pooling and servicing agreement,
in our capacity as transferor, we transfer all receivables sold to us by the
bank under the receivables purchase agreement to the trust. The bank will
continue to own the accounts that are designated to the trust.
After all outstanding series of investor certificates that have been issued by
World Financial Network Credit Card Master Trust have been retired, we may cause
World Financial Network Credit Card Master Trust to terminate, at which time the
receivables will be transferred to the issuer and held directly by the issuer.
We refer to the entity -- either World Financial Network Credit Card Master
Trust or the issuer -- that holds the receivables at any given time as the
trust.
The notes will represent the right to payments from a portion of collections on
the credit card receivables and certain fees held by the trust. All new
receivables generated in the accounts will be automatically transferred to the
trust. The total amount of receivables held by the trust will fluctuate daily as
new receivables are generated and payments are received on existing receivables.
1
The bank continues to service the receivables that are transferred to the trust
and will act as the issuer's administrator.
BNY Midwest Trust Company, successor to the corporate trust administration of
Harris Trust and Savings Bank, successor to The Bank of New York, is the trustee
for World Financial Network Credit Card Master Trust. BNY Midwest Trust Company
will also act as indenture trustee for the issuer. The issuer will grant a
security interest in its assets -- including the collateral certificate or, if
World Financial Network Credit Card Master Trust has terminated, the receivables
- -- to the indenture trustee for the benefit of the noteholders.
2
RISK FACTORS
THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL RISK FACTORS THAT APPLY TO
AN INVESTMENT IN THE NOTES. YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS AND
ANY RISK FACTORS IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT BEFORE DECIDING
WHETHER TO PURCHASE THE NOTES.
IT MAY NOT BE POSSIBLE TO FIND AN INVESTOR TO PURCHASE YOUR
NOTES.
The underwriters may assist in resales of the notes
but they are not required to do so. A secondary market for any
notes may not develop. If a secondary market does develop, it
might not continue or it might not be sufficiently liquid to
allow you to resell any of your notes.
SOME LIENS WOULD BE GIVEN PRIORITY OVER YOUR NOTES WHICH COULD
CAUSE DELAYED OR REDUCED PAYMENTS.
We and the bank account for the transfer of the
receivables as a sale. Even so, a court could conclude that we
or the bank own the receivables and that the trust holds only
a security interest. Even if a court would reach that
conclusion, however, steps will be taken to give the indenture
trustee a first-priority perfected security interest, either
directly or through World Financial Network Credit Card Master
Note Trust.
If a court were to conclude that the trust has only a
security interest, a tax or governmental lien or other lien
imposed under applicable state or federal law without consent
on our property arising before receivables come into existence
may be senior to the trust's interest in the receivables.
Additionally, if a receiver or conservator were appointed for
the bank, the fees and expenses of the receiver or conservator
might be paid from the receivables before the trust receives
any payments on the receivables. In addition, the trust may
not have a first-priority perfected security interest in
collections commingled and used for the benefit of the
servicer if (a) insolvency proceedings were commenced by or
against the servicer or (b) a twenty-day period were to elapse
after receipt by the servicer of collections that have been
commingled with other funds. If any of these events were to
occur, payments to you could be delayed or reduced. See
"MATERIAL LEGAL ASPECTS OF THE RECEIVABLES--TRANSFER OF
RECEIVABLES" and "DESCRIPTION OF THE NOTES--REPRESENTATIONS
AND WARRANTIES" in this prospectus.
IF A CONSERVATOR OR RECEIVER WERE APPOINTED FOR WORLD
FINANCIAL NETWORK NATIONAL BANK DELAYS OR REDUCTIONS IN
PAYMENT OF YOUR NOTES COULD OCCUR.
-3-
If the bank were to become insolvent, the FDIC could
act as conservator or receiver for the bank. In that role, the
FDIC would have broad powers to repudiate contracts to which
the bank was party if the FDIC determined that the contracts
were burdensome and that repudiation would promote the orderly
administration of the bank's affairs. Also, if the FDIC were
acting as the bank's conservator or receiver, the FDIC might
have the power to extend its repudiation and avoidance powers
to us because we are a wholly-owned subsidiary of the bank.
The FDIC has adopted a rule stating that, if
certain conditions are met, the FDIC shall not use its
repudiation power to reclaim, recover or recharacterize as
property of an FDIC-insured bank any financial assets
transferred by that bank in connection with a securitization
transaction. Although the FDIC has the power to repeal or
amend its own rules, the securitization rule states that any
repeal or amendment of that rule will not apply to any
transfers of financial assets made before the repeal or
modification.
We have structured the issuance of the notes with the
intention that the transfers of the receivables by the bank
would have the benefit of this rule. If the FDIC were to
assert that the rule does not apply to these transfers of
receivables or that these transactions do not comply with
certain banking laws, however, payments of principal and
interest on your notes could be delayed and, if the FDIC were
successful, possibly reduced. Furthermore, if the FDIC were
successful, the FDIC could--
o require the indenture trustee or any of the other
transaction parties to go through the
administrative claims procedure established by
the FDIC in order to obtain payments on the notes;
o obtain a stay of any actions by any of those
parties to enforce the transaction documents
against the bank; or
o repudiate the transaction documents and
limit the affected parties' claims to their
"actual direct compensatory
-4-
damages" (as defined in the statute that
governs the FDIC's authority and actions as
a receiver or conservator).
If the FDIC were to successfully take any of these actions,
the amount payable to you could be lower than the outstanding
principal and accrued interest on the notes, thus resulting in
losses to you.
We are a wholly-owned bankruptcy remote subsidiary of
the bank and our limited liability company agreement limits
the nature of our business. If, however, we became a debtor in
a bankruptcy case, and our transfer of the receivables to the
trust were construed as a grant of a security interest to
secure a borrowing, your payments of outstanding principal and
interest could be delayed and possibly reduced.
Because we are a wholly-owned subsidiary of
the bank, certain banking laws and regulations may apply to
us, and if we were found to have violated any of these laws
or regulations, payments to you could be delayed or
reduced. In addition, if the bank entered conservatorship
or receivership, the FDIC could seek to exercise control
over the receivables or our other assets on an interim or a
permanent basis. Although steps have been taken to minimize
this risk, the FDIC could argue that --
o our assets (including the receivables)
constitute assets of the bank available for
liquidation and distribution by a conservator
or receiver for the bank;
o we and our assets (including the receivables)
should be substantively consolidated with the
bank and its assets; or
o the FDIC's control over the receivables is
necessary for the bank to reorganize or to
protect the public interest.
If these or similar arguments were made, whether
successfully or not, payments to you could be delayed or
reduced. Furthermore, regardless of any decision made by
the FDIC or ruling made by a court, the fact that the bank
has entered into conservatorship or receivership could have
an adverse effect on the liquidity and value of the notes.
If a conservator or receiver were appointed for the
bank, an early payment of principal on all outstanding
series could result. Under the terms of the agreement that
governs the transfer of the receivables from us to the
trust, new principal receivables would not be transferred
to the trust. However, the conservator or the receiver may
have the power, regardless of the terms of that agreement,
to prevent the early payment of principal or to require new
principal receivables to continue being transferred. In
addition, the conservator or receiver may have the power to
prevent either the indenture trustee or the noteholders
from appointing a new servicer or to direct the servicer to
stop servicing the receivables. See "MATERIAL LEGAL ASPECTS
OF THE RECEIVABLES-- CONSERVATORSHIP, RECEIVERSHIP AND
BANKRUPTCY" in this prospectus.
THE BANK MAY CHANGE THE TERMS AND CONDITIONS OF THE ACCOUNTS
IN A WAY THAT REDUCES COLLECTIONS.
As owner of the accounts, the bank retains the right
to change various account terms, including finance charges,
other fees and the required monthly minimum payment. These
changes may be voluntary on the part of the bank or may be
required by law or market conditions. Changes in interest and
fees could decrease the effective yield on the accounts and
this could result in an early payment of principal of your
notes. Changes could also cause a reduction in the credit
ratings on your notes.
-5-
ALLOCATIONS OF CHARGED-OFF RECEIVABLES OR UNCOVERED DILUTION
COULD REDUCE PAYMENTS TO YOU.
The primary risk associated with extending credit to
the bank's customers under its private label credit card
programs is the risk of default or bankruptcy of the customer,
resulting in the customer's account balance being charged-off
as uncollectible. We rely principally on the customer's
creditworthiness for repayment of the account and therefore
have no other recourse for collection. The bank may not be
able to successfully identify and evaluate the
creditworthiness of cardholders to minimize delinquencies and
losses. General economic factors, such as the rate of
inflation, unemployment levels and interest rates, may result
in greater delinquencies that lead to greater credit losses
among customers.
In addition to being affected by general economic
conditions and the success of the servicer's collection and
recovery efforts, the trust's delinquency and net credit card
receivable charge-off rates are affected by the credit risk of
credit card receivables and the average age of the various
credit card account portfolios. The average age of credit card
receivables affects the stability of delinquency and loss
rates of the portfolio because delinquency and loss rates
typically increase as the average age of accounts in a credit
card portfolio increases. We believe that the trust's
portfolio will experience increasing levels of delinquency and
loan losses as the average age of the accounts increases. The
servicer will write off the receivables arising in accounts
designated to the trust if the receivables become
uncollectible. Your series will be allocated a portion of
these charged-off receivables. See "DESCRIPTION OF SERIES
PROVISIONS-- ALLOCATION PERCENTAGES" and "--INVESTOR
CHARGE-OFFS" in the accompanying prospectus supplement.
Unlike charged-off receivables, reductions in the
receivables due to returns of merchandise, unauthorized
charges or disputes between a cardholder and a merchant,
called dilution, are typically absorbed by reductions in our
interest in the trust, the transferor interest, or reimbursed
by us through cash deposits to the excess funding account and
are not intended to be allocated to investors. However, to the
extent our interest is insufficient to cover dilution for any
calendar month and we then default in our obligation to
compensate the trust for these reductions, your series will be
allocated a portion of the uncovered dilution. If the amount
of charged-off receivables and any uncovered dilution
allocated to your series of notes exceeds the amount of funds
available to reimburse those amounts, you may not receive the
full amount of
-6-
principal and interest due to you. See "Description of Series
Provisions--Investor Charge-Offs" in the accompanying
prospectus supplement and "Description of the Notes--Defaulted
Receivables; Dilution; Investor Charge-Offs" in this
prospectus.
CURRENT AND PROPOSED REGULATION AND LEGISLATION RELATING TO
CONSUMER PROTECTION LAWS MAY IMPEDE COLLECTION EFFORTS OR
REDUCE COLLECTIONS.
Various federal and state consumer protection laws
regulate the creation and enforcement of consumer loans,
including credit card accounts and receivables. Such laws and
regulations, among other things, limit the fees and other
charges that the bank can impose on customers, limit or
prescribe certain other terms of the bank's products and
services, require specified disclosures to consumers, or
require that we maintain certain licenses, qualifications and
minimum capital levels. In some cases, the precise application
of these statutes and regulations is not clear. In addition,
numerous legislative and regulatory proposals are advanced
each year which, if adopted, could have a material adverse
effect on the amount of collections available to the trust or
further restrict the manner in which the servicer may conduct
its activities. The failure to comply with, or adverse changes
in, these laws or regulations or adverse changes in their
interpretation, could make it more difficult for the servicer
of the receivables to collect payments on the receivables or
reduce the finance charges and other fees that can be charged,
resulting in reduced collections.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable under their
terms against the obligors on those receivables. If a
cardholder sought protection under federal or state bankruptcy
or debtor relief laws, a court could reduce or discharge
completely the cardholder's obligations to repay amounts due
on its account and, as a result, the related receivables would
be written off as uncollectible. See "MATERIAL LEGAL ASPECTS
OF THE RECEIVABLES--CONSUMER PROTECTION LAWS" in this
prospectus.
LIMITED REMEDIES FOR BREACHES OF REPRESENTATIONS COULD REDUCE
OR DELAY PAYMENTS.
When we transfer the receivables to the trust, we
make representations and warranties relating to the validity
and enforceability of the receivables arising under the
accounts designated to the trust, and as to the perfection and
priority of the indenture trustee's interest in the
receivables. However, none of the trustee for World Financial
Network Credit Card Master Trust,
-7-
the owner trustee or the indenture trustee will make any
examination of the receivables or the related assets to
determine the presence of defects or compliance with the
representations and warranties or for any other purpose.
A representation or warranty relating to the
receivables may be violated if the related obligors have
defenses to payment or offset rights, or our creditors or
creditors of the bank claim rights to the trust assets. If a
representation or warranty is violated, we may have an
opportunity to cure the violation. If we are unable to cure
the violation within the specified time period or if there is
no right to cure the violation, we must accept reassignment of
the receivables affected by the violation. These reassignments
are the only remedy for breaches of representations and
warranties, even if your damages exceed your share of the
reassignment price. See "DESCRIPTION OF THE
NOTES--REPRESENTATIONS AND WARRANTIES" in this prospectus.
PAYMENT AND ORIGINATION PATTERNS OF RECEIVABLES AND OPERATIONS
OF RETAILERS COULD REDUCE COLLECTIONS.
The receivables transferred to the trust may be paid
at any time. Prepayments represent principal reductions in
excess of the contractually scheduled reductions. The rate of
cardholder prepayments or defaults on credit card balances may
be affected by a variety of economic factors, including
interest rates and the availability of alternative financing,
most of which are not within the bank's control. A decrease in
interest rates could cause cardholder prepayments to increase.
We cannot assure the creation of additional receivables in the
accounts designated to the trust or that any particular
pattern of cardholder payments will occur. A significant
decline in the amount of new receivables generated could
result in the occurrence of an early amortization event for
one or more series and the commencement of the early
amortization period for each of those series. If an early
amortization event occurs, you could receive payment of
principal sooner than expected. In addition, changes in
finance charges can alter the monthly payment rates of
cardholders. A significant decrease in monthly payment rates
could slow the return or accumulation of principal during an
amortization period or accumulation period. See "MATURITY
CONSIDERATIONS" in the accompanying prospectus supplement.
The bank's ability to generate new receivables is
dependent upon its ability to compete in the current industry
environment and upon the retailers from which purchases may be
financed on its private label credit cards. Accordingly, the
trust is completely
-8-
dependent upon sales at or through the retailers for the
generation of receivables. The retailing industry is intensely
competitive. Generally, the retailers compete not only with
other retailers, department stores and catalogue sale
businesses in the geographic areas in which they operate but
also with numerous other types of retail outlets. We cannot
assure you that the retailers will continue to generate
receivables at the same rate as in prior years. Also, the
retailers generally accept most major credit cards, and we
cannot guaranty that credit card sales under the bank's
proprietary card programs will not decline as a percentage of
total credit card sales by the retailers.
In addition, the bank operates its private label
credit card programs with various retailers under agreements
with fixed minimum terms, some of which may expire while your
notes are outstanding. Also, the agreements generally permit
the retailer to discontinue the program prior to the
termination date if the bank materially breaches its
obligations under the agreement. If the bank was unable to
adequately perform its obligations, or a retailer were
otherwise to assert that the bank was not adequately
performing, then one or more of the programs could be
terminated, leading to a reduction in the generation of
receivables.
THE BANK DEPENDS ON ITS ABILITY TO SELL AND SECURITIZE ITS
CREDIT CARD RECEIVABLES TO FUND NEW RECEIVABLES.
The bank's ability to originate and service
receivables is dependent upon its continued access to funding
sources. Since January 1996, the bank has used a program
involving the sale and securitization of its private label
credit card receivables as its primary funding vehicle for
private label credit card receivables. If the bank was unable
to regularly securitize its receivables, its ability to
generate new receivables and to service receivables would be
materially impaired. A number of factors affect securitization
transactions, some of which are beyond the bank's control,
including:
o conditions in the securities markets in
general and the asset-backed securitization
market in particular;
o conformity in the quality of private label
credit card receivables to rating agency
requirements and changes in those
requirements; and
o availability of credit enhancement.
-9-
These factors could adversely affect the bank's ability to
effect securitization transactions or the benefits to the bank
of securitization transactions.
In addition, the bank has overcollateralized and
maintained an interest in its securitizations in order to
achieve better credit ratings. Failure to obtain acceptable
credit ratings or more stringent credit enhancement
requirements could decrease the efficiency of or have an
adverse effect on the timing of, or the bank's ability to
effect, future securitizations.
The bank intends to continue public securitizations
of its private label credit card receivables. The inability to
securitize private label credit card receivables due to
changes in the market, the unavailability of credit
enhancements, or any other circumstance or event would have a
material adverse effect on the bank's business, financial
condition and operating results.
THE RETAIL AFFILIATES OF THE LIMITED ARE A SIGNIFICANT
STOCKHOLDER OF THE BANK'S PARENT, AND A CHANGE IN OWNERSHIP OF
THESE RETAILERS COULD AFFECT THE GENERATION OF RECEIVABLES AND
IMPACT THE RETURN ON YOUR NOTES.
A number of the retailers, representing approximately
68.9% of the receivables in the portfolio as of April 30,
2001, on a pro-forma basis, are presently owned, in whole or
in part, by The Limited, Inc., which through its wholly
owned subsidiary, Limited Commerce Corp., beneficially owns
approximately 19.9% of the common stock of Alliance Data
Systems Corporation as of June 13, 2001, which in turn owns
100% of the common stock of our parent, World Financial
Network National Bank. The Limited, Inc. is not required
by the transaction documents to maintain any particular
percentage ownership of World Financial Network National
Bank or any of the retailers. See "THE BANK'S PRIVATE LABEL
CREDIT CARD ACTIVITIES--WORLD FINANCIAL NETWORK NATIONAL
BANK CREDIT CARDS."
The Limited, Inc. is currently planning a
restructuring involving some of its retail affiliates. The
proposed restructuring would involve a sale of Lane Bryant and
the integration of Structure into the Express brand name as
Express Men's. While the bank has a contract with Lane Bryant
through 2006, we cannot assure you that an acquirer of Lane
Bryant would assume the current credit card processing
agreement or that the acquirer would continue its marketing
strategy with regards to private label credit cards. The
integration of Structure could lead to the closing of stores
and the change in the name could adversely impact the
generation of receivables and the return on your notes.
-10-
SUBORDINATED CLASSES BEAR LOSSES BEFORE SENIOR CLASSES.
One or more classes of notes in a series may be
subordinated to one or more senior classes of notes in the
same series. Principal allocations to the subordinated class
or classes may not begin until each of the more senior classes
has been paid in full. Additionally, if collections of finance
charge receivables allocated to a series are insufficient to
cover amounts due for that series' senior notes or to
reimburse for that series' share of charged-off receivables,
the collateral amount for the series might be reduced. This
would reduce the amount of finance charge collections
available to the subordinated notes in future periods and
could cause a possible delay or reduction in principal and
interest payments on the subordinated notes.
RECHARACTERIZATION OF PRINCIPAL RECEIVABLES WOULD REDUCE
PRINCIPAL RECEIVABLES AND MAY REQUIRE THE ADDITION OF NEW
RECEIVABLES.
As described under "DESCRIPTION OF THE
NOTES--DISCOUNT OPTION," we may designate a percentage of the
receivables that would otherwise be treated as principal
receivables to be treated as finance charge receivables. This
designation should decrease the likelihood of an early
amortization event occurring as a result of a reduction of the
average net portfolio yield for a given period. However, this
designation will also reduce the aggregate amount of principal
receivables, which may increase the likelihood that we will be
required to add receivables to the trust. If we were unable to
add receivables and could not make a sufficient cash deposit
into the excess funding account, one or more series of notes,
including your series, could go into early amortization.
THE NOTE INTEREST RATE AND THE RECEIVABLES INTEREST RATE MAY
RE-SET AT DIFFERENT TIMES, RESULTING IN REDUCED OR EARLY
PAYMENTS TO YOU.
Some accounts may have finance charges assessed at a
variable rate. A series of notes may bear interest either at a
fixed rate or at a floating rate based on a different index.
If the interest rate charged on the accounts declines,
collections of finance charge receivables may be reduced
without a corresponding reduction in the amounts of interest
payable on your notes and other amounts required to be paid
out of collections of finance charge receivables. If the
interest rate on the accounts declines or the interest rate on
a series increases, this could decrease the spread, or
difference, between collections of finance charge receivables
and those collections allocated to make interest payments on
your notes. This would increase the risk of early repayment of
your notes, as
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well as the risk that there may not be sufficient collections
to make all required payments on your notes.
WE MAY ASSIGN OUR OBLIGATIONS AS TRANSFEROR AND THE BANK MAY
ASSIGN ITS OBLIGATIONS AS SERVICER.
In our capacity as transferor and the bank's capacity
as servicer, either of us may transfer our rights and
obligations under the pooling and servicing agreement and
transfer and servicing agreement to one or more entities
without noteholders' consent so long as specific conditions
are satisfied. The entity assuming the rights and obligations
may or may not be affiliated with us or the bank. After the
assignment, either we or the bank, as the case may be, would
have no further liability or obligation under the pooling and
servicing agreement or transfer and servicing agreement, other
than those liabilities that arose prior to the transfer.
This prospectus uses defined terms. You can find a glossary of these
terms under the caption "GLOSSARY OF TERMS FOR PROSPECTUS" beginning on page 87
in this prospectus.
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IMPORTANT PARTIES
THE ISSUER
The issuer of your notes will be World Financial Network Credit Card
Master Note Trust. The issuer will be a statutory business trust created under
the laws of the State of Delaware. It will be operated under a trust agreement,
dated as of [_______ __, 2001], between us and Chase Manhattan Bank USA,
National Association, as owner trustee.
The activities of the issuer are limited to:
o acquiring, owning and managing the trust assets and the
proceeds of those assets;
o issuing and making payments on the notes; and
o engaging in related activities.
The issuer's principal offices are in Newark, Delaware, in care of
Chase Manhattan Bank USA, National Association, as owner trustee, at the
following address: 500 Stanton Christiana Road, Building 4 - 3rd Floor,
Newark, Delaware 19713, Attention: Institutional Trust Services.
We will pay the fees of the owner trustee and will reimburse it for
various liabilities and expenses.
WFN CREDIT COMPANY, LLC
We--WFN Credit Company, LLC--are a limited liability company formed
under the laws of the State of Delaware on May 1, 2001, and are a wholly-owned,
direct subsidiary of World Financial Network National Bank. We were organized
for the limited purpose of purchasing, holding, owning and transferring
receivables and related activities.
WORLD FINANCIAL NETWORK CREDIT CARD MASTER TRUST
The notes are secured by a beneficial interest in a pool of receivables
that arise under private label credit card accounts owned by the bank and
designated by the bank as trust accounts. The receivables are currently held by
World Financial Network Credit Card Master Trust, a New York common law trust
formed by the bank in January 1996 to securitize a portion of the bank's private
label credit card receivables. World Financial Network Credit Card Master Trust
is operated under a pooling and servicing agreement, amended in [__________
2001], among us, as transferor, the bank, as servicer, and BNY Midwest Trust
Company, successor to the corporate trust administration of Harris Trust and
Savings Bank, successor to The Bank of New York, as trustee.
World Financial Network Credit Card Master Trust has issued a
collateral certificate to us that represents a beneficial interest in the
receivables. We have transferred this collateral certificate to the issuer under
a transfer and servicing agreement between us, as transferor, the bank, as
servicer, and the issuer. The other outstanding series of investor certificates
issued by World Financial Network Credit Card Master Trust and the notes are
referred to in this
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prospectus, collectively, as the securities, and the holders of those securities
are referred to as the securityholders. After all the outstanding series of
investor certificates issued by World Financial Network Credit Card Master Trust
are retired, we may cause World Financial Network Credit Card Master Trust to
terminate, at which time the receivables will be transferred to the issuer under
the transfer and servicing agreement and held directly by the issuer.
WORLD FINANCIAL NETWORK NATIONAL BANK
World Financial Network National Bank is a national banking association
and a limited purpose credit card bank established under the Competitive
Equality Banking Act of 1987. The bank is regulated, supervised, and examined by
the Office of the Comptroller of the Currency, its primary regulator, and is
also subject to regulation by the board of Governors of the Federal Reserve
System and the Federal Deposit Insurance Corporation, as back-up regulators.
The bank was formed in 1989 to provide private label credit card
services to the various retail establishments owned by The Limited, Inc. and its
subsidiaries and their customers. Until October 1995, the bank was a wholly
owned subsidiary of Limited Commerce Corp., a wholly owned subsidiary of The
Limited, Inc. In October 1995, Limited Commerce Corp. sold a 60% ownership
interest in the bank to Welsh, Carson, Anderson & Stowe VII, L.P. and certain
other persons affiliated with the investment firm of Welsh, Carson, Anderson &
Stowe, initially retaining the remaining ownership interest. As of June 13,
2001, Limited Commerce Corp. beneficially owned approximately 19.9% of the
common stock of the bank's parent corporation, Alliance Data Systems
Corporation.
Under credit card processing agreements entered into prior to or in
connection with the sale of the 60% ownership interest referred to above, the
bank is required to continue to provide private label credit card services to
the then current retailers affiliated with The Limited, Inc. until at least
January 2006. However, The Limited, Inc. is currently planning a restructuring
involving some of its retail affiliates. The proposed restructuring would
involve a sale of Lane Bryant and the integration of Structure into the Express
brand name as Express Men's. While the bank has a contract with Lane Bryant
through 2006, we cannot assure you that an acquirer of Lane Bryant would assume
the current credit card processing agreement or that the acquirer would continue
its marketing strategy with regards to private label credit cards. See "RISK
FACTORS--THE RETAIL AFFILIATES OF THE LIMITED ARE A SIGNIFICANT STOCKHOLDER OF
THE BANK'S PARENT, AND A CHANGE IN OWNERSHIP OF THESE RETAILERS COULD AFFECT THE
GENERATION OF RECEIVABLES AND IMPACT THE RETURN ON YOUR NOTES."
The bank continues to leverage its experience with private label
product development, marketing support and risk management to support the sales
of The Limited, Inc. and other third-party retailers. The bank's goal is to
provide world class credit and information services which build lifetime
relationships with customers and generate incremental sales and profit for
retailer clients. The bank seeks to differentiate itself from other providers of
store credit such as general purpose credit cards by delivering superior quality
and service at all times.
The bank plans to continue to selectively acquire private label credit
card portfolios. The bank completed its first portfolio acquisition in November
1996, when it acquired the private label portfolios of National City Bank of
Columbus. The National City Bank portfolio consisted
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of $383 million in receivables, representing over 25 retailers in a broad range
of industries including softgoods, lumber, furniture and electronics. Since the
acquisition of the National City Bank portfolio, the bank has acquired or
launched private label credit card programs for a number of other retailers.
The bank is a fully integrated provider of private label credit card
services. All activities pertaining to credit card operations are performed
in-house or by its sister company, ADS Alliance Data Systems Inc.
Also, in the bank's capacity as administrator under the
administration agreement, between it and the issuer, the bank will provide
the notices and perform on behalf of the issuer other administrative
obligations required by the transfer and servicing agreement, the indenture
and the indenture supplement for each series, and will be compensated for
acting as the administrator.
ALLIANCE DATA SYSTEMS
The bank's parent company, Alliance Data Systems Corporation offers
transaction services, credit services and marketing services as described below:
SEGMENT PRODUCTS AND SERVICES TARGET MARKETS
TRANSACTION SERVICES o Transaction Processing o Specialty Retail
- Network Services o Petroleum Retail
- Merchant Bankcard Services o Regulated and De-regulated
o Account Processing and Utility
Servicing o Mass Transit
- Card Processing o Tollways
- Billing and Payment o Parking
Processing
- Customer Care
CREDIT SERVICES o Private Label Receivables o Specialty Retail
Financing o Petroleum Retail
- Underwriting and Risk
Management
- Merchant Processing
- Receivables Funding
MARKETING SERVICES o Loyalty Programs o Specialty Retail
- Air Miles o Petroleum Retail
- One-to-One Loyalty o Supermarkets
o Database Marketing Services o Financial Services
o Enhancement Services o Regulated and De-regulated
o Direct Marketing Utility
The bank's customer service, billing and collections functions related
to the portfolios it owns and securitizes are outsourced to Alliance Data
Systems.
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THE BANK'S PRIVATE LABEL CREDIT CARD ACTIVITIES
WORLD FINANCIAL NETWORK NATIONAL BANK CREDIT CARDS
The trust's portfolio of credit card accounts currently consists of
revolving credit card accounts included in private label credit card programs,
which allow cardholders to finance purchases from stores and catalogue programs
operated by one or more affiliated retailers. Not all of the bank's private
label credit card programs are included in the trust portfolio. As of
[______ __, 2001], Eligible Accounts from five additional retailers will have
been added to the trust portfolio.
As of April 30, 2001, a number of the retailers representing
68.9% of the receivables in the trust portfolio, were owned, in whole or in
part, by The Limited, Inc. In addition, approximately 6.2% of the receivables in
the current portfolio related to credit card programs for catalogue operations
of Brylane. The data provided in this paragraph regarding the trust portfolio
and retailers is presented on a pro-forma basis and assumes that portfolios
relating to five additional retailers were added to the trust as of
April 30, 2001.
We refer to the stores and catalogue programs associated with private
label credit card programs currently included in the trust as the current
retailers. The bank's credit cards are issued under the insignia of the current
retailers based on the store or catalogue business through which the account was
opened as well as under the insignia of Limited Fashion Group. The credit card
programs are administered under a credit card processing agreement with the
corporation that operates each of the current retailers. The private label
credit card may be used to purchase merchandise from one or more affiliated
retailers, to purchase third-party products/services marketed through statement
inserts or "bang-tail" remittance envelopes, or to obtain cash advances. The
bank also offers premium cards, such as gold and platinum cards, for some
current retailers. While these cards may offer certain ancillary benefits to
customers, they generally carry identical pricing parameters.
MARKETING PROGRAMS AND ACCOUNT ORIGINATION
Each of the current retailers operates as a separate company, and
therefore the bank has separately developed programs to promote credit with each
of the retailers and has developed varying credit guidelines for the different
retailers. The bank originates credit card accounts through several different
programs: (1) in-store solicitation using "quick credit" and "instant credit,"
(2) preapproved catalogue mailings and solicitation of customers placing
catalogue orders and (3) the acquisition of credit card portfolios from other
financial institutions or retailers.
The bank primarily uses in-store solicitation using "quick credit" and
"instant credit" to acquire new accounts. Applicants provide a limited amount of
information, such as name, mailing address and social security number, which
allows the credit underwriting department to access its credit bureau reports.
The credit underwriting department then scores an applicant's credit bureau
report using proprietary credit score cards. Applicants must also present a
valid driver's license and major credit card to the store associate.
With "instant credit," an account can be opened in under three minutes
from the time the bank receives the call. The salesperson at a retail store
records the applicant information on an abbreviated application form and then
calls the bank with this information. One of the bank's associates then
processes all the necessary information and transmits the applicant data to
credit
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bureaus. The credit bureau report is transmitted to the bank and is risk-scored.
An associate relays the decision, account number and credit limit back to the
salesperson at the retail store.
With "quick credit," an account can be opened in less than a minute.
Applicant information is taken at the retail store through use of the store cash
register and the customer's major credit card. The applicant's name is read from
the credit card and the customer's social security number and home zip code are
entered via the register. This data is then transmitted electronically to credit
bureaus where a sophisticated match routine is used to order a credit bureau
report. The bank then scores the credit bureau report and electronically
transmits the decision, account number and credit limit back to the store's
register.
The bank uses two methods of soliciting new catalogue accounts: (1)
pre-approved catalogue mailings and (2) soliciting customers when they call in
an order using either instant credit or on-line pre-screen. The on-line
pre-screen process requires the customer's name, address and social security
number to be sent to a credit bureau where it is matched to the customer's
credit report. The credit bureau then analyzes the customer's credit report
against the bank's normal pre-screen criteria. If a customer passes the
criteria, the bank pre-approves the customer with a pre-determined credit limit.
The bank offers credit cards to pre-approved customers at the completion of the
order placing process. In certain circumstances, the bank will approve customers
who do not pass the criteria if the catalogue issuer has agreed to compensate
the bank for the additional credit risk.
A number of the current retailers use or have used pre-approved account
solicitations in varying degrees. Of the accounts originated by the bank in
2000, approximately 7% were pre-approved. The bank may purchase names for the
pre-approved account solicitations from a number of sources or may obtain the
names directly from the catalogue or in-store customer files. The bank then
compares these lists against the database of existing cardholders to eliminate
duplicates. The bank risk scores the remaining names using credit bureau reports
and mails a pre-approved account solicitation to each individual who meets an
established minimum risk score.
The bank enters application information on all new accounts into a new
account processing system that codes each application to allow future tracking
of activation rates, sales, delinquencies and charge-offs. Some retailers offer
new cardholders discounts on purchases in return for obtaining a credit card. At
the time a new account is opened, the bank groups the credit card account into
one of nineteen billing cycles based upon geography. Each billing cycle has a
separate monthly billing date.
For "instant" and "quick" credit accounts, a salesperson issues a
temporary card and terms of the account to the customer at the retail store so
that the credit card can be used immediately for purchases. For other approved
applications, the bank mails the credit card and the terms of the account to the
new cardholders.
In addition, the accounts may receive discount inserts and sale
announcements in the monthly statements. Customers phoning with account
inquiries may be given a marketing message regarding products which are
currently popular in stores. The bank can support marketing efforts related to
premium cards, loyal shopper rebates, gift certificate orders by phone
-17-
and fulfillment, surveys, outbound telemarketing, deferred billing and
sweepstakes, etc. The bank regularly uses reactivation mailings and credit card
reissues to reactivate dormant accounts.
PORTFOLIO ACQUISITIONS
In November 1996, the bank acquired the private label portfolio of
National City Bank of Columbus, which consisted of $383 million in receivables
and represented over 25 retailers in a broad range of industries including
softgoods, lumber, furniture and electronics. Since 1996, the bank has also
acquired or launched private label credit card programs for a number of
retailers. Conversely, over that same period of time, the bank has not renewed
its credit card processing agreements relating to the private label credit card
programs of several retailers. The bank plans to continue selectively acquiring
private label credit card portfolios.
UNDERWRITING PROCESS
In order to efficiently and accurately process the millions of annual
applications the bank receives, it uses a high degree of automation in scoring
technology and verification procedures. In the initial credit evaluation
process, the bank uses one of six proprietary scorecards that have been refined
to reflect performance of the various retail programs. Credit scoring is based
on several factors including delinquency history, number of recent credit
inquiries and the amount of credit used and available. The bank continuously
validates, monitors and maintains these scorecards and uses the resulting data
to ensure optimal risk performance.
The bank scores each application on the basis of information purchased
from one of the major credit bureaus. The bank chooses an appropriate credit
bureau based on the applicant's mailing address and the perceived strength of
each credit bureau in that geographic region. Most programs also use a FICO
score in addition to the proprietary score in the credit granting decision.
Cut-off scores are reviewed twice a year to ensure the accounts approved are
performing as expected and profitability is being maintained at predetermined
levels.
In order to monitor and control the quality of the credit card
portfolio, the bank uses behavioral scoring models to score each active account
on its monthly billing date. The behavioral scoring models dynamically evaluate
credit limit assignments to determine whether or not credit limits should be
increased, decreased or maintained based on the creditworthiness of the
individual cardholder. The bank's proprietary scoring models include such
factors as: how long the account has been on file, credit utilization, shopping
patterns and trends, payment history and account delinquency.
Point-of-sale terminals in stores operated by the current retailers
have an on-line connection with the bank's credit authorization system and allow
real-time updating of accounts. Every sales transaction is passed through the
bank's automated authorization system. If the proposed charge would place the
account over its credit limit, the sale is declined, unless the store associate
calls us and obtains an override or an increase in the cardholder's credit
limit.
SERVICING OF ACCOUNTS
The bank's credit card operations are organized to support the specific
retailers being serviced around the core functional components. The organization
is managed to provide for the
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consistent application of credit policies and service standards for each
portfolio serviced. Accounts are serviced by Alliance Data Systems in one of six
leased call centers located throughout the United States. Each call center
processes new account applications, responds to customer inquiries and collects
on delinquent or past due accounts. The service provided within a call center
can be customized to support the particular requirements of each retailer. The
credit processing functions consisting of statement rendering and mailing,
payment processing, and card embossing are centralized in one of two processing
centers. Credit card production is performed in a secured environment, including
a separately alarmed secured area and audit procedures that are designed to
maintain an absolute count of all cards produced, stored, destroyed and mailed.
Alliance Data Systems, on the bank's behalf, mails monthly billing
statements to cardholders. Statement mailing is highly automated, using
pre-sorting and bar coding. The billing statements present the total amount due
showing the split between principal, current fees, current finance charges and
the minimum payment due. Subject to applicable law, late and returned check fees
are also added to a cardholder's outstanding balance. No over credit limit or
transaction fees are charged to any cardholders. The processing of cardholder
remittances is also performed by Alliance Data Systems, on the bank's behalf,
using automated payment processing equipment and systems.
Finance charges are calculated by multiplying the average daily balance
outstanding on an account during the monthly billing period times the applicable
periodic finance charge rate. Finance charges are assessed from the date of
purchase. A grace period of approximately 25 days is available to avoid the
finance charge if the account is paid in full by the due date. Payments are
generally applied in the following order: (1) to fees assessed on the account,
(2) to finance charges and (3) to the unpaid principal balance of purchases
allocated first to the longest outstanding receivable. In most instances the
annual fixed finance charge rate is currently 22.8%, although a small percentage
of the accounts offer a lower prime-based rate. The bank may change finance
charge rates from time to time at its discretion.
Currently, the minimum monthly payment amount is equal to a percentage
of the account balance, as well as any past due amounts. Minimum monthly
payments are in most instances subject to a $10 minimum payment. The bank may
change the minimum monthly payment from time to time at its discretion.
DELINQUENCY AND COLLECTIONS PROCEDURES
Efforts to collect delinquent receivables are made by Alliance Data
Systems' collection department on the bank's behalf and, if necessary, by
collection agencies and outside attorneys. As of April 30, 2001, the
collections department consists of approximately 920 full-time equivalents.
New collectors undergo training which includes courses in professional debt
collection, the Fair Debt Collection Practices Act and negotiating skills. These
courses are also available on a "refresher" basis for experienced collectors.
The bank classifies an account as delinquent when the minimum payment
due on the account is not received by the payment due date specified in the
cardholder's billing statement. It is the bank's policy to continue to accrue
interest and fee income on all credit card accounts,
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except in limited circumstances until the account and all related loans,
interest and other fees are charged-off or paid. When an account becomes
delinquent, the bank prints a message requesting payment on the cardholder's
billing statement. After an account becomes 30 days past due, a proprietary
collection scoring algorithm automatically scores the risk of the account
rolling to a more delinquent status. The collection system then recommends a
collection strategy for the past-due account based on the collection score and
account balance, and dictates the contact schedule and collections priority for
the account. The key measures used are (1) age of account, (2) number of
previous delinquencies, (3) account balance, and (4) previous payment history.
If the bank is unable to make a collection after exhausting all in-house
efforts, it engages collection agencies and outside attorneys to continue those
efforts.
Specific collection actions include automatic letter dunning, telephone
calls using automated dialing equipment, no action and sending the account to
the mid-range collections group. The mid-range collection staff handles the
intermediate to serious collection efforts. Unlike the auto-dial collections
staff, the mid-range collectors are responsible for their own individual
accounts and are reviewed accordingly. The mid-range collections group can take
past due accounts as early as 30 days past due.
The bank charges off accounts which become 180 days contractually past
due. Accounts may be re-aged during delinquency, however, if the obligor
demonstrates a willingness and ability to repay by making at least three
consecutive minimum payments and certain other conditions are satisfied.
THE TRUST PORTFOLIO
We refer to the accounts that have been designated as trust accounts as
the trust portfolio. References to the trustee in this prospectus will refer to
(a) BNY Midwest Trust Company, as trustee of World Financial Network Credit Card
Master Trust under the pooling and servicing agreement for so long as World
Financial Network Credit Card Master Trust holds the receivables, or (b) BNY
Midwest Trust Company, as indenture trustee, if the issuer holds the
receivables.
In addition to the receivables in the trust portfolio, the notes will
be secured by:
o all proceeds of these receivables and related recoveries;
o all monies on deposit in specified trust accounts or
investments made with these monies, including any earned
investment proceeds if the prospectus supplement for your
series of notes so indicates;
o other assets that may be added to the trust consisting of
participations or trust certificates representing undivided
legal or beneficial interests in a pool of assets primarily
consisting of private label credit card receivables originated
by World Financial Network National Bank or other approved
credit card originators and the funds collected thereon;
o our rights under the receivables purchase agreement;
-20-
o our rights to receive payments from retailers under their
credit card processing agreements for in-store payments
received by retailers from obligors; and
o proceeds of any credit enhancement or derivative contracts,
consisting of interest rate swaps, currency swaps, credit
swaps, interest rate caps, interest rate floors or bankruptcy
options, which are instruments under which a counterparty
assumes the risk of an increase in bankruptcies in exchange
for payment, as described in the prospectus supplement for
your series of notes.
Receivables in the trust consist of:
o principal receivables, which are amounts charged by trust
account cardholders for goods and services and cash advances;
and
o finance charge receivables, which are periodic finance
charges, other amounts charged to trust accounts, including
late fees and return check fees.
The receivables arise in the bank's private label credit card programs
for various retailers. We refer to the accounts relating to those programs
collectively as the "approved portfolios." In addition, we may designate
additional portfolios of accounts as "approved portfolios" to be included in the
trust portfolio if certain conditions are met. We currently designate all newly
created Eligible Accounts arising in the approved portfolios as automatic
additional accounts, and the receivables in these accounts will be transferred
to the trust. If we acquire or begin to directly originate additional types of
private label credit cards, bank cards or other types of open end consumer
credit accounts, these accounts may be designated as supplemental accounts and
added to the trust so long as each rating agency that rates any outstanding
notes has confirmed that the designation will not impair the rating of those
notes. We refer to both the supplemental accounts and the automatic additional
accounts in this prospectus as "additional accounts".
Our right to automatically add additional Eligible Accounts to the
trust as they arise is subject to the quantitative limitations described in
"DESCRIPTION OF THE NOTES--ADDITION OF TRUST ASSETS" in this prospectus. We may
also elect to stop the automatic addition of receivables arising in automatic
additional accounts, but only as to accounts created on or after the date of
suspension or termination. If we do so, we have the right, and in some cases the
obligation, to designate from time to time additional Eligible Accounts to the
trust portfolio and to convey to the trust all receivables in those additional
accounts, whether those receivables are then existing or thereafter created.
The accounts must be Eligible Accounts as of the date we designate them
as supplemental accounts or automatic additional accounts. Once these accounts
are designated, only the receivables arising under these accounts, and not the
accounts themselves, are sold. In
-21-
addition, as of the date on which any new receivables are created, we will
represent and warrant to the trust that the receivables conveyed to the trust on
that day are Eligible Receivables. However, we cannot guarantee that all the
accounts will continue to meet the applicable eligibility requirements
throughout the life of the trust.
Under some circumstances, we may also designate that some accounts will
no longer be trust accounts, and the receivables originated under these accounts
will be removed from the trust. Throughout the term of the trust, the trust
portfolio will consist of receivables originated in the initial accounts plus
receivables originated in any additional accounts and minus receivables
originated in any removed accounts and plus any participation interests.
We cannot assure you that additional accounts will be of the same
credit quality as the initial accounts. Moreover, additional accounts may
contain receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts described in this prospectus.
Additional accounts may also have different credit guidelines, balances and
ages. Consequently, we cannot assure you that the accounts will continue to have
the characteristics described in this prospectus as additional accounts are
added. In addition, if we designate additional accounts with lower periodic
finance charges, that may have the effect of reducing the portfolio yield.
The prospectus supplement relating to each series of notes will provide
the following information about the trust portfolio as of the date specified:
o the amount of principal receivables;
o the amount of finance charge receivables;
o the range and average of principal balances of the accounts;
o the range and average of credit limits of the accounts;
o the range and average of ages of the accounts;
o the geographic distribution of the accounts; and
o delinquency statistics relating to the accounts.
USE OF PROCEEDS
We will receive the net proceeds from the sale of each series of notes
offered by this prospectus and will use those proceeds (a) to retire existing
series of investor certificates, and (b) for general corporate purposes.
DESCRIPTION OF THE NOTES
The issuer will issue one or more series of notes under a master
indenture and an indenture supplement entered into by the issuer and the
indenture trustee. The following summaries describe all material provisions
common to each series of notes. The accompanying
-22-
prospectus supplement gives you all of the additional material terms specific to
the notes of your series. The summaries are qualified by all of the provisions
of the transfer and servicing agreement, the indenture and the related indenture
supplement and the pooling and servicing agreement. We have filed a copy of the
pooling and servicing agreement for World Financial Network Credit Card Master
Trust and a form of each of the transfer and servicing agreement, the indenture
and an indenture supplement with the SEC as exhibits to the registration
statement relating to the notes.
GENERAL
The notes will be secured by and paid from the assets of the issuer.
The amount of collateral allocated for any series of notes, called its
collateral amount, will be specified in the related prospectus supplement. Each
series of notes will be allocated collections of principal receivables and
finance charge receivables based on its allocation percentage, which will be
based on the collateral amount for that series and will be calculated as
described in the related prospectus supplement.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and one or more of which may be subordinated notes.
Each class of a series will evidence the right to receive a specified portion of
each distribution of principal or interest or both. Each class of a series may
differ from other classes in some aspects, including:
o amounts allocated to principal payments;
o maturity date;
o interest rate; and
o availability and amount of enhancement.
We or our assigns will have the right to receive all cash flows from
the assets of the trust not required to make payments on the securities or to
make payments to credit enhancement providers for any series of securities. Our
interest is called the transferor interest and is an amount equal to the
Transferor Amount.
During the revolving period, the amount of collateral for a series will
remain constant unless reduced on account of:
o defaulted receivables or dilution; or
o reallocation of principal collections to cover shortfalls in
the payment of interest or other specified amounts to be paid
from finance charge collections.
See "--DEFAULTED RECEIVABLES; DILUTION; INVESTOR CHARGE-OFFS" in this
prospectus. The amount of principal receivables in the trust, however, will vary
each day as new principal receivables are created and others are paid. The
Transferor Amount will fluctuate each day to reflect the changes in the amount
of the principal receivables in the trust. When a series is amortizing, the
collateral amount of that series will decline as customer payments of principal
receivables are
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collected and distributed, or accumulated for distribution, to the noteholders.
As a result, the Transferor Amount will generally increase to reflect reductions
in the collateral amount for that series and will also change to reflect the
variations in the amount of principal receivables in the trust. The Transferor
Amount may also be reduced as the result of new issuances by the issuer, see
"--NEW ISSUANCES OF NOTES" in this prospectus, or new issuances of investor
certificates by World Financial Network Credit Card Master Trust, see "POOLING
AND SERVICING AGREEMENT--NEW ISSUANCES OF INVESTOR CERTIFICATES" in this
prospectus.
Generally, notes offered under this prospectus and the accompanying
prospectus supplement:
o will be represented by notes registered in the name of a DTC
nominee;
o will be available for purchase in minimum denominations of
$1,000 and multiples of $1,000 in excess of that amount; and
o will be available for purchase in book-entry form only.
The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed us that its nominee will be Cede & Co. Accordingly,
Cede & Co. is expected to be the holder of record of each series of notes. As an
owner of beneficial interests in the notes, you will generally not be entitled
to a definitive note representing your interest in the issued notes because you
will own notes through a book-entry record maintained by DTC. References in this
prospectus and the accompanying prospectus supplement to distributions, reports,
notices and statements to noteholders refer to DTC or Cede & Co., as registered
holder of the notes, for distribution to you in accordance with DTC procedures.
All references in this prospectus and the accompanying prospectus supplement to
actions by noteholders shall refer to actions taken by DTC upon instructions
from DTC participants.
The accompanying prospectus supplement may state that an application
will be submitted to list your series or class of notes on the Luxembourg Stock
Exchange or another exchange.
BOOK-ENTRY REGISTRATION
This section describes the form your notes will take, how your notes
may be transferred and how payments will be made to you.
The information in this section concerning DTC and DTC's book-entry
system has been provided by DTC. We have not independently verified the accuracy
of this information.
You may hold your notes through DTC in the U.S., Clearstream or
Euroclear in Europe or in any other manner described in the accompanying
prospectus supplement. You may hold your notes directly with one of these
systems if you are a participant in the system, or indirectly through
organizations which are participants.
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Cede & Co., as nominee for DTC, will hold the global notes. Clearstream
and Euroclear will hold omnibus positions on behalf of the Clearstream customers
and the Euroclear participants, respectively, through customers' securities
accounts in Clearstream's and Euroclear's names on the books of their respective
depositaries, which in turn will hold those positions in customers' securities
accounts in the depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include other organizations.
Participants also may include the underwriters of any series. Indirect access to
the DTC system also is available to others, including banks, brokers, dealers
and trust companies, as indirect participants, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between Clearstream customers and Euroclear participants will
occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, those cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines, which will be based on European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream customers and Euroclear participants may not deliver instructions
directly to Clearstream's and Euroclear's depositaries.
Because of time-zone differences, credits of securities in Clearstream
or Euroclear as a result of a transaction with a participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and those credits or any transactions in
those securities settled during that processing will be reported to the relevant
Clearstream customer or Euroclear participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream customer or a Euroclear participant to a DTC participant
will be received with value on the DTC settlement date but will be available in
the relevant Clearstream or Euroclear cash account only as of the business day
following settlement in DTC.
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Note owners that are not participants or indirect participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, notes may do so only through participants and indirect participants. In
addition, note owners will receive all distributions of principal of and
interest on the notes from the indenture trustee through the participants who in
turn will receive them from DTC. Under a book-entry format, note owners may
experience some delay in their receipt of payments, since payments will be
forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will
forward those payments to its participants, which thereafter will forward them
to indirect participants or note owners. It is anticipated that the only
"noteholder" will be Cede & Co., as nominee of DTC. Note owners will not be
recognized by the indenture trustee as noteholders, as that term is used in the
indenture, and note owners will only be permitted to exercise the rights of
noteholders indirectly through the participants who in turn will exercise the
rights of noteholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
participants on whose behalf it acts with respect to the notes and is required
to receive and transmit distributions of principal and interest on the notes.
Participants and indirect participants with which note owners have accounts with
respect to the notes similarly are required to make book-entry transfers and
receive and transmit those payments on behalf of their respective note owners.
Accordingly, although note owners will not possess notes, note owners will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a note owner
to pledge notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of those notes, may be limited due
to the lack of a physical certificate for those notes.
DTC has advised us that it will take any action permitted to be taken
by a noteholder under the indenture only at the direction of one or more
participants to whose account with DTC the notes are credited. Additionally, DTC
has advised us that it will take those actions with respect to specified
percentages of the collateral amount only at the direction of and on behalf of
participants whose holdings include interests that satisfy those specified
percentages. DTC may take conflicting actions with respect to other interests to
the extent that those actions are taken on behalf of participants whose holdings
include those interests.
Clearstream is incorporated under the laws of Luxembourg. Clearstream
holds securities for its customers and facilitates the clearance and settlement
of securities transactions between Clearstream customers through electronic
book-entry changes in accounts of Clearstream customers, thereby eliminating the
need for physical movement of notes. Transactions may be settled in Clearstream
in any of 36 currencies, including United States dollars. Clearstream provides
to its Clearstream customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream is registered as a bank in Luxembourg, and
therefore is subject to regulation by the Commission de Surveillance du Secteur
Financier, which supervises Luxembourg banks. Clearstream's customers are
world-wide financial institutions, including underwriters, securities brokers
and dealers, banks, trust
-26-
companies and clearing corporations, among others, and may include the
underwriters of any series of notes. Clearstream's U.S. customers are limited to
securities brokers and dealers and banks. Currently, Clearstream has
approximately 2,000 customers located in over 80 countries, including all major
European countries, Canada and the United States. Indirect access to Clearstream
is also available to other institutions that clear through or maintain a
custodial relationship with an account holder of Clearstream. Clearstream has
established an electronic bridge with Euroclear Bank S.A./N.V. as the operator
of the Euroclear System in Brussels to facilitate settlement of trades between
Clearstream and Euroclear.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 34 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Euroclear Bank S.A./N.V. as
the Euroclear operator. All operations are conducted by the Euroclear operator,
and all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator. Euroclear participants include central
banks and other banks, securities brokers and dealers and other professional
financial intermediaries and may include the underwriters of any series of
notes. Indirect access to the Euroclear System is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
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. These terms and
conditions govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
operator acts under these rules and laws only on behalf of Euroclear
participants and has no record of or relationship with persons holding through
Euroclear participants.
Distributions with respect to notes held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream customers or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Those distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "FEDERAL INCOME TAX CONSEQUENCES" in this prospectus.
Clearstream or the Euroclear operator, as the case may be, will take any other
action permitted to be taken by a noteholder under the indenture on behalf of a
Clearstream customer or Euroclear participant only in accordance with its
relevant rules and procedures and subject to its depositary's ability to effect
those actions on its behalf through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Clearstream and Euroclear, they
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are under no obligation to perform or continue to perform those procedures and
those procedures may be discontinued at any time.
DEFINITIVE NOTES
Notes that are initially cleared through DTC will be issued in
definitive, fully registered, certificated form to note owners or their
nominees, rather than to DTC or its nominee, only if:
o we advise the indenture trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to that series or class of notes, and the
indenture trustee or the issuer is unable to locate a qualified
successor;
o we, at our option, advise the indenture trustee in writing
that we elect to terminate the book-entry system through DTC
with respect to that series or class of notes; or
o after the occurrence of a servicer default, note owners representing
more than 50%--or another percentage specified in the accompanying
prospectus supplement--of the outstanding principal amount of the
notes of that series or class advise the indenture trustee and DTC
through participants in writing that the continuation of a
book-entry system through DTC or a successor to DTC is no longer in
the best interest of those note owners.
If any of these events occur, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument representing the notes and instructions for
re-registration, the issuer will execute and the indenture trustee will
authenticate the notes as definitive notes, and thereafter the indenture trustee
will recognize the registered holders of those definitive notes as noteholders
under the indenture.
Distribution of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with the
procedures set forth in this prospectus and in the indenture. Interest payments
and any principal payments on each distribution date will be made to holders in
whose names the definitive notes were registered at the close of business on the
related record date. Distributions will be made by check mailed to the address
of the noteholders as it appears on the register maintained by the indenture
trustee. However, the final payment on any note--whether definitive notes or the
notes registered in the name of Cede & Co. representing the notes--will be made
only upon presentation and surrender of that note at the office or agency
specified in the notice of final distribution to noteholders. The indenture
trustee will provide this notice to registered noteholders not later than the
fifth day of the month of the final distributions.
Definitive notes will be transferable and exchangeable at the offices
of the transfer agent and registrar, which will initially be the indenture
trustee. No service charge will be imposed for any registration of transfer or
exchange, but the issuer and transfer agent and registrar may require payment of
a sum sufficient to cover any tax or other governmental charge imposed in
connection with the transfer or exchange. The transfer agent and registrar will
not be required to register the transfer or exchange of definitive notes for a
period of twenty days preceding the due date for any payment on those definitive
notes.
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INTEREST PAYMENTS
Your class of notes will pay interest on the dates and at the interest
rate specified in the accompanying prospectus supplement. The interest rate on
any note may be a fixed, floating or any other type of rate as specified in the
accompanying prospectus supplement. If your notes bear interest at a floating or
variable rate, the accompanying prospectus supplement will describe how that
rate is calculated.
Interest payments or deposits on any distribution date will be funded
from:
o collections of finance charge receivables allocated to the
series during the preceding monthly period or periods;
o investment earnings, if any, on any funds held in trust
accounts, to the extent described in the accompanying
prospectus supplement;
o any credit enhancement or derivative instrument, to the extent
described in the accompanying prospectus supplement; and
o collections of principal receivables treated as collections of
finance charge receivables as described under "--DISCOUNT
OPTION," to the extent described in the accompanying
prospectus supplement.
If interest payments will be made less frequently than monthly, an
interest funding account may be established to accumulate the required interest
amount. If a series has more than one class of notes, that series may have more
than one interest funding account. For any series, all accrued and unpaid
interest will be due and payable on the final maturity date of such series.
PRINCIPAL PAYMENTS
Each series will begin with a revolving period during which no
principal payments will be made to the noteholders of that series. However, if
specified in the accompanying prospectus supplement, principal may be payable
during the revolving period in connection with a partial amortization. A partial
amortization would occur if the transferor were required to add receivables and
was unable to designate sufficient Eligible Accounts and the transferor elected
to avoid an early amortization event by commencing a partial amortization.
The revolving period for each series will be scheduled to end on or no
later than a specified date, at which time a new period will begin during which
principal collections available to that series will be set aside on a daily
basis to repay the series. That new period is called an amortization period if
partial principal payments are made each month and an accumulation period if the
available principal is accumulated for a series over one or more months to pay
off a class in full. If the amount paid or accumulated each month is limited to
some specified figure, then the period is called a controlled amortization
period or controlled accumulation period.
However, each series will also be subject to early amortization events,
which could cause the revolving period to end earlier than scheduled or could
terminate an existing amortization period or accumulation period. Upon an early
amortization event, an early amortization period
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will begin, during which available principal will be distributed monthly and
will not be subject to any controlled amount or accumulation provision. Finally,
a series with an accumulation period may specify some adverse events as
accumulation events, rather than early amortization events, resulting in an
early start to an accumulation period or removing any limitation based on a
controlled accumulation amount.
Principal payments for any series or class will be funded from
collections of principal receivables allocated to that series or class and from
other sources specified in the accompanying prospectus supplement. In the case
of a series with more than one class of notes, the noteholders of one or more
classes may receive payments of principal at different times. The accompanying
prospectus supplement will describe the manner, timing and priority of payments
of principal to noteholders of each class.
Funds on deposit in any principal accumulation account for a series may
be subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement intended to assure a minimum rate of return on the investment
of those funds if specified in the related prospectus supplement. In order to
enhance the likelihood of the payment in full of the principal amount of a
series or a related class of notes at the end of an accumulation period, that
series or class of notes may be subject to a principal guaranty or other similar
arrangement if specified in the related prospectus supplement.
SUSPENSION AND POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The prospectus supplement for any series having a controlled
accumulation period will specify the date on which that period is scheduled to
commence and the scheduled length of that period. However, if specified in the
prospectus supplement for any series, upon notice to the indenture trustee, the
servicer may extend the revolving period and postpone the controlled
accumulation period, or may elect to suspend the controlled accumulation,
subject to the conditions described in the third following paragraph and any
other conditions described in the related prospectus supplement.
On each determination date until the controlled accumulation period
begins for any series, the servicer will review the amount of expected principal
collections and determine the number of months expected to be required to fully
fund the principal accumulation account by the related expected principal
payment date for each class of notes in that series. If the number of months
needed to fully fund the principal accumulation account by the related expected
principal payment date for each class is less than the number of months in the
scheduled controlled accumulation period, the servicer may then elect to
postpone the controlled accumulation period. In making its decision, the
servicer is required to assume that (1) the principal payment rate will be no
greater than the lowest monthly principal payment rate for the prior 12 months,
(2) the total amount of principal receivables in the trust and the amounts on
deposit in the excess funding account will remain constant, (3) no early
amortization event for any series will occur and (4) no additional series will
be issued after the related determination date. In no case will the controlled
accumulation period for any series be reduced to less than two months.
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The method for determining the number of months required to fully fund
the principal accumulation account may be changed if each rating agency confirms
that the change will not impair its rating of any outstanding series or class.
If specified in the prospectus supplement for any series having a
controlled accumulation period, the servicer may also elect to suspend the
controlled accumulation period if it:
o obtains a qualified maturity agreement in which an Eligible
Institution agrees to deposit in the related principal
accumulation account on the expected principal payment date
for each class of notes of that series an amount equal to the
outstanding principal amount of those notes as of their
respective expected principal payment dates; and
o delivers an opinion of counsel to the indenture trustee to the
effect that the qualified maturity agreement is enforceable
against the provider of that agreement.
The issuer will pledge to the indenture trustee, for the benefit of the
noteholders of the related series, all right, title and interest in any
qualified maturity agreement.
If the issuer obtains a qualified maturity agreement, the issuer will
cause the provider of that agreement to deposit in the principal accumulation
account for the related series or class on or before its expected principal
payment date an amount equal to the outstanding principal amount of that series
or class. However, on the expected principal payment date for any series or
class, we may instead elect to fund all or a portion of the required deposit
from either the proceeds of a new series or collections of principal receivables
and other amounts allocated to that series or class for that purpose.
A qualified maturity agreement for any series or class will terminate
at the close of business on the related expected principal payment date.
However,
(1) the issuer may terminate a qualified maturity agreement
earlier than the expected principal payment date if the
available reserve account amount equals the required reserve
account amount and one of the following occurs:
(a) the issuer obtains a substitute qualified maturity
agreement,
(b) the institution providing the qualified maturity
agreement ceases to be an Eligible Institution and
the issuer is unable to obtain a substitute
qualified maturity agreement, or
(c) an early amortization event occurs for the related
series; and
(2) the issuer may terminate a qualified maturity agreement
prior to the later of:
(a) the date on which the controlled accumulation period
was scheduled to begin, before giving effect to the
suspension of the controlled accumulation period, and
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(b) the date to which the commencement of the controlled
accumulation period may be postponed, as determined
on the determination date preceding the termination
of the qualified maturity agreement.
If the institution providing a qualified maturity agreement ceases to
be an Eligible Institution, the issuer will use its best efforts to obtain a
substitute qualified maturity agreement, unless the issuer elects to terminate
the qualified maturity agreement and is not required to obtain a substitute
qualified maturity agreement for any of the reasons described in the preceding
paragraph.
If a qualified maturity agreement is terminated prior to the earlier of
the expected principal payment date for the related series or class and the
commencement of the early amortization period for that series and the issuer
does not obtain a substitute qualified maturity agreement, the controlled
accumulation period will begin on the latest of:
o the date on which the controlled accumulation period
was scheduled to begin, before giving effect to the
suspension of the controlled accumulation period;
o at the issuer's election, the date to which the
controlled accumulation period may be postponed, as
determined on the determination date preceding the
termination of the qualified maturity agreement; and
o the first day of the calendar month following the
termination of the qualified maturity agreement.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The receivables comprising the trust have been transferred either
directly by the bank to the trust or by the bank to us, and in turn, by us to
the trust. Under the pooling and servicing agreement entered into by the bank in
1996, the bank, in its capacity as transferor, transferred the receivables in
designated accounts to the trust. As of [_______ __] 2001, the pooling and
servicing agreement was amended, to designate us as the transferor in
replacement of the bank. At the same time, we entered into a receivables
purchase agreement with the bank whereby the bank designated all eligible
accounts to us and transferred the receivables created after the date of the
agreement to us. The bank will also transfer and assign future receivables
created in these accounts and additional accounts to us. Under the amended
pooling and servicing agreement, in our capacity as transferor, we transfer all
receivables sold to us by the bank under the receivables purchase agreement to
the trust. We and the bank have indicated and, in connection with each future
transfer of receivables to the trust, will indicate in our computer files or
books and records that the receivables have been conveyed to the trust. In
addition, we and the bank have provided or caused to be provided to the trustee
and the owner trustee computer files or microfiche lists, containing a true and
complete list showing each account, identified by account number and by total
outstanding balance on the date of transfer. Neither we nor the bank will
deliver to the trustee or the owner trustee any other records or agreements
relating to the accounts or the receivables, except in connection with additions
or removals of accounts. Except as stated in this paragraph, the records and
agreements that the bank maintains relating to the accounts and the receivables
are not and will not be segregated from other documents and agreements relating
to
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other credit card accounts and receivables and are not and will not be stamped
or marked to reflect the transfers described in this paragraph, but the bank's
computer records are and will be required to be marked to evidence these
transfers. We and the bank have filed in all appropriate jurisdictions Uniform
Commercial Code financing statements with respect to the receivables meeting the
requirements of applicable law. See "RISK FACTORS--SOME LIENS WOULD BE GIVEN
PRIORITY OVER YOUR NOTES WHICH COULD CAUSE DELAYED OR REDUCED PAYMENTS" and
"MATERIAL LEGAL ASPECTS OF THE RECEIVABLES" in this prospectus.
MULTIPLE ISSUANCE SERIES
If specified in the accompanying prospectus supplement, a series of
notes may be a multiple issuance series. In a multiple issuance series, notes of
any class can be issued on any date so long as the issuer has received
confirmation from the rating agencies then rating any outstanding notes of the
multiple issuance series that the issuance will not impair its rating and the
other conditions of issuance set forth in the indenture are met. All of the
subordinated notes of a multiple issuance series provide subordination
protection to all of the senior notes of the same series, regardless of whether
the subordinated notes are issued before, at the same time as, or after the
senior notes of that series. As part of a multiple issuance series, we expect
the issuer to issue different classes of notes or additional notes of an already
issued class, at different times. Notes in a particular class will have the same
interest rate, expected principal payment date, final maturity date and other
characteristics, regardless of date of issue. Neither you nor any other
noteholder will have the right to consent to the issuance of future notes of
your multiple issuance series.
NEW ISSUANCES OF NOTES
We may cause the owner trustee, on behalf of the issuer, to issue one
or more new series of notes or for any multiple issuance series, notes of any
class for that series. We will define all principal terms of each new series in
an indenture supplement. Each series issued may have terms and enhancements that
are different than those for any other series. No prior noteholders' consent
will be required for the issuance of an additional series of notes, and we do
not expect to request such consents. We may offer any series or class relating
to a multiple issuance series under a prospectus or other disclosure document in
transactions either registered under the Securities Act or exempt from
registration under the Securities Act directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless World Financial Network Credit Card Master Trust has been
terminated, the interests of all series of notes in the receivables and the
other trust assets will be evidenced by a single global certificate held by the
issuer. A new collateral certificate will be deemed to be issued and evidenced
by the global certificate upon the issuance of each series and class of notes.
No new series or for any multiple issuance series, notes of any class
for that series may be issued unless we satisfy various conditions, including
that:
(1) each rating agency confirms that the new issuance will not
impair its rating of any outstanding series or class;
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(2) we certify that we reasonably believe, based on the facts
known to the certifying officer, that the new issuance will
not cause an early amortization event, an event of default or
materially and adversely affect the amount or timing of
distributions to be made to the noteholders of any series or
class;
(3) after giving effect to the new issuance, the Transferor Amount
is not less than the Minimum Transferor Amount and the
Aggregate Principal Balance is not less than the Required
Principal Balance;
(4) we deliver an opinion of counsel to the effect that, for
federal income tax purposes:
(a) except as otherwise stated in the related indenture
supplement, the notes of the new series will be
characterized as debt;
(b) the issuance will not adversely affect the tax
characterization as debt of the notes of any
outstanding series or class that were characterized
as debt at the time of their issuance;
(c) the new issuance will not cause the issuer to be
deemed to be an association or publicly traded
partnership taxable as a corporation; and
(d) the new issuance will not cause or constitute an
event in which gain or loss would be recognized by
any noteholder; and
(5) unless World Financial Network Credit Card Master Trust has
been terminated, all of the conditions required for it to
issue a new series of investor certificates are satisfied, as
described under "POOLING AND SERVICING AGREEMENT--NEW
ISSUANCES OF INVESTOR CERTIFICATES" in this prospectus.
For any multiple issuance series, there are no restrictions on the
timing or amount of any additional issuance of notes, so long as the conditions
described above are met. As of the date of any additional issuance of an
outstanding class of notes, the outstanding principal amount for that class will
be increased to reflect the principal amount of the additional notes. When
issued, the additional notes of an outstanding class will be identical in all
respects to the other outstanding notes of that class and will be equally and
ratably entitled to the benefits of the indenture and the related indenture
supplement as the other outstanding notes of that class without preference,
priority or distinction.
REPRESENTATIONS AND WARRANTIES
As of the closing date for each series of securities and the date each
account is designated for inclusion to the trust, we represent to the trust
that:
o each account is an Eligible Account as of the date it is
designated to the trust and each receivable is an Eligible
Receivable on the date it is transferred to the trust;
o the account schedule and information contained therein is true and
correct in all material respects;
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o each receivable has been conveyed to the trust free and clear
of any liens, other than liens permitted by the pooling and
servicing agreement and the transfer and servicing agreement,
and in compliance in all material respects with all applicable
laws;
o we own all right, title and interest in each such receivable
and have the right to transfer it to the trust; and
o all required governmental approvals in connection with the
transfer of each such receivable to the trust have been
obtained and remain in full force and effect.
If any of these representations is not true in any material respect for
any receivables as of the date specified in the representation and as a result
of the untrue statement or breach any receivables in the related account become
defaulted receivables or the trust's rights in the receivables or the proceeds
of the receivables are impaired or are not available to the trust free and clear
of any lien, we are required to accept reassignment of the affected receivable.
We will be permitted 60 days to cure the breach or a longer period not to exceed
150 days agreed to by the trustee.
We will accept retransfer of a receivable by directing the servicer to
deduct the principal amount of the ineligible receivable from the Transferor
Amount. If this would reduce the Transferor Amount below the Specified
Transferor Amount, we will make a cash deposit in the collection account in the
amount by which the Transferor Amount would have been reduced below the
Specified Transferor Amount after giving effect to the deduction. Any deduction
or deposit is considered a repayment in full of the ineligible receivable.
On the closing date for each series, in our capacity as transferor, we
will also make representations and warranties to the trust as to:
o our valid existence and good standing as a limited liability company
and our ability to perform our obligations under each transaction
document;
o our qualification to do business and good standing as a
foreign corporation and our possession of necessary licenses
and approvals to conduct our business;
o the due authorization, execution, delivery and performance of
each transaction document to which we are a party;
o the enforceability of each transaction document against us as
legal, valid and binding obligations;
o the effectiveness of the agreement governing our transfer of
the receivables to the trust as a valid transfer and
assignment of, or a grant of a first priority perfected
security interest in the receivables, other than liens
permitted by the transfer agreement; and
o the absence of any transferor claims or interests in the
collection account, excess funding account, series account or
credit enhancement for a series.
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If any of these representations and warranties is false in any material
respect and the breach of the representation or warranty has a material adverse
effect on the receivables or the availability of the proceeds of the receivables
to the trust, then either the trustee or securityholders holding more than 50%
of the principal amount of any series of securities may direct us to accept
retransfer of the entire trust portfolio. We will be permitted 60 days after the
direction is given, or a longer period, not to exceed 150 days, as may be
specified in the direction, to cure the breach.
The reassignment price would equal the aggregate outstanding principal
amounts for all series of securities, in each case as of the distribution date
on which the reassignment is scheduled to be made, PLUS accrued and unpaid
interest on the securities through the distribution date, PLUS any other amounts
specified in any prospectus supplement.
Reassignment of any affected receivables or the entire trust portfolio
to us, as the case may be, is the sole remedy respecting any breach of the
representations and warranties described in this section.
On the closing date for each series, in our capacity as transferor, we
will also make the following representations and warranties to the trust:
o the transfer and assignment of the collateral certificate under the
transfer and servicing agreement constitutes:
(1) either a sale of the collateral certificate;
(2) a grant of a perfected security interest therein from
us to the issuer; or
(3) a grant of a perfected security interest in the
collateral certificate from us to the indenture
trustee.
o we have good and marketable title to the collateral certificate free
and clear of all liens, other than liens permitted by the transfer
and servicing agreement;
o upon our transfer of the collateral certificate to the issuer, the
issuer will have good and marketable title to the collateral
certificate free and clear of all liens, other than liens permitted
by the transfer and servicing agreement; and
o all actions necessary under the applicable Uniform Commercial Code
have been taken to give either the issuer or the indenture trustee a
first priority perfected security interest in the collateral
certificate.
ADDITION OF TRUST ASSETS
We may, at our option, designate additional accounts to the trust, the
receivables in which will be sold and assigned to the trust. As described above
under "THE TRUST PORTFOLIO," we currently designate all new Eligible Accounts to
the trust automatically upon their establishment, and we expect to continue to
do so. However, we may elect to terminate or suspend the automatic addition of
accounts at any time by delivering prior written notice to the trustee, the
owner trustee, the rating agencies and the servicer. We are permitted to
continue to automatically designate all new Eligible Accounts as they arise
unless an automatic addition limitation event or additional limitation event has
occurred. These events will occur if we reach specified triggers relating to
default ratios and payment rates on the receivables.
Upon the occurrence of an automatic addition limitation event, the
following limits will apply:
(1) the new accounts designated during the period from the first
day of the transferor's fiscal year in which the addition is
to occur through the date the new accounts will be added may
not exceed 20% of the number of accounts as of the first day
of that period; or
(2) for any fiscal calendar quarter, the new accounts designated
during that fiscal calendar quarter may not exceed 15% of the
number of accounts as of the first day of that fiscal calendar
quarter.
Upon the occurrence of an additional limitation event, the following
limits will apply:
(1) the aggregate balance of receivables in the new accounts
designated during any twelve month or shorter period beginning
on the occurrence of such trigger event may not exceed 20% of
the aggregate balance of the receivables in the trust
portfolio as of the first day after such trigger event occurs;
or
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(2) for any three month or shorter period beginning on the date on
which such trigger event occurs, the aggregate balance of
receivables in the new accounts designated during that
calendar quarter may not exceed 15% of the aggregate balance
of the receivables in the trust portfolio as of the first day
after such trigger event occurs.
The limitations imposed upon the occurrence of an automatic addition
limitation event or additional limitation event will no longer apply if each
rating agency that rates any outstanding notes confirms that the resumption of
treating new accounts as automatic additional accounts will not impair its
rating.
In addition, we will be required to make an addition of supplemental
accounts and/or participation interests in order to maintain:
o the Transferor Amount averaged over any period of thirty
consecutive days at the Minimum Transferor Amount for that
period; and
o for any record date, the Aggregate Principal Balance at the
Required Principal Balance.
When we transfer receivables in additional accounts or participation
interests to the trust, other than in connection with automatic additions of
accounts, we must satisfy several conditions, including:
o we must give each rating agency and the servicer prior notice of
each addition;
o we must certify that:
o each additional account is an Eligible Account and
each receivable in such additional account is an
Eligible Receivable;
o no selection procedures materially adverse to the
securityholders were used in selecting the additional
accounts from the available Eligible Accounts;
o as of the addition date, we are not insolvent and
would not become insolvent by the addition of the
accounts; and
o the transfer of the additional receivables
constitutes a valid transfer to the trust of all our
right, title and interest in the receivables in the
additional accounts or the grant to the trust of a
first priority perfected security interest in those
receivables; and
o we must deliver an opinion of counsel with respect to the
perfection of the transfer and related matters.
In addition to the periodic reports otherwise required to be filed by
the servicer with the SEC in accordance with the Securities Exchange Act of
1934, we will file a Report on Form 8-K with respect to any addition to the
trust of receivables in additional accounts that would have a material effect on
the composition of the trust assets.
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Defaulted accounts that have been charged-off as uncollectible in
accordance with the servicer's credit card guidelines and the servicer's
customary and usual policies and procedures for servicing revolving credit card
receivables will not be included in any account addition. See "--DEFAULTED
RECEIVABLES; DILUTION; INVESTOR CHARGE-OFFS" in this prospectus.
REMOVAL OF ACCOUNTS
We also have the right to remove accounts from the list of designated
accounts and to require the reassignment to us of all receivables in the removed
accounts, whether the receivables already exist or arise after the designation.
Our right to remove accounts is subject to the satisfaction of several
conditions, including that:
(1) if the accounts to be removed have outstanding receivables,
each rating agency confirms that the removal will not impair
its rating of any outstanding series or class of securities;
(2) we certify that:
(a) individual accounts or administratively convenient
groups of accounts, such as billing cycles, were
chosen for removal randomly or on another basis
intended to achieve sale treatment of the accounts
for accounting purposes;
(b) no selection procedures materially adverse to the
securityholders were used in selecting the removed
accounts; and
(c) in our reasonable belief, the removal will not cause
an early amortization event, or an event that with
notice or lapse of time or both, would constitute an
early amortization event; and
(3) the removal will not cause (i) the Transferor Amount to be
less than the Minimum Transferor Amount, (ii) the Aggregate
Principal Balance to be less than the Required Principal
Balance or (iii) a decrease in the sum of the collateral and
invested amounts for all outstanding series, in any case,
after giving effect to the removal.
In addition, we may from time to time, remove accounts designated for
repurchase by a retailer under the terms of their credit card processing
agreement. The repurchase price for these receivables will be calculated as if
the receivables were ineligible receivables. Amounts received by the trust for
these removed receivables will be treated as collections of principal
receivables. Accounts relating to the retailers affiliated with The Limited or
BryLane may not be removed under these circumstances until after the trust's
Series 1996-A and Series 1996-B Certificates have been retired.
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COLLECTION AND OTHER SERVICING PROCEDURES
As servicer, the bank will be responsible for servicing and
administering the receivables in the trust portfolio in accordance with the
servicer's policies and procedures for servicing credit card receivables
comparable to the receivables in the trust portfolio. The servicer will be
required to maintain fidelity bond coverage insuring against losses through
wrongdoing of its officers and employees who are involved in the servicing of
credit card receivables.
DISCOUNT OPTION
We have the option to reclassify a percentage of collections of
principal receivables in the trust portfolio as collections of finance charge
receivables. If we do so, the reclassified percentage of collections of
principal receivables for the trust portfolio for each monthly period will be
considered collections of finance charge receivables and will be allocated with
all other collections of finance charge receivables in the trust portfolio.
We may exercise this option in order to compensate for a decline in the
portfolio yield, but only if there would be sufficient principal receivables to
allow for that discounting. Exercise of this option would result in a larger
amount of collections of finance charge receivables and a smaller amount of
collections of principal receivables. By doing so, we would reduce the
likelihood that an early amortization event would occur as a result of a
decreased portfolio yield and, at the same time, would increase the likelihood
that we will have to add principal receivables to the trust. We may not exercise
our option to reclassify collections of principal receivables as collections of
finance charge receivables if we reasonably believe that doing so would cause an
early amortization event, or any event that with notice or lapse of time or
both, would constitute an early amortization event for any series of securities.
In addition, we may not set the percentage of receivables for
reclassification above 3% unless each rating agency confirms that doing so will
not impair its rating of any outstanding series or class of securities.
TRUST ACCOUNTS
As servicer, we have established and maintain a collection account and
an excess funding account, each in the name of the trustee, for the benefit of
the securityholders. Both the collection account and the excess funding account
must be Qualified Accounts.
The funds on deposit in these accounts may only be invested, at the
direction of the servicer, in highly rated liquid investments that meet the
criteria described in the indenture or the related indenture supplement for that
series.
The indenture trustee, acting as the initial paying agent--or any
entity then acting as paying agent--will have the revocable power to withdraw
funds from the collection account and the excess funding account for the purpose
of making payments to the noteholders of any series under the related indenture
supplement.
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FUNDING PERIOD
On the closing date for any series of notes, the total amount of
principal receivables in the trust available to that series may be less than the
total principal amount of the notes of that series. If this occurs, the initial
collateral amount for that series of notes will be less than the principal
amount of that series of notes. In this case, the related prospectus supplement
will set forth the terms of the funding period, which is the period from that
series' closing date to the earliest of:
o the date that series' collateral amount equals the principal
amount of that series of notes;
o the date specified in the related prospectus supplement, which
will be no later than one year after that series' closing
date; and
o the commencement of an early amortization period.
During the funding period, the portion of the collateral amount not
invested in receivables will be maintained in a prefunding account, which is a
trust account established with the indenture trustee for the benefit of the
noteholders of that series. On the closing date for that series of notes, this
amount may be up to 100% of the principal balance of that series of notes. The
collateral amount for that series will increase as new receivables are
transferred to the trust or as the collateral amounts of other outstanding
series of securities are reduced. The collateral amount may decrease due to
investor charge-offs allocated to the series.
During the funding period, funds on deposit in the prefunding account
will be paid to us as the collateral amount increases. If the collateral amount
for that series is not increased so that the initial collateral amount equals
the initial principal balance of the notes of that series, by the end of the
funding period, any amount remaining in the prefunding account will be repaid to
noteholders.
The prospectus supplement for a series with a funding period will set
forth:
o the series' initial collateral amount;
o the initial principal balance of the series of notes;
o the date on which the series' collateral amount is expected to
equal the series' initial principal balance;
o the date by which the funding period will end; and
o what other events, if any, will occur if the end of the
funding period is reached before the full collateral amount is
funded.
We will file a Current Report on Form 8-K with the SEC following the
termination of any funding period containing updated trust portfolio
information.
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APPLICATION OF COLLECTIONS
The servicer must deposit into the collection account, no later than
two business days after processing, all payments made on receivables in the
trust portfolio. However, the servicer will be able to make these deposits on a
monthly or other periodic basis if:
(1) the bank remains the servicer; and
(2) either:
(a) the servicer provides to the trustee a letter of
credit or other arrangement covering risk of
collection of the servicer acceptable to the rating
agencies;
(b) the servicer has and maintains a short-term debt
rating of at least A-1 by Standard & Poor's, F-1 by
Fitch and P-1 by Moody's and has deposit insurance as
required by law and by the FDIC; or
(c) with respect to collections allocated to any series,
any other conditions specified in the related
indenture supplement are satisfied.
The servicer currently has not provided a letter of credit and does not
currently maintain the rating described above.
The servicer is only required to make daily or periodic deposits to the
collection account during any monthly period to the extent that the funds are
needed for deposit into other trust accounts or distribution to securityholders
or other parties on or prior to the related distribution date. If the collection
account balance ever exceeds the amount needed for those deposits or
distributions, the servicer may withdraw the excess and pay that amount to us or
our assigns. Subject to the immediate preceding sentence, the servicer may
retain its servicing fee for any series and will not be required to deposit it
in the collection account.
The servicer will then allocate all collections of finance charge
receivables and principal receivables among each series of securities and the
Transferor Amount based on the respective allocation percentages for each series
and the transferor allocation percentage. The transferor allocation percentage
at any time will equal 100% MINUS the total of the applicable allocation
percentages for all outstanding series. The transferor allocation percentage of
finance charge collections and principal collections will first be deposited in
the excess funding account to the extent required to maintain a Transferor
Amount that is not less than the Specified Transferor Amount. Any remaining
finance charge collections and principal collections will be paid to us or our
assigns. The collections allocated to each series will be retained in the
collection account or applied as described in the related prospectus supplement.
Under the terms of each credit card processing agreement, many of the
retailers accept payments on the accounts at their stores. These amounts are
netted against payments owed by the servicer to the retailers on a periodic
basis.
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SHARED EXCESS FINANCE CHARGE COLLECTIONS
If a series is identified in the prospectus supplement for that series
as included in a group, collections of finance charge receivables allocated to
that series in excess of the amount needed to make deposits or payments for the
benefit of that series may be shared with other series of securities that have
been designated for inclusion in the same group. The servicer will allocate the
aggregate of the excess finance charge collections for all series in the same
group to cover any payments required to be made out of finance charge
collections for any series in that group that have not been covered out of the
finance charge collections allocable to those series. If the finance charge
shortfalls exceed the excess finance charge collections for any group for any
calendar month, excess finance charge collections will be allocated PRO RATA
among the applicable series based on the relative amounts of finance charge
shortfalls.
SHARED PRINCIPAL COLLECTIONS
Each series of notes will share excess principal collections with each
other series of securities unless the related prospectus supplement excludes
that series from this sharing arrangement. If a principal sharing
series--including any series of investor certificates designated as a principal
sharing series--is allocated principal in excess of the amount needed for
deposits or distributions of principal collections, that excess will be shared
with other principal sharing series. The servicer will allocate the aggregate of
the shared principal collections for all principal sharing series to cover any
scheduled or permitted principal distributions to securityholders and deposits
to principal accumulation accounts, if any, for any series that have not been
covered out of the collections of principal receivables allocable to those
series. Shared principal collections will not be used to cover investor
charge-offs for any series of securities.
If the principal shortfalls exceed the amount of shared principal
collections for any calendar month, shared principal collections for all series
will be allocated PRO RATA among the applicable series based on the relative
amounts of principal shortfalls. If shared principal collections exceed
principal shortfalls, the balance will be paid to us or our assigns or deposited
in the excess funding account under the circumstances described under "--EXCESS
FUNDING ACCOUNT" below.
EXCESS FUNDING ACCOUNT
On each business day on which the Transferor Amount is less than the
Specified Transferor Amount, the servicer will deposit collections of principal
receivables allocable to the Transferor Amount, as described in "--APPLICATION
OF COLLECTIONS" above, and excess shared principal collections otherwise
distributable to us or our assigns, into the excess funding account until the
Transferor Amount equals the Specified Transferor Amount. Thereafter, funds on
deposit in the excess funding account will be treated as shared principal
collections to the extent that the Transferor Amount - calculated without
including the excess funding account balance - is less than zero.
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Investment earnings on amounts on deposit in the excess funding
account will be treated as finance charge collections and allocated to each
series of securities based on the respective allocation percentages for each
series.
DEFAULTED RECEIVABLES; DILUTION; INVESTOR CHARGE-OFFS
Receivables in any account will be charged-off as uncollectible in
accordance with our credit card guidelines and our customary and usual policies
and procedures for servicing revolving credit card receivables and other
revolving credit account receivables comparable to the receivables. Our current
policy is to charge off the receivables in an account when that account becomes
180 days delinquent. On the date on which a receivable is charged-off, the
receivable will no longer be shown as an amount payable on the servicer's
records and will cease to be a receivable.
Each series will be allocated a portion of defaulted receivables in an
amount equal to its allocation percentage, as specified in the related
prospectus supplement, of the aggregate amount of principal receivables in any
accounts charged-off during each calendar month.
Unlike defaulted receivables, dilution, which includes reductions in
principal receivables as a result of returns, unauthorized charges and the like,
is not intended to be allocated to investors. Instead, these reductions are
applied to reduce the Transferor Amount, and to the extent they would reduce the
Transferor Amount below the Specified Transferor Amount, we are required to
deposit the amount of the reduction into the trust's excess funding account.
However, if we default in our obligation to make a payment to cover dilution,
then a portion of any resulting shortfall in receivables will be allocated to
your series as specified in the accompanying prospectus supplement.
On each distribution date, if the sum of the defaulted receivables and
any dilution allocated to any series is greater than the finance charge
collections and other funds available to cover those amounts as described in the
related prospectus supplement, then the collateral amount for that series will
be reduced by the amount of the excess. Any reductions in the collateral amount
for any series on account of defaulted receivables and dilution will be
reinstated to the extent that finance charge collections and other amounts on
deposit in the collection account are available for that purpose on any
subsequent distribution date as described in the related prospectus.
DEFEASANCE
If so specified in the prospectus supplement relating to a series, the
issuer may, at our direction, terminate its substantive obligations in respect
of that series or the trust by depositing with the indenture trustee, from
amounts representing, or acquired with, collections of receivables, money or
eligible investments sufficient to make all remaining scheduled interest and
principal payments on that series on the dates scheduled for those payments and
to pay all amounts owing to any credit enhancement provider with respect to that
series or all outstanding series, as the case may be, if that action would not
result in an early amortization event for any series. Prior to its first
exercise of its right to substitute money or eligible investments for
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receivables, the issuer will deliver to the indenture trustee an opinion of
counsel to the effect that:
o for federal income tax purposes, the deposit and termination
of obligations will not cause the trust, or any portion of the
trust, to be deemed to be an association or publicly traded
partnership taxable as a corporation; and
o the deposit and termination of obligations will not result in
the trust being required to register as an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
FINAL PAYMENT OF PRINCIPAL
If so specified in the prospectus supplement relating to a series, the
servicer will have the option to purchase the notes at any time after the
remaining outstanding principal amount of that series is 5% or less of the
initial principal amount of that series. The purchase price will equal:
o the outstanding principal amount of the notes of that series,
PLUS
o any accrued and unpaid interest through the day preceding the
distribution date on which the repurchase occurs or, if the
repurchase occurs on any other date, through the day preceding
the distribution date immediately following the repurchase
date.
For any series of notes, the related prospectus supplement may specify
additional conditions to the servicer's purchase option.
Each prospectus supplement will specify the final maturity date for the
related series of notes, which will generally be a date falling substantially
later than the expected principal payment date. For any series, principal will
be due and payable on the final maturity date. Additionally, the failure to pay
principal in full not later than the final maturity date will be an event of
default, and the indenture trustee or holders of a specified percentage of the
notes of that series will have the rights described under "THE INDENTURE--EVENTS
OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT" in this prospectus.
PAIRED SERIES
The prospectus supplement for a series of notes will specify whether
that series may be paired with a previously or later issued series so that a
decrease in the collateral amount of the previously issued series results in a
corresponding increase in the collateral amount of the later issued series. In
general, a series may be issued as a paired series so the trust can fund the
amount by which the previously issued series either has amortized or has
accumulated funds for a principal payment.
The later issued series will either be prefunded with an initial
deposit to a prefunding account in an amount up to the initial principal balance
of the previously issued series or will have a variable principal amount.
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During the controlled amortization period or controlled accumulation
period for any series that is paired with a later issued series, as principal
payments are made on that previously issued series or deposits are made for
purposes of principal payments:
(a) in the case of a prefunded paired series, an equal
amount of funds on deposit in any prefunding account
for that prefunded paired series will be released,
which funds will be distributed to us;
(b) in the case of a paired series having a variable
principal amount, an interest in that variable paired
series in an equal or lesser amount may be sold by
the issuer, and the proceeds from the issuance will
be distributed to us; and
(c) in either case, the collateral amount of the later
issued series will increase by up to a corresponding
amount.
If an early amortization event occurs for the previously issued series
or its paired series when the previously issued series is amortizing, the
allocation percentage for the allocation of collections of principal receivables
for the previously issued series may be reset to a lower percentage as described
in the prospectus supplement for that series and the period over which it will
amortize may be lengthened as a result. The extent to which the period over
which it amortizes is lengthened will depend on many factors, only one of which
is the reduction of its allocation percentage. For a discussion of these
factors, see "MATURITY CONSIDERATIONS" in the accompanying prospectus
supplement.
EARLY AMORTIZATION EVENTS
The revolving period for your series of notes will continue through the
date specified in the accompanying prospectus supplement unless an early
amortization event occurs prior to that date. An early amortization event occurs
with respect to all series issued by the issuer upon the occurrence of any of
the following events:
(a) bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to us or the
bank;
(b) we are unable for any reason to transfer receivables
to the trust; and
(c) World Financial Network Credit Card Master Trust or
the issuer becomes subject to regulation as an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, an early amortization event may occur with respect to any
series upon the occurrence of any other event specified in the accompanying
prospectus supplement. On the date on which an early amortization event is
deemed to have occurred, the early amortization period or, if so specified in
the accompanying prospectus supplement, the controlled accumulation period will
commence. If, because of the occurrence of an early amortization event, the
early amortization period begins earlier than the scheduled commencement of an
amortization period or prior to an expected principal payment date, noteholders
will begin
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receiving distributions of principal earlier than they otherwise would have,
which may shorten the average life of the notes.
In addition to the consequences of an early amortization event
discussed above, unless otherwise specified in the accompanying prospectus
supplement, if insolvency or similar proceedings under the Federal Deposit
Insurance Act or similar laws occur with respect to us or the holder of the
transferor interest, on the day of that event we will immediately cease to
transfer principal receivables to the trust and promptly give notice to the
trustee for World Financial Network Credit Card Master Trust, the indenture
trustee and the owner trustee of this event. Any principal receivables or
participation interests transferred to the trust prior to the event, as well
as collections on those principal receivables or participation interests and
finance charge receivables accrued at any time with respect to those
principal receivables, will continue to be part of the trust assets. Unless
World Financial Network Credit Card Master Trust has terminated and the
issuer holds the receivables directly, upon the occurrence of an event of
this type, the trustee for World Financial Network Credit Card Master Trust
will sell the receivables held by World Financial Network Credit Card Master
Trust in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of that sale or liquidation will be applied to payments
on the outstanding series of securities as specified above in "--APPLICATION
OF COLLECTIONS" and in the accompanying prospectus supplement.
If the only early amortization event to occur is our insolvency, the
court may have the power to require the continued transfer of principal
receivables to the trust. See "RISK FACTORS--IF A CONSERVATOR OR RECEIVER WERE
APPOINTED FOR WORLD FINANCIAL NETWORK NATIONAL BANK DELAYS OR REDUCTIONS IN
PAYMENT OF YOUR NOTES COULD OCCUR" in this prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer receives a fee for its servicing activities and
reimbursement of expenses incurred in administering the issuer. The share of the
servicing fee allocable to each series of notes for any distribution date will
be equal to one-twelfth of the product of (a) the weighted average of the
servicing fee rates for each outstanding series and (b) the amount of principal
receivables in the trust on the last day of the prior monthly period. The
prospectus supplement for each series will describe the servicing fee allocable
to that series.
The servicer will pay from its servicing compensation expenses of
servicing the receivables, including payment of the fees and disbursements of
the indenture trustee, the trustee for World Financial Network Credit Card
Master Trust, the owner trustee and independent certified public accountants and
other fees which are not expressly stated in the transfer and servicing
agreement, the indenture, any indenture supplement or the pooling and servicing
agreement for World Financial Network Credit Card Master Trust to be payable by
the issuer or the securityholders, other than federal, state and local income
and franchise taxes, if any, of the issuer or World Financial Network Credit
Card Master Trust.
Each series' servicing fee is payable each period from collections of
finance charge receivables allocated to the series. Neither the issuer nor the
noteholders are responsible for any servicing fee allocable to the Transferor
Amount.
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MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The servicer may not resign from its obligations and duties, except:
o upon a determination that performance of its duties is no
longer permissible under applicable law, as evidenced by an
opinion of counsel to that effect delivered to the trustee and
there is no reasonable action that the servicer could take to
make the performance of its duties permissible under
applicable law; or
o as may be required in connection with the merger or
consolidation of the servicer or the conveyance or transfer of
substantially all of its assets.
If within 120 days of the determination that the servicer is no longer
permitted to act as servicer, the indenture trustee is unable to appoint a
successor, then the indenture trustee will act as servicer. If the indenture
trustee is unable to act as servicer, it will petition an appropriate court to
appoint an eligible successor.
The servicer's resignation will not become effective until the
indenture trustee or another successor has assumed the servicer's obligations
and duties. The indenture trustee will notify each rating agency upon the
appointment of a successor servicer. The servicer may delegate any of its
servicing duties to any entity that agrees to conduct those duties in accordance
with our charge account guidelines. However, the servicer's delegation of its
duties will not relieve it of its liability and responsibility with respect to
the delegated duties.
The servicer will indemnify the indenture trustee and its officers,
directors, employees and agents for any losses, including legal fees, incurred
by the indenture trustee in connection with its performance of its duties under
the indenture, the transfer and servicing agreement and related documents except
for any losses or expenses incurred as a result of the indenture trustee's
willful misconduct or negligence.
The servicer will indemnify World Financial Network Credit Card Master
Trust, the issuer, the owner trustee and the trustee for World Financial Network
Credit Card Master Trust for any losses suffered as a result of actions or
omissions arising out of the activities of World Financial Network Credit Card
Master Trust, the issuer, the owner trustee or the trustee for World Financial
Network Credit Card Master Trust under the pooling and servicing agreement, the
transfer and servicing agreement, the indenture and related documents, including
its actions or omissions as servicer, except in each case, for losses resulting
from the fraud, negligence, or willful misconduct by the trustee for World
Financial Network Credit Card Master Trust or the fraud, negligence or willful
misconduct by the owner trustee. The indemnity also does not include:
o any liabilities, costs or expenses of World Financial Network
Credit Card Master Trust, the trustee for World Financial
Network Credit Card Master Trust, the issuer or the
securityholders arising from any action taken by the trustee
for World Financial Network Credit Card Master Trust or the
indenture trustee at the direction of the securityholders;
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o any losses, claims or damages that are incurred by World
Financial Network Credit Card Master Trust, the issuer or any
securityholder in the capacity of an investor, including
losses incurred as a result of the performance of the
receivables; and
o any federal, state or local income or franchise taxes or any
other tax imposed on or measured by income or any penalties
under any related tax laws required to be paid by World
Financial Network Credit Card Master Trust, the issuer or any
securityholder.
No indemnity payments by the servicer will be paid from the assets of the issuer
or World Financial Network Credit Card Master Trust.
Except as provided in the preceding two paragraphs, neither the
servicer nor any of its directors, officers, employees, or agents will be liable
to World Financial Network Credit Card Master Trust, the issuer, the owner
trustee, the indenture trustee, the trustee for World Financial Network Credit
Card Master Trust, the securityholders or any other person for any action, or
for refraining from taking any action under the pooling and servicing agreement
or the transfer and servicing agreement. However, none of them will be protected
against any liability resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under the pooling and servicing agreement or
the transfer and servicing agreement. In addition, we are 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 and the transfer and servicing agreement and which in its reasonable
opinion may expose it to any expense or liability.
The servicer will be liable for any actual damages resulting directly
from our material failure to perform any of our obligations under the pooling
and servicing agreement or the transfer and servicing agreement, but only if
another remedy is not provided for in those agreements.
The trust agreement provides that we may sell, assign, pledge or
otherwise transfer our interest in all or a portion of the transferor interest.
Before we may transfer our interest in the transferor interest, the following
must occur:
(1) each rating agency confirms that the transfer will not impair
its rating of any outstanding series or class of notes;
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(2) we deliver an opinion of counsel to the effect that, for
federal income tax purposes:
(a) the transfer will not adversely affect the tax
characterization as debt of notes of any outstanding
series or class that were characterized as debt at
the time of their issuance;
(b) the transfer will not cause the issuer to be deemed
to be an association or publicly traded partnership
taxable as a corporation; and
(c) the transfer will not cause or constitute an event in
which gain or loss would be recognized by any
noteholder; and
(3) we deliver an opinion to the effect that the transfer does not
require registration of the interest under the Securities Act
or state securities laws except for any registration that has
been duly completed and become effective.
We or the servicer may consolidate with, merge into, or sell our or its
respective businesses to, another entity, in accordance with the pooling and
servicing agreement and the transfer and servicing agreement on the following
conditions:
(1) the entity, if other than us or the servicer, as applicable,
formed by the consolidation or merger or that acquires our
property or assets or the servicer's property or assets, as
the case may be:
(a) with respect to us, is organized under the laws of
the United States or any one of its states and (x) a
business entity that may not become a debtor in a
proceeding under the bankruptcy code or (y) is a
special-purpose corporation, the powers and
activities of which are limited to the performance of
our obligations under the pooling and servicing
agreement, transfer and servicing agreement and
related documents;
(b) with respect to the Servicer, is a corporation or a
state or federal banking association; and
(c) expressly assumes, by a supplemental agreement, to
perform every covenant and obligation of us or the
servicer, as applicable;
(2) delivery to the trustee for World Financial Network Credit
Card Master Trust and the indenture trustee of an officer's
certificate stating that the merger, consolidation or transfer
and the related supplemental agreement comply with the pooling
and servicing agreement and the transfer and servicing
agreement and that all conditions precedent relating to the
applicable transaction have been complied with and, an
opinion of counsel to the effect that, the related
supplemental agreement is legal, valid and binding with
respect to us or the servicer, as applicable; and
(3) delivery of notice of the applicable transaction to each
rating agency.
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SERVICER'S REPRESENTATIONS AND WARRANTIES
The servicer will make customary representations and warranties to the
trust. If certain of these representations and warranties are breached and the
trust's rights in, to or under the related receivables or accounts are
materially impaired or the proceeds of the receivables are not available to the
trust free and clear of any lien, then after specified time periods, the
affected receivables and/or accounts will be assigned to the servicer. The
servicer will effect the assignment by depositing funds into the collection
account in an amount equal to the amount of those receivables. The
representations and warranties of the servicer, the breach of which would cause
an assignment of receivables and/or accounts to the servicer include the
following:
o the servicer must maintain all necessary qualifications to do
business and materially comply with applicable laws in
connection with servicing the receivables and related accounts
which the failure to comply with would cause a material
adverse effect on the interests of noteholders;
o the servicer may not permit any recission or cancellation of a
receivable except as ordered by a court or other governmental
authority or in the ordinary course of its business in
accordance with its Credit Card Guidelines;
o the servicer may not take any action, nor omit to take any
action, the omission of which would materially impair the
rights of noteholders in any receivable or account, nor may
it, except in the ordinary course of its business and in
accordance with the Credit Card Guidelines, reschedule, revise
or defer collections due on the receivables; and
o except in connection with its enforcement or collection of an
account, the servicer will take no action to cause any receivable to
be evidenced by any instrument, other than an instrument that, taken
together with one or more other writings, constitutes chattel paper
and, if any receivable is so evidence it shall be reassigned or
assigned to the servicer as provided in the transfer and servicing
agreement or the pooling and servicing agreement, as applicable.
SERVICER DEFAULT
Each of the following events constitutes a servicer default:
(1) failure by the servicer to make any payment, transfer or
deposit or to give instructions or notice to the trustee to do
so, on the required date under the pooling and servicing
agreement, any series supplement to the pooling and servicing
agreement with respect to a series of investor certificates,
the transfer and servicing agreement, the indenture or any
indenture supplement, in each case on or before the date
occurring 5 business days after the date that payment,
transfer, deposit or that instruction or notice is required to
be made or given by the servicer under the applicable
document; provided, that, if the delay or default could not
have been prevented by the exercise of reasonable due
diligence by the servicer and the delay or failure was caused
by an act of God or other similar occurrence, then the
servicer shall have an additional 5 business days to cure the
default;
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(2) failure on the part of the servicer to observe or perform in
any material respect any of its other covenants or agreements
if the failure has a material adverse effect on the
securityholders which continues unremedied for a period of 60
days after notice to the servicer by the trustee or to the
servicer and the trustee by securityholders holding not less
than 25% of the aggregate outstanding principal amount all
series (or, with respect to any failure that does not relate
to all series, 25% of the aggregate outstanding principal
amount of all series to which the failure relates); provided,
that, if the delay or default could not have been prevented by
the exercise of reasonable due diligence by the servicer and
the delay or failure was caused by an act of God or other
similar occurrence, then the servicer shall have an additional
60 business days to cure the default;
(3) the servicer delegates its duties, except as specifically
permitted under the pooling and servicing agreement and the
transfer and servicing agreement, and the delegation remains
unremedied for 15 days after written notice to the servicer by
the trustee or to the servicer and the trustee by
securityholders holding not less than 25% of the aggregate
outstanding principal amount of all series;
(4) any representation, warranty or certification made by the
servicer in the pooling and servicing agreement or the
transfer and servicing agreement, or in any certificate
delivered in accordance with either agreement, proves to have
been incorrect when made if it:
(a) has a material adverse effect on the rights of the
securityholders of any series or class; and
(b) continues to be incorrect in any material respect for
a period of 60 days after notice to the servicer by
the trustee or to the servicer and the trustee by
securityholders holding not less than 25% of the
aggregate outstanding principal amount of all series
(or, with respect to any representation, warranty or
certification that does not relate to all series, 25%
of the aggregate outstanding principal amount of all
series to which the representation, warranty or
certification relates), provided, that, if the delay
or default could not have been prevented by the
exercise of reasonable due diligence by the servicer
and the delay or failure was caused by an act of God
or other similar occurrence, then the servicer shall
have an additional 60 days to cure the default; and
(5) specific insolvency, liquidation, conservatorship,
receivership or similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus
supplement.
If a servicer default occurs, for so long as it has not been remedied,
the trustee or securityholders representing more than 50% of the aggregate
principal amount of all outstanding series of securities may give notice to the
servicer, and if notice is given by the securityholders, the trustee,
terminating all of the rights and obligations of the servicer under the transfer
and servicing agreement. After the occurrence of a servicer default, the trustee
must offer the transferor the right, at its option, to purchase the receivables
for all outstanding series if the following events occur:
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o the trustee is unable to obtain any bids from eligible
successor servicers within 60 days of receipt of a servicer
termination notice; and
o the servicer delivers a certificate of an authorized officer
to the effect that the servicer cannot in good faith cure the
servicer default that gave rise to the servicer termination
notice.
The transferor's purchase price in this case will be paid on the
distribution date occurring in the month following receipt of the servicer
termination notice and will equal the sum of the amounts specified in the
prospectus supplement for each series.
If no successor has been appointed and has accepted the appointment by
the time the servicer ceases to act as servicer, the trustee will automatically
become the successor. If the trustee is legally unable to act as servicer, the
trustee will petition a court of competent jurisdiction to appoint an eligible
servicer.
Any default by the servicer or us in the performance of its or our
obligations under the transfer and servicing agreement may be waived by
securityholders holding 66 2/3% or more of the then-outstanding principal
balance of the securities of each series as to which that default relates, or
with respect to any series with two or more classes, each class as to which the
default relates, unless that default relates to a failure to make any required
deposits or payments to be made to noteholders. No waiver by the securityholders
of any default under the pooling and servicing agreement will affect the rights
of any credit enhancement provider for any series.
Our rights and obligations under the pooling and servicing agreement
and the transfer and servicing agreement will be unaffected by any change in
servicer.
If a conservator or receiver is appointed for the servicer, the
conservator or receiver may have the power to prevent either the trustee or the
securityholders from appointing a successor servicer.
REPORTS TO NOTEHOLDERS
Noteholders of each series issued by the issuer will receive reports
with information on the series and the trust. The paying agent will forward to
each noteholder of record a report, prepared by the servicer, for its series on
the distribution dates for that series. The report will contain the information
specified in the related prospectus supplement. If a series has multiple
classes, information will be provided for each class, as specified in the
related prospectus supplement.
Periodic information to noteholders generally will include:
o the total amount distributed;
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o the amount of principal and interest for distribution;
o collections of principal receivables and finance charge
receivables allocated to the series;
o the aggregate amount of principal receivables, the collateral
amount and the collateral amount as a percentage of the
aggregate amount of the principal receivables in the trust
portfolio;
o the aggregate outstanding balance of accounts broken out by
delinquency status;
o the aggregate defaults and dilution allocated to the series;
o the amount of reductions, if any, to the collateral amount due
to defaulted receivables and dilution allocated to the series
and any reimbursements of previous reductions to the
collateral amount;
o the monthly servicing fee for that series;
o the amount available under the credit enhancement, if any, for
the series or each class of the series;
o the "pool factor," which is the ratio of the current
collateral amount to the initial collateral amount;
o the base rate and portfolio yield, each as defined in the
related prospectus supplement for the series;
o if the series or a class of the series bears interest at a
floating or variable rate, information relating to that rate;
o for any distribution date during a funding period, the
remaining balance in the prefunding account; and
o for the first distribution date that is on or immediately
following the end of a funding period, the amount of any
remaining balance in the prefunding account that has not been
used to fund the purchase of receivables and is being paid as
principal on the notes.
By January 31 of each calendar year, the paying agent will also provide
to each person who at any time during the preceding calendar year was a
noteholder of record a statement, prepared by the servicer, containing the type
of information presented in the periodic reports, aggregated for that calendar
year or the portion of that calendar year that the person was a noteholder,
together with other information that is customarily provided to holders of debt,
to assist noteholders in preparing their United States tax returns.
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EVIDENCE AS TO COMPLIANCE
The transfer and servicing agreement provides that on or before the
90th day following the end of servicer's fiscal year, beginning with 2002, the
servicer will have a firm of independent certified public accountants furnish a
report showing that, for the prior calendar year:
o the accounting firm has applied the procedures required by those
agreements to the documents and records relating to the servicing
of the accounts, compared the information contained in the
servicer's certificates delivered during the prior calendar year
with those documents and records, and that based upon those
procedures, no matters came to the attention of that accounting
firm that caused them to believe that servicing was not conducted
in compliance with specified sections of the transfer and
servicing agreement, and
o the accounting firm has compared specified amounts set forth in
the periodic reports prepared by the servicer for the prior
calendar year with the servicer's computer reports and that, in
the accounting firm's opinion, the amounts are in agreement,
in either case, except for any discrepancies or exceptions they consider
immaterial or that are otherwise disclosed.
The transfer and servicing agreement also provides that by the 90th day
following the end of the servicer's fiscal year, beginning with 2002, the
servicer will deliver to the indenture trustee, each credit enhancement provider
and each rating agency a certificate of an authorized officer to the effect that
the servicer has fully performed its obligations under the transfer and
servicing agreement during the preceding year, or, if there has been a default
in the performance of any of its obligations, specifying the nature and status
of the default.
AMENDMENTS
The transfer and servicing agreement may be amended by us, the servicer
and the issuer, without the consent of the indenture trustee or the noteholders
of any series to cure any ambiguity, to correct or supplement any provisions of
the agreement that are inconsistent with any other provisions of the agreement
or to add any other provisions concerning matters or questions raised under the
agreement that are not inconsistent with the provisions of the agreement, so
long as the amendment does not adversely affect in any material respect the
interests of any noteholder. In addition, the transfer and servicing agreement
may be amended by us, the servicer and the issuer, without the consent of the
indenture trustee or the noteholders of any series, on the following conditions:
(1) we deliver to the owner trustee and the indenture trustee a
certificate of an authorized officer stating that, in our
reasonable belief, the amendment will not:
(a) result in the occurrence of an early amortization
event or an event of default; or
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(b) materially and adversely affect the amount or timing
of distributions to be made to noteholders of any
series or class; and
(2) each rating agency confirms that the amendment will not impair
its rating of any outstanding series or class of notes.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer at our direction, without the consent of the indenture
trustee, the noteholders of any series or the credit enhancement providers for
any series to add, modify or eliminate any provisions necessary or advisable in
order to enable the issuer or any portion of the issuer to (i) qualify as, and
to permit an election to be made for the issuer to be treated as, a "financial
asset securitization investment trust" under the Internal Revenue Code and (ii)
avoid the imposition of state or local income or franchise taxes on the issuer's
property or its income. However, we may not amend the transfer and servicing
agreement as described in this paragraph unless each rating agency confirms that
the amendment will not impair its rating of any outstanding series or class of
notes. In addition, the amendment must not affect the rights, duties or
obligations of the indenture trustee or the owner trustee under the transfer and
servicing agreement.
The amendments that we may make without the consent of the noteholders
of any series or the credit enhancement providers for any series may include the
addition or sale of receivables in the trust portfolio and the addition of one
or more persons, other than us, as transferors of receivables to the issuer.
The transfer and servicing agreement may also be amended by us, the
servicer and the issuer with the consent of noteholders representing more than
66 2/3% of the then-outstanding principal balance of the notes of each series
affected by the amendment for which we have not delivered a certificate of an
authorized officer stating that, in our reasonable belief, the amendment will
not:
(a) result in the occurrence of an early amortization
event or an event of default; or
(b) materially and adversely affect the amount or timing
of distributions to be made to the noteholders of any
series or class.
However, no amendment may occur if it:
(1) reduces the amount of, or delays the timing of:
(a) any distributions to be made to noteholders of any
series or deposits of amounts to be distributed; or
(b) the amount available under any credit enhancement,
in each case, without the consent of each affected noteholder;
(2) changes the manner of calculating the interest of any
noteholder without the consent of each affected noteholder;
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(3) reduces the percentage of the outstanding principal balance of
the notes required to consent to any amendment, without the
consent of each affected noteholder; or
(4) adversely affects the rating of any series or class by each
rating agency, without the consent of noteholders representing
more than 66?% of the then-outstanding principal balance of
the notes of each affected series or class.
For purposes of clause (1) above, changes in early amortization events
or events of default that decrease the likelihood of the occurrence of those
events will not be considered delays in the timing of distributions.
In no event may any amendment to the transfer and servicing agreement
adversely affect in any material respect the interests of any credit enhancement
provider without the consent of that credit enhancement provider.
THE INDENTURE
We have summarized the material terms of the indenture below. The
summary is not complete and is qualified in its entirety by reference to the
indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
An event of default will occur under the indenture for any series of
notes upon the occurrence of any of the following events:
(1) the issuer fails to pay principal when it becomes due and
payable on the final maturity date for that series of notes;
(2) the issuer fails to pay interest when it becomes due and
payable and the default continues for a period of 35 days;
(3) bankruptcy, insolvency, conservatorship, receivership,
liquidation or similar events relating to the issuer;
(4) the issuer fails to observe or perform covenants or agreements
made in the indenture in respect of the notes of that series,
and:
(a) the failure continues, or is not cured, for 60 days
after notice to the issuer by the indenture trustee
or to the issuer and the indenture trustee by
noteholders representing 25% or more of the
then-outstanding principal amount of that series of
notes; and
(b) as a result, the interests of the noteholders are
materially and adversely affected, and continue to be
materially and adversely affected during the 60-day
period; or
(5) any additional event specified in the indenture supplement
related to that series.
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An event of default will not occur if the issuer fails to pay the full
principal amount of a note on its expected principal payment date.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
If an event of default referred to in clause (1), (2) or (4) above
occurs and is continuing with respect to any series of notes, the indenture
trustee or noteholders holding a majority of the then-outstanding principal
balance of the notes of the affected series may declare the principal of the
notes of that series to be immediately due and payable. If an event of default
referred to in clause (3) above occurs and is continuing, the unpaid principal
and interest due on the notes automatically will be deemed to be declared due
and payable. Before a judgment or decree for payment of the money due has been
obtained by the indenture trustee, noteholders holding a majority of the
then-outstanding principal balance of the notes of that series may rescind the
declaration of acceleration of maturity if:
(a) the issuer has paid or deposited with the indenture
trustee all principal and interest due on the notes
and all other amounts that would then be due if the
event of default giving rise to the acceleration had
not occurred, including all amounts then payable to
the indenture trustee; and
(b) all events of default have been cured or waived.
If an event of default occurs, the indenture trustee will be under no
obligation to exercise any of the rights or powers under the indenture if
requested or directed by any of the holders of the notes of the affected series
if:
(1) the indenture trustee is advised by counsel that the action it
is directed to take is in conflict with applicable law or the
indenture;
(2) the indenture trustee determines in good faith that the
requested actions would be illegal or involve the indenture
trustee in personal liability or be unjustly prejudicial to
noteholders not making the request or direction; or
(3) the indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and
liabilities which might be incurred by it in complying with
that request.
Subject to those provisions for indemnification and those limitations
contained in the indenture, noteholders holding more than 50% of the
then-outstanding principal balance of the notes of the affected series will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the indenture trustee if an event of default has
occurred and is continuing. Prior to the acceleration of the maturity of the
notes of the affected series, the noteholders holding more than 50% of the
then-outstanding principal balance of each class of the notes of the affected
series may also waive any default with respect to the notes, except a default in
the payment of principal or interest or a default relating to a covenant or
provision of the indenture that cannot be modified without the waiver or consent
of each affected noteholder.
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After acceleration of a series of notes, principal collections and
finance charge collections allocated to those notes will be applied to make
monthly principal and interest payments on the notes until the earlier of the
date the notes are paid in full or the final maturity date of the notes. Funds
in the collection account, the excess funding account and the other trust
accounts for an accelerated series of notes will be applied immediately to pay
principal of and interest on those notes.
Upon acceleration of the maturity of a series of notes following an
event of default, the indenture trustee will have a lien on the collateral for
those notes for its unpaid fees and expenses that ranks senior to the lien of
those notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies
of the holders of accelerated notes. However, noteholders will have the right to
institute any proceeding with respect to the indenture if the following
conditions are met:
o the noteholder or noteholders have previously given the indenture
trustee written notice of a continuing event of default;
o the noteholders of at least 25% of the then-outstanding principal
balance of each affected series make a written request of the
indenture trustee to institute a proceeding as indenture trustee;
o the noteholders offer indemnification to the indenture trustee
against the costs, expenses and liabilities of instituting a
proceeding that is satisfactory to the indenture trustee;
o the indenture trustee has not instituted a proceeding within 60 days
after receipt of the request and offer of indemnification; and
o during the 60-day period following receipt of the request and
offer of indemnification, the indenture trustee has not received
from noteholders holding more than 50% of the then-outstanding
principal balance of the notes of that series a direction
inconsistent with the request.
If the indenture trustee receives conflicting or inconsistent requests
and indemnity from two or more groups of any affected series, each representing
no more than 50% of the then-outstanding principal balance of that series, the
indenture trustee in its sole discretion may determine what action, if any, will
be taken.
Each holder of a note will have an absolute and unconditional right to
receive payment of the principal of and interest in respect of that note as
principal and interest become due and payable, and to institute suit for the
enforcement of any payment of principal and interest then due and payable and
those rights may not be impaired without the consent of that noteholder.
If any series of notes has been accelerated following an event of
default, and the indenture trustee has not received any valid directions from
those noteholders, the indenture trustee may, but is not required to, elect to
continue to hold the portion of the trust assets that secures those notes and
apply distributions on the trust assets to make payments on those notes to the
extent funds are available.
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Subject to the provisions of the indenture relating to the duties of
the indenture trustee, if any series of notes has been accelerated following an
event of default, the indenture trustee may:
o institute proceedings in its own name and as trustee for the
collection of all amounts then payable on the notes of the affected
series; or
o take any other appropriate action to protect and enforce the rights
and remedies of the indenture trustee and the noteholders of the
affected series.
Subject to the conditions described in the following sentence, the
indenture trustee also may cause the trust to sell principal receivables in an
amount equal to the collateral amount for the series of accelerated notes and
the related finance charge receivables. Before exercising this remedy, the
indenture trustee must receive an opinion of counsel to the effect that exercise
of this remedy complies with applicable federal and state securities laws and
one of the following conditions must be satisfied:
o receipt by the indenture trustee of the consent of all noteholders
of the affected series;
o determination by the indenture trustee that any proceeds from
exercising the remedy will be sufficient to discharge in full all
principal and interest due on the accelerated notes, and the
indenture trustee obtains the consent of noteholders holding more
than 50% of the then-outstanding principal balance of the
affected series; or
o determination by the indenture trustee that the assets may not
continue to provide sufficient funds for the payment of principal
of and interest on those notes as they would have become due if
the notes had not been accelerated, and the indenture trustee
obtains the consent of noteholders holding at least 66 2/3% of the
then-outstanding principal balance of each class of the notes of
the affected series.
The remedies described above are the exclusive remedies provided to
noteholders and each noteholder by accepting its interest in the notes of any
series or the indenture trustee expressly waives any other remedy that might
have been available under the Uniform Commercial Code.
The indenture trustee and the noteholders will covenant that they will
not at any time institute against the issuer or World Financial Network Credit
Card Master Trust any reorganization or other proceeding under any federal or
state law.
None of us, the administrator, the owner trustee, the indenture
trustee, the servicer, or World Financial Network Credit Card Master Trust, nor
any holder of an ownership interest in the issuer, nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, successors or
assigns shall, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the notes
or for the agreements of the issuer contained in the indenture. The notes will
represent obligations solely of the issuer, and the notes will not be insured or
guaranteed by us, the servicer, the administrator, the owner trustee, the
indenture trustee, or any other person or entity.
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COVENANTS
The indenture provides that the issuer may not consolidate with, merge
into or sell its business to, another entity, unless:
(1) the entity, if other than the issuer, formed by or surviving
the consolidation or merger or that acquires the issuer's
business:
(a) is organized under the laws of the United States or
any one of its states;
(b) is not subject to regulation as an "investment
company" under the Investment Company Act of 1940;
(c) expressly assumes, by supplemental indenture, the
issuer's obligation to make due and punctual payments
upon the notes and the performance of every covenant
of the issuer under the indenture;
(d) in the case of a sale of the issuer's business,
expressly agrees, by supplemental indenture that (i)
all right, title and interest so conveyed or
transferred by the issuer will be subject and
subordinate to the rights of the noteholders and (ii)
it will make all filings with the Securities and
Exchange Commission required by the Securities
Exchange Act of 1934 in connection with the notes;
and
(e) in the case of a sale of the issuer's business,
expressly agrees to indemnify the issuer from any
loss, liability or expense arising under the
indenture and the notes;
(2) no early amortization event or event of default will exist
immediately after the merger, consolidation or sale;
(3) each rating agency confirms that the transaction will not
impair its rating of any outstanding series or class of notes;
(4) the issuer will have received an opinion of counsel to the
effect that for federal income tax purposes:
(a) the transaction will not adversely affect the tax
characterization as debt of notes of any outstanding
series or class that were characterized as debt at
the time of their issuance;
(b) the transaction will not cause the issuer to be
deemed to be an association or publicly traded
partnership taxable as a corporation; and
(c) the transaction will not cause or constitute an event
in which gain or loss would be recognized by any
noteholder;
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(5) any action necessary to maintain the lien and security
interest created by the indenture will have been taken; and
(6) the issuer has delivered to the indenture trustee an opinion
of counsel and officer's certificate each stating that the
consolidation, merger or sale satisfies all requirements under
the indenture and that the supplemental indenture is duly
authorized, executed and delivered and is valid, binding and
enforceable.
As long as the notes are outstanding, the issuer will not, among other
things:
o except as expressly permitted by the indenture, the transfer
and servicing agreement or related documents, sell, transfer,
exchange or otherwise dispose of any of the assets of the
issuer that secure the notes unless directed to do so by the
indenture trustee;
o claim any credit on or make any deduction from payments in
respect of the principal of and interest on the notes--other
than amounts withheld under the Internal Revenue Code or
applicable state law--or assert any claim against any present
or former noteholders because of the payment of taxes levied
or assessed upon the assets of the issuer that secure the
notes;
o voluntarily dissolve or liquidate in whole or in part; or
o permit (A) the validity or effectiveness of the indenture or
the lien under the indenture to be impaired, or permit any
person to be released from any covenants or obligations with
respect to the notes under the indenture except as may be
expressly permitted by the indenture, (B) any lien or other
claim of a third party to be created with respect to the
assets of the issuer, or (C) the lien of the indenture not to
constitute a valid first priority perfected security interest
in the assets of the issuer that secure the notes.
The issuer may not engage in any activity other than as specified under
"THE ISSUER" in this prospectus. The issuer will not incur, assume or guarantee
any indebtedness other than indebtedness under the notes and the indenture.
MODIFICATION OF THE INDENTURE
The issuer and the indenture trustee may, without the consent of any
noteholders but with prior written notice to each rating agency, enter into one
or more supplemental indentures for any of the following purposes:
o to correct or enhance the description of any property subject
to the lien of the indenture, or to take any action that will
enhance the indenture trustee's lien under the indenture, or
to add to the property pledged to secure the notes;
o to reflect the agreement of another person to assume the role
of the issuer;
o to add to the covenants of the issuer, for the benefit of the
noteholders, or to surrender any right or power of the issuer;
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o to transfer or pledge any property to the indenture trustee;
o to cure any ambiguity, to correct or supplement any provision
in the indenture or in any supplemental indenture that may be
inconsistent with any other provision in the indenture or in
any supplemental indenture or to make any other provisions
concerning matters arising under the indenture as long as that
action would not adversely affect the interests of the
noteholders;
o to appoint a successor to the indenture trustee with respect
to the notes and to add to or change any of the provisions of
the indenture to allow more than one indenture trustee to act
under the indenture;
o to modify, eliminate or add to the provisions of the indenture
as necessary to qualify the indenture under the Trust
Indenture Act of 1939, or any similar federal statute later
enacted;
o to permit the issuance of one or more new series of notes
under the indenture; or
o to terminate any interest rate swap agreement or other credit
enhancement in accordance with the related indenture
supplement.
The issuer and the indenture trustee may also, without the consent of
any noteholders, enter into one or more supplemental indentures to amend the
indenture, upon:
(1) receipt of written confirmation from each rating agency that
the action will not impair its rating of any outstanding
series or class of notes;
(2) our certification to the effect that, in the reasonable belief
of the certifying officer, the action will not (i) cause an
early amortization event or an event of default or (ii)
materially and adversely affect the amount or timing of
payments to be made to the noteholders of any series or
class; and
(3) the issuer will have recieved an opinion of counsel to the
effect that for federal income tax purposes:
(a) the transaction will not adversely affect the tax
characterization as debt of notes of any outstanding
series or class that were characterized as debt at the
time of their issuance;
(b) the transaction will not cause the issuer to be deemed
to be an association or publicly traded partnership
taxable a corporation; and
(c) the transaction will not cause or constitute an event
in which gain or loss would be recognized by any
noteholder.
The issuer and the indenture trustee may also, without the consent of
the noteholders of any series or the credit enhancement providers for any
series, enter into one or more supplemental indentures to add, modify or
eliminate any provisions necessary or advisable in order to enable the issuer or
any portion of the issuer (i) to qualify as, and to permit an election to be
made for the issuer to be treated as, a "financial asset securitization
investment trust" under the Internal Revenue Code and (ii) to avoid the
imposition of state or local income or franchise taxes on the issuer's property
or its income. Prior to any amendment described in this paragraph, each rating
agency must confirm that the amendment will not impair its rating of any
outstanding series or class of notes. In addition, no amendment described in
this paragraph may affect the rights, duties or obligations of the indenture
trustee or the owner trustee under the indenture.
The issuer and the indenture trustee will not, without prior notice to
each rating agency and the consent of each noteholder affected, enter into any
supplemental indenture to:
o change the date of payment of any installment of principal of
or interest on any note or reduce the principal amount of a
note, the note interest rate or the redemption price of
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the note or change any place of payment where, or the currency
in which, any note is payable;
o impair the right to institute suit for the enforcement of
specified payment provisions of the indenture;
o reduce the percentage of the aggregate principal amount of the
notes of any series, whose consent is required (a) for
execution of any supplemental indenture or (b) for any waiver
of compliance with specified provisions of the indenture or of
some defaults under the indenture and their consequences
provided in the indenture;
o reduce the percentage of the aggregate outstanding amount of
the notes required to direct the indenture trustee to sell or
liquidate the trust assets if the proceeds of the sale would
be insufficient to pay the principal amount and interest due
on those notes;
o decrease the percentage of the aggregate principal amount of
the notes required to amend the sections of the indenture that
specify the percentage of the principal amount of the notes of
a series necessary to amend the indenture or other related
agreements;
o modify provisions of the indenture prohibiting the voting of
notes held by the issuer, any other party obligated on the
notes, us, or any of their affiliates; or
o permit the creation of any lien superior or equal to the lien
of the indenture with respect to any of the collateral for any
notes or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on the
collateral or deprive any noteholder of the security provided
by the lien of the indenture.
The issuer and the indenture trustee may otherwise, with receipt of
written confirmation from each rating agency that the action will not impair
its rating of any outstanding series or class and with the consent of
noteholders holding more than 66 2/3% of the then-outstanding principal
balance of the notes of each series adversely affected, enter into one or
more supplemental indentures to add provisions to or change in any manner or
eliminate any provision of the indenture or to change the rights of the
noteholders under the indenture.
ANNUAL COMPLIANCE STATEMENT
The issuer will be required to present to the indenture trustee each
year a written statement as to the performance of its obligations under the
indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The indenture trustee will be required to mail to the noteholders each
year a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held by
the indenture trustee and any action it took that materially affects the notes
and that has not been previously reported.
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LIST OF NOTEHOLDERS
Holders of not less than 10% of the outstanding principal balance
of any series of notes may obtain access to the list of noteholders the
indenture trustee maintains for the purpose of communicating with other
noteholders. The indenture trustee may elect not to allow the requesting
noteholders access to the list of noteholders if it agrees to mail the
requested communication or proxy, on behalf and at the expense of the
requesting noteholders, to all noteholders of record.
SATISFACTION AND DISCHARGE OF INDENTURE
The indenture will be discharged with respect to the notes upon the
delivery to the indenture trustee for cancellation of all the notes or, with
specific limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
THE INDENTURE TRUSTEE
The indenture trustee may resign at any time. Noteholders holding
more than 66 2/3% of the aggregate outstanding principal balance of all
series may remove the indenture trustee and may appoint a successor indenture
trustee. In addition, the administrator will remove the indenture trustee if
it ceases to be eligible to continue as an indenture trustee under the
indenture or if the indenture trustee becomes insolvent or otherwise becomes
legally unable to act as indenture trustee. If the indenture trustee resigns
or is removed, the administrator will then be obligated to appoint a
successor indenture trustee. If a successor indenture trustee does not assume
the duties of indenture trustee within 60 days after the retiring indenture
trustee resigns or is removed, the retiring indenture trustee, the issuer or
noteholders representing more than 50% of the aggregate outstanding principal
balance of all series may petition a court of competent jurisdiction to
appoint a successor indenture trustee. In addition, if the indenture trustee
ceases to be eligible to continue as indenture trustee, any noteholder may
petition a court of competent jurisdiction for the removal of the indenture
trustee and the appointment of a successor indenture trustee.
If an event of default occurs under the indenture, under the Trust
Indenture Act of 1939, the indenture trustee may be deemed to have a conflict of
interest and be required to resign as indenture trustee for one or more classes
of each series of notes. In that case, a successor indenture trustee will be
appointed for one or more of those classes of notes and may provide for rights
of senior noteholders to consent to or direct actions by the indenture trustee
which are different from those of subordinated noteholders. Any resignation or
removal of the indenture trustee and appointment of a successor indenture
trustee for any class or series of notes will not become effective until the
successor indenture trustee accepts its appointment.
The indenture trustee is not responsible for the accuracy, validity or
adequacy of any of the information contained in this prospectus.
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MATTERS REGARDING THE ADMINISTRATOR
The administrator will, to the extent provided in the administration
agreement, provide the notices and perform on behalf of the issuer other
administrative obligations required by the indenture.
POOLING AND SERVICING AGREEMENT
We have summarized the terms of the pooling and servicing agreement
that are material to noteholders in this prospectus. The summary is not complete
and is qualified in its entirety by reference to the pooling and servicing
agreement.
NEW ISSUANCES OF INVESTOR CERTIFICATES
The pooling and servicing agreement provides that, in any one or more
series supplements to the pooling and servicing agreement, we may direct the
trustee for World Financial Network Credit Card Master Trust to issue one or
more new series of investor certificates and may define all principal terms of
those series. Until the World Financial Credit Card Master Trust has been
terminated, each issuance of notes will also be treated as an issuance of a new
series of investor certificates. A series supplement may only modify or amend
the terms of the pooling and servicing agreement as applied to the new series.
There is no limit to the number of new issuances we may cause under the pooling
and servicing agreement.
No new series of investor certificates may be issued unless we satisfy
various conditions, including that:
(1) each rating agency confirms that the issuance of the new
series will not impair its rating of any outstanding series or
class of investor certificates;
(2) we certify that, after giving effect to the issuance of the
new series:
(i) we reasonably believe that the new issuance will not,
based on the facts known to the certifying officer,
cause an early amortization event with respect to any
series;
(ii) the Transferor Amount would not be less than the
Minimum Transferor Amount; and
(iii) the Aggregate Principal Balance would not be less
than the Required Principal Balance.
(3) we deliver an opinion to the effect that:
(i) the issuance will not adversely affect the tax
characterization as debt of any outstanding series or
class of investor certificates that was characterized
as debt at the time of its issuance;
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(ii) the issuance will not cause World Financial Network
Credit Card Master Trust to be deemed to be an
association or publicly traded partnership taxable as
a corporation; and
(iii) the transaction will not cause or constitute an event
in which gain or loss would be recognized by an
investor certificateholder.
AMENDMENTS
The pooling and servicing agreement and any series supplement to the
pooling and servicing agreement may be amended by us, the servicer and the
trustee for World Financial Network Credit Card Master Trust, without the
consent of certificateholders of any series, to cure any ambiguity, to correct
or supplement any provisions which may be inconsistent with any other provisions
of the pooling and servicing agreement, to issue a supplemental certificate in
exchange for any transferor certificate, the assumption by another entity of the
transferor's obligations under the pooling and servicing agreement or to add any
other provisions which would not be inconsistent with the pooling and servicing
agreement if the amendment would not adversely effect the interests of the
certificateholders in any material respect and the following conditions are
satisfied:
o we deliver to the trustee a certificate of an
authorized officer stating that, in our reasonable
belief, the amendment will not adversely affect in
any material respect the interests of any
certificateholder;
o each rating agency confirms that the amendment will
not impair its rating of any outstanding series or
class of certificates; and
o we deliver an opinion relating to the tax
consequences of the amendment.
The amendments that we may make without the consent of the
certificateholders of any series or the credit enhancement providers for any
series may include the addition or sale of receivables or participation
interests in the trust portfolio.
The pooling and servicing agreement may also be amended by us, the
servicer and the trustee for World Financial Network Credit Card Master Trust,
with the consent of certificateholders representing not less than 66 2/3% of the
aggregate invested amount of all series adversely affected by the amendment,
and, unless each rating agency confirms that the amendment will not impair its
rating of any outstanding series or class of investor certificates, of each
class of each adversely affected series. Even with the consent of the investor
certificateholders and the written confirmation from the rating agencies
described in the preceding sentence, no amendment may occur if it:
(1) reduces the amount of, or delays the timing of, any
distributions to be made to certificateholders of any
series or the amount available under any credit
enhancement without the consent of each affected
certificateholder;
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(2) changes the manner of calculating the invested
amounts and allocation percentages for any series or
changes the manner of allocating defaulted
receivables to any series without the consent of each
affected certificateholder; or
(3) reduces the percentage of undivided interests the
holders of which are required to consent to any
amendment, without the consent of each affected
certificateholder.
CREDIT ENHANCEMENT
GENERAL
For any series, credit enhancement may be provided with respect to one
or more of the related classes. Credit enhancement may be in the form of setting
the collateral amount for that series at an amount greater than the initial
principal amount of the notes in that series, the subordination of one or more
classes of the notes of that series, a letter of credit, the establishment of a
cash collateral guaranty or account, a surety bond, an insurance policy, a
spread account, a reserve account, the use of cross support features or another
method of credit enhancement described in the accompanying prospectus
supplement, or any combination of these. If so specified in the accompanying
prospectus supplement, any form of credit enhancement may be structured so as to
be drawn upon by more than one class to the extent described in that
accompanying prospectus supplement. Any credit enhancement that constitutes a
guarantee of the applicable notes will be separately registered under the
Securities Act unless exempt from registration under the Securities Act.
In the prospectus supplement for each series, we will describe the
amount and the material terms of the related credit enhancement. Often, the
credit enhancement will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal balance of the notes and
interest thereon. If losses occur which exceed the amount covered by the credit
enhancement or which are not covered by the credit enhancement, noteholders will
bear their allocable share of deficiencies.
If credit enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
o the amount payable under that credit enhancement;
o any conditions to payment not described here;
o the conditions, if any, under which the amount payable under
that credit enhancement may be reduced and under which that
credit enhancement may be terminated or replaced; and
o any material provision of any agreement relating to that
credit enhancement.
The accompanying prospectus supplement may also set forth additional
information with respect to any credit enhancement provider, including:
o a brief description of its principal business activities;
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o its principal place of business, place of incorporation and
the jurisdiction under which it is chartered or licensed to do
business;
o if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its
business; and
o its total assets, and its stockholders' or policy holders'
surplus, if applicable, and other appropriate financial
information as of the date specified in the prospectus
supplement.
If so specified in the accompanying prospectus supplement, credit
enhancement with respect to a series may be available to pay principal of the
notes of that series following the occurrence of one or more early amortization
events with respect to that series. In this event, the credit enhancement
provider will have an interest in the cash flows in respect of the receivables
to the extent described in that prospectus supplement.
SUBORDINATION
If so specified in the accompanying prospectus supplement, one or more
classes of any series will be subordinated as described in the accompanying
prospectus supplement to the extent necessary to fund payments with respect to
the senior notes. The rights of the holders of these subordinated notes to
receive distributions of principal and/or interest on any distribution date for
that series will be subordinate in right and priority to the rights of the
holders of senior notes, but only to the extent set forth in the accompanying
prospectus supplement. If so specified in the accompanying prospectus
supplement, subordination may apply only in the event that a specified type of
loss is not covered by another credit enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
o the amount of subordination of a class or classes of
subordinated notes in a series;
o the circumstances in which that subordination will be
applicable;
o the manner, if any, in which the amount of subordination will
decrease over time; and
o the conditions under which amounts available from payments
that would otherwise be made to holders of those subordinated
notes will be distributed to holders of senior notes.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as support for a class of another
series, the accompanying prospectus supplement will specify the manner and
conditions for applying that cross-support feature.
LETTER OF CREDIT
If so specified in the accompanying prospectus supplement, support for
a series or one or more of the related classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection against
some losses in addition to or in lieu of other credit enhancement. The issuer of
the letter of credit, will be obligated to honor demands with respect
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to that letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to any conditions as are
specified in the accompanying prospectus supplement.
The maximum liability of the issuer of a letter of credit under its
letter of credit will generally be an amount equal to a percentage specified in
the accompanying prospectus supplement of the initial collateral amount of a
series or a class of that series. The maximum amount available at any time to be
paid under a letter of credit will be set forth in the accompanying prospectus
supplement.
CASH COLLATERAL GUARANTY, CASH COLLATERAL ACCOUNT OR EXCESS COLLATERAL
If so specified in the accompanying prospectus supplement, support for
a series or one or more of the related classes will be provided by the
following:
o a cash collateral guaranty, secured by the deposit of cash or
permitted investments in a cash collateral account, reserved
for the beneficiaries of the cash collateral guaranty;
o a cash collateral account; or
o a collateral amount in excess of the initial principal amount
of the notes for that series.
We refer to the undivided interest in the trust as a collateral
interest. The amounts on deposit in the cash collateral account or available
under the cash collateral guaranty may be increased under the circumstances
described in the accompanying prospectus supplement which may include:
o to the extent we elect to apply collections of principal
receivables allocable to the excess collateral to decrease the
excess collateral;
o to the extent collections of principal receivables allocable
to the excess collateral must be deposited into the cash
collateral account; and
o to the extent excess collections of finance charge receivables
must be deposited into the cash collateral account.
The amount available from the cash collateral guaranty, the cash
collateral account and any excess collateral be limited to an amount specified
in the accompanying prospectus supplement. The accompanying prospectus
supplement will set forth the circumstances under which payments are made to
beneficiaries of the cash collateral guaranty from the cash collateral account
or from the cash collateral account directly.
SURETY BOND OR INSURANCE POLICY
If so specified in the accompanying prospectus supplement, insurance
with respect to a series or one or more of the related classes will be provided
by one or more insurance companies. This insurance will guarantee, with respect
to one or more classes of the related series,
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distributions of interest or principal in the manner and amount specified in the
accompanying prospectus supplement.
If so specified in the accompanying prospectus supplement, a surety
bond will be purchased for the benefit of the holders of any series or class of
that series to assure distributions of interest or principal with respect to
that series or class of notes in the manner and amount specified in the
accompanying prospectus supplement.
If an insurance policy or a surety bond is provided for any series or
class, the provider of the insurance policy or surety bond will be permitted to
exercise the voting rights of the noteholders of the applicable series or class
to the extent described in the prospectus supplement for that series. For
example, if specified in the related prospectus supplement, the provider of the
insurance policy or surety bond, rather than the noteholders of that series, may
have the sole right to:
o consent to amendments to the indenture, the pooling and
servicing agreement, the transfer and servicing agreement or
any other document applicable to that series;
o if an event of default occurs, accelerate the notes of that
series or direct the trustee to exercise any remedy available
to the noteholders; or
o waive any event of default for that series.
SPREAD ACCOUNT
If so specified in the accompanying prospectus supplement, support for
a series or one or more of the related classes will be provided by the periodic
deposit of all or a portion of available excess cash flow from the trust assets
into a spread account intended to assist with subsequent distribution of
interest and principal on the notes of that class or series in the manner
specified in the accompanying prospectus supplement.
RESERVE ACCOUNT
If so specified in the accompanying prospectus supplement, support for
a series or one or more of the related classes or any related enhancement will
be provided by a reserve account. The reserve account may be funded, to the
extent provided in the accompanying prospectus supplement, by an initial cash
deposit, the retention of a portion of periodic distributions of principal or
interest or both otherwise payable to one or more classes of notes, including
the subordinated notes, or the provision of a letter of credit, guarantee,
insurance policy or other form of credit or any combination of these
arrangements. The reserve account will be established to assist with the
subsequent distribution of principal or interest on the notes of that series or
the related class or any other amount owing on any related enhancement in the
manner provided in the accompanying prospectus supplement.
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DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The following is a summary of the material terms of the receivables
purchase agreement entered into by the bank and us. The summary is qualified in
its entirety by reference to the receivables purchase agreement. The receivables
purchase agreement is filed as an exhibit to the registration statement of which
this prospectus is a part.
SALE OF RECEIVABLES
The bank previously transferred some of the receivables in the accounts
currently designated to the trust directly to the trust under the pooling and
servicing agreement. Under the receivables purchase agreement, the bank sold the
remaining receivables in the accounts designated to the trust and, in the
future, may sell to us receivables in additional accounts as of the related
addition dates.
REPRESENTATIONS AND WARRANTIES
In the receivables purchase agreement, the bank represents and warrants
to us as of the closing date for each series of securities and the date each
account is designated for inclusion to the trust that:
o each account is an Eligible Account as of the date it is
designated to the trust and each receivable is an Eligible
Receivable on the date it is transferred to us;
o the account schedule and information contained therein is true
and correct in all material respects;
o each receivable has been conveyed to us free and clear of any
liens, other than liens permitted by the receivables purchase
agreement, and in compliance in all material respects with all
applicable laws;
o it owns all right, title and interest in each such receivable
and has the right to transfer it to us; and;
o all required governmental approvals in connection with the
transfer of each such receivable to us have been obtained.
In the event of a breach of any of these representation and warranties
which results in the requirement that we accept retransfer of an ineligible
receivable under the pooling and servicing agreement or the transfer and
servicing agreement, we can require the bank to repurchase that ineligible
receivable on the date of the retransfer. The purchase price for the ineligible
receivables will be the outstanding principal amount of those receivables.
In the receivables purchase agreement, the bank will also make
representations and warranties to us as to:
o the bank's valid existence and good standing as a national
banking organization and its ability to perform its
obligations under each transaction document;
o the bank's qualification to do business and good standing as a
foreign corporation and its possession of necessary licenses
and approvals to conduct its business;
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o the due authorization, execution, delivery and performance of
the receivables purchase agreement;
o the enforceability of the receivables purchase agreement against the
bank as a legal, valid and binding obligation; and
o the effectiveness of the receivables purchase agreement governing
the bank's transfer of the receivables to us as a valid transfer and
assignment of its ownership interest in the receivables, other
than liens permitted by the receivables purchase agreement.
If the breach of any of the representations or warranties described in
this paragraph results in our obligation under the pooling and servicing
agreement or the transfer and servicing agreement to accept retransfer of the
receivables, we can require the bank to repurchase the receivables retransferred
to us, for an amount of cash equal to the outstanding principal balance of the
retransferred receivables.
COVENANTS
In the receivables purchase agreement, the bank covenants that it will
comply with and perform its obligations under the credit card agreements
relating to the accounts and its policies and procedures relating to the
accounts unless the failure to do so would not have a material adverse effect on
the rights of the trustee and the rights of the securityholders. The bank may
change the terms and provisions of the credit card agreements or policies and
procedures in any respect, including the calculation of the amount, or the
timing of, charge-offs, so long as any changes made are also made to comparable
accounts in the bank's private label credit card portfolio.
The bank also covenants that it will not reduce the finance charges and
other fees on the accounts, if as a result of the reduction, its reasonable
expectation of the portfolio yield as of the time of the reduction would be less
than the highest of the base rates of all outstanding series, except as required
by law or as is consistent with the pooling and servicing agreement and the
transfer and servicing agreement and as the bank deems advisable for its private
label program based on a good faith assessment of various factors impacting the
use of its private label credit cards.
AMENDMENTS
The receivables purchase agreement may be amended without the consent
of the noteholders. However, no amendment may adversely affect in any material
respect the interests of the securityholders. If World Financial Network Credit
Card Master Trust is terminated, the parties to the receivables purchase
agreement will not be permitted to amend the purchase price for receivables or
change any obligation of us or the bank under the receivables purchase agreement
unless each rating agency confirms that the amendment will not impair its rating
of any outstanding series or class.
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TERMINATION
The receivables purchase agreement will terminate immediately after the
trust terminates. In addition, if a receiver or conservator is appointed for the
bank or we become a debtor in a bankruptcy case or other specified liquidation,
bankruptcy, insolvency or similar events occur or the bank becomes unable for
any reason to transfer receivables to us in accordance with the receivables
purchase agreement, we will immediately cease to purchase receivables under the
receivables purchase agreement.
NOTE RATINGS
Any rating of the notes by a rating agency will indicate:
o its view on the likelihood that noteholders will receive
required interest and principal payments; and
o its evaluation of the receivables and the availability of any
credit enhancement for the notes.
o Among the things a rating will not indicate are:
o the likelihood that principal payments will be paid on a
scheduled date;
o the likelihood that an early amortization event will occur;
o the likelihood that a U.S. withholding tax will be imposed on
non-U.S. noteholders;
o the marketability of the notes;
o the market price of the notes; or
o whether the notes are an appropriate investment for any
purchaser.
A rating will not be a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
We will request a rating of the notes offered by this prospectus and
the accompanying prospectus supplement from at least one rating agency. Rating
agencies other than those requested could assign a rating to the notes and, if
so, that rating could be lower than any rating assigned by a rating agency
chosen by us. Except as otherwise expressly stated, any reference in this
prospectus or the accompanying prospectus supplement to a rating agency refers
to a rating agency selected by us to rate the securities issued by the issuer or
World Financial Network Credit Card Master Trust.
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MATERIAL LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
In the receivables purchase agreement, the bank will represent and
warrant that its transfer of receivables constitutes a valid sale and assignment
of all of its right, title and interest in and to the receivables. In the
pooling and servicing agreement and the transfer and servicing agreement, we
will represent and warrant that the transfer of receivables constitutes either
(1) a valid sale and assignment of all of our or the bank's, as the case may be,
right, title and interest in and to the receivables, except for the transferor
interest, or (2) creates in favor of the trust a (x) valid first-priority
perfected security interest in our or the bank's, as the case may be, rights in
the receivables in existence at the time that the trust is formed or at the time
that receivables in additional accounts are transferred, as the case may be, and
(y) a valid first-priority perfected security interest in our rights in the
receivables arising in accounts already designated for the trust portfolio on
and after their creation, in each case until termination of the trust. For a
discussion of the issuer's rights arising from these representations and
warranties not being satisfied, see "DESCRIPTION OF THE NOTES--REPRESENTATIONS
AND WARRANTIES" in this prospectus.
We will represent in the pooling and servicing agreement and the
transfer and servicing agreement and the bank will represent in the
receivables purchase agreement that the receivables are "accounts" for
purposes of the UCC. Both the sale of accounts and the transfer of accounts
as security for an obligation are subject to the provisions of Article 9 of
the UCC. Therefore, we and the bank will file appropriate UCC financing
statements to perfect the respective transferee's security interest in the
receivables.
There are limited circumstances in which prior or subsequent
transferees of receivables coming into existence after a series closing date
could have an interest in those receivables with priority over the trust's
interest. Under the receivables purchase agreement, however, the bank will
represent and warrant, as to itself and the receivables transferred by it,
that it has transferred the receivables to us free and clear of the lien of
any third party other than the trust and the indenture trustee. In addition,
the bank will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any receivable or any interest in any receivable other than
to us, the trust, or the indenture trustee. Similarly, under the pooling and
servicing agreement and the transfer and servicing agreement, we will
represent and warrant that the receivables have been transferred to the trust
free and clear of the lien of any third party other than the indenture
trustee and specified tax liens. In addition, we will covenant that we will
not sell, pledge, assign, transfer, or grant any lien on any receivable or
any interest in any receivable other than to the trust. Nevertheless, a tax,
governmental or other nonconsensual lien on our property or the bank's
property arising prior to the time a receivable comes into existence may have
priority over the trust's interest in that receivable. Furthermore, if the
FDIC were appointed as the bank's receiver or conservator, administrative
expenses of the receiver or conservator may have priority over the trust's
interest in the receivables.
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If the servicer has satisfied the conditions discussed in "DESCRIPTION
OF THE NOTES--APPLICATION OF COLLECTIONS" in this prospectus, the servicer will
be permitted to make deposits of collections on a monthly or other periodic
basis. In that event, cash collections held by the servicer may be commingled
and used for the benefit of the servicer prior to each distribution date and, in
the event of the insolvency of the servicer or the lapse of a twenty-day period
after receipt by the servicer of collections that have been commingled with
other funds, the trust may not have a first-priority perfected security interest
in those collections. In that event, the amount payable to you could be lower
than the outstanding principal and accrued interest on the notes, thus resulting
in losses to you.
CONSERVATORSHIP AND RECEIVERSHIP
The bank is chartered as a national banking association and is
regulated and supervised principally by the Office of the Comptroller of the
Currency, which is required to appoint the FDIC as conservator or receiver
for the bank if specified events occur relating to the bank's financial
condition or the propriety of its actions. In addition, the FDIC could appoint
itself as conservator or receiver for the bank.
In its role as conservator or receiver, the FDIC would have broad
powers to repudiate contracts to which the bank was a party if the FDIC
determined that the contracts were burdensome and that repudiation would
promote the orderly administration of the bank's affairs.
Further, if the FDIC were acting as the bank's conservator or
receiver, the FDIC may have the power to extend its repudiation and
avoidance powers to us because we are a wholly-owned subsidiary of the bank.
The FDIC has adopted a rule stating that, if certain conditions are
met, the FDIC shall not use its repudiation power to reclaim, recover or
recharacterize as property of an FDIC-insured bank any financial assets
transferred by that bank in connection with a securitization transaction.
Although the FDIC has the power to repeal or amend its own rules, the
securitization rule states that any repeal or amendment of that rule will not
apply to any transfers of financial assets made in connection with a
securitization that was in effect before the repeal or modification.
We have structured the issuance of the notes with the intention that
the transfers of receivables by the bank would have the benefit of this rule.
Nevertheless, if the FDIC were to assert that the transfers do not have the
benefit of the rule or violate the banking laws, or were to require the
indenture trustee or any of the other transaction parties to go through the
administrative claims procedure established by the FDIC in order to obtain
payments on the notes, or were to request a stay of any actions by any of
those parties to enforce the agreement, delays in payments on outstanding
series of notes could occur. Furthermore, if the FDIC's assertions were
successful, possible reductions in the amount of those payments could occur.
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In addition, regardless of the terms of the transaction documents,
the FDIC as conservator or receiver of the bank may have the power to prevent
the commencement of an early amortization period, to prevent or limit the
early liquidation of the receivables and termination of the trust, or to
require the continued transfer of new principal receivables. Regardless of
the instructions of those authorized to direct the indenture trustee and the
trust, moreover, the FDIC as conservator or receiver of the bank may have the
power to require the early liquidation of the receivables, to require the
early termination of the trust and the retirement of the notes, or to
prohibit or limit the continued transfer of new principal receivables. If
bankruptcy, insolvency or similar proceedings occur with respect to the bank,
we will promptly notify the indenture trustee and an early amortization event
will occur with respect to each series. Under the pooling and servicing
agreement and the transfer and servicing agreement, newly created receivables
will not be transferred to the trust on and ofter any of these bankruptcy or
insolvency related events.
In the event of conservatorship or receivership of the servicer, the
conservator or receiver may have the power to prevent either the indenture
trustee or the noteholders from appointing a successor servicer or to direct
the servicer to stop servicing the receivables. See "DESCRIPTION OF THE
NOTES--SERVICER DEFAULT" in this prospectus.
In the event of conservatorship or receivership of the
administrator, the conservator or receiver may have the power to prevent the
issuer from appointing a successor administrator.
Our organizational documents and structure have been designed so
that the substantive consolidation of our assets and liabilities with those
of the bank is unlikely. We are a separate, limited purpose limited liability
company, and our operating agreement contains limitations on the nature of
our business. In addition, the indenture trustee will covenant in the
indenture and the trustee for World Financial Network Credit Card Master
Trust has covenanted in the pooling and servicing agreement that it will not
at any time institute against us any bankruptcy, insolvency or similar
proceedings under the Bankruptcy Code or similar laws. Nevertheless, if we
were to become a debtor in a bankruptcy case and if a bankruptcy trustee or
one of our creditors or we as debtor-in-possession were to take the position
that the transfer of the receivables by us to the trust should be
characterized as a pledge of those receivables then delays in payment on the
notes and possible reductions in the amount of those payments could result.
Because we are a wholly-owned subsidiary of the bank, certain banking
laws and regulations may apply to us, and if we were found to have violated
any of these laws or regulations, payments to you could be delayed or
reduced. In addition, if the bank entered conservatorship or receivership,
the FDIC could seek to exercise control over the receivables or our other
assets on an interim or a permanent basis. Although steps have been taken to
minimize this risk, the FDIC could argue that --
o our assets (including the receivables) constitute assets of the bank
available for liquidation and distribution by a conservator or receiver
for the bank;
o we and our assets (including the receivables) should be substantively
consolidated with the bank and its assets; or
o the FDIC's control over the receivables is necessary for the bank to
reorganize or to protect the public interest.
If these or similar arguments were made, whether successfully or not,
payments to you could be delayed or reduced. Furthermore, regardless of any
decision made by the FDIC or ruling made by a court, the fact that the bank
has entered conservatorship or receivership could have an adverse effect on
the liquidity and value of the notes.
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A conservator or receiver or bankruptcy court, however, may have the
power to delay application of collections or to require the continued transfer
of principal receivables to the trust. See "RISK FACTORS--IF A CONSERVATOR OR
RECEIVER WERE APPOINTED FOR WORLD FINANCIAL NETWORK NATIONAL BANK, OR IF WE
BECAME A DEBTOR IN A BANKRUPTCY CASE, DELAYS OR REDUCTIONS IN PAYMENT OF YOUR
NOTES COULD OCCUR" in this prospectus.
Application of federal and state insolvency and debtor relief laws
would affect the interests of the noteholders if those laws result in any
receivables being charged-off as uncollectible. See "DESCRIPTION OF THE
NOTES--DEFAULTED RECEIVABLES; DILUTION; INVESTOR CHARGE-OFFS" in this
prospectus.
CONSUMER PROTECTION LAWS
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by us, 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 account holder
liability for unauthorized use, prohibit various discriminatory practices in
extending credit and regulate practices followed in collections. In addition,
account holders are entitled under these laws to have payments and credits
applied to the revolving credit 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 consumer revolving credit
industry. The trust may be liable for violations of consumer protection laws
that apply to the receivables, either as assignee from us 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, an account holder may be entitled to assert those 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 consumer protection laws, if the noncompliance has a
material adverse effect on the noteholders' interest therein, will be reassigned
to us. The servicer has also agreed in the pooling and servicing agreement and
the transfer and servicing agreement to indemnify the trust, among other things,
for any liability arising from those types of 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 "DESCRIPTION OF THE
NOTES--REPRESENTATIONS AND WARRANTIES" in this prospectus.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes the material United States federal
income tax consequences of the purchase, ownership and disposition of the notes.
Additional federal
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income tax considerations relevant to a particular series may be set forth in
the accompanying prospectus supplement. The following summary has been prepared
and reviewed by Mayer, Brown & Platt as special tax counsel to the Issuer. The
summary is based on the Internal Revenue Code of 1986, as amended as of the date
hereof, and final, temporary and proposed Treasury regulations, revenue rulings
and judicial decisions, all of which are subject to prospective and retroactive
changes. The summary is addressed only to original purchases of the notes, deals
only with notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code and, except as specifically set forth below, does not
address tax consequences of holding notes that may be relevant to investors in
light of their own investment circumstances or their special tax situations, for
example:
o banks and thrifts,
o insurance companies,
o regulated investment companies,
o dealers in securities,
o holders that will hold the offered notes as a position in a
"straddle" for tax purposes or as a part of a "synthetic
security," "conversion transaction" or other integrated
investment comprised of the offered notes, and one or more
other investments,
o trusts and estates, and
o pass-through entities, the equity holders of which are any of
the foregoing.
Further, this discussion does not address alternative minimum tax
consequences or any tax consequences to holders of interests in a noteholder.
Special tax counsel to the issuer is of the opinion that the following summary
of federal income tax consequences is correct in all material respects. An
opinion of special tax counsel to the issuer, however, is not binding on the
Internal Revenue Service or the courts, and no ruling on any of the issues
discussed below will be sought from the IRS. In addition, no transaction closely
comparable to the purchase of the notes has been the subject of any Treasury
Regulation, revenue ruling or judicial decision. Accordingly, we suggest that
persons considering the purchase of notes consult their own tax advisors with
regard to the United States federal income tax consequences of an investment in
the notes and the application of United States federal income tax laws, as well
as the laws of any state, local or foreign taxing jurisdictions, to their
particular situations.
TAX CLASSIFICATION OF THE ISSUER AND THE NOTES
TREATMENT OF THE ISSUER AS AN ENTITY, NOT SUBJECT TO TAX. Special
tax counsel to the issuer is of the opinion that, although no transaction
closely comparable to that contemplated herein has been the subject of any
Treasury Regulation, revenue ruling or judicial decision, neither World
Financial Network Credit Card Master Trust nor the issuer will be treated as
an association or as a publicly traded partnership taxable as a corporation
for federal income tax purposes. As a result, special tax counsel to the
issuer is of the opinion that the issuer will not be subject to federal
income tax. However, as discussed above, this opinion is not binding on the
IRS and no assurance can be given that this classification will prevail.
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The precise tax classification of the issuer for federal income tax
purposes is not certain. It might be viewed as merely holding assets on our
behalf as collateral for notes issued by us. On the other hand, the issuer could
be viewed as a separate entity for tax purposes issuing its own notes. This
distinction may have a significant tax effect on particular noteholders as
stated below under "POSSIBLE ALTERNATIVE CLASSIFICATIONS."
TREATMENT OF THE NOTES AS DEBT. Special tax counsel to the issuer is of
the opinion that, although no transaction closely comparable to that
contemplated herein has been the subject of any Treasury regulation, revenue
ruling or judicial decision, the notes will be characterized as debt for United
States federal income tax purposes. However, opinions of counsel are not binding
on the IRS, and there can be no assurance that the IRS could not successfully
challenge this conclusion. The issuer agrees by entering into the Indenture, and
the noteholders agree by their purchase and holding of notes, to treat the notes
as debt for United States federal, state and local income or franchise tax
purposes. However, because different criteria are used to determine the non-tax
accounting characterization of the transactions contemplated by the Pooling and
Servicing Agreement, we expect to treat such transactions, for regulatory and
financial accounting purposes, as a sale of an ownership interest in the
receivables and not as a debt obligation.
In general, whether for United States federal income tax purposes a
transaction constitutes a sale of property or a loan, the repayment of which is
secured by the property, is a question of fact, the resolution of which is based
upon the economic substance of the transaction rather than its form or the
manner in which it is labeled. While the IRS and the courts have set forth
several factors to be taken into account in determining whether the substance of
a transaction is a sale of property or a secured indebtedness for United States
federal income tax purposes, the primary factor in making this determination is
whether the transferee has assumed the risk of loss or other economic burdens
relating to the property and has obtained the benefits of ownership thereof.
Special tax counsel may analyze and rely on several factors in reaching its
opinion that the weight of the benefits and burdens of ownership of the
receivables has not been transferred to the noteholders.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. It is expected that special tax
counsel may advise that the rationale of those cases should not apply to the
transaction evidenced by the notes because the form of the transaction, as
reflected in the operative provisions of the documents, either is not
inconsistent with the characterization of the notes as debt for United States
federal income tax purposes or otherwise makes the rationale of those cases
inapplicable to this situation.
POSSIBLE ALTERNATIVE CLASSIFICATIONS. If, contrary to the opinion of
special tax counsel to the issuer, the IRS successfully asserted that a series
or class of notes did not represent debt for United States federal income tax
purposes, it could find that the arrangement created by the Pooling and
Servicing Agreement and the related prospectus supplement constitutes a
partnership that could be treated as a "publicly traded partnership" taxable as
a corporation. We currently do not intend to comply with the United States
federal income tax reporting requirements that would apply if any series or
class of notes were treated as interests in a partnership or corporation.
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If the Pooling and Servicing Agreement is treated as creating a
partnership between the us and noteholders, the partnership itself would not be
subject to United States federal income tax (unless it were to be characterized
as a publicly traded partnership taxable as a corporation); rather, the
partners of such partnership, including the noteholders, would be taxed
individually on their respective distributive shares of the partnership's
income, gain, loss, deductions and credits.
Treatment of a noteholder as a partner could have adverse tax
consequences to certain holders; for example, income to foreign persons
generally would be subject to United States tax and United States tax return
filing and withholding requirements, and individual holders might be subject to
limitations on their ability to deduct their share of partnership expenses. The
result of the differences in tax treatment noted above might cause an individual
to be taxed on a greater amount of income than the stated rate on the notes.
If it were determined that a transaction created an entity classified
as a publicly traded partnership taxable as a corporation, the issuer would be
subject to United States federal income tax at corporate income tax rates on the
income it derives from the receivables and the issuer would not be able to
reduce its taxable income by deductions for interest expense on notes
recharacterized as equity. Such classification could materially reduce cash
available to make payments on the notes; further, noteholders might not be
entitled to any dividends received deduction in respect of payments of interest
on notes treated as dividends.
In addition, even if the notes are treated as debt, the issuer is also
able to issue other securities which may be treated as debt or as equity
interests in the issuer. The issuance of additional securities requires the
delivery of a new opinion of counsel generally to the effect that the new
issuance will not cause the issuer to become taxable as a separate entity for
federal income tax purposes; however, the new opinion would not bind the IRS,
and the issuer could become a taxable entity as a result of the new issuance,
potentially diminishing cash available to make payments on the notes. We suggest
that prospective investors consult with their own tax advisors with regard to
the consequences of each of the possible alternative characterizations to them
in their particular circumstances. The following discussion assumes that the
classifications of the notes as debt is correct.
CONSEQUENCES TO HOLDERS OF THE OFFERED NOTES
INTEREST AND ORIGINAL ISSUE DISCOUNT. In general, stated interest on a
note will be includible in gross income as it accrues or is received in
accordance with a noteholder's usual method of tax accounting. Interest received
on the notes may also constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense. It is not anticipated that any series or class of notes will be issued
with original issue discount within the meaning of Section 1273 of the Code. If
a class of notes is issued with original issue discount, the provisions of
Sections 1271 through 1273 and 1275 of the Code will apply to those notes. Under
those provisions, a holder of a note issued with original issue
discount--including a cash basis holder--generally would be required to include
the original issue discount on a note in income for federal income tax purposes
on a constant yield basis, resulting in the inclusion of original issue discount
in income in advance of the receipt of cash attributable to that income. In
general, a note will be treated as having original
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issue discount to the extent that its "stated redemption price" exceeds its
"issue price," if that excess equals or exceeds 0.25 percent multiplied by the
weighted average life of the note, determined by taking into account the number
of complete years following issuance until payment is made for each partial
principal payment. Under Section 1272(a)(6) of the Internal Revenue Code,
special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the notes is
unclear, but the application of Section 1272(a)(6) could affect the rate of
accrual of original issue discount and could have other consequences to holders
of the notes. Additionally, the IRS could take the position based on Treasury
regulations that none of the interest payable on a note is "unconditionally
payable" and hence that all of the interest payable on the note should be
included in the note's stated redemption price at maturity. If sustained, that
treatment should not significantly affect tax liabilities for most holders of
the notes, but we suggest that prospective noteholders consult their own tax
advisors concerning the impact to them in their particular circumstances. The
issuer intends to take the position that interest on the notes constitutes
"qualified stated interest" and that the above consequences do not apply.
MARKET DISCOUNT. Noteholders should be aware that the resale of offered
notes may be affected by the market discount provisions of the Code. The market
discount rules generally provide that, subject to a DE MINIMIS exception, if a
holder of a note acquires it at a market discount (i.e., at a price below its
stated redemption price at maturity or its "adjusted issue price" if it was
issued with original issue discount) and thereafter recognizes gain upon a
disposition of the note, the lesser of such gain or the portion of the market
discount that accrued while the note was held by such holder will be treated as
ordinary interest income realized at the time of the disposition. A taxpayer may
elect to include market discount currently in gross income in taxable years to
which it is attributable, computed using either a ratable accrual method or a
yield to maturity method. The market discount rules may also cause the deferral
of interest deductions on debt incurred to acquire market discount obligations.
MARKET PREMIUM. A subsequent holder who purchases a note at a premium
may elect to amortize and deduct this premium over the remaining term of the
note in accordance with rules set forth in Section 171 of the Code.
DISPOSITION OF THE NOTES: DEFEASANCE. Upon the sale, exchange,
retirement or other taxable disposition of a note, the holder of the note
generally will recognize taxable gain or loss in an amount equal to the
difference between (a) the amount realized on the disposition, other than that
part of the amount attributable to, and taxable as, accrued interest and (b) the
holder's adjusted tax basis in the note. A taxable exchange of a note could also
occur as a result of our substitution of money or investments for the
receivables in the trust portfolio. See "DESCRIPTION OF THE NOTES--DEFEASANCE"
in this prospectus. The holder's adjusted tax basis in the note generally will
equal the cost of the note to that holder, increased by any original issue
discount or market discount previously included in income by that holder with
respect to the note, and decreased by any deductions previously allowed for
amortizable bond premium and by the amount of any payments of principal or
original issue discount previously received by that holder with respect to its
note. Subject to the market discount rules discussed above, any related gain or
loss generally will be capital gain or loss, and will be long-term capital gain
or loss if at the time
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of sale the note has been held for more than one year. The maximum ordinary
income rate for individuals, estates, and trusts exceeds the maximum long-term
capital gains rate for such taxpayers. In addition, any capital losses realized
generally may be used by a corporate taxpayer only to offset capital gains and
by an individual taxpayer only to the extent of capital gains plus $3,000 of
other income.
FOREIGN HOLDERS. The following information describes the United
States federal income tax treatment if the notes are treated as debt to an
investor that is a nonresident alien individual or a foreign corporation
(collectively, a "foreign person"). Some foreign persons, including certain
residents of certain United States possessions or territories, may be subject
to special rules not discussed in this summary.
Interest, including original issue discount, if any, paid to a foreign
person on a note will not be subject to withholding of United States federal
income tax, provided that:
o the interest payments are effectively connected with the
conduct of a trade or business within the United States by the
foreign person and such foreign person submits a properly
executed IRS Form W-8ECI; or
o the foreign person is not, for United States federal income
tax purposes, actually or constructively a "10 percent
shareholder" of us or the issuer, a "controlled foreign
corporation" with respect to which we or the issuer is a
"related person" within the meaning of the Internal Revenue
Code, or a bank extending credit under a loan agreement
entered into in the ordinary course of its trade or business,
and, under current Treasury Regulations, either (i) the beneficial
owner represents that it is a foreign person and provides its name and address
to us or our paying agent on a properly executed IRS Form W-8BEN, or a suitable
substitute form, signed under penalties of perjury; or (ii) if a note is held
through a securities clearing organization or other financial institution, as is
expected to be the case unless definitive notes are issued, the organization or
financial institution certifies to us or our paying agent under penalties of
perjury that it has received IRS Form W-8BEN or a suitable substitute form from
the foreign person or from another qualifying financial institution
intermediary, and provides a copy to us or our paying agent.
If these exceptions do not apply to a foreign person, interest,
including original issue discount, if any, paid to such foreign person
generally will be subject to withholding of United States federal income tax
at a 30% rate. Such foreign person may, however, be able to claim the benefit
of a reduced withholding tax rate under an applicable income tax treaty. The
required information for claiming treaty benefits is generally submitted,
under current Treasury Regulations, on IRS Form W-8BEN. Special rules apply
to partnerships, estates and trusts, and in certain circumstances
certifications as to foreign status and other matters may be required to be
provided by partners and beneficiaries thereof. Recently issued final
Treasury Regulations revised some of the procedures whereby a foreign person
may establish an exemption from withholding generally beginning January 1,
2001. We suggest that foreign persons consult their tax advisors concerning
the impact to them, if any, of those revised procedures.
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Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, the individual is not present in the United States for 183 days or more
in the taxable year in which the sale, redemption, retirement or other taxable
disposition occurs.
If the interest or gain on the note is effectively connected with the
conduct of a trade or business within the United States, then although the
foreign person will be exempt from the withholding of tax previously discussed
if an appropriate statement is provided, such foreign person generally will be
subject to United States federal income tax on the interest, including original
issue discount, if any, or gain at applicable graduated federal income tax
rates. In addition, if a foreign person is a foreign corporation, such foreign
corporation may be subject to a branch profits tax equal to 30% of your
"effectively connected earnings and profits" within the meaning of the Code for
the taxable year, as adjusted for certain items, unless such foreign corporation
qualifies for a lower rate under an applicable tax treaty.
BACKUP WITHHOLDING. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a note, may
be subject to "backup withholding" tax under Section 3406 of the Internal
Revenue Code if a noteholder fails to furnish its taxpayer identification
number, fails to report interest, dividends or other "reportable payments"
(as defined in the Code) properly, or under certain circumstances fails to
provide a certified statement, under penalty of perjury, that it is not
subject to backup withholding. The backup withholding tax rate of 31% for
payments made on or before August 6, 2001, will be reduced 30.5% for payments
made on or after August 7, 2001, 30% for payments made during the years 2002
and 2003, 29% for payments made during the years 2004 and 2005, and 28% for
payments made during the years 2006 through 2010. For payments maded after the
taxable year of 2010, the backup withholding rate will be increased to 31%.
Any amounts deducted and withheld would be allowed as a credit against the
recipient's United States federal income tax if appropriate proof is provided
under rules established by the IRS. Furthermore, penalties may be imposed by
the IRS on a recipient of payments that is required to supply information but
does not do so in the proper manner. Backup withholding will not apply with
respect to payments made to exempt recipients, such as corporations and
financial institutions. Holders of the notes are urged to consult their tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining an exemption. Information returns will be
sent annually to the IRS and to each noteholder setting forth the amount of
interest paid (and original issue discount accrued, if any) on the notes and
the amount of tax withheld thereon.
The United States federal income tax discussion set forth above may not
be applicable depending upon a holder's particular tax situation, and does not
purport to address the issues described with the degree of specificity that
would be provided by a taxpayer's own tax advisor. We suggest that prospective
purchasers consult their own tax advisors with respect to the tax consequences
to them of the purchase, ownership and disposition of the notes and the possible
effects of changes in federal tax laws.
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the taxation of the trust or the
tax consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. We suggest that each investor consult
its own tax advisor regarding state and local tax consequences.
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ERISA CONSIDERATIONS
The prospectus supplement for each series of notes will specify whether
the notes offered by that prospectus supplement are eligible for purchase by
employee benefit plans.
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as an individual
retirement account or Keogh plan, from engaging in specified transactions with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Internal Revenue Code with respect to these benefit plans. A violation
of these "prohibited transaction" rules may result in an excise tax or other
penalties and liabilities under ERISA and the Internal Revenue Code for these
persons. Title I of ERISA also requires that fiduciaries of a benefit plan
subject to ERISA make investments that are prudent, diversified (unless clearly
prudent not to do so), and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
notes might be deemed to constitute or result in prohibited transactions under
ERISA and Section 4975 of the Internal Revenue Code if assets of the trust were
deemed to be assets of a benefit plan or "plan assets". Under a regulation
issued by the United States Department of Labor, the assets of the trust would
be treated as plan assets of a benefit plan for the purposes of ERISA and the
Internal Revenue Code only if the benefit plan acquires an "equity interest" in
the trust and none of the exceptions contained in the regulation is applicable.
An equity interest is defined under the regulation as an interest in an entity
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. Although there can be no
assurances in this regard, it appears that, at the time of their initial
issuance, the notes should be treated as debt without substantial equity
features for purposes of the regulation. The debt characterization of the notes
could change after their initial issuance if the trust incurs losses.
However, without regard to whether the notes are treated as an equity
interest for these purposes, the acquisition or holding of the notes by or on
behalf of benefit plans could be considered to give rise to a prohibited
transaction if we, the issuer, the owner trustee, the servicer, the
administrator or the indenture trustee, is or becomes a party in interest or a
disqualified person with respect to these benefit plans. In that case, various
exemptions from the prohibited transaction rules could be applicable depending
on the type and circumstances of the benefit plan fiduciary making the decision
to acquire a note. Included among these exemptions are:
o Prohibited Transaction Class Exemption 96-23, regarding
transactions effected by "in-house asset managers";
o Prohibited Transaction Class Exemption 95-60, regarding
transactions effected by "insurance company general accounts";
o Prohibited Transaction Class Exemption 91-38, regarding
investments by bank collective investment funds;
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o Prohibited Transaction Class Exemption 90-1, regarding
investments by insurance company pooled separate accounts; and
o Prohibited Transaction Class Exemption 84-14, regarding
transactions effected by "qualified professional asset
managers."
By your acquisition of a note, you will be deemed to represent and
warrant that your purchase and holding of the note will not result in a
non-exempt prohibited transaction under ERISA or Section 4975 of the Internal
Revenue Code.
Employee benefit plans that are governmental plans, as defined in
Section 3(32) of ERISA, and certain church plans, as defined in Section 3(33) of
ERISA, are not subject to ERISA requirements, but may be subject to state or
other federal law requirements which may impose restrictions similar to those
under ERISA and the Internal Revenue Code discussed above.
If you are a benefit plan fiduciary considering the purchase of any of
the notes, you should consult your tax and legal advisors regarding whether the
assets of the trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting
agreement to be entered into with respect to each series of notes, we will cause
the notes to be sold by the issuer to each of the underwriters named in that
underwriting agreement and in the accompanying prospectus supplement, and each
of those underwriters will severally agree to purchase from the issuer, the
principal amount of notes set forth in that underwriting agreement and in the
accompanying prospectus supplement, subject to proportional adjustment on the
terms and conditions set forth in the related underwriting agreement in the
event of an increase or decrease in the aggregate amount of notes offered by
this prospectus and by the accompanying prospectus supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in that underwriting agreement, to
purchase all the notes offered by this prospectus and by the accompanying
prospectus supplement if any of those notes are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
specified circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each
series of notes or class being offered initially will be offered to the public
and any concessions that may be offered to dealers participating in the offering
of those notes. After the initial public offering, the public offering price and
those concessions may be changed.
Each underwriting agreement will provide that the transferor will
indemnify the related underwriters against specified liabilities, including
liabilities under the Securities Act of 1933, as amended.
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The place and time of delivery for any series of notes in respect of
which this prospectus is delivered will be set forth in the accompanying
prospectus supplement.
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the issuer. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the notes. No financial reports will be sent to you. See
"DESCRIPTION OF THE NOTES--BOOK-ENTRY REGISTRATION," "--REPORTS TO NOTEHOLDERS"
and "--EVIDENCE AS TO COMPLIANCE" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the notes with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room in Washington, D.C. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at (800) SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings are also available to
the public on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will be filed under the name of World Financial Network National Bank
and will automatically update the information in this prospectus. In all cases,
you should rely on the later information over different information included in
this prospectus or the accompanying prospectus supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the issuer and World Financial Network Credit Card
Master Trust until we terminate our offering of the notes.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents--unless
the exhibits are specifically incorporated by reference--at no cost, by writing
or calling us care of: World Financial Network National Bank, 800 TechCenter
Drive, Gahanna, Ohio 43230, Telephone: (614) 729-4000.
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GLOSSARY OF TERMS FOR PROSPECTUS
"AGGREGATE PRINCIPAL BALANCE" means, on any date, the sum of (a) the
total amount of principal receivables, other than discount option receivables
and (b) the amount on deposit in the excess funding account, after excluding any
investment earnings.
"ELIGIBLE ACCOUNT" means an account in an approved portfolio:
o that is payable in United States dollars;
o that is serviced by us, any transferee of accounts from us, an
approved originator of accounts, or any affiliates of the
foregoing;
o the cardholder of which has provided, as his or her most
recent billing address, an address located in the United
States or a United States military address, except that up to
2% (or a greater number approved by the rating agencies) of
the Aggregate Principal Receivables may have cardholders who
have provided addresses outside of these jurisdictions;
o that does not have any receivables that have been charged off
as uncollectible by the servicer in accordance with its charge
account guidelines or its customary and usual servicing
procedures;
o that does not have receivables that have been sold or pledged
to any other party; and
o has not been identified as an account, the credit cards with
respect to which have been reported as being lost or stolen or
the cardholder of which is the subject of a bankruptcy
proceeding.
"ELIGIBLE INSTITUTION" means:
(a) a depository institution, which may include the owner trustee
or the indenture trustee, that:
(1) is organized under the laws of the United States or
any one of its states,
(2) has FDIC deposit insurance, and
(3) has a long-term unsecured debt rating or a
certificate of deposit rating acceptable to the
rating agencies; or
(b) any other institution acceptable to the rating agencies, which
may include the servicer.
"ELIGIBLE RECEIVABLE" means each receivable:
o that has arisen under an Eligible Account;
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o that was created in compliance, in all material respects, with
the charge account guidelines and all requirements of law
applicable to us or the originator of the related account
pursuant to a credit card agreement between the cardholder and
us or the originator of the related account which complies, in
all material respects, with all requirements of law applicable
to us or the originator of the related account;
o for which all consents, licenses, approvals or authorizations
of, or registrations with, any governmental authority required
to be obtained or given by us or the originator of the related
account in connection with the creation of the receivable or
the execution, delivery and performance by us or the
originator of the related account of the related credit card
agreement have been duly obtained or given and are in full
force and effect as of the date of the creation of that
receivable;
o as to which, immediately prior to being transferred to the
trust, we had good title free and clear of all liens and
security interests arising under or through us and our
affiliates, other than any lien for state, municipal or other
local taxes if those taxes are not then due and payable or if
we are then contesting the validity of those taxes in good
faith by appropriate proceedings and we have set aside on our
books adequate reserves with respect to those taxes;
o that is the subject of a valid transfer and assignment, or the
grant of a security interest, from the transferor to the
trust;
o as to which the transferor has not taken any action which, or
failed to take any action the omission of which, would, at the
time of transfer to the trust, impair the rights of the trust
or the noteholders in the receivable;
o that is the legal, valid and binding payment obligation of the
related cardholder, enforceable against that cardholder in
accordance with its terms, subject to permitted insolvency-
and equity-related exceptions;
o that constitutes an "account" under Article 9 of the Uniform
Commercial Code as in effect in the State of New York;
o that, at the time of transfer to the trust, has not been
waived or modified except as permitted by our charge account
guidelines and which waiver or modification has been reflected
in our computer files;
o that, at the time of transfer to the trust, is not, to our
knowledge, subject to any right of recission, setoff,
counterclaim or defense, including usury, that would require
that receivable to be charged off in accordance with our
charge account guidelines, other than some insolvency- and
equity-related defenses;
o as to which we have satisfied all obligations required to be
satisfied at the time it is transferred to the trust;
o with respect to receivables transferred to the issuer after
the termination of World Financial Network Credit Card Master
Trust, in which all of our right, title and interest
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has been validly transferred and assigned to the issuer or in
which a valid first priority perfected security interest has
been granted to the issuer; and
o with respect to receivables transferred to the issuer after
the termination of World Financial Network Credit Card Master
Trust, as to which, at the time of transfer of that receivable
to the issuer, we have not taken or omitted to take any action
that would impair the rights of the issuer or the noteholders.
"MINIMUM TRANSFEROR AMOUNT" will be calculated as follows:
(a) (i) Aggregate Principal (ii) 4%, or if less, the highest of the
Balance TIMES required retained transferor
percentages specified in the
prospectus supplement for each
series
PLUS
(b) any additional amounts
specified in the prospectus
supplement for any series
"QUALIFIED ACCOUNT" means either:
(a) a segregated account established with an Eligible
Institution; or
(b) a segregated trust account with the corporate trust
department of a depository institution that:
(1) is organized under the laws of the United
States or any one of its states,
(2) acts as trustee for funds deposited in the
account, and
(3) has a credit rating from each rating agency
in one of its generic credit rating
categories that signifies investment grade.
"REQUIRED PRINCIPAL BALANCE" means, on any date of determination, the
sum of the numerators used to calculate the allocation percentages for principal
collections for all outstanding series of securities on that date of
determination.
"SPECIFIED TRANSFEROR AMOUNt" means, zero or such higher amount as may
be specified in the accompanying prospectus supplement.
"TRANSFEROR AMOUNT" means, on any date, the difference between:
(1) the Aggregate Principal Balance on that
date; minus
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(2) the aggregate of the collateral and invested
amounts of all outstanding series of
securities; plus
(3) the principal amount on deposit in the
collection account for any series, to the
extent not deducted in calculating the
collateral or invested amount for the
related series.
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Annex I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered World
Financial Network Credit Card Master Note Trust Asset Backed Notes (the "global
securities") to be issued in series from time to time will be available only in
book-entry form. Investors in the global securities may hold those global
securities through any of The Depository Trust Company, Clearstream or
Euroclear. The global securities will be tradable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding global securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice--i.e., seven calendar day settlement.
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective depositaries of Clearstream and Euroclear, in that
capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S.
withholding taxes unless those holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants.
INITIAL SETTLEMENT
All global securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the global
securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, Clearstream and
Euroclear will hold positions on behalf of their participants through their
respective depositaries, which in turn will hold those positions in accounts as
DTC participants.
Investors electing to hold their global securities through DTC (other
than through accounts at Clearstream or Euroclear) will follow the settlement
practices applicable to U.S. corporate debt obligations. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their global securities through Clearstream
or Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global securities will be credited to
the securities custody accounts on the settlement date against payment for value
on the settlement date.
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SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and
transferor's accounts are located to ensure that settlement can be made on the
desired value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
participants, other than the depositaries for Clearstream and Euroclear, will be
settled using the procedures applicable to U.S. corporate debt obligations in
same-day funds.
TRADING BETWEEN CLEARSTREAM CUSTOMERS AND/OR EUROCLEAR PARTICIPANTS.
Secondary market trading between Clearstream customers and/or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CLEARSTREAM CUSTOMER OR EUROCLEAR
PURCHASER. When global securities are to be transferred from the account of a
DTC participant--other than the depositaries for Clearstream and Euroclear--to
the account of a Clearstream customer or a Euroclear participant, the purchaser
must send instructions to Clearstream prior to 12:30 p.m. on the settlement
date. Clearstream or Euroclear, as the case may be, will instruct the respective
depositary to receive the global securities for payment. Payment will then be
made by the respective depositary, as the case may be, to the DTC participant's
account against delivery of the global securities. After settlement has been
completed, the global securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Clearstream customer's or Euroclear participant's account. Credit for the
global securities will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the global securities will accrue
from, the value date, which would be the preceding day when settlement occurred
in New York. If settlement is not completed on the intended value date (i.e.,
the trade fails), the Clearstream or Euroclear cash debit will be valued instead
as of the actual settlement date.
Clearstream customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream customers or Euroclear participants can elect not to
pre-position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream customers or Euroclear
participants purchasing global securities would incur overdraft charges for one
day, assuming they cleared the overdraft when the global securities were
credited to their accounts. However, interest on the global securities would
accrue from the value date. Therefore, in many cases the investment income on
the global securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will depend
on each Clearstream customer's or Euroclear participant's particular cost of
funds.
A-2
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for sending global securities
to the respective European depositary for the benefit of Clearstream customers
or Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participant a cross-market transaction
will settle no differently from a trade between two DTC participants.
TRADING BETWEEN CLEARSTREAM OR EUROCLEAR SELLER AND DTC PURCHASER. Due
to time zone differences in their favor, Clearstream customers and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through the respective European depositary, to another DTC participant. The
seller will send instructions to Clearstream before 12:30 p.m. on the settlement
date. In these cases, Clearstream or Euroclear will instruct the respective
European depositary, as appropriate, to credit the global securities to the DTC
participant's account against payment. The payment will then be reflected in the
account of the Clearstream customer or Euroclear participant the following day,
and receipt of the cash proceeds in the Clearstream customer's or Euroclear
participant's account would be back-valued to the value date, which would be the
preceding day, when settlement occurred in New York. If the Clearstream customer
or Euroclear participant has a line of credit with its respective clearing
system and elects to draw on such line of credit in anticipation of receipt of
the sale proceeds in its account, the back-valuation may substantially reduce or
offset any overdraft charges incurred over that one-day period. If settlement is
not completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Clearstream customer's or Euroclear participant's account
would instead be valued as of the actual settlement date.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream, Euroclear or through DTC--if the holder has an address outside the
U.S.--will be subject, to the 30% U.S. withholding tax that generally applies to
payments of interest, including original issue discount, on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business in the chain of intermediaries between the
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) the beneficial owner provides
the appropriate certification for obtaining an exemption or reduced tax rate.
See "FEDERAL INCOME TAX CONSEQUENCES" in this prospectus.
A-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses in connection with the offering of the Securities being
registered herein are as follows:
Registration Statement fee ............................ $ 500,000
Legal fees and expenses ............................... $ 250,000
Accounting fees and expenses .......................... $ 100,000
Rating agency fees .................................... $ 100,000
Trustee fees and expenses ............................. $ 25,000
Blue Sky expenses ..................................... $ 10,000
Printing and engraving ................................ $ 50,000
Miscellaneous ......................................... $ 25,000
Total .................................. $1,060,000
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ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware Limited Liability Company Act (Section 18-108) gives Delaware
limited liability companies broad powers to indemnify and hold harmless any
member or manager or other person from and against any and all claims and
demands whatsoever. WFN Credit Company, LLC shall, to the fullest extent
permitted by the Act, indemnify and hold harmless, and advance expenses to, each
member, any manager and each officer and director against any losses, claims,
damages or liabilities to which the indemnified party may become subject in
connection with any matter arising from, related to, or in connection with, WFN
Credit Company's business or affairs.
Pursuant to agreements which WFN Credit Company, LLC may enter into with
underwriters or agents (forms of which will be included as exhibits to the
registration statement), officers and directors of WFN Credit Company, LLC, and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against certain liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been or will be furnished to the
registrant by such underwriters or agents that appears in the registration
statement or any prospectus.
ITEM 16. EXHIBITS.
1.1 -- Form of Underwriting Agreement
3.1 -- Certificate of Formation for WFN Credit Company, LLC*
3.2 -- Limited Liability Company Agreement for WFN Credit Company, LLC*
4.1 -- Form of Master Indenture
4.2 -- Form of Indenture Supplement, including form of Notes
4.3 -- Form of Transfer and Servicing Agreement
4.4 -- Form of Trust Agreement of World Financial Network Credit Card
Master Note Trust
4.5 -- Form of Administration Agreement
4.6 -- Form of Pooling and Servicing Agreement
4.7 -- Form of Collateral Series Supplement
II-3
4.8 -- Form of Receivables Purchase Agreement
5.1 -- Opinion of Mayer, Brown & Platt with respect to legality
8.1 -- Opinion of Mayer, Brown & Platt with respect to tax matters
23.1 -- Consent of Mayer, Brown & Platt (included in Exhibits 5.1 and 8.1)
24.1 --Power of Attorney*
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of BNY Midwest Trust Company, as
indenture trustee under the Indenture
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* Previously filed
ITEM 17. UNDERTAKINGS
(a) As to Rule 415: The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this registration statement;
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar volume of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
PROVIDED, HOWEVER, that the undertakings set forth in clauses (i) and (ii) above
do not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed with or
furnished to the Commission by the registrants pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, as amended, that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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(b) As to documents subsequently filed that are incorporated by reference:
The undersigned registrants hereby undertake that, for purposes of determining
any liability under the Securities Act of 1933, as amended, each filing of the
registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(c) As to indemnification: Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the registrants pursuant to the
provisions described in Item 15 herein, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or controlling
person of the registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by them is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, reasonably believes that the
security rating requirement for the asset-backed securities being registered on
this form will be met by the time of the sale and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, Ohio, on the date of July 5, 2001.
WFN CREDIT COMPANY, LLC,
as Co-Registrant
By: /s/ Robert P. Armiak
----------------------------------------
WORLD FINANCIAL NETWORK CREDIT CARD
MASTER TRUST,
as Co-Registrant
By: WORLD FINANCIAL NETWORK NATIONAL BANK,
as servicer of World Financial Network
Credit Card Master Trust
By: /s/ Robert P. Armiak
-----------------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 5, 2001 by the following persons
in the capacities indicated on behalf of WFN Credit Company, LLC.
SIGNATURE TITLE
--------- -----
/s/* President andDirector
- --------------------------------------- (Principal Executive Officer and Principal
Daniel T. Groomes Financial Officer)
/s/ Robert P. Armiak Treasurer and Director
- --------------------------------------- (Principal Accounting Officer)
Robert P. Armiak
/s/*
- --------------------------------------- Director
Carolyn S. Melvin
* signed by Robert P. Armiak as Attorney-in-Fact under Power of Attorney.
II-6
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1 Form of Underwriting Agreement
3.1 Certificate of Formation for WFN Credit Company, LLC*
3.2 Limited Liability Company Agreement for WFN Credit Company, LLC*
4.1 Form of Master Indenture
4.2 Form of Indenture Supplement, including form of Notes
4.3 Form of Transfer and Servicing Agreement
4.4 Form of Trust Agreement of World Financial Network Credit Card
Master Note Trust
4.5 Form of Administration Agreement
4.6 Form of Pooling and Servicing Agreement
4.7 Form of Collateral Series Supplement
4.8 Form of Receivables Purchase Agreement
5.1 Opinion of Mayer, Brown & Platt with respect to legality
8.1 Opinion of Mayer, Brown & Platt with respect to tax matters
23.1 Consent of Mayer, Brown & Platt (included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney*
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of BNY Midwest Trust Company, as
indenture trustee under the Indenture
- ----------
* Previously filed
II-7