Filed Pursuant Rule 424B3
Registration File No. 333-74303
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. WE CANNOT SELL THESE SECURITIES UNTIL A FINAL PROSPECTUS
SUPPLEMENT IS DELIVERED. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS
IS AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JUNE 6, 2001
Prospectus Supplement CHASE LOGO
(To Prospectus dated June 6, 2001)
CHASE CREDIT CARD OWNER TRUST 2001-2
Issuer
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION, Transferor and Administrator THE
CHASE MANHATTAN BANK, Servicer of Chase Credit Card Master Trust $500,000,000
CLASS A FLOATING RATE ASSET BACKED NOTES, SERIES 2001-2
$ 41,666,000 CLASS B FLOATING RATE ASSET BACKED NOTES, SERIES 2001-2
$ 53,572,000 CLASS C FLOATING RATE ASSET BACKED NOTES, SERIES 2001-2
Class A Class B Class C
----------------------- ----------------------- ---------------------
Principal Amount $ 500,000,000 $ 41,666,000 $ 53,572,000
Price $ ( %) $ ( %) $ ( %)
Underwriters' Commissions $ ( %) $ ( %) $ ( %)
Proceeds to the Transferor $ ( %) $ ( %) $ ( %)
Interest Rate one-month LIBOR + one-month LIBOR + one-month LIBOR +
% p.a. % p.a. % p.a.
Interest Payment Dates monthly on the 15th monthly on the 15th monthly on the 15th
First Interest Payment Date July 16, 2001 July 16, 2001 July 16, 2001
Scheduled Note Payment Date May 15, 2006 June 15, 2006 June 15, 2006
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.
THESE SECURITIES ARE INTERESTS IN CHASE CREDIT CARD OWNER TRUST 2001-2, AND ARE
BACKED ONLY BY THE ASSETS OF THE OWNER TRUST. NEITHER THESE SECURITIES NOR THE
ASSETS OF THE OWNER TRUST ARE RECOURSE OBLIGATIONS OF CHASE CREDIT CARD MASTER
TRUST, CHASE MANHATTAN BANK USA, N.A., THE CHASE MANHATTAN BANK OR ANY OF THEIR
AFFILIATES, OR OBLIGATIONS INSURED BY THE FDIC.
THESE SECURITIES ARE HIGHLY STRUCTURED. BEFORE YOU PURCHASE THESE SECURITIES,
BE SURE YOU UNDERSTAND THE STRUCTURE AND THE RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-12 OF THIS PROSPECTUS SUPPLEMENT.
WE INTEND TO APPLY TO HAVE THE SECURITIES LISTED ON THE LUXEMBOURG STOCK
EXCHANGE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS SUPPLEMENT AND THE ATTACHED
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The underwriters for each class of notes have agreed to purchase those notes,
subject to the terms and conditions in the underwriting agreement.
Underwriters of the Class A Notes
JPMORGAN
BANC ONE CAPITAL MARKETS, INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
GUZMAN & COMPANY
Underwriters of the Class B Notes and the Class C Notes
JPMORGAN
BANC ONE CAPITAL MARKETS, INC.
SALOMON SMITH BARNEY
June , 2001
TABLE OF CONTENTS
WHERE TO FIND INFORMATION IN THESE
DOCUMENTS ............................... S-3
SUMMARY OF TERMS ............................. S-4
STRUCTURAL SUMMARY ........................... S-5
SELECTED MASTER TRUST PORTFOLIO SUMMARY
DATA ...................................... S-9
RECENT DEVELOPMENT ........................... S-11
RISK FACTORS ................................. S-12
You May Receive Principal
Payments Earlier or Later than
the Scheduled Maturity
Date if the Portfolio Yield is
Reduced ............................... S-12
Allocations of Charged-Off
Receivables Could Reduce
Payments to You ............................ S-14
Issuance of Additional Series by the
Master Trust May Affect the
Timing of Payments to You ............. S-14
Chase USA May Add Accounts
with Different Terms to the
Master Trust Portfolio ................ S-14
Chase USA May Not Be Able to
Add New Accounts When
Required under the Pooling
and Servicing Agreement ............... S-15
Insolvency or Bankruptcy of Chase
USA Could Result in
Accelerated, Delayed or
Reduced Payments to You ............... S-15
You Will Have Limited Control of
Owner Trust and Master Trust
Actions ............................... S-17
You May Not Be Able to Resell
Your Notes ............................ S-17
Repayment of Your Notes is
Limited to the Owner Trust
Assets ................................ S-17
Class B Bears Losses Before
Class A ............................... S-18
Class C Bears Losses Before
Class A and Class B ................... S-18
CHASE CREDIT CARD MASTER TRUST PORTFOLIO ..... S-19
General ................................... S-19
Delinquency and Loss Experience ........... S-19
Characteristics of Receivables
Portfolio ............................. S-20
MATURITY CONSIDERATIONS ...................... S-24
Controlled Accumulation ................... S-24
Rapid Amortization Period ................. S-24
Historical Payment Rates .................. S-25
RECEIVABLE YIELD CONSIDERATIONS .............. S-25
CREATION OF THE OWNER TRUST .................. S-26
USE OF PROCEEDS .............................. S-26
DESCRIPTION OF THE SECURITIES ................ S-27
DESCRIPTION OF THE SERIES CERTIFICATE ........ S-27
General ................................... S-27
Interest Allocations ...................... S-27
Principal Allocations ..................... S-28
Controlled Accumulation ................... S-28
Allocation Percentages .................... S-28
Reallocation of Cash Flows ................ S-29
Application of Collections ................ S-29
Shared Excess Finance Charge
Collections ........................... S-34
Shared Principal Collections .............. S-34
Defaulted Receivables ..................... S-34
Principal Funding Account ................. S-34
Accumulation Period Reserve
Account ............................... S-35
Pay Out Events ............................ S-36
Servicing Fees and Expenses ............... S-38
DESCRIPTION OF THE NOTES ..................... S-38
General ................................... S-38
Subordination ............................. S-38
Interest Payments ......................... S-38
Principal Payments ........................ S-39
Optional Redemption ....................... S-40
Distributions ............................. S-40
Owner Trust Spread Account ................ S-41
Events of Default ......................... S-42
Noteholder Reports ........................ S-43
LISTING AND GENERAL INFORMATION .............. S-44
UNDERWRITING ................................. S-45
OTHER SERIES ISSUED AND OUTSTANDING .......... S-47
GLOSSARY OF TERMS FOR PROSPECTUS
SUPPLEMENT .............................. S-56
S-2
WHERE TO FIND INFORMATION IN THESE DOCUMENTS
The attached prospectus provides general information about Chase Credit
Card Owner Trust 2001-2 and Chase Credit Card Master Trust, including terms and
conditions that are generally applicable to the notes issued by the owner trust
and the certificates issued by the master trust. The specific terms of the notes
and the series certificate are described in this supplement.
This supplement begins with several introductory sections describing your
series, Chase Credit Card Owner Trust 2001-2, and Chase Credit Card Master Trust
in abbreviated form:
o Summary of Terms provides important amounts, dates and other terms of
your notes,
o Structural Summary gives a brief introduction to the key structural
features of your notes and the series certificate and directions for
locating further information,
o Selected Master Trust Portfolio Summary Data gives certain financial
information about the assets of the master trust, and
o Risk Factors describes risks that apply to your notes and the series
certificate.
As you read through these sections, cross-references will direct you to
more detailed descriptions in the attached prospectus and elsewhere in this
supplement. You can also directly reference key topics by looking at the table
of contents pages in this supplement and the attached prospectus.
As a purchaser of notes, you should review carefully the description of the
series certificate in this prospectus supplement and the prospectus. The most
significant asset of the owner trust will be the series certificate issued by
the master trust and pledged to secure the notes.
This prospectus supplement and the attached prospectus may be used by J.P.
Morgan Securities Inc., an affiliate of Chase Manhattan Bank USA, N.A. and of
The Chase Manhattan Bank and a subsidiary of J.P. Morgan Chase & Co., in
connection with offers and sales related to market-making transactions in the
notes offered by this supplement and the attached prospectus. J.P. Morgan
Securities Inc. may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of sale.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone to provide you with different information.
We are not offering these notes in any state where the offer is not
permitted.
We do not make any representation as to the accuracy of the information in
this prospectus supplement and the prospectus as of any date other than the
dates stated on their respective covers.
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY THE
ATTACHED PROSPECTUS AND THIS SUPPLEMENT IN THEIR ENTIRETY.
S-3
SUMMARY OF TERMS
Transferor and Administrator: Chase Manhattan Bank USA, National Association--"Chase USA"
Issuer: Chase Credit Card Owner Trust 2001-2
Indenture Trustee: The Bank of New York
Owner Trustee: Wilmington Trust Company
Pricing Date: June , 2001
Closing Date: June , 2001
Clearance and Settlement: DTC/Clearstream/Euroclear
Owner Trust Assets: The series certificate issued by Chase Credit Card Master Trust
representing the right to certain collections on receivables originated in
the VISA and MasterCard accounts comprising the master trust portfolio,
including recoveries on charged-off receivables and fees payable by VISA
and MasterCard to Chase USA. The series certificate will be rated in one
of the four highest rating categories by at least one nationally recognized
rating agency.
% of Initial Series
Note Structure: Amount Principal Amount
Class A $ 500,000,000 84%
Class B $ 41,666,000 7%
Class C $ 53,572,000 9%
Annual Servicing Fee: 2%
CLASS A CLASS B CLASS C
Credit Enhancement: subordination of Class B subordination of Class C spread account
and Class C
ERISA Eligible: Yes Yes Yes
(investors subject to
ERISA should consult
with their counsel)
Interest Rate: 1-month LIBOR + % 1-month LIBOR + % 1-month LIBOR + %
p.a. p.a. p.a.
Interest Accrual Method: actual/360 actual/360 actual/360
Interest Payment Dates: monthly (15th) monthly (15th) monthly (15th)
Interest Rate Index Reset 2 business days before 2 business days before 2 business days before
Date: each interest payment each interest payment each interest payment
date date date
First Interest Payment July 16, 2001 July 16, 2001 July 16, 2001
Date:
Scheduled Note Payment
Date: May 15, 2006 June 15, 2006 June 15, 2006
Final Note Payment Date
(no later than): September 15, 2008 September 15, 2008 September 15, 2008
Application for Exchange
Listing: Luxembourg Luxembourg Luxembourg
CUSIP Number:
ISIN:
Common Code:
Anticipated Ratings: Aaa/AAA/AAA A2/A/A Baa2/BBB/BBB
(Moody's/S&P/Fitch)
It is a condition of issuance that at least one of the anticipated ratings be
obtained for Class A and Class B notes and that at least two of the anticipated
ratings be obtained for the Class C notes.
S-4
STRUCTURAL SUMMARY
This summary briefly describes certain major structural components of
Series 2001-2. To fully understand the terms of Series 2001-2 you will need to
read both this supplement and the attached prospectus in their entirety.
THE OWNER TRUST AND THE NOTES
The notes are obligations of the owner trust and bear interest at the rates and
are payable on the dates stated in the summary of terms. The notes will be
issued by the owner trust. The owner trust is a Delaware common law trust formed
by Chase USA and the owner trustee for the purpose of issuing the notes. Chase
USA is the beneficial owner of the owner trust.
The notes are secured by the series certificate and the proceeds of the series
certificate that may be held from time to time by the owner trust.
For more information on the owner trust, see "Creation of the Owner Trust" in
this supplement. For more information on the notes, see "Description of the
Securities--Description of the Notes" in this supplement. For more information
on the series certificate, see "Description of the Securities--Description of
the Series Certificate" in this supplement.
THE MASTER TRUST AND THE SERIES CERTIFICATE
Chase Credit Card Master Trust is the issuer of the series certificate. On the
closing date, the series certificate for Series 2001-2 will be one of twenty-two
outstanding series issued by the master trust. The series certificate will not
be subordinated to any other series of certificates issued by the master trust.
The trustee of the master trust maintains the master trust for several
beneficiaries:
o the owner trust, as holder of the series certificate for Series
2001-2, is entitled to an allocation of collections on the receivables
in the master trust portfolio based on the outstanding amount of the
series certificate,
o certificateholders of other series issued by the master trust are
entitled to allocations of collections on the receivables based on the
aggregate outstanding amount of each series,
o providers of credit enhancements for certain series of certificates
issued by the master trust are entitled to allocations of collections
on the receivables based on the terms of those enhancements, and
o Chase USA, as transferor of the receivables to the master trust, is
entitled to the remainder of the collections on the receivables.
The series certificate represents an undivided interest in certain assets of the
master trust. Each month, a portion of collections and net losses on the
receivables will be allocated to the owner trust as holder of the series
certificate. The amounts allocated to the series certificate will be used to pay
principal and interest due on the notes, to cover net losses allocated to the
series certificate and to pay the servicing fees and other expenses allocated to
the series certificate.
For more information on the series certificate, see "Description of the
Securities--Description of the Series Certificate" in this supplement. For more
information on the allocation of collections on the series certificate and
payment on the series certificate, see "Description of the
Securities--Description of the Series Certificate--Interest Allocations,"
"--Principal Allocations" and "--Allocation Percentages" in this supplement.
SHARING EXCESS COLLECTIONS
If the collections allocated to the series certificate exceed the principal and
interest payable on the notes, the servicing fee payable to the servicer of the
master trust, net losses allocated to the series certificate and any required
funding of the spread account (collections (greater than) principal + interest +
servicing fee + losses + spread account funding), the servicer will share the
excess with other series of certificates issued by the master trust, and then
distribute any remaining excess to Chase USA as the owner of the equity interest
in the owner trust. In no case will the holders of the notes receive more than
the outstanding amount of principal and interest due on the notes.
For more information with respect to the sharing of excess collections, see
"Description of the
S-5
Securities--Description of the Series Certificate--Shared Excess Finance Charge
Collections" and "--Shared Principal Collections" in this supplement.
SCHEDULED PAYMENT DATES; MATURITY DATES
The notes are scheduled to be paid in full on the following payment dates for
each class:
Class A May 15, 2006
Class B June 15, 2006
Class C June 15, 2006
The owner trust expects to pay each class of notes in full on the scheduled
payment date for that class.
For the benefit of the owner trust, the master trust will accumulate funds in a
principal funding account for the purpose of repaying Class A. The master trust
will deposit principal collections in the principal funding account during a
controlled accumulation period that ends on the scheduled payment date for Class
A. The controlled accumulation period may be as long as twelve months, but will
be shortened if Chase USA determines that a shorter period will suffice for the
accumulation of the Class A principal amount. During the controlled accumulation
period, the master trust will make monthly deposits into the principal funding
account in specified amounts. The funds available for deposit in the principal
funding account will comprise the monthly principal collections allocated to
Series 2001-2 but may also include principal collections allocated to other
series that would otherwise be paid to Chase USA as transferor of the
receivables to the master trust. In general, the availability of principal
collections allocated to other series would be expected to permit Chase USA to
shorten the controlled accumulation period. On the scheduled payment date for
Class A, the master trust will pay to the owner trust the amount on deposit in
the principal funding account, and the owner trust will make a principal
allocation to Class A to the extent of the available funds.
On the scheduled payment date for Class B, if Class A has been paid in full, the
master trust will pay to the owner trust all principal collections allocated to
Series 2001-2 and the owner trust will make a principal allocation to Class B,
up to the outstanding principal amount of Class B, to the extent of the
available funds.
On the scheduled payment date for Class C, if Class A and Class B have been paid
in full, the master trust will pay to the owner trust all principal collections
allocated to Series 2001-2 and the owner trust will make a principal allocation
to Class C, up to the outstanding principal amount of Class C, to the extent of
the available funds.
The notes will mature, and any remaining principal and interest will be payable,
on September 15, 2008. No further payments on the notes will be made after that
date.
For more information with respect to repayment of principal of notes and the
controlled accumulation period, see "Description of the Securities--Description
of the Notes--Principal Payments," "Maturity Considerations-- Controlled
Accumulation" and "Description of the Securities--Description of the Series
Certificate--Controlled Accumulation" in this supplement.
SHORTFALLS IN EXPECTED CASHFLOWS
If the funds available in the principal funding account and paid to the owner
trust on the scheduled Class A payment date are insufficient to pay Class A
principal in full, the owner trust will use the available funds to pay in part
each of the outstanding Class A notes. On each subsequent payment date, the
owner trust will apply all principal allocations it receives on the series
certificate to the further payment of each of the outstanding Class A notes
until they have been paid in full.
If Class A remains outstanding on the scheduled Class B payment date, the owner
trust will use the principal collections it receives from the master trust to
pay Class A until Class A has been paid in full. If the principal collections
remaining after Class A has been paid in full are insufficient to pay Class B in
full, the owner trust will use those funds to pay in part each of the
outstanding Class B notes. On each subsequent payment date, the owner trust will
apply all principal allocations it receives on the series certificate to the
further payment of each of the outstanding Class B notes until they have been
paid in full.
S-6
If Class A or Class B remains outstanding on the scheduled Class C payment date,
the owner trust will use the principal collections it receives from the master
trust to pay Class A and Class B until Class A and Class B have been paid in
full. If the available funds remaining after Class A and Class B have been paid
in full are insufficient to pay Class C in full, the owner trust will use those
funds to pay in part each of the outstanding Class C notes. On each subsequent
payment date, the owner trust will apply all principal allocations it receives
on the series certificate to the further payment of each of the outstanding
Class C notes until they have been paid in full.
For more information on shortfalls in expected cashflows, see "Description of
the Securities--Description of the Notes--Principal Payments" in this
supplement.
OPTIONAL REDEMPTION
Chase USA, as transferor of the receivables to the master trust, has the right,
but not the obligation, to purchase the series certificate, and cause the
payment in full of the outstanding notes, when the outstanding amount of the
series certificate is less than or equal to 5% of the amount of the series
certificate at the closing date. If Chase USA exercises its right to purchase
the series certificate, the purchase price received by the owner trust will be
used to redeem the outstanding notes. The redemption price for any note will
equal the sum of the outstanding principal amount of the note plus the accrued
but unpaid interest on the note at the redemption date.
For more information with respect to optional redemption of the notes, see
"Description of the Securities--Description of the Notes--Optional Redemption"
in this supplement and "Description of the Securities--Description of the
Certificates--Optional Repurchase" in the attached prospectus.
ALLOCATION OF NET LOSSES; CREDIT ENHANCEMENT
The series certificate represents an interest in both collections and net losses
on the receivables in the master trust portfolio. The Class A and Class B notes,
however, feature credit enhancement by means of the subordination of other
interests, which provides the Class A and Class B notes with a measure of
protection from net losses and shortfalls in cash flow. Class C has the benefit
of a spread account that is available to reimburse any losses that Class C may
suffer.
The master trust will allocate a portion of net losses on the receivables in the
master trust portfolio to the series certificate. Finance charge collections
allocated to the series certificate ordinarily will be used to pay interest on
the notes, to fund the servicing fee with respect to Series 2001-2 and then to
cover the portion of net losses allocated to the series certificate. If finance
charge collections are insufficient to make all required payments and
reimbursements in any month, shared finance charge collections from other
series, if any, may be used to make up the shortfall.
If those amounts are not sufficient, reallocated principal collections may be
used to make up the shortfall, but in that event the outstanding amount of the
series certificate will be reduced by the amount of the reallocated principal.
Any reduction in the outstanding amount of the series certificate may be
reinstated on subsequent payment dates by application of any finance charge
collections remaining after payment of all other required amounts.
If any reduction of the outstanding amount of the series certificate is not
reinstated, the owner trust will not receive sufficient principal allocations
for the redemption or repayment of the entire aggregate principal amount of the
notes. In that event, the owner trust will pay first the principal of Class A,
then the principal of Class B, and finally the principal of Class C. In this
manner, Class C will be subordinated to Class A and Class B, and Class B will be
subordinated to Class A.
Class C will have the benefit of the spread account maintained by the owner
trust. The master trust will make payments to the owner trust out of available
finance charge collections on the receivables in order to fund the spread
account. If payments of principal and finance charge collections on the series
certificate are insufficient to pay the principal and interest due on Class C,
the owner trust will use the funds on deposit in the spread account, if any, to
make up the shortfall.
For more information on allocation of losses, see "Description of the
Securities--Description of the
S-7
Notes--Subordination" in this supplement. For more information with respect to
the use of the spread account for payments to Class C, see "Description of the
Securities--Description of the Notes--Owner Trust Spread Account."
MINIMUM YIELD ON THE RECEIVABLES; EVENTS OF DEFAULT AND ACCELERATION OF
MATURITY
The owner trust will begin to repay the principal of the notes before their
scheduled payment dates if the finance charge collections on the receivables in
the master trust portfolio are too low. The minimum amount of collections for
any month, referred to as the base rate, is the sum of the interest payable on
the notes for the related interest period, plus the servicing fee allocated to
the series certificate for the related month. If the average net yield for the
master trust portfolio, after deducting net loss amounts, for any three
consecutive months is less than the average base rate for the same three
consecutive months, a pay out event will occur with respect to the series
certificate and the master trust will begin a rapid amortization of the series
certificate through payment of all allocated principal to the owner trust. The
owner trust, in turn, will use the proceeds of any rapid amortization to repay
the notes in full or in part as described above under "--Shortfalls in Expected
Cashflows."
The series certificate is also subject to several other pay out events, which
could cause the start of a rapid amortization of the series certificate. Also,
the notes are subject to certain events of default, which could result in the
acceleration of the maturity of the notes. These other events are summarized
under the headings "Description of the Securities--Description of the Series
Certificate--Pay Out Events" and "--Description of the Notes--Events of Default"
in this supplement.
For more information on pay out events, the portfolio yield and base rate, early
principal repayment and redemption and rapid amortization, see "Maturity
Considerations--Rapid Amortization Period," "Description of the
Securities--Description of the Series Certificate--Pay Out Events" and
"--Description of the Notes--Principal Payments" and "--Optional Redemption" in
this supplement and "Description of the Securities--Description of the
Certificates--Principal Allocations" and "--Final Payment of Principal; Series
Termination" in the attached prospectus.
TAX STATUS OF CLASS A, CLASS B, CLASS C AND CHASE CREDIT CARD MASTER TRUST
Simpson Thacher & Bartlett, tax counsel to Chase USA, is of the opinion that:
o under existing laws the Class A, Class B and Class C notes will be
characterized as debt for U.S. federal income tax purposes, and
o neither Chase Credit Card Owner Trust 2001-2 nor the Chase Credit Card
Master Trust will be an association or publicly traded partnership
taxable as a corporation for U.S. federal income tax purposes.
For further information regarding the application of U.S. federal income tax
laws, see "Tax Matters" in the attached prospectus.
ERISA CONSIDERATIONS
Subject to important considerations described under "Employee Benefit Plan
Considerations" in the attached prospectus, each class of notes will be eligible
for purchase by persons investing assets of employee benefit plans or individual
retirement accounts.
For further information regarding the application of ERISA, see "Employee
Benefit Plan Considerations" in the attached prospectus.
MAILING ADDRESS AND TELEPHONE NUMBER OF
PRINCIPAL EXECUTIVE OFFICES
The mailing address of Chase Manhattan Bank USA, National Association is White
Clay Center Building 200, Route 273, Newark, Delaware 19711, and its telephone
number is (302) 575-5000.
S-8
SELECTED MASTER TRUST PORTFOLIO SUMMARY DATA
The chart below shows the geographic distribution of the receivables in the
master trust portfolio among the 50 states and the District of Columbia. Other
than the states specifically shown in the chart, no state accounts for more than
5% of receivables in the master trust portfolio.
[GRAPHIC OMITTED]
GEOGRAPHIC DISTRIBUTION OF RECEIVABLES IN MASTER TRUST PORTFOLIO
AS OF THE BEGINNING OF THE DAY ON APRIL 1, 2001
California 12.33%
New York 12.20%
Texas 7.85%
Florida 6.80%
New Jersey 5.36%
Other 55.46%
The chart below shows the percentages of the receivables in the master trust
portfolio arising under accounts within the age brackets shown.
[GRAPHIC OMITTED]
RECEIVABLES IN MASTER TRUST PORTFOLIO BY AGE OF ACCOUNT
AS OF THE BEGINNING OF THE DAY ON APRIL 1, 2001
0-12 1.01%
13-24 8.38%
25-36 7.95%
37-48 11.42%
49-60 11.19%
61-120 33.90%
120+ 26.15%
S-9
The chart below shows the master trust yield, payment rate and net charge-off
rate for the master trust portfolio for each month from April 1999 to March
2001.
[GRAPHIC OMITTED]
"Master trust yield" for any month means the total amount of collected
finance charges and interchange fees allocated to Chase Credit Card Master Trust
for the month, expressed as a percentage of total outstanding principal
receivables at the beginning of the month.
The "payment rate" for any month is the total amount collected on
receivables during the month, including recoveries on previously charged-off
receivables, expressed as a percentage of total outstanding receivables at the
beginning of the month.
The amount of "net charge-offs" for any month is the amount of charged-off
receivables recorded in the month, net of any recoveries from earlier
charge-offs on receivables in the master trust portfolio, expressed as a
percentage of total outstanding principal receivables at the beginning of the
month.
S-10
RECENT DEVELOPMENT
CHANGE IN ACCOUNTING STANDARDS
Under existing accounting rules, Chase USA records the issuance of notes
and related transfers of receivables to the master trust as a sale of the credit
card receivables. The Financial Accounting Standards Board has adopted revised
accounting rules applicable to the transfers of receivables. Chase USA expects
the board to delay the effective date of certain provisions of the revised
accounting rules as such rules would apply to banks, such as Chase USA, until at
least December 31, 2001. Chase USA has not determined how it will comply with
the revised accounting rules. However, Chase USA will comply with such rules so
as to continue to record the transfers of receivables to the master trust as
sales under generally accepted accounting principles.
One method under consideration to comply with the revised accounting rules
is to interpose one or more special purpose entities between Chase USA, as a
seller of the credit card receivables, and the master trust. These special
purpose entities, which would be owned by Chase USA, would purchase the credit
card receivables from Chase USA and transfer them to the master trust. In order
to effect such a change in the structure of the transaction some of the
operative documents, including the pooling and servicing agreement and the
indenture, would need to be amended. Chase USA has not determined the scope of
the necessary amendments or whether consent of the holders of the notes or the
holders of any other series of notes or certificates will be required in order
to implement the necessary amendments. THEREFORE, THE INDENTURE PURSUANT TO
WHICH THE NOTES WILL BE ISSUED PROVIDES THAT, BY PURCHASING THE NOTES, YOU WILL
BE CONSENTING TO ANY SUCH AMENDMENTS. Notwithstanding whether Chase USA
ultimately determines that consent is or is not required to implement the
necessary amendments, it will be a condition of any such amendment that the
rating agencies confirm that the amendment will not cause the ratings assigned
to any outstanding notes or other series of certificates or notes to be
withdrawn or reduced.
S-11
RISK FACTORS
The following is a summary of all material risks that apply to an
investment in the notes. The remainder of this supplement and the attached
prospectus provide much more detailed information about these risks. You should
consider the following risk factors in light of your investment strategy in
deciding whether to purchase the notes.
YOU MAY RECEIVE PRINCIPAL If the average master trust net yield
PAYMENTS EARLIER OR LATER THAN THE allocated to Series 2001-2--called portfolio
SCHEDULED MATURITY DATE IF THE yield--for any three consecutive months is
PORTFOLIO YIELD IS REDUCED less than the amount of interest payable on
the notes for the related interest period,
plus the servicing fee allocated to the
series certificate averaged for the same
three consecutive months, a pay out event
will occur for the series certificate for
your series. The master trust then will
commence a rapid amortization of the series
certificate and the master trust will begin
making payments of principal to the
indenture trustee who holds the series
certificate for your benefit. As a result,
you will receive principal allocations from
the indenture trustee earlier than the
scheduled principal allocation date of your
notes. Additionally, if principal
collections on receivables allocated to
other series are available for application
to a rapid amortization of your securities,
a rapid amortization may be substantially
shortened. Because of the potential for
early repayment if the portfolio yield on
the receivables falls below the minimum
amount, any circumstances that tend to
reduce the portfolio yield increase the risk
of early repayment of your notes.
The following four factors could result in
reduced portfolio yield:
CHASE USA MAY CHANGE THE Chase USA will transfer to the master trust
TERMS AND CONDITIONS OF THE receivables arising under specified credit
ACCOUNTS card accounts, but Chase USA will continue
to own those accounts. As the owner of those
accounts, Chase USA retains the right to
change various terms and conditions of those
accounts, including finance charges and
other fees it charges and the required
minimum monthly payment. Chase USA may
change the terms of the accounts to maintain
its competitive position in the credit card
industry. Changes in the terms of the
accounts may reduce the amount of
receivables arising under the accounts,
reduce the amount of collections on those
receivables, or otherwise alter payment
patterns. See "Description of the
Securities--Description of the
Certificates--Addition of Master Trust
Assets" and "Chase USA's Credit Card
Activities--Billing and Payments" in the
attached prospectus.
SECURITIES INTEREST RATE AND Finance charges on some of the accounts in
RECEIVABLES INTEREST RATE MAY the master trust accrue at a variable rate
RESET AT DIFFERENT TIMES above a stated prime rate or other index
under the terms of the agreement with the
cardholder. The interest rate of your note
is based on LIBOR. Changes in LIBOR might
not be reflected in the prime rate or other
index, resulting in a higher or lower
S-12
spread, or difference, between the amount of
collections of finance charge receivables on
the accounts and the amounts of interest
payable on your notes and other amounts
required to be funded out of collections of
finance charge receivables.
Finance charges on some of the accounts in the
master trust accrue at a fixed rate. If LIBOR
increases, the interest payments on your notes
and other amounts required to be funded out of
collections of finance charge receivables will
increase, while the amount of collections of
finance charge receivables on the accounts will
remain the same unless and until the fixed
rates on the accounts are reset.
A decrease in the spread between collections of
finance charge receivables and those allocated
to make interest payments on your notes could
reduce the portfolio yield and increase the
risk of early repayment of the series
certificate and early repayment of your notes
as described above.
CHANGES TO CONSUMER Federal and state consumer protection laws
PROTECTION LAWS MAY IMPEDE regulate the creation and enforcement of
CHASE'S COLLECTION EFFORTS consumer loans, including credit card
accounts and receivables. Changes or
additions to those regulations 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 we can charge on credit
card account balances, resulting in reduced
collections. See "Description of the
Securities--Description of the
Certificates--Pay Out Events" in the
attached prospectus.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable
in accordance with their terms against the
obligors on those receivables. Chase USA makes
representations and warranties relating to the
validity and enforceability of the receivables
in the master trust. No other party will make
any examination of the receivables or the
related records for the purpose of determining
the presence or absence of defects, compliance
with representations and warranties, or for any
other purpose. The only remedy if any of Chase
USA's representations or warranties is
violated, and the violation continues beyond
the period of time allowed to correct the
violation, is that Chase USA must accept
reassignment of the receivables affected by the
violation. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in the
attached prospectus.
CARDHOLDERS MAY MAKE The receivables transferred to the master
PRINCIPAL PAYMENTS AT ANY trust may be repaid by cardholders at any
TIME time. We cannot assure the creation of
additional receivables in the master trust's
accounts or that any particular pattern of
cardholder payments will occur. A
significant decline in the amount of
S-13
new receivables generated by the accounts in
the master trust could result in reduced
amounts of collections in the master trust
portfolio and could increase the risk of early
repayment of the series certificate and early
repayment of your notes as described above. See
"Maturity Considerations" in this supplement.
ALLOCATIONS OF CHARGED-OFF CMB as servicer will write off the
RECEIVABLES COULD REDUCE receivables arising in accounts in the
PAYMENTS TO YOU master trust portfolio if the receivables
become uncollectible or are otherwise more
than 180 days past due. The series
certificate for your series will be
allocated a portion of these charged-off
receivables. If the amount of charged-off
receivables allocated to the series
certificate for your series exceeds the
amount of funds available for reimbursement
of those charge-offs, the owner trust as the
holder of the series certificate for your
series may not receive the full amount of
principal and interest due to it by the
scheduled note payment date for your notes
and you may suffer a loss in the repayment
of your principal. See "Chase Credit Card
Master Trust Portfolio--Delinquency and Loss
Experience" and "Description of the
Securities--Description of the Series
Certificate--Reallocation of Cash Flows,"
"--Application of Collections" and
"--Defaulted Receivables" in this
supplement.
ISSUANCE OF ADDITIONAL SERIES BY Chase Credit Card Master Trust, as a master
THE MASTER TRUST MAY AFFECT THE trust, may issue series of certificates from
TIMING OF PAYMENTS TO YOU time to time. The master trust may issue an
additional series certificate with terms
that are different from the series
certificate for your series without your
prior review or consent. It is a condition
to the issuance of each new series
certificate that each rating agency that has
rated an outstanding series confirm in
writing that the issuance of the new series
will not result in a reduction or withdrawal
of its rating of any class of any
outstanding series or of any series of
securities. The rating agency confirmation
will be based primarily on the master
trust's ability to pay principal by the
final note payment date and interest on each
payment date, but the rating agency will not
consider how the terms of a new series could
otherwise affect the timing and amounts of
payments on your series. See "Description of
the Securities-- Description of the
Certificates--Issuing New Series of
Certificates" in the attached prospectus.
CHASE USA MAY ADD ACCOUNTS In addition to the accounts already
WITH DIFFERENT TERMS TO THE designated for the master trust, Chase USA
MASTER TRUST PORTFOLIO is permitted to designate additional
accounts for the master trust portfolio and
to transfer the receivables in those
accounts to the master trust. Any newly
designated accounts and receivables may have
different terms and conditions than the
receivables already in the master
trust--such as higher or lower fees or
interest rates, or longer or shorter
principal allocation terms. Credit card
accounts purchased by Chase USA may
S-14
be designated as additional accounts if
conditions in the pooling and servicing
agreement are satisfied. Credit card accounts
purchased by Chase USA will have been created
using the account originator's underwriting
criteria, not those used by Chase USA. The
account originator's underwriting criteria may
be more or less stringent than those of Chase
USA. The new receivables may produce higher or
lower collections or charge-offs over time than
the receivables already in the master trust and
could tend to reduce the amount of collections
allocated to the series certificate for your
series. See "Description of the
Securities--Description of the
Certificates--Addition of Master Trust Assets"
in the attached prospectus.
CHASE USA MAY NOT BE ABLE TO If Chase USA's percentage interest in the
ADD NEW ACCOUNTS WHEN receivables in the master trust falls to 7%
REQUIRED UNDER THE POOLING AND or less, Chase USA will be required to
SERVICING AGREEMENT maintain that level by designating
additional accounts for the master trust
portfolio and transferring the receivables
in those accounts to the master trust. Chase
USA may not have any additional accounts to
add at that time. If Chase USA fails to add
accounts when required, a "pay out event"
will occur and you could receive payment of
principal sooner than you expected. See
"Description of the Securities--Description
of the Certificates--Addition of Master
Trust Assets" in the attached prospectus.
INSOLVENCY OR BANKRUPTCY OF Chase USA accounts for the transfer of
CHASE USA COULD RESULT IN receivables to the master trust as a sale.
ACCELERATED, DELAYED OR REDUCED However, a court could conclude that Chase
PAYMENTS TO YOU USA still owns the receivables and that the
master trust holds only a security interest.
If a court concludes that the transfer to
the master trust is only a grant of a
security interest in the receivables, a tax
or government lien on our property arising
before new receivables come into existence
may have priority over the master trust's
interests in those receivables. See "Certain
Legal Aspects of the Receivables--Transfer
of Receivables" and "Description of the
Securities--Description of the
Certificates--Chase USA's Representations
and Warranties" in the attached prospectus.
Chase USA is chartered as a national banking
association and is subject to regulation and
supervision by the Office of the Comptroller of
the Currency. If Chase USA becomes insolvent,
is in an unsound condition or engages in
violations of its bylaws or regulations, the
Comptroller is authorized to appoint the FDIC
as conservator or receiver. Under such
circumstances, the FDIC could:
o require the master trust trustee to go
through an administrative claims
procedure to establish its right to
payments collected on the receivables in
the master trust,
o request a stay of proceedings with
respect to the master trust's claims
against Chase USA, or
S-15
o repudiate without compensation Chase USA's
ongoing obligations under the pooling and
servicing agreement, such as the duty to
collect payments or otherwise service the
receivables or to provide administrative
services to the owner trust.
If the FDIC were to take any of those actions,
pay ments of principal and interest on your
notes could be delayed or reduced.
By statute, the FDIC as conservator or receiver
is authorized to repudiate any "contract" of
Chase USA upon payment of "actual direct
compensatory damages." This authority may be
interpreted by the FDIC to permit it to
repudiate the transfer of receivables to the
master trust. Under a recently enacted FDIC
regulation, however, the FDIC as conservator or
receiver will not reclaim, recover, or
recharacterize a bank's transfer of financial
assets if certain conditions are met, including
that the transfer qualifies for sale accounting
treatment, was made for adequate consideration,
and was not made fraudulently, in contemplation
of insolvency, or with the intent to hinder,
delay, or defraud the bank or its creditors.
Chase USA believes the new FDIC regulation
applies to the transfer of receivables under
the pooling and servicing agreement and that
the conditions of the regulation have been
satisfied.
If a condition required under the FDIC
regulation, or other statutory or regulatory
requirement applicable to the transaction, were
found not to have been satisfied, the FDIC as
conservator or receiver might refuse to
recognize Chase USA's transfer of the
receivables to the master trust. In that event
the master trust could be limited to seeking
recovery based upon its security interest in
the receivables. The FDIC's statutory authority
has been interpreted by the FDIC and at least
one court to permit the repudiation of a
security interest upon payment of actual direct
compensatory damages measured as of the date of
conservatorship or receivership. Such damages
do not include damages for lost profits or
opportunity, and no damages would be paid for
the period between the date of conservatorship
or receivership and the date of repudiation.
The FDIC could delay its decision whether to
recognize Chase USA's transfer of the
receivables for a reasonable period following
its appointment as conservator or receiver for
the bank. If the FDIC were to refuse to
recognize Chase USA's transfer of the
receivables, payments of principal and interest
on your notes could be delayed or reduced. See
"Certain Legal Aspects of the
Receivables--Certain Matters Relating to
Receivership" in the attached prospectus.
If a conservator or receiver were appointed for
Chase USA, then a "pay out event" would occur
for all outstanding series under the terms of
the pooling and servicing agreement. New
principal receivables would not
S-16
be transferred to the master trust and the
master trust trustee would sell the receivables
unless holders of more than 50% of the investor
interest of each class of outstanding
certificates gave the master trust trustee
other instructions. The master trust would then
terminate earlier than was planned and you
could have a loss if the sale of the
receivables produced insufficient net proceeds
to pay you in full. The conservator or receiver
may nonetheless have the power:
o regardless of the terms of the pooling and
servicing agreement, (a) to prevent the
beginning of a rapid amortization period,
(b) to prevent the early sale of the
receivables and termination of the master
trust or (c) to require new principal
receivables to continue being transferred
to the master trust, or
o regardless of the instructions of the
certificateholders, (a) to require the
early sale of of the receivables, (b) to
require termination of the master trust and
retirement of the certificates or (c) to
prohibit the continued transfer of
principal receivables to the master trust.
In addition, if the servicer defaults on its
obligations under the pooling and servicing
agreement solely because a conservator or
receiver is appointed for it, the conservator
or receiver might have the power to prevent
either the master trust trustee or the holders
of securities issued by the master trust from
appointing a new servicer under the pooling and
servicing agreement. See "Certain Legal Aspects
of the Receivables--Certain Matters Relating to
Receivership" in the attached prospectus.
YOU WILL HAVE LIMITED CONTROL OF You will have limited voting rights relating to
OWNER TRUST AND MASTER TRUST actions of the owner trust and indenture
ACTIONS trustee. You will not have the right to vote to
direct the master trust trustee to take any
actions other than the right to vote to declare
a pay out event or a servicer default.
YOU MAY NOT BE ABLE TO RESELL The underwriters may assist in resales of any
YOUR NOTES class of the notes but they are not required to
do so. A secondary market for your 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 your
notes.
REPAYMENT OF YOUR NOTES IS The owner trust will not have any significant
LIMITED TO THE OWNER TRUST assets other than the series certificate, the
ASSETS owner trust spread account and the note
distribution account. As a result, you must rely
only on those assets for repayment of your
notes. Although the owner trust may be required
to sell the series certificate following a pay
out event, we cannot assure you that the
proceeds of a sale of the series certificate
will be sufficient to pay the interest or
principal due to you.
S-17
Additionally, the sale of the series
certificate is subject to restrictions on
transfer that may delay the payment on your
notes.
CLASS B BEARS LOSSES BEFORE Class B is subordinated to Class A. Principal
CLASS A allocations to Class B will not begin until
Class A has been paid in full. If principal
collections allocated to the series certificate
are reallocated to make interest allocations and
not reimbursed, the full amount of Class B
principal may not be repaid. If receivables had
to be sold, the net proceeds of that sale
available to pay principal on the notes would be
paid first to Class A before any remaining net
proceeds would be available for payments due to
Class B. See "Description of the
Securities--Description of the
Notes--Subordination" in this supplement.
CLASS C BEARS LOSSES BEFORE Class C is subordinated to Class A and Class B.
CLASS A AND CLASS B Principal allocations to Class C will not begin
until Class A and Class B are repaid. If
principal collections allocated to the series
certificate are reallocated to make interest
allocations and not reimbursed, the full amount
of Class C principal may not be repaid. If
receivables had to be sold, the net proceeds of
that sale available to pay principal would be
paid first to Class A, then to Class B, before
any remaining net proceeds would be available
for payments due to Class C. See "Description of
the Securities-- Description of the
Notes--Subordination" in this supplement.
S-18
CHASE CREDIT CARD MASTER TRUST PORTFOLIO
Defined terms are indicated by boldface type. Both the attached prospectus
and this supplement contain a glossary of important terms where definitions can
be found.
GENERAL
The assets of the master trust include credit card receivables generated
through accounts that Chase USA has designated as master trust accounts. The
master trust accounts are accounts designated when the master trust was
established and additional accounts that have been designated since that time.
Chase USA is permitted to add accounts, and at times is required to add
accounts, to the master trust. Chase USA can remove accounts from the master
trust if the conditions to removal are satisfied. As a result, the composition
of the master trust is expected to change over time. See "The Receivables" in
the attached prospectus for a general description of the receivables in the
master trust.
DELINQUENCY AND LOSS EXPERIENCE
The following table provides you with delinquency experience for the MASTER
TRUST PORTFOLIO as of the indicated dates. Number of Days Delinquent means the
number of days after the first billing date following the original billing date;
for example, 30 days delinquent means that the minimum payment was not received
within 60 days of the original billing date. Delinquencies are calculated as a
percentage of outstanding receivables as of the end of the indicated month.
DELINQUENCY EXPERIENCE
MASTER TRUST PORTFOLIO
(DOLLAR AMOUNTS IN MILLIONS)
AS OF MARCH 31, AS OF DECEMBER 31,
-------------------------- -------------------------------------------------------------------------------
2001 2000 1999 1998
-------------------------- -------------------------- -------------------------- -------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE OF
NUMBER OF DAYS DELINQUENT OF TOTAL DELINQUENT OF TOTAL DELINQUENT OF TOTAL DELINQUENT TOTAL
DELINQUENT AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES
- --------------------- ------------ ------------- ------------ ------------- ------------ ------------- ----------- -------------
30 to 59 Days ....... $289 1.39% $ 306 1.39% $257 1.29% $264 1.49%
60 to 89 Days ....... 216 1.03 242 1.10 185 0.92 177 1.00
90 Days or More ..... 469 2.25 477 2.17 393 1.97 369 2.08
---- ---- ------ ---- ---- ---- ---- ----
TOTAL ............. $974 4.67% $1,025 4.66% $835 4.18% $810 4.57%
==== ==== ====== ==== ==== ==== ==== ====
The following table provides you with loss experience for the MASTER TRUST
PORTFOLIO for the indicated periods. Average Principal Receivables Outstanding
is the average of the beginning of the month balance of master trust PRINCIPAL
RECEIVABLES outstanding during the indicated period. Gross Charge-Offs shown
include only the principal portion of charged-off receivables. Also excluded
from Gross Charge-Offs is the amount of any reductions in Average Principal
Receivables Outstanding due to fraud, returned goods or customer disputes. The
percentage shown for the three months ended March 31, 2001 is annualized.
S-19
LOSS EXPERIENCE
MASTER TRUST PORTFOLIO
(DOLLAR AMOUNTS IN MILLIONS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------
2001 2000 1999 1998
----------------- ------------ ------------ ------------
Average Principal Receivables Outstanding ......... $ 20,730 $ 20,486 $ 18,332 $ 15,658
Gross Charge-Offs ................................. 326 1,161 1,120 1,109
Recoveries ........................................ 21 69 75 84
Net Charge-Offs ................................... 305 1,093 1,045 1,025
Net Charge-Offs as a Percentage of Average
Principal Receivables Outstanding ................ 5.89% 5.33% 5.70% 6.55%
As of March 31, 2001, accounts 60 or more days delinquent were 3.28% of
total receivables compared with 3.27% as of December 31, 2000, 2.89% as of
December 31, 1999 and 3.08% as of December 31, 1998. Delinquencies are a leading
indicator of future charge-offs. For the three months ended March 31, 2001 net
charge-offs as a percentage of average principal receivables outstanding were
5.89% compared with 5.33% for the year ended December 31, 2000, 5.70% for the
year ended December 31, 1999 and 6.55% for the year ended December 31, 1998.
Delinquencies and charge-offs depend on a variety of factors, including:
o general economic conditions and trends in consumer bankruptcy filings,
o the availability of other sources of credit, and
o seasonal variations in consumer spending and borrowing patterns.
We attribute the general decrease in charge-offs in 2000 to the following
factors:
o improving general economic conditions reduced the number of consumers
that were unable to make the minimum payments on their accounts and
the number of consumers filing for bankruptcy, and
o we took steps to improve account management techniques and made
significant investments in decision support technology. These steps
include implementing refined credit scoring models, improved
collection techniques, enhanced credit line management and
underwriting.
The increase in charge-offs in the first quarter of 2001 can be attributed
primarily to increased bankruptcy filings as well as to a general deterioration
in economic conditions and to the implementation of a new collection system
which temporarily affected productivity.
CHARACTERISTICS OF RECEIVABLES PORTFOLIO
The receivables and the accounts in the MASTER TRUST PORTFOLIO, as of the
beginning of the day on April 1, 2001:
o included approximately $20.07 billion of PRINCIPAL RECEIVABLES and
$0.82 billion of FINANCE CHARGE RECEIVABLES,
o had an average principal receivables balance of $1,662,
o had an average credit limit of $7,806, of which the average principal
receivables balance represented approximately 22%,
o represented approximately 58% of aggregate receivables in the BANK
PORTFOLIO,
o had an average age of 89 months,
o had billing addresses in all 50 states and the District of Columbia,
S-20
o included approximately 55% as standard accounts, representing
approximately 53% of outstanding PRINCIPAL RECEIVABLES balances, and
o included approximately 45% as premium accounts, representing
approximately 47% of outstanding PRINCIPAL RECEIVABLES balances.
The following tables summarize characteristics of the MASTER TRUST
PORTFOLIO as of the beginning of the day on April 1, 2001. Because the
composition of the MASTER TRUST PORTFOLIO may change in the future, these tables
are not necessarily indicative of the composition of the MASTER TRUST PORTFOLIO
at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE--MASTER TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER RECEIVABLES TOTAL
ACCOUNT BALANCE ACCOUNTS OF ACCOUNTS OUTSTANDING RECEIVABLES
- ---------------------------------- ------------- --------------- ------------------- --------------
Credit Balance ................... 169,473 1.40% $ (27,246,297) (0.13)%
No Balance ....................... 5,139,017 42.56 0 0.00
$0.01 to $1,500.00 ............... 3,122,654 25.86 1,475,642,991 7.06
$1,500.01 to $5,000.00 ........... 2,012,555 16.66 6,059,661,144 29.01
$5,000.01 to $10,000.00 .......... 1,319,711 10.93 9,564,518,412 45.79
$10,000.01 to $20,000.00 ......... 307,660 2.55 3,707,015,296 17.74
Over $20,000.00 .................. 4,341 0.04 110,430,380 0.53
--------- ------ --------------- ------
TOTAL ......................... 12,075,411 100.00% $20,890,021,926 100.00%
========== ====== =============== ======
COMPOSITION BY CREDIT LIMIT--MASTER TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER RECEIVABLES TOTAL
CREDIT LIMIT ACCOUNTS OF ACCOUNTS OUTSTANDING RECEIVABLES
- --------------------------------- ------------- --------------- ------------------- --------------
$0.00 ........................... 651 0.01% $ (17,706) (0.00)%
$0.01 to $1,500.00 .............. 686,141 5.68 410,418,708 1.97%
$1,500.01 to $5,000.00 .......... 2,776,976 23.00 2,941,649,808 14.08
$5,000.01 to $10,000.00 ......... 5,787,494 47.92 8,984,968,073 43.01
Over $10,000.00 ................. 2,824,149 23.39 8,553,003,043 40.94
--------- ------ --------------- ------
TOTAL ........................ 12,075,411 100.00% $20,890,021,926 100.00%
========== ====== =============== ======
COMPOSITION BY PERIOD OF DELINQUENCY--MASTER TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER RECEIVABLES TOTAL
PAYMENT STATUS ACCOUNTS OF ACCOUNTS OUTSTANDING RECEIVABLES
- ------------------------------------ ------------ --------------- ------------------ --------------
Current ............................ 11,631,895 96.33% $19,002,540,963 90.96%
1 to 29 days delinquent ............ 245,800 2.03 913,057,096 4.37
30 to 59 days delinquent ........... 65,452 0.54 289,476,989 1.39
60 to 89 days delinquent ........... 42,993 0.36 215,527,826 1.03
90 days delinquent or more ......... 89,271 0.74 469,419,052 2.25
---------- ------ --------------- ------
TOTAL ........................... 12,075,411 100.00% $20,890,021,926 100.00%
========== ====== =============== ======
In the Composition by Account Seasoning table below, account age is
determined by the number of months elapsed since the account was originally
opened, except that for some accounts converted from standard to premium
accounts, account age is determined by the number of months since the account
was converted.
S-21
COMPOSITION BY ACCOUNT SEASONING--MASTER TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER RECEIVABLES TOTAL
ACCOUNT AGE ACCOUNTS OF ACCOUNTS OUTSTANDING RECEIVABLES
- -------------------------------------- ------------- --------------- ------------------ --------------
Not more than 6 Months ............... 0 0.00% $ 0 0.00%
Over 6 Months to 12 Months ........... 142,857 1.18 210,082,273 1.01
Over 12 Months to 24 Months .......... 1,177,942 9.75 1,749,793,987 8.38
Over 24 Months to 36 Months .......... 963,393 7.98 1,661,338,523 7.95
Over 36 Months to 48 Months .......... 1,573,052 13.03 2,386,096,615 11.42
Over 48 Months to 60 Months .......... 1,536,592 12.73 2,338,331,877 11.19
Over 60 Months to 120 Months ......... 3,907,575 32.36 7,080,831,991 33.90
Over 120 Months ...................... 2,774,000 22.97 5,463,546,660 26.15
--------- ------ --------------- ------
TOTAL ............................. 12,075,411 100.00% $20,890,021,926 100.00%
========== ====== =============== ======
S-22
GEOGRAPHIC DISTRIBUTION--MASTER TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER RECEIVABLES TOTAL
STATE ACCOUNTS OF ACCOUNTS OUTSTANDING RECEIVABLES
- -------------------------- ------------- --------------- ----------------- --------------
California ............... 1,509,412 12.50% $ 2,575,977,266 12.33%
New York ................. 1,508,060 12.49 2,549,551,416 12.20
Texas .................... 850,374 7.04 1,640,445,542 7.85
Florida .................. 833,002 6.90 1,421,002,337 6.80
New Jersey ............... 652,303 5.40 1,118,654,981 5.36
Illinois ................. 576,428 4.77 969,817,398 4.64
Ohio ..................... 463,411 3.84 801,127,501 3.84
Pennsylvania ............. 438,038 3.63 698,876,368 3.35
Michigan ................. 375,769 3.11 651,060,529 3.12
Massachusetts ............ 384,206 3.18 602,666,077 2.89
Virginia ................. 270,714 2.24 493,144,133 2.36
Georgia .................. 235,541 1.95 458,765,281 2.20
North Carolina ........... 229,034 1.90 418,991,044 2.01
Maryland ................. 229,481 1.90 399,895,379 1.91
Indiana .................. 223,597 1.85 382,957,111 1.83
Connecticut .............. 195,117 1.62 336,119,009 1.61
Missouri ................. 191,253 1.58 329,302,450 1.58
Washington ............... 172,140 1.43 318,021,227 1.52
Wisconsin ................ 197,247 1.63 303,090,175 1.45
Arizona .................. 161,979 1.34 301,295,082 1.44
Tennessee ................ 171,725 1.42 294,305,491 1.41
Colorado ................. 162,756 1.35 279,108,274 1.34
Minnesota ................ 179,187 1.48 271,271,937 1.30
Louisiana ................ 156,385 1.30 266,214,741 1.27
Alabama .................. 142,832 1.18 257,921,618 1.23
Kentucky ................. 128,456 1.06 209,679,336 1.00
Oklahoma ................. 111,594 0.92 201,400,067 0.96
South Carolina ........... 107,845 0.89 198,516,165 0.95
Oregon ................... 108,001 0.90 196,394,019 0.94
Nevada ................... 82,646 0.69 170,473,039 0.82
Arkansas ................. 92,959 0.77 165,560,585 0.79
Kansas ................... 84,779 0.70 148,684,166 0.71
Mississippi .............. 80,344 0.67 140,953,619 0.67
Iowa ..................... 87,188 0.72 130,595,743 0.63
New Hampshire ............ 60,957 0.51 106,943,251 0.51
New Mexico ............... 57,461 0.48 105,236,904 0.50
Rhode Island ............. 62,133 0.52 99,568,053 0.48
West Virginia ............ 54,828 0.45 88,743,896 0.43
Maine .................... 49,702 0.41 86,428,426 0.41
Nebraska ................. 52,124 0.43 83,495,243 0.40
Hawaii ................... 42,370 0.35 82,577,880 0.40
Utah ..................... 43,167 0.36 77,929,408 0.37
Idaho .................... 32,737 0.27 56,947,977 0.27
Delaware ................. 27,865 0.23 53,124,961 0.25
Vermont .................. 28,500 0.24 52,737,584 0.25
Montana .................. 30,641 0.25 51,455,401 0.25
Washington, D.C. ......... 23,287 0.19 43,293,279 0.21
Alaska ................... 18,652 0.16 39,048,192 0.19
South Dakota ............. 20,912 0.17 35,033,702 0.17
Wyoming .................. 18,416 0.15 32,607,539 0.16
North Dakota ............. 19,364 0.16 31,508,647 0.15
Other .................... 38,492 0.32 61,502,477 0.29
--------- ------ --------------- ------
TOTAL ................... 12,075,411 100.00% $20,890,021,926 100.00%
========== ====== =============== ======
S-23
MATURITY CONSIDERATIONS
Each class of notes is scheduled to receive principal as follows:
o the Class A scheduled note payment date is the May 2006 PAYMENT DATE,
following the CONTROLLED ACCUMULATION PERIOD,
o the Class B scheduled note payment date is the June 2006 PAYMENT DATE,
following payment of Class A, and
o the Class C scheduled note payment date is the June 2006 PAYMENT DATE,
following payment of Class B.
CONTROLLED ACCUMULATION
Principal for payment to Class A will accumulate in the PRINCIPAL FUNDING
ACCOUNT during the CONTROLLED ACCUMULATION PERIOD. The CONTROLLED ACCUMULATION
PERIOD is scheduled to begin at the close of business on the last day of the
April 2005 MONTHLY PERIOD, but may be delayed based on recent payment rate
experience and the amount of principal collections expected to be available for
sharing from other series. On each TRANSFER DATE during the CONTROLLED
ACCUMULATION PERIOD, the master trust trustee shall deposit into the PRINCIPAL
FUNDING ACCOUNT for the benefit of the Class A noteholders, the least of:
o AVAILABLE INVESTOR PRINCIPAL COLLECTIONS,
o the CONTROLLED DEPOSIT AMOUNT, and
o ADJUSTED INVESTOR INTEREST before any deposits on that TRANSFER DATE.
The length of the CONTROLLED ACCUMULATION PERIOD may be adjusted if Chase
USA believes that, based on expected collections of principal, Class A will be
fully repaid on its SCHEDULED NOTE PAYMENT DATE. Whether or not the CONTROLLED
ACCUMULATION PERIOD is shortened, we can give no assurance that principal
adequate to repay Class A will be available on Class A's SCHEDULED NOTE PAYMENT
DATE.
Note that if the RAPID AMORTIZATION PERIOD begins before the CONTROLLED
ACCUMULATION PERIOD, there will be no accumulation of principal. If the RAPID
AMORTIZATION PERIOD begins during the CONTROLLED ACCUMULATION PERIOD, all
principal in the PRINCIPAL FUNDING ACCOUNT will be paid to Class A on the next
PAYMENT DATE.
See "Description of the Securities--Description of the Series
Certificate--Principal Allocations" and "--Controlled Accumulation" in this
supplement for a more detailed discussion.
Principal on the Class B and Class C notes is expected to be available for
payment in one lump sum on the June 2006 PAYMENT DATE. There will be no
controlled accumulation of principal collections for the Class B and Class C
notes. Principal will not be paid to Class B until Class A is fully repaid, and
no principal will be paid to Class C until Class A and Class B are fully repaid.
RAPID AMORTIZATION PERIOD
If a PAY OUT EVENT occurs, a rapid amortization will begin and any
principal in the PRINCIPAL FUNDING ACCOUNT and principal allocated to the SERIES
CERTIFICATE will be distributed to Class A on the following PAYMENT DATE. If
Class A is not paid in full on its SCHEDULED NOTE PAYMENT DATE, all principal
allocated to the SERIES CERTIFICATE on each subsequent monthly DISTRIBUTION DATE
will be paid to Class A until Class A is fully repaid. After Class A is repaid,
any remaining principal allocated to the SERIES CERTIFICATE will be paid to
Class B on each monthly DISTRIBUTION DATE until Class B is repaid, and finally
to Class C on each monthly DISTRIBUTION DATE until Class C is repaid. If
charge-offs are allocated to your class of notes and not reimbursed, principal
will be paid to you only up to your principal balance net of these charge-offs.
See "Description of the Securities--Description of the Series
Certificate--Principal Allocations" and "--Pay Out Events" in this supplement
for a more detailed discussion.
S-24
HISTORICAL PAYMENT RATES
The following table provides you with the highest and lowest cardholder
monthly payment rates for the MASTER TRUST PORTFOLIO during any month in the
periods shown, and the average cardholder monthly payment rate for all months in
the periods shown. These payment rates are calculated as total payments
collected during each month, including recoveries on previously charged-off
receivables, expressed as a percentage of total outstanding master trust
receivables at the beginning of the month. Monthly averages are shown as an
arithmetic average of the payment rate for each month during the indicated
period. Payment rates shown in this table are based on total cash payments
toward principal and finance charges made by cardholders whose receivables are
included in the master trust.
CARDHOLDER MONTHLY PAYMENT RATES
MASTER TRUST PORTFOLIO
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------
2001 2000 1999 1998
----------------- ----------- ----------- -----------
Highest Month ........... 15.70% 15.97% 14.45% 12.70%
Lowest Month ............ 13.47% 13.81% 12.21% 10.96%
Monthly Average ......... 14.87% 14.82% 13.51% 12.11%
We can give no assurance that cardholder monthly payment rates in the
future will be similar to this historical experience. If there is a slowdown in
the payment rate below the payment rate used to determine the amount deposited
in the PRINCIPAL FUNDING ACCOUNT during the CONTROLLED ACCUMULATION PERIOD, we
cannot assure you if you hold Class A notes that there will be sufficient time
to accumulate the principal collections necessary to pay you principal on the
SCHEDULED NOTE PAYMENT DATE for your notes. If the owner trust cannot repay
Class A due to insufficient funds in the PRINCIPAL FUNDING ACCOUNT, principal
payments to Class B and Class C will be delayed since you cannot receive
principal if you hold Class B or Class C notes until Class A is fully repaid.
See "Maturity Considerations" in the attached prospectus.
RECEIVABLE YIELD CONSIDERATIONS
Gross revenues from finance charges and fees collected from accounts
designated for the MASTER TRUST PORTFOLIO for the three months ended March 31,
2001 and each of the three calendar years 2000, 1999 and 1998 are set forth in
the following table. In the following table:
o Finance Charges and Fees Collected include periodic and minimum
finance charges, annual membership fees, late charges, cash advance
transaction fees, INTERCHANGE, overlimit fees and fees for returned
checks,
o Average Principal Receivables Outstanding is the average of the
beginning of the month balance of master trust PRINCIPAL RECEIVABLES
outstanding,
o Yield from Finance Charges and Fees Collected is calculated as a
percentage of Average Principal Receivables Outstanding,
o historical yield figures are calculated on a cash collections basis,
and
o the yield percentage for the first quarter of 2001 is annualized.
S-25
PORTFOLIO YIELD
MASTER TRUST PORTFOLIO
(DOLLAR AMOUNTS IN MILLIONS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
2001 2000 1999 1998
----------------- ------------ ------------ ------------
Finance Charges and Fees Collected ................ $ 955 $ 3,820 $ 3,373 $ 2,795
Average Principal Receivables Outstanding ......... $ 20,730 $ 20,486 $ 18,332 $ 15,658
Yield from Finance Charges and Fees
Collected ....................................... 18.43% 18.65% 18.40% 17.85%
CREATION OF THE OWNER TRUST
Chase USA and Wilmington Trust Company, a Delaware banking corporation, as
OWNER TRUSTEE will form Chase Credit Card Owner Trust 2001-2 as a Delaware
common law trust. The TRUST AGREEMENT for the owner trust provides that the
owner trust has been formed for a limited purpose and may not engage in any
activities other than:
o acquiring, owning and managing the assets of the owner trust,
o issuing and making payments on the notes and the certificates of
beneficial interest in the owner trust, and
o engaging in other activities incidental to the activities described
above, as long as those activities would not be contrary to the status
of the owner trust as a "qualifying special purpose entity" under
existing accounting literature.
Because of its limited activities, the owner trust has contracted with Chase USA
to provide administrative services, including providing notices to you and
directions to the INDENTURE TRUSTEE. You should refer to the TRUST AGREEMENT and
the DEPOSIT AND ADMINISTRATION AGREEMENT for a complete description of the owner
trust's activities.
The owner trust's assets include:
o the SERIES CERTIFICATE, and
o the OWNER TRUST SPREAD ACCOUNT.
Only the Class C notes will receive any benefit from the OWNER TRUST SPREAD
ACCOUNT.
The owner trust will not have any other assets and payments of principal
and interest on the notes will only be made to the extent that the master trust
allocates finance charge and principal collections to the SERIES CERTIFICATE.
The owner trust's address is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, in care of the OWNER TRUSTEE and its telephone
number at that address is (302) 651-1000.
USE OF PROCEEDS
The net proceeds from the sale of your notes will be:
o used to make a deposit into the FINANCE CHARGE ACCOUNT for the initial
Interest Payment Date,
o used to make an initial deposit into the OWNER TRUST SPREAD ACCOUNT,
and
o paid to Chase USA in consideration for the SERIES CERTIFICATE.
Chase USA will use the proceeds it receives for general corporate purposes.
S-26
DESCRIPTION OF THE SECURITIES
The following is a summary of the material provisions of the notes and the
Series Certificate for your series. This summary is not a complete description
of the terms of the notes or the Series Certificate for your series. You should
refer to "Description of the Securities" in the attached prospectus as well as
the Indenture, the Pooling and Servicing Agreement and the Series 2001-2
Supplement for a complete description.
DESCRIPTION OF THE SERIES CERTIFICATE
- -------------------------------------
The owner trust will hold the SERIES CERTIFICATE to be issued through the
SERIES 2001-2 SUPPLEMENT. The owner trust will pledge the SERIES CERTIFICATE
including its allocations of principal and interest from the master trust to the
INDENTURE TRUSTEE for your benefit.
GENERAL
The SERIES CERTIFICATE represents the right to receive its allocation of
cardholder payments which have been transferred to the master trust. The SERIES
CERTIFICATE will be allocated:
o a FLOATING ALLOCATION PERCENTAGE of collections of FINANCE CHARGE
RECEIVABLES that will be used to pay interest on your notes,
o a FLOATING ALLOCATION PERCENTAGE of DEFAULT AMOUNTS that will reduce
your INVESTOR INTEREST if not paid from collections of FINANCE CHARGE
RECEIVABLES,
o only during the REVOLVING PERIOD, a FLOATING ALLOCATION PERCENTAGE of
collections of PRINCIPAL RECEIVABLES, and
o during the CONTROLLED ACCUMULATION PERIOD or a RAPID AMORTIZATION
PERIOD, a FIXED ALLOCATION PERCENTAGE of PRINCIPAL RECEIVABLES that
will be used to repay your principal.
The master trust trustee will also allocate to your series:
o SHARED PRINCIPAL COLLECTIONS, and
o EXCESS FINANCE CHARGE COLLECTIONS.
Class A will also be entitled to amounts in the PRINCIPAL FUNDING ACCOUNT and
the ACCUMULATION PERIOD RESERVE ACCOUNT as well as investment earnings on those
amounts.
The SERIES CERTIFICATE is included in GROUP I. The series listed under
"Other Series Issued and Outstanding" below are also included in GROUP I and
additional series issued by the master trust may also be included in GROUP I.
The SERIES CERTIFICATE will not be subordinated to any other series of
certificates.
INTEREST ALLOCATIONS
Interest payments on the SERIES CERTIFICATE for your series will be funded
from:
o finance charge receivables collected during the prior month allocated
to the SERIES CERTIFICATE other than INTERCHANGE used to pay a portion
of the INVESTOR SERVICING FEE,
o investment earnings on amounts deposited in the PRINCIPAL FUNDING
ACCOUNT for the prior month, and
o amounts deposited in the ACCUMULATION PERIOD RESERVE ACCOUNT but only
if necessary to pay interest to you.
The owner trust will receive the amount described above that is not applied
to:
o the INVESTOR SERVICING FEE,
o the INVESTOR DEFAULT AMOUNT,
S-27
o the INVESTOR CHARGE-OFFS and unreimbursed REALLOCATED PRINCIPAL
COLLECTIONS, and
o EXCESS FINANCE CHARGE COLLECTIONS paid to other series.
The owner trust will receive these amounts on the business day preceding
the 15th day of each month.
PRINCIPAL ALLOCATIONS
Principal payments on the SERIES CERTIFICATE for your series will be funded
from:
o PRINCIPAL RECEIVABLES allocated to the SERIES CERTIFICATE collected
during the prior month, minus
o PRINCIPAL RECEIVABLES reallocated to other series, plus
o SHARED PRINCIPAL COLLECTIONS allocated to your series.
During the REVOLVING PERIOD, these amounts will be treated as SHARED
PRINCIPAL COLLECTIONS and be used to pay principal to other series or to Chase
USA.
During the CONTROLLED ACCUMULATION PERIOD, an amount equal to the least of:
o AVAILABLE INVESTOR PRINCIPAL COLLECTIONS allocated to the SERIES
CERTIFICATE,
o the CONTROLLED DEPOSIT AMOUNT, and
o the excess of the Class A note principal balance over the amount on
deposit in the PRINCIPAL FUNDING ACCOUNT
will be deposited in the PRINCIPAL FUNDING ACCOUNT to be paid to the owner trust
on each TRANSFER DATE for distribution to Class A noteholders on the May 2006
PAYMENT DATE.
After payment has been made to Class A, AVAILABLE INVESTOR PRINCIPAL
COLLECTIONS will be available to pay Class B and Class C. There is no PRINCIPAL
FUNDING ACCOUNT for Class B and Class C.
During the RAPID AMORTIZATION PERIOD, AVAILABLE INVESTOR PRINCIPAL
COLLECTIONS will be paid to the owner trust on each TRANSFER DATE until the
SERIES CERTIFICATE is paid in full and will be used to pay Class A, then to pay
Class B and finally to pay Class C.
CONTROLLED ACCUMULATION
The CONTROLLED ACCUMULATION PERIOD is scheduled to last 12 months. However,
the SERVICER may elect to extend the REVOLVING PERIOD and postpone the
CONTROLLED ACCUMULATION PERIOD by providing a notice to the master trust
trustee. The SERVICER can make this election only if the number of months needed
to fund the PRINCIPAL FUNDING ACCOUNT based on expected principal collections
needed to pay principal on Class A is less than 12 months. On each determination
date from the February 2005 determination date until the CONTROLLED ACCUMULATION
PERIOD begins, the SERVICER will review the amount of expected principal
collections until Class A's SCHEDULED NOTE PAYMENT DATE and may elect to
postpone the CONTROLLED ACCUMULATION PERIOD. In making this determination, the
SERVICER is required to assume that the principal payment rate will be no
greater than the lowest monthly payment rate for the prior 12 months and will
consider the amount of principal expected to be allocable to certificateholders
of all other series which are not expected to be amortizing or accumulating
principal. In no case will the CONTROLLED ACCUMULATION PERIOD be reduced to less
than one month.
ALLOCATION PERCENTAGES
The master trust trustee will use the FLOATING ALLOCATION PERCENTAGE to
allocate to the SERIES CERTIFICATE collections of FINANCE CHARGE RECEIVABLES and
DEFAULT AMOUNTS at any time and collections of PRINCIPAL RECEIVABLES during the
REVOLVING PERIOD.
S-28
o The FLOATING ALLOCATION PERCENTAGE for each month will equal a
fraction:
-- the numerator of which is equal to the ADJUSTED INVESTOR
INTEREST, and
-- the denominator of which is equal to the greater of:
o the sum of the amount of PRINCIPAL RECEIVABLES in the master
trust and any amount on deposit in the EXCESS FUNDING
ACCOUNT as of the close of business on the last day of the
prior month (or, in the case of the first monthly period,
the amount of PRINCIPAL RECEIVABLES as of the close of
business on the day immediately preceding the CLOSING DATE),
and
o the sum of the numerators used to calculate the INVESTOR
PERCENTAGES for allocations of FINANCE CHARGE RECEIVABLES,
DEFAULT AMOUNTS or PRINCIPAL RECEIVABLES for other master
trust series outstanding.
The master trust trustee will use the FIXED ALLOCATION PERCENTAGE to
allocate to the SERIES CERTIFICATE collections of PRINCIPAL RECEIVABLES during
the CONTROLLED ACCUMULATION PERIOD and the RAPID AMORTIZATION PERIOD.
o The FIXED ALLOCATION PERCENTAGE for each month will equal a fraction:
-- the numerator of which is equal to the INVESTOR INTEREST as of
the last day of the REVOLVING PERIOD, and
-- the denominator of which is equal to the greater of:
o the sum of the amount of PRINCIPAL RECEIVABLES in the master
trust and any amount on deposit in the EXCESS FUNDING
ACCOUNT as of the close of business on the last day of the
prior month, and
o the sum of the numerators used to calculate the INVESTOR
PERCENTAGE for allocations of PRINCIPAL RECEIVABLES for
other master trust series outstanding.
When there has been an addition or removal of receivables during the prior
month, the denominator used to determine these percentages will be adjusted.
REALLOCATION OF CASH FLOWS
On each TRANSFER DATE, the SERVICER will allocate principal collections to
pay Class A and Class B interest and the NET INVESTOR SERVICING FEE in an amount
equal to the REALLOCATED PRINCIPAL COLLECTIONS.
If REALLOCATED PRINCIPAL COLLECTIONS are greater than zero, then principal
collections allocated to the INVESTOR INTEREST will be treated as finance charge
collections and be available to pay Class A and B interest and the NET INVESTOR
SERVICING FEE and the INVESTOR INTEREST will be reduced accordingly. A reduction
in the INVESTOR INTEREST will reduce the allocation of finance charge and
principal collections to the SERIES CERTIFICATE.
APPLICATION OF COLLECTIONS
On each TRANSFER DATE, the SERVICER will direct the master trust trustee to
apply AVAILABLE INVESTOR FINANCE CHARGE COLLECTIONS from the prior month in the
following order:
o deposit an amount equal to the CLASS A INTEREST REQUIREMENT for the
related DISTRIBUTION DATE into the NOTE DISTRIBUTION ACCOUNT for
distribution to the owner trust on that DISTRIBUTION DATE,
o deposit an amount equal to the CLASS B INTEREST REQUIREMENT for the
related DISTRIBUTION DATE into the NOTE DISTRIBUTION ACCOUNT for
distribution to the owner trust on that DISTRIBUTION DATE,
S-29
o pay an amount equal to the NET INVESTOR SERVICING FEE plus the amount of
any overdue NET INVESTOR SERVICING FEE, to the SERVICER,
o deposit an amount equal to the NET CLASS C INTEREST REQUIREMENT for the
related DISTRIBUTION DATE into the NOTE DISTRIBUTION ACCOUNT for
distribution to the owner trust on that DISTRIBUTION DATE,
o treat an amount equal to the INVESTOR DEFAULT AMOUNT, if any, for the
related MONTHLY PERIOD, as AVAILABLE INVESTOR PRINCIPAL COLLECTIONS and
deposit it into the PRINCIPAL ACCOUNT,
o treat an amount equal to the sum of the INVESTOR CHARGE-OFFS and the
amount of unreimbursed REALLOCATED PRINCIPAL COLLECTIONS as AVAILABLE
INVESTOR PRINCIPAL COLLECTIONS and deposit it into the PRINCIPAL ACCOUNT,
o deposit into the ACCUMULATION PERIOD RESERVE ACCOUNT on and after the
RESERVE ACCOUNT FUNDING DATE, but prior to the date on which the
ACCUMULATION PERIOD RESERVE ACCOUNT terminates an amount equal to the
excess, if any, of the REQUIRED ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT
over the AVAILABLE ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT, and
o pay to the owner trust an amount equal to the excess, if any, of the
REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT over the amount then on deposit
in the OWNER TRUST SPREAD ACCOUNT.
All remaining amounts will be treated as EXCESS FINANCE CHARGE COLLECTIONS and
will be available to cover any shortfalls in finance charge collections for
other outstanding series. After payment of shortfalls, the remaining amount will
be paid to the owner trust as the holder of the SERIES CERTIFICATE.
S-30
The following diagram provides you with an outline of the allocation of
finance charge receivables. This diagram is a simplified demonstration of the
allocation and payment provisions contained in this supplement and the attached
prospectus.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
[GRAPHIC OMITTED]
Collection of Finance Charge
Receivables Allocated to Your Series
|
During accumulation period: |
withdrawal from Accumulation \ |
Period Reserve Account, \ |
if necessary \ |
\ V
Available Investor Finance Charge Excess Finance Charge
Investor Principal Funding -----------> Collections <------------- Collections from other
Investment Proceeds series, if necessary
|
|
|
|
|
V
1. Class A Interest Requirement -----------------|
2. Class B Interest Requirement -----------------|
3. Net Investor Servicing Fee |
4. Net Class C Interest Requirement -----------------|
5. Investor Default Amount |
6. Reimburse Investor Interest |
7. Reserve Account deposit, if necessary |
8. Owner Trust Spread Account deposit |
if necessary |
| |
| |
| |
V |
|
Excess Finance Charge Collections to other |
series, if necessary |
| |
| |
| |
V |
|
CHASE CREDIT CARD OWNER TRUST 2001-3 <-----------------
|
|
|
V
1. Class A Interest Payment |-----------------|
2. Class B Interest Payment ----->| |
3. Class C Interest Payment | |
4. Owner Trust Spread Account deposit | |
| | |
| | Owner Trust |
| | Spread Account |
V | |
| |
Remaining Class C Interest Requirement <-----| |
| |-----------------|
|
|
V
Chase USA
S-31
The SERVICER will direct the master trust trustee to apply AVAILABLE
INVESTOR PRINCIPAL COLLECTIONS--after reallocating principal collections to
cover shortfalls in amounts payable from finance charge collections--in the
following order:
o during the REVOLVING PERIOD, treat as SHARED PRINCIPAL COLLECTIONS and
make available to cover any shortfalls in principal collections for other
outstanding series and will be shared between series as described below
under "--Shared Principal Collections,"
o during the CONTROLLED ACCUMULATION PERIOD, deposit the CONTROLLED DEPOSIT
AMOUNT in the PRINCIPAL FUNDING ACCOUNT and treat any remaining amount as
SHARED PRINCIPAL COLLECTIONS, or
o during the RAPID AMORTIZATION PERIOD, distribute to the owner trust to
make principal payments to you.
S-32
The following diagram provides you with an outline of the allocation of
principal collections. This diagram is a simplified demonstration of the
allocation and payment provisions contained in this supplement and the attached
prospectus.
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
[GRAPHIC OMITTED]
Collection of Principal Receivables
Allocated to Your Series
|
|
|
V
Reallocation to unpaid:
1. Class A Interest Payment
2. Class B Interest Payment
3. Net Investor Servicing Fee
|
|
|
V
Shared Principal
Available Investor Principal Collection
Collections <----------- from other series,
| if necessary
|
|
V
During accumulation period:
Controlled Deposit
|
|
|
V
Shared Principal Collection to other
series, if necessary
|
|
|
V
During revolving and accumulation periods:
remaining principal paid to Chase USA
|
|
|
V
CHASE CREDIT CARD OWNER TRUST 2001-3
|
|
|
V
1. Class A Principal Payment
2. Class B Principal Payment
3. Class C Principal Payment
S-33
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Finance charge collections--and other amounts treated like finance charge
collections--in excess of the amount required to make payments or deposits for
the SERIES CERTIFICATE for your series will be made available to other series
included in GROUP I whose allocation of finance charge collections is not
sufficient to make its required payments or deposits. We call these collections
EXCESS FINANCE CHARGE COLLECTIONS. If the SERIES CERTIFICATE for your series
requires more finance charge collections than allocated through the INVESTOR
PERCENTAGE, it will have access to finance charge collections--and other amounts
treated like finance charge collections--from other series in GROUP I. Each
series that is part of GROUP I and has a shortfall will receive a share of the
total amount of EXCESS FINANCE CHARGE COLLECTIONS available for that month based
on the amount of shortfall for that series divided by the total shortfall for
all series for that same month.
SHARED PRINCIPAL COLLECTIONS
Collections of PRINCIPAL RECEIVABLES allocated to the INVESTOR INTEREST in
excess of the CONTROLLED DEPOSIT AMOUNT during the CONTROLLED ACCUMULATION
PERIOD and principal payments to the owner trust, as the holder of the SERIES
CERTIFICATE, during the RAPID AMORTIZATION PERIOD, will be made available to
other series whose allocation of principal collections is not sufficient to make
payments or deposits required to be made from principal collections allocated to
those series. We call these collections SHARED PRINCIPAL COLLECTIONS. If the
SERIES CERTIFICATE for your series requires more principal collections than
allocated through the INVESTOR PERCENTAGE, it will share in the excess available
from other series in GROUP I. Each series that is part of GROUP I and has a
shortfall will receive a share of the total amount of SHARED PRINCIPAL
COLLECTIONS available for that month based on the amount of shortfall for that
series divided by the total shortfall for all series for that same month. SHARED
PRINCIPAL COLLECTIONS will not, however, be available to cover INVESTOR
CHARGE-OFFS for any series.
If SHARED PRINCIPAL COLLECTIONS exceed shortfalls, the master trust trustee
will distribute the remaining amount to the holder of the TRANSFEROR CERTIFICATE
or, under certain circumstances, deposit it into the EXCESS FUNDING ACCOUNT.
DEFAULTED RECEIVABLES
The DEFAULT AMOUNT represents the investors' share of losses from the
MASTER TRUST PORTFOLIO. On each TRANSFER DATE, CMB as SERVICER will calculate
the DEFAULT AMOUNT by multiplying:
o the FLOATING ALLOCATION PERCENTAGE for that month, by
o the total amount of receivables in MASTER TRUST PORTFOLIO accounts that
were charged-off for that month.
If the DEFAULT AMOUNT exceeds the amount of finance charge collections
allocated to fund this amount for the prior month, then the INVESTOR INTEREST
will be reduced by the excess. If the INVESTOR INTEREST is reduced to zero, the
SERIES CERTIFICATE will not receive any further allocations of finance charge
and principal collections. The INVESTOR INTEREST will also be reduced by the
amount of any REALLOCATED PRINCIPAL COLLECTIONS used to make interest payments
to Class A and Class B. In no event, however, shall the INVESTOR INTEREST be
reduced below zero. Reductions in the INVESTOR INTEREST from both of these items
may be reimbursed from subsequent finance charge collections allocated for
reimbursement, if available.
PRINCIPAL FUNDING ACCOUNT
The master trust trustee will establish an account in which it will collect
principal collections (other than REALLOCATED PRINCIPAL COLLECTIONS), including
SHARED PRINCIPAL COLLECTIONS, during the CONTROLLED ACCUMULATION PERIOD. The
amounts collected will be distributed to the owner trust to make principal
payments to holders of Class A notes on Class A's SCHEDULED NOTE PAYMENT DATE.
S-34
However, if a rapid amortization occurs, those amounts will be paid to you if
you hold Class A notes on the first DISTRIBUTION DATE after the RAPID
AMORTIZATION PERIOD begins. There is no PRINCIPAL FUNDING ACCOUNT for Class B
and Class C.
The SERVICER will direct the master trust trustee to invest money on
deposit in this account in short-term, highly rated liquid investments permitted
under the terms of the POOLING AND SERVICING AGREEMENT. As stated above,
investment earnings on these investments will be treated as finance charge
collections. We call these amounts INVESTOR PRINCIPAL FUNDING INVESTMENT
PROCEEDS. If for any month, the INVESTOR PRINCIPAL FUNDING INVESTMENT PROCEEDS
are less than the product of:
o the actual number of days in that month divided by 360,
o the balance of the PRINCIPAL FUNDING ACCOUNT as of the RECORD DATE,
and
o the interest rate on the Class A notes in effect for that month,
then the master trust trustee will withdraw the shortfall from the ACCUMULATION
PERIOD RESERVE ACCOUNT and treat those amounts as finance charge collections.
ACCUMULATION PERIOD RESERVE ACCOUNT
The master trust trustee will establish an account that it will use to fund
shortfalls in investment earnings on amounts in the Principal Funding Account
during the CONTROLLED ACCUMULATION PERIOD. At least two months prior to the
beginning of the CONTROLLED ACCUMULATION PERIOD, the master trust trustee will
begin to deposit AVAILABLE INVESTOR FINANCE CHARGE COLLECTIONS into this account
until the account balance equals the REQUIRED ACCUMULATION PERIOD RESERVE
ACCOUNT AMOUNT.
CMB as SERVICER will direct the master trust trustee to invest money on
deposit in this account in short-term, highly rated liquid investments permitted
under the terms of the POOLING AND SERVICING AGREEMENT. Investment earnings (net
of expenses and losses) will be retained in this account. The master trust
trustee will withdraw money from this account in excess of the REQUIRED
ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT on each TRANSFER DATE and the amount
withdrawn will be used to fund any shortfall in INVESTOR PRINCIPAL FUNDING
INVESTMENT PROCEEDS.
On each TRANSFER DATE during the CONTROLLED ACCUMULATION PERIOD, and on the
first TRANSFER DATE during the RAPID AMORTIZATION PERIOD, the SERVICER will
withdraw from the ACCUMULATION PERIOD RESERVE ACCOUNT and treat as AVAILABLE
INVESTOR FINANCE CHARGE COLLECTIONS the lesser of:
o the AVAILABLE ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT, and
o the PRINCIPAL FUNDING INVESTMENT SHORTFALL with respect to that
TRANSFER DATE.
The ACCUMULATION PERIOD RESERVE ACCOUNT will be terminated on the earliest
to occur of:
o the termination date of the master trust,
o if the CONTROLLED ACCUMULATION PERIOD has not begun, the first
TRANSFER DATE after the RAPID AMORTIZATION PERIOD has begun, and
o if the CONTROLLED ACCUMULATION PERIOD has begun, the earlier of:
-- the first TRANSFER DATE with respect to the RAPID AMORTIZATION
PERIOD, and
-- the TRANSFER DATE immediately preceding the SCHEDULED PRINCIPAL
ALLOCATION COMMENCEMENT DATE.
When this account is closed, funds in this account will be treated as
AVAILABLE INVESTOR FINANCE CHARGE COLLECTIONS and used to pay interest to you.
S-35
PAY OUT EVENTS
The REVOLVING PERIOD will continue until the scheduled date for the
beginning of the CONTROLLED ACCUMULATION PERIOD unless one of the events
identified in the chart below occurs. The chart also indicates whether each
listed PAY OUT EVENT is an event that requires a majority vote of the
noteholders to declare the occurrence of a PAY OUT EVENT. Unless otherwise
specified, PAY OUT EVENTS are declared upon their occurrence without the
necessity for a vote. Additionally, some events cause a rapid amortization of
the SERIES CERTIFICATE while others will cause a rapid amortization for all
series issued by the master trust and outstanding when the event occurs.
S-36
REQUIRES A CAUSES RAPID CAUSES RAPID
MAJORITY VOTE OF AMORTIZATION OF AMORTIZATION OF ALL
PAY OUT EVENT NOTEHOLDERS SERIES 2001-2 SERIES
- ---------------------------------------------------------- ------------------ ----------------- --------------------
1. Chase USA fails to make a payment or - -
deposit when required under the POOLING
AND SERVICING AGREEMENT or within five
days after that date.
2. Chase USA fails to observe or perform - -
any covenant or agreement and that
failure has a material adverse effect on
you and the failure continues unremedied
for 60 days after written notice to
Chase USA.
3. Chase USA makes a representation or - -
warranty that was materially incorrect
when made and that continues to be
materially incorrect for 60 days after
written notice to Chase USA and as a
result you are materially and adversely
affected, unless Chase USA accepts
reassignment of the related receivables.
4. Chase USA provides materially incorrect - -
information about the master trust
accounts and that information continues
to be materially incorrect for 60 days
after written notice to Chase USA and as
a result you are materially and
adversely affected, unless Chase USA
accepts reassignment of the related
receivables.
5. The average of the PORTFOLIO YIELDS for -
three consecutive MONTHLY PERIODS is
less than the average of the BASE RATES
for the same period.
6. Chase USA fails to transfer receivables -
under additional accounts or
participations when required under the
POOLING AND SERVICING AGREEMENT.
7. A SERVICER DEFAULT occurs which has a - -
material adverse effect on you.
8. There are insufficient funds in the -
DISTRIBUTION ACCOUNT to pay the INVESTOR
INTEREST in full on the second
DISTRIBUTION DATE following the
SCHEDULED PRINCIPAL ALLOCATION
COMMENCEMENT DATE.
9. Chase USA becomes bankrupt or insolvent -
or enters receivership or
conservatorship.
10. Chase USA becomes unable to transfer -
receivables to the master trust in
accordance with the POOLING AND
SERVICING AGREEMENT.
11. The master trust becomes subject to -
regulation as an"investment company"
under the Investment Company Act of
1940.
12. An EVENT OF DEFAULT occurs under the -
INDENTURE.
Once a rapid amortization begins, principal will begin to be distributed to
the owner trust on the first DISTRIBUTION DATE following the month in which the
PAY OUT EVENT occurred or was declared. If a rapid amortization begins, the
average life of the notes you hold may be shortened.
S-37
SERVICING FEES AND EXPENSES
The master trust trustee will pay the SERVICER a 2% annual servicing fee
payable in twelve equal monthly installments. We expect to pay half of the
servicing fee from finance charge collections and half of the servicing fee from
INTERCHANGE allocated to the INVESTOR INTEREST. INTERCHANGE paid to the SERVICER
is limited to 1% of the ADJUSTED INVESTOR INTEREST. If there is not enough
INTERCHANGE to pay half of the servicing fee, none of the master trust, the
INDENTURE TRUSTEE nor the noteholders will be responsible for paying the
SERVICER the amount of any shortfall.
The SERVICER will pay expenses out of the servicing fee it receives,
including the fees and expenses of any master trust trustee and independent
certified public accountants and other fees not stated to be paid by the master
trust. CMB as the SERVICER will not be responsible for the payment of any
federal, state or local taxes on your notes or on the SERIES CERTIFICATE for
your series.
DESCRIPTION OF THE NOTES
- ------------------------
The following is a summary of the material terms of the notes. You should
refer to "Description of the Securities--Description of the Notes" in the
attached prospectus as well as the Indenture for a complete description of the
notes.
GENERAL
The Class A, Class B and Class C notes will be issued under an INDENTURE
between the owner trust and The Bank of New York, as INDENTURE TRUSTEE. The form
of the INDENTURE has been filed as an exhibit to the Registration Statement and
a copy will be filed with the SEC after the notes are issued. The notes are
obligations of the owner trust and payments on the notes will only be made if
the owner trust receives payment on the SERIES CERTIFICATE.
Notes will be issued in $1,000 denominations and will be available only in
book-entry form through DTC. As described in the attached prospectus, as long as
the notes are held in book-entry form, you will only be able to transfer your
notes through the facilities of DTC. You will receive payments and notices
through DTC and its participants. Payments of interest and principal will be
made to the noteholders in whose names notes are registered on the RECORD DATE,
to the extent of available funds, on each PAYMENT DATE.
The RECORD DATE for the notes is the last business day of the calendar
month before the PAYMENT DATE.
SUBORDINATION
The Class B notes and the Class C notes are subordinated to the Class A
notes. Interest payments will be made to the Class A notes prior to the Class B
notes and the Class C notes. Interest payments will be made to the Class B notes
prior to the Class C notes. Principal payments to the Class B notes will not
begin until the Class A notes have been paid in full. Principal payments to the
Class C notes will not begin until the Class A notes and the Class B notes have
been paid in full. If principal collections allocated to the SERIES CERTIFICATE
are reallocated to pay the Class A notes, the principal amount of the Class C
notes and the Class B notes may not be repaid. If principal collections
allocated to the SERIES CERTIFICATE are reallocated to pay interest on the Class
B notes, the principal amount of the Class C notes may not be repaid. If
receivables are sold after an EVENT OF DEFAULT or PAY OUT EVENT, the net
proceeds of that sale which are available to pay principal on the notes would be
paid first to the Class A notes before any remaining net proceeds would be
available for payments due to the Class B notes or the Class C notes.
INTEREST PAYMENTS
Interest will begin to accrue on the notes beginning on the CLOSING DATE
and will be paid to you on the 16th of July 2001 and the 15th day of each
following month or, if that day is not a business day, on the following business
day.
S-38
On each PAYMENT DATE, you will receive an interest payment based on the
interest rate for your class and the outstanding balance of your notes as
follows:
o the Class A interest rate is % per annum above one-month LIBOR,
o the Class B interest rate is % per annum above one-month LIBOR, and
o the Class C interest rate is % per annum above one-month LIBOR.
The INDENTURE TRUSTEE will calculate the amount of interest to be paid to
you by multiplying:
o the note balance of your class as of the last RECORD DATE by
o the interest rate for your class by
o a fraction equal to the number of actual days for that interest period
divided by 360.
An interest period is the period from the prior PAYMENT DATE through the day
before the current PAYMENT DATE. However, the first interest period begins on
the CLOSING DATE and ends on the day before the first PAYMENT DATE. The owner
trust will pay interest from money it received from the SERIES CERTIFICATE and
deposited in the NOTE DISTRIBUTION ACCOUNT. Interest on each class of notes will
be paid from amounts on deposit in the NOTE DISTRIBUTION ACCOUNT; however, Class
C interest will also be paid from the OWNER TRUST SPREAD ACCOUNT. Class A will
receive interest payments prior to Class B and Class C. Class B will receive
interest payments prior to Class C, except to the extent Class C interest
payments are paid from the OWNER TRUST SPREAD ACCOUNT.
If you do not receive your interest in full on any PAYMENT DATE, you will
be paid the shortfall on a following PAYMENT DATE as well as interest at the
interest rate for your class on those unpaid amounts to the extent of available
funds.
The INDENTURE TRUSTEE will determine one-month LIBOR on the second business
day prior to the beginning of each interest period by referring to the rate for
dollar deposits for one month on Telerate Page 3750 at 11 a.m. London time. If
the rate does not appear, the INDENTURE TRUSTEE will request four major banks in
the London interbank market to provide quotes for interest rates on dollar
deposits for one month and will use the arithmetic mean of the quotes. If less
than two London banks provide quotes, the INDENTURE TRUSTEE will request major
New York City banks to provide quotes for interest rates on dollar deposits to
be lent to European banks for one month and will use the arithmetic mean of the
quotes. LIBOR for the period from the CLOSING DATE through July 15, 2001 will be
determined on June , 2001. The term "business day" means (a) any day other than
a Saturday, Sunday or day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to be closed or (b) for
purposes of determining LIBOR, any day (i) on which dealings in deposits in
United States dollars are transacted in the London interbank market and (ii)
which satisfies the criteria described in clause (a) above.
You can call the INDENTURE TRUSTEE at 212-815-5286 to obtain the interest
rate for any class of notes for the prior and current interest periods. The
ADMINISTRATOR of the owner trust will also notify the Luxembourg Stock Exchange
by the first day of the interest period of the interest rate for each class of
notes and the amount of interest to be paid to each class of notes on that date.
This information will also be included in the monthly noteholder statement.
PRINCIPAL PAYMENTS
The notes will mature on the September 2008 PAYMENT DATE which is the NOTE
MATURITY DATE and are required to be paid on that date.
The Class A notes are scheduled to be repaid in full on the May 2006
PAYMENT DATE from the amounts on deposit in the PRINCIPAL FUNDING ACCOUNT. The
notes may be repaid or redeemed before or after the SCHEDULED NOTE PAYMENT DATE.
If the Class A notes are repaid, the Class B notes will be repaid in full
on the June 2006 PAYMENT DATE.
S-39
If the Class A and Class B notes are repaid, the Class C notes will be
repaid in full on the June 2006 PAYMENT DATE.
The INDENTURE TRUSTEE is required to use the amount on deposit in the NOTE
DISTRIBUTION ACCOUNT to pay principal on the SCHEDULED NOTE PAYMENT DATE for
each class of notes. If there is an outstanding principal balance of any class
of notes after its SCHEDULED NOTE PAYMENT DATE, principal will be paid on the
following PAYMENT DATES until the full balance is repaid. After an EVENT OF
DEFAULT has been declared, if the INDENTURE TRUSTEE and the noteholders
determine that the principal amount of the notes is due and payable, such
amounts will be paid to each class in order of seniority. If the full balance is
not repaid by the NOTE MATURITY DATE, an EVENT OF DEFAULT will be declared. You
may suffer a loss if principal is not repaid to you by the NOTE MATURITY DATE.
OPTIONAL REDEMPTION
The owner trust will redeem the notes if the TRANSFEROR exercises its
option to purchase the SERIES CERTIFICATE when the INVESTOR INTEREST of the
SERIES CERTIFICATE is less than or equal to 5% of the INVESTOR INTEREST of the
SERIES CERTIFICATE on the CLOSING DATE. If a redemption occurs, you will receive
your remaining principal balance plus accrued but unpaid interest through the
PAYMENT DATE on which the notes are redeemed. Please refer to "Description of
the Securities--Description of the Certificates--Optional Repurchase" in the
attached prospectus for a description of the option of the TRANSFEROR to
repurchase a series.
DISTRIBUTIONS
On each TRANSFER DATE for the SERIES CERTIFICATE, the master trust trustee
will allocate finance charge and principal collections to pay interest,
principal, fees and other amounts on the notes. The timing, calculation,
distribution, order, source and priority for payment of these amounts by or on
behalf of the INDENTURE TRUSTEE are provided below:
o deposit the CLASS A INTEREST REQUIREMENT into the NOTE DISTRIBUTION
ACCOUNT for distribution to the Class A noteholders on the related PAYMENT
DATE,
o deposit the CLASS B INTEREST REQUIREMENT into the NOTE DISTRIBUTION
ACCOUNT for distribution to the Class B noteholders on the related PAYMENT
DATE,
o deposit the CLASS C INTEREST REQUIREMENT into the NOTE DISTRIBUTION
ACCOUNT for distribution to the Class C noteholders on the related PAYMENT
DATE,
o deposit the CLASS A NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT into the
NOTE DISTRIBUTION ACCOUNT for distribution to the Class A noteholders on
the related PAYMENT DATE,
o deposit the CLASS B NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT into the
NOTE DISTRIBUTION ACCOUNT for distribution to the Class B noteholders on
the related PAYMENT DATE,
o deposit the CLASS C NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT into the
NOTE DISTRIBUTION ACCOUNT for distribution to the Class C noteholders on
the related PAYMENT DATE, and
o deposit into the OWNER TRUST SPREAD ACCOUNT, the excess, if any, of:
-- the REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT for such TRANSFER DATE
over
-- the amount on deposit in the OWNER TRUST SPREAD ACCOUNT on such
TRANSFER DATE, not taking into account the amount deposited into the
OWNER TRUST SPREAD ACCOUNT on such TRANSFER DATE described by this
clause.
Any remaining funds will be distributed to Chase USA as the owner of the
equity interest in the owner trust.
The INDENTURE TRUSTEE can also use the funds on deposit in the OWNER TRUST
SPREAD ACCOUNT to pay:
o Class C interest to Class C noteholders, and
S-40
o Class C principal on or after the Class C scheduled maturity date if:
-- the Class A and B notes have been repaid or
-- the INVESTOR INTEREST of the SERIES CERTIFICATE is zero.
On each PAYMENT DATE, money on deposit in the NOTE DISTRIBUTION ACCOUNT will be
distributed to you.
OWNER TRUST SPREAD ACCOUNT
The INDENTURE TRUSTEE will establish this account for the benefit of the
Class C Notes only. It will be funded from allocations of funds from the SERIES
CERTIFICATE after payment of the CLASS A, CLASS B AND CLASS C INTEREST
REQUIREMENTS and the CLASS A AND CLASS B NOTEHOLDERS' PRINCIPAL DISTRIBUTION
AMOUNTS for such TRANSFER DATE. The balance of such account will be used to pay
Class C interest and principal as described in the preceding section. The
availability of funds in this account is intended to increase the likelihood
that Class C noteholders will receive the full amount of principal and interest
owed to them and to decrease the likelihood that Class C noteholders will suffer
a loss of principal. If you purchase Class C notes, you should note that the
funds deposited in this account are limited and may not be available when needed
to make up interest or principal shortfalls.
The required balance of the OWNER TRUST SPREAD ACCOUNT will initially equal
$5,952,380 and will adjust each TRANSFER DATE to an amount equal to the initial
principal balance of the notes times a percentage based on the average EXCESS
SPREAD PERCENTAGE for the prior three months described in the following chart.
PERCENTAGE OF
QUARTERLY EXCESS SPREAD PERCENTAGE INITIAL NOTE BALANCE
- -------------------------------------------------------------- ---------------------
Greater than 4.5% 1.00%
Less than or equal to 4.5% but greater than 4.25% 1.50%
Less than or equal to 4.25% but greater than 4.0% 2.00%
Less than or equal to 4.0% but greater than 3.5% 2.50%
Less than or equal to 3.5% but greater than 3.0% 3.00%
Less than or equal to 3.0% but greater than 2.5% 3.50%
Less than or equal to 2.5% but greater than or equal to 0.0% 4.00%
Less than 0.0% 9.00%
In the event a PAY OUT EVENT (other than an EVENT OF DEFAULT) occurs, the
REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT will increase to 4.0%.
The balance of the OWNER TRUST SPREAD ACCOUNT will never be required to be
more than the CLASS C NOTE PRINCIPAL BALANCE.
After the REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT has increased as
specified in the above chart, the REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT
shall remain at that amount, unless further increased or decreased on any
TRANSFER DATE to another specified percentage; provided, however, that the
REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT will not be adjusted downward until
at least three months have elapsed since the later to occur of:
o the CLOSING DATE, and
o any previous upward adjustment in the REQUIRED OWNER TRUST SPREAD ACCOUNT
AMOUNT.
The quarterly EXCESS SPREAD PERCENTAGES used on the first three TRANSFER
DATES will be determined based on the performance of an existing series for the
periods before the first full MONTHLY PERIOD.
The ADMINISTRATOR will be able to modify the method for calculating the
REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT if the rating agencies agree that the
modification will not result in negative rating action on the notes and an
authorized officer of Chase USA certifies to the INDENTURE TRUSTEE
S-41
that the modification will not result in an EVENT OF DEFAULT. The
ADMINISTRATOR/TRANSFEROR will not be able to modify this formula if a PAY OUT
EVENT relating to the nonpayment of interest or principal has occurred.
The ADMINISTRATOR will direct the INDENTURE TRUSTEE to invest money on
deposit in this account in short-term, highly rated liquid investments permitted
under the terms of the INDENTURE. Investment earnings (net of expenses and
losses) will be deposited in the NOTE DISTRIBUTION ACCOUNT and will be used to
pay Class C interest.
If an EVENT OF DEFAULT occurs because the owner trust fails to pay interest
or principal when due and payable, the REQUIRED OWNER TRUST SPREAD ACCOUNT
AMOUNT will increase to an amount equal to:
o the amount then on deposit in the OWNER TRUST SPREAD ACCOUNT, and
o the amount available on that date to be deposited in the OWNER TRUST
SPREAD ACCOUNT after payments of principal and interest on the notes,
but not greater than the outstanding principal amount of the Class C notes. If
an EVENT OF DEFAULT occurs that is not a result of the owner trust failing to
pay interest or principal, the INDENTURE TRUSTEE may, or will if it receives
written instruction from Class C noteholders representing at least 662/3% of the
outstanding principal amount of the Class C notes, increase the REQUIRED OWNER
TRUST SPREAD ACCOUNT AMOUNT to an amount equal to the outstanding principal
amount of the Class C notes.
Amounts in excess of the REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT will be
distributed to Chase USA as the holder of the equity interest in the owner
trust. After the payment in full of the Class C notes, the balance of this
account will be distributed to Chase USA as the holder of the equity interest in
the owner trust.
EVENTS OF DEFAULT
Each of the following events is an EVENT OF DEFAULT under the INDENTURE:
o Class A, B or C principal is not paid on the NOTE MATURITY DATE,
o the owner trust fails to pay interest on the notes and the failure
continues for 35 days,
o the owner trust becomes bankrupt or insolvent,
o failure to observe or perform in any material respect any covenants or
agreements contained in the Indenture and that failure has a material
adverse effect on you and the failure continues unremedied for 60 days
after written notice is given by the INDENTURE TRUSTEE or noteholders
representing greater than 50% of the outstanding balance of the notes, or
o the owner trust becomes subject to regulation as an "investment company"
under the Investment Company Act of 1940.
If an EVENT OF DEFAULT occurs, the INDENTURE TRUSTEE or the holders of a
majority of the notes may declare the notes to be immediately due and payable.
If the notes are accelerated, the INDENTURE TRUSTEE can:
o begin proceedings to collect amounts due from the owner trust or exercise
other remedies available to it as a secured party,
o foreclose on the SERIES CERTIFICATE,
o sell the SERIES CERTIFICATE in accordance with the restrictions described
in the attached prospectus and use the proceeds from the sale to repay
you, and
o allow the OWNER TRUSTEE to continue to hold the SERIES CERTIFICATE and
pass through any payments on the SERIES CERTIFICATE to you.
If an EVENT OF DEFAULT is declared and the notes are accelerated, you may
receive principal prior to the SCHEDULED NOTE PAYMENT DATE for your notes.
S-42
NOTEHOLDER REPORTS
You will receive a monthly report from the ADMINISTRATOR as described in
the attached prospectus. In addition, the report will specify if any money is
withdrawn from the OWNER TRUST SPREAD ACCOUNT.
So long as the notes are listed on the Luxembourg Stock Exchange, we will
publish a notice in a daily newspaper in Luxembourg that provides the
information contained in the monthly report. We expect initially to publish the
notice in the Luxemburger Wort.
If definitive notes are issued, the monthly notice will be mailed to your
address as it appears on the INDENTURE TRUSTEE'S register.
S-43
LISTING AND GENERAL INFORMATION
We intend to apply to the Luxembourg Stock Exchange to list the Class A
notes, the Class B notes and the Class C notes. In connection with the listing
application, the Organization Certificate and By-laws of Chase USA, and legal
notice relating to the issuance of the Class A notes, the Class B notes and the
Class C notes will be deposited before listing with the Chief Registrar of the
District Court of Luxembourg, where you may obtain copies of those documents if
the notes are listed. The Class A notes, the Class B notes and the Class C notes
will trade through the facilities of DTC, CLEARSTREAM and the EUROCLEAR system.
The securities identification numbers for the notes are listed below:
INTERNATIONAL
SECURITIES
IDENTIFICATION
CUSIP NUMBER NUMBER (ISIN) COMMON CODE
-------------- --------------- ------------
Class A
Class B
Class C
As of the date of this supplement, neither the master trust nor the owner
trust is involved in any litigation or arbitration proceeding relating to claims
that are material in the context of the issuance of the notes, nor so far as
Chase USA is aware are any of those proceedings pending or threatened.
Except as disclosed in this prospectus supplement, there has been no
material adverse change in the financial position of the master trust since
March 31, 2001 through the date of this prospectus supplement.
The transactions described in this prospectus supplement were authorized by
resolutions adopted by Chase USA's Board of Directors on January 25, 2001 and
will be approved by resolutions to be adopted by Chase USA's Asset and Loan
Securitization Committee on or prior to the closing date.
Copies of the POOLING AND SERVICING AGREEMENT, the SERIES 2001-2
SUPPLEMENT, the applicable INDENTURE, DEPOSIT AND ADMINISTRATION AGREEMENT and
the TRUST AGREEMENT, the annual report of independent certified public
accountants described in "Description of the Securities--Description of the
Certificates--Evidence as to Compliance" in the attached prospectus, the
documents referred to under "Where You Can Find More Information" and the
reports to noteholders referred to under "Reports to Securityholders" and
"Description of the Securities--Description of the Notes--Reports to
Noteholders" in the attached prospectus will be available free of charge at the
office of the LISTING AGENT in Luxembourg. Financial information regarding Chase
USA is included in the consolidated financial statements of J.P. Morgan Chase &
Co.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
Such report is available, and reports for subsequent years will be available, at
the office of the LISTING AGENT.
So long as there is no PAYING AGENT and transfer agent in Luxembourg,
Banque Generale du Luxembourg, S.A. will act as intermediary agent in
Luxembourg. If securities are issued in fully registered, certificated form
under the circumstances described in the attached prospectus, a PAYING AGENT and
transfer agent will be appointed in Luxembourg.
The notes, the POOLING AND SERVICING AGREEMENT, the SERIES 2001-2
SUPPLEMENT, the INDENTURE and the DEPOSIT AND ADMINISTRATION AGREEMENT are
governed by the laws of the State of New York. The TRUST AGREEMENT is governed
by the laws of the State of Delaware.
Although we intend to apply to list the notes on the Luxembourg Stock
Exchange, we cannot guarantee that the application for the listing will be
accepted. You should consult with the LISTING AGENT in Luxembourg to determine
whether or not the notes are listed on the Luxembourg Stock Exchange.
This prospectus supplement and the attached prospectus have been prepared
by Chase USA solely for use in connection with the offering and listing of the
notes described in this prospectus
S-44
supplement. At the request of the Luxembourg Stock Exchange, Chase USA confirms
that it has taken reasonable care to ensure that facts stated in this prospectus
supplement and the attached prospectus are true and accurate in all material
respects and there have not been omitted material facts the omission of which
would make misleading any statements of fact or opinion in this prospectus
supplement or the prospectus, and that Chase USA accepts responsibility
accordingly.
UNDERWRITING
Chase USA has agreed to sell to the underwriters listed below the amount of
securities of each class set forth next to each underwriter's name. Each
underwriter has agreed to purchase that amount of those securities.
CLASS A NOTES PRINCIPAL AMOUNT
- ------------------------------- -----------------
J.P. Morgan Securities Inc. $
Banc One Capital Markets, Inc.
Lehman Brothers Inc.
Salomon Smith Barney Inc.
Guzman & Company
Total $500,000,000
============
CLASS B NOTES
- -------------------------------
J.P. Morgan Securities Inc. $
Banc One Capital Markets, Inc.
Salomon Smith Barney Inc.
Total $ 41,666,000
============
CLASS C NOTES
- -------------------------------
J.P. Morgan Securities Inc. $
Banc One Capital Markets, Inc.
Salomon Smith Barney Inc.
Total $ 53,572,000
============
The price to public, underwriters' discounts and commissions, the
concessions that the underwriters may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, each expressed
as a percentage of the principal amount of each class of notes are as follows:
UNDERWRITING SELLING
PRICE TO DISCOUNT AND CONCESSIONS, REALLOWANCE,
PUBLIC COMMISSIONS NOT TO EXCEED NOT TO EXCEED
---------- -------------- --------------- --------------
Class A Notes
Class B Notes
Class C Notes
S-45
After the offering is completed, Chase USA will receive the proceeds, after
deduction of the underwriting and other expenses, listed below:
PROCEEDS TO TRANSFEROR (AS % UNDERWRITING
PROCEEDS TO OF THE PRINCIPAL AMOUNT OF THE DISCOUNTS AND
TRANSFEROR NOTES) CONCESSIONS
------------- -------------------------------- --------------
Class A Notes $ % $
Class B Notes $ % $
Class C Notes $ % $
After the public offering, the public offering price and other selling
terms may be changed by the underwriters.
The underwriters' obligations to acquire any Series 2001-2 notes will be
subject to certain conditions. The underwriters will offer the Series 2001-2
notes for sale only if the owner trust issues the notes, and all conditions to
the issuance of the notes are satisfied or waived. The underwriters have agreed
either to purchase all of the Series 2001-2 notes, or none of them.
The underwriters may reject any orders in whole or in part.
J.P. Morgan Securities Inc. is a wholly-owned subsidiary of J.P. Morgan
Chase & Co. and an affiliate of Chase USA.
Each underwriter has represented and agreed that:
o it has not offered or sold, and will not offer or sell, any notes to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995,
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, and
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 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 (as amended) or is a person to whom the
document may otherwise lawfully be issued or passed on.
This prospectus supplement and the attached prospectus may be used by J.P.
Morgan Securities Inc. in connection with offers and sales related to
market-making transactions in the notes. J.P. Morgan Securities Inc. may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. J.P. Morgan Securities
Inc. has no obligation to make a market in the notes and any such market-making
may be discontinued at any time without notice, in its sole discretion. J.P.
Morgan Securities Inc. is among the underwriters participating in the initial
distribution of the notes.
S-46
OTHER SERIES ISSUED AND OUTSTANDING
The table below discusses the principal characteristics of the twenty other
series of certificates previously issued by the master trust that will be
outstanding on the closing date of this series and the notes issued by various
owner trusts and secured by certain certificates issued by the master trust. For
more specific information with respect to any series, any prospective investor
should contact The Chase Manhattan Bank at (212) 270-6000. The Chase Manhattan
Bank will provide, without charge, to any prospective investor, a copy of the
disclosure documents for any other publicly issued series.
SERIES 1995-3
1. Class A Certificates
Initial Investor Interest ....................................$450,000,000
Certificate Rate ....................................................6.23%
Controlled Accumulation Amount (subject to adjustment) ........$37,500,000
Commencement of Controlled Accumulation Period (subject
to adjustment) ..............................................June 30, 2002
Annual Servicing Fee Percentage .....................................2.0%
Initial Collateral Interest ................................$35,795,636.36
Other Enhancement ...................Subordination of Class B Certificates
Scheduled Payment Date ....................................August 15, 2002
Series 1995-3 Termination Date .............................April 15, 2005
Series Issuance Date ....................................November 21, 1995
2. Class B Certificates
Initial Investor Interest .....................................$25,568,000
Certificate Rate ....................................................6.39%
Annual Servicing Fee Percentage ......................................2.0%
Initial Collateral Interest ........Same as above for Class A Certificates
Scheduled Payment Date .................................September 15, 2002
Series 1995-3 Termination Date .....Same as above for Class A Certificates
Series Issuance Date ...............Same as above for Class A Certificates
SERIES 1995-4
1. Class A Certificates
Initial Investor Interest ....................................$300,000,000
Certificate Rate ................................Three Month LIBOR + 0.20%
Controlled Accumulation Amount (subject to adjustment) ........$25,000,000
Commencement of Controlled Accumulation Period
(subject to adjustment) ................................September 30, 2002
Annual Servicing Fee Percentage ......................................2.0%
Initial Collateral Interest ................................$35,714,857.14
Other Enhancement ...................Subordination of Class B Certificates
Scheduled Payment Date ..................................November 25, 2002
Series 1995-4 Termination Date ..............................July 25, 2005
Series Issuance Date ....................................November 29, 1995
2. Class B Certificates
Initial Investor Interest .....................................$21,428,000
Certificate Rate ................................Three Month LIBOR + 0.32%
Annual Servicing Fee Percentage ......................................2.0%
Initial Collateral Interest ........Same as above for Class A Certificates
Scheduled Payment Date ..................................November 25, 2002
Series 1995-4 Termination Date .....Same as above for Class A Certificates
Series Issuance Date ...............Same as above for Class A Certificates
S-47
SERIES 1996-2
1. Class A Certificates
Initial Investor Interest .....................................$550,000,000
Certificate Rate .....................................................5.98%
Controlled Accumulation Amount (subject to adjustment) ......$45,833,333.33
Commencement of Controlled Accumulation Period
(subject to adjustment) ..................................December 31, 2004
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .................................$43,750,000.00
Other Enhancement ....................Subordination of Class B Certificates
Scheduled Payment Date ....................................January 15, 2006
Series 1996-2 Termination Date ..........................September 15, 2008
Series Issuance Date ......................................January 23, 1996
2. Class B Certificates
Initial Investor Interest ......................................$31,250,000
Certificate Rate .....................................................6.16%
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .........Same as above for Class A Certificates
Scheduled Payment Date ...................................February 15, 2006
Series 1996-2 Termination Date ......Same as above for Class A Certificates
Series Issuance Date ................Same as above for Class A Certificates
SERIES 1996-3
1. Class A Certificates
Initial Investor Interest .....................................$411,983,000
Certificate Rate .....................................................7.09%
Controlled Accumulation Amount (subject to adjustment) ......$34,331,916.67
Commencement of Controlled Accumulation Period
(subject to adjustment) .......................................May 31, 2005
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .................................$32,772,440.86
Other Enhancement ....................Subordination of Class B Certificates
Scheduled Payment Date .......................................June 15, 2006
Series 1996-3 Termination Date ...........................February 15, 2009
Series Issuance Date ..........................................May 30, 1996
2. Class B Certificates
Initial Investor Interest ......................................$23,408,000
Certificate Rate .....................................................7.27%
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .........Same as above for Class A Certificates
Scheduled Payment Date .......................................July 15, 2006
Series 1996-3 Termination Date ......Same as above for Class A Certificates
Series Issuance Date ................Same as above for Class A Certificates
SERIES 1996-4
1. Class A Certificates
Initial Investor Interest ...................................$1,400,000,000
Certificate Rate ...................................One Month LIBOR + 0.13%
Controlled Accumulation Amount (subject to adjustment) .....$116,666,666.67
Commencement of Controlled Accumulation Period
(subject to adjustment) ...................................October 31, 2002
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest ................................$150,000,666.67
Other Enhancement ....................Subordination of Class B Certificates
S-48
Scheduled Payment Date ...................................November 17, 2003
Series 1996-4 Termination Date ...............................July 17, 2006
Series Issuance Date .....................................November 14, 1996
2. Class B Certificates
Initial Investor Interest .....................................$116,666,000
Certificate Rate ...................................One Month LIBOR + 0.35%
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .........Same as above for Class A Certificates
Scheduled Payment Date ...................................December 15, 2003
Series 1996-4 Termination Date ......Same as above for Class A Certificates
Series Issuance Date ................Same as above for Class A Certificates
SERIES 1997-1
1. Class A Certificates
Initial Investor Interest ...................................$1,150,000,000
Certificate Rate ...................................One Month LIBOR + 0.09%
Controlled Accumulation Amount (subject to adjustment) ......$95,833,333.33
Commencement of Controlled Accumulation Period
(subject to adjustment) ...................................January 31, 2003
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest ...................................$123,214,619
Other Enhancement ....................Subordination of Class B Certificates
Scheduled Payment Date ...................................February 15, 2004
Series 1997-1 Termination Date ............................October 15, 2006
Series Issuance Date .....................................February 24, 1997
2. Class B Certificates
Initial Investor Interest ......................................$95,833,000
Certificate Rate ...................................One Month LIBOR + 0.29%
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .........Same as above for Class A Certificates
Scheduled Payment Date ......................................March 15, 2004
Series 1997-1 Termination Date ......Same as above for Class A Certificates
Series Issuance Date ................Same as above for Class A Certificates
SERIES 1997-4
1. Class A Certificates
Initial Investor Interest .....................................$600,000,000
Certificate Rate ...................................One Month LIBOR + 0.16%
Controlled Accumulation Amount (subject to adjustment) .........$50,000,000
Commencement of Controlled Accumulation Period
(subject to adjustment) ..................................October 31, 2002
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest ....................................$64,285,715
Other Enhancement ....................Subordination of Class B Certificates
Scheduled Payment Date ...................................December 15, 2002
Series 1997-4 Termination Date .............................August 15, 2005
Series Issuance Date ..................................... December 8, 1997
2. Class B Certificates
Initial Investor Interest ......................................$50,000,000
Certificate Rate ...................................One Month LIBOR + 0.36%
Annual Servicing Fee Percentage .......................................2.0%
Initial Collateral Interest .........Same as above for Class A Certificates
Scheduled Payment Date ....................................January 15, 2003
S-49
Series 1997-4 Termination Date ........Same as above for Class A Certificates
Series Issuance Date ..................Same as above for Class A Certificates
SERIES 1997-5
1. Class A Certificates
Initial Investor Interest .......................................$500,000,000
Certificate Rate ......................................................6.194%
Controlled Accumulation Amount (subject to adjustment) ...........$41,666,667
Commencement of Controlled Accumulation Period
(subject to adjustment) .....................................October 31, 2002
Annual Servicing Fee Percentage .........................................2.0%
Initial Collateral Interest ......................................$39,772,819
Other Enhancement ......................Subordination of Class B Certificates
Scheduled Payment Date .....................................December 15, 2002
Series 1997-5 Termination Date ...............................August 15, 2005
Series Issuance Date .......................................December 23, 1997
2. Class B Certificates
Initial Investor Interest ........................................$28,409,000
Certificate Rate ......................................................6.388%
Annual Servicing Fee Percentage .........................................2.0%
Initial Collateral Interest ...........Same as above for Class A Certificates
Scheduled Payment Date ......................................January 15, 2003
Series 1997-5 Termination Date ........Same as above for Class A Certificates
Series Issuance Date ..................Same as above for Class A Certificates
SERIES 1998-1
1. Class A Certificates
Initial Investor Interest .......................................$762,232,488
Certificate Rate ...................................One Month LIBOR + 0.2216%
Controlled Accumulation Amount (subject to adjustment) ...........$63,519,374
Commencement of Controlled Accumulation Period
(subject to adjustment) .....................................January 31, 2004
Annual Servicing Fee Percentage .........................................2.0%
Initial Collateral Interest ......................................$81,668,141
Other Enhancement ......................Subordination of Class B Certificates
Scheduled Payment Date .....................................February 15, 2005
Series 1998-1 Termination Date ..............................October 15, 2007
Series Issuance Date .......................................February 12, 1998
2. Class B Certificates
Initial Investor Interest ........................................$63,519,000
Certificate Rate .....................................One Month LIBOR + 0.37%
Annual Servicing Fee Percentage .........................................2.0%
Initial Collateral Interest ...........Same as above for Class A Certificates
Scheduled Payment Date ........................................March 15, 2005
Series 1998-1 Termination Date ........Same as above for Class A Certificates
Series Issuance Date ..................Same as above for Class A Certificates
SERIES 1998-3
1. Class A Certificates
Initial Investor Interest .......................................$600,000,000
Certificate Rate ......................................................6.000%
Controlled Accumulation Amount (subject to adjustment) ...........$50,000,000
Commencement of Controlled Accumulation Period
(subject to adjustment) .......................................March 31, 2002
Annual Servicing Fee Percentage .........................................2.0%
Initial Collateral Interest ......................................$47,728,182
S-50
Other Enhancement .......................Subordination of Class B Certificates
Scheduled Payment Date .........................................April 15, 2003
Series 1998-3 Termination Date ............................... August 15, 2005
Series Issuance Date ..............................................May 1, 1998
2. Class B Certificates
Initial Investor Interest .........................................$34,090,000
Certificate Rate .......................................................6.150%
Annual Servicing Fee Percentage ..........................................2.0%
Initial Collateral Interest ............Same as above for Class A Certificates
Scheduled Payment Date ...........................................May 15, 2003
Series 1998-3 Termination Date .........Same as above for Class A Certificates
Series Issuance Date ...................Same as above for Class A Certificates
SERIES 1998-4
1. Class A Certificates
Initial Investor Interest ........................................$552,486,188
Certificate Rate .....................................One Month LIBOR + 0.134%
Controlled Accumulation Amount (subject to adjustment) ............$46,040,516
Commencement of Controlled Accumulation Period
(subject to adjustment) .........................................July 31, 2007
Annual Servicing Fee Percentage ..........................................2.0%
Initial Collateral Interest .......................................$59,195,465
Other Enhancement .......................Subordination of Class B Certificates
Scheduled Payment Date ........................................August 15, 2008
Series 1998-4 Termination Date ..............................December 15, 2010
Series Issuance Date ............................................July 28, 1998
2. Class B Certificates
Initial Investor Interest .........................................$46,040,000
Certificate Rate ......................................One Month LIBOR + 0.36%
Annual Servicing Fee Percentage ..........................................2.0%
Initial Collateral Interest ............Same as above for Class A Certificates
Scheduled Payment Date .....................................September 15, 2008
Series 1998-4 Termination Date .........Same as above for Class A Certificates
Series Issuance Date ...................Same as above for Class A Certificates
SERIES 1998-5
1. Class A Certificates
Initial Investor Interest ........................................$650,000,000
Certificate Rate ......................................One Month LIBOR + 0.16%
Controlled Accumulation Amount (subject to adjustment) ............$54,166,667
Commencement of Controlled Accumulation Period
(subject to adjustment) .......................................August 31, 2002
Annual Servicing Fee Percentage ..........................................2.0%
Initial Collateral Interest .......................................$69,643,524
Other Enhancement .......................Subordination of Class B Certificates
Scheduled Payment Date .....................................September 15, 2003
Series 1998-5 Termination Date ...............................January 15, 2006
Series Issuance Date .......................................September 24, 1998
2. Class B Certificates
Initial Investor Interest .........................................$54,166,000
Certificate Rate ......................................One Month LIBOR + 0.36%
Annual Servicing Fee Percentage ..........................................2.0%
Initial Collateral Interest ............Same as above for Class A Certificates
Scheduled Payment Date .......................................October 15, 2003
S-51
Series 1998-5 Termination Date .........................Same as above for Class A Certificates
Series Issuance Date ...................................Same as above for Class A Certificates
SERIES 1998-6
1. Class A Certificates
Initial Investor Interest ........................................................$650,000,000
Certificate Rate ......................................................One Month LIBOR + 0.26%
Controlled Accumulation Amount (subject to adjustment) ............................$54,166,667
Commencement of Controlled Accumulation Period (subject to adjustment) .........March 31, 2002
Annual Servicing Fee Percentage ..........................................................2.0%
Initial Collateral Interest .......................................................$69,643,524
Other Enhancement .......................................Subordination of Class B Certificates
Scheduled Payment Date .......................................................... May 15, 2002
Series 1998-6 Termination Date .............................................September 15, 2004
Series Issuance Date ........................................................November 24, 1998
2. Class B Certificates
Initial Investor Interest .........................................................$54,166,000
Certificate Rate ......................................................One Month LIBOR + 0.51%
Annual Servicing Fee Percentage ..........................................................2.0%
Initial Collateral Interest ............................Same as above for Class A Certificates
Scheduled Payment Date ..........................................................June 15, 2002
Series 1998-6 Termination Date .........................Same as above for Class A Certificates
Series Issuance Date ...................................Same as above for Class A Certificates
SERIES 1999-1
1. Class A Certificates
Initial Investor Interest ........................................................$750,000,000
Certificate Rate ......................................................One Month LIBOR + 0.16%
Controlled Accumulation Amount (subject to adjustment) ............................$62,500,000
Commencement of Controlled Accumulation Period (subject to adjustment) .........April 30, 2003
Annual Servicing Fee Percentage ..........................................................2.0%
Initial Collateral Interest .......................................................$80,357,143
Other Enhancement .......................................Subordination of Class B Certificates
Scheduled Payment Date ...........................................................May 15, 2004
Series 1999-1 Termination Date .............................................September 15, 2006
Series Issuance Date ............................................................March 4, 1999
2. Class B Certificates
Initial Investor Interest .........................................................$62,500,000
Certificate Rate .....................................................One Month LIBOR + 0.39%
Annual Servicing Fee Percentage ..........................................................2.0%
Initial Collateral Interest ............................Same as above for Class A Certificates
Scheduled Payment Date June 15, 2004
Series 1999-1 Termination Date .........................Same as above for Class A Certificates
Series Issuance Date ...................................Same as above for Class A Certificates
SERIES 1999-2
1. Class A Certificates
Initial Investor Interest ........................................................$500,000,000
Certificate Rate ......................................................One Month LIBOR + 0.14%
Controlled Accumulation Amount (subject to adjustment) ............................$41,666,667
Commencement of Controlled Accumulation Period (subject to adjustment) .........April 30, 2002
Annual Servicing Fee Percentage ..........................................................2.0%
S-52
Initial Collateral Interest ........................................$53,572,096
Other Enhancement ....................... Subordination of Class B Certificates
Scheduled Payment Date ...........................................June 15, 2002
Series 1999-2 Termination Date ................................October 15, 2004
Series Issuance Date .............................................July 15, 1999
2. Class B Certificates
Initial Investor Interest ..........................................$41,666,000
Certificate Rate .......................................One Month LIBOR + 0.36%
Annual Servicing Fee Percentage ...........................................2.0%
Initial Collateral Interest .............Same as above for Class A Certificates
Scheduled Payment Date ...........................................July 15, 2002
Series 1999-2 Termination Date ..........Same as above for Class A Certificates
Series Issuance Date ....................Same as above for Class A Certificates
SERIES 1999-3
SERIES 1999-3 CERTIFICATE
Initial Principal Amount ..........................................$965,590,000
Controlled Accumulation Amount (subject to adjustment) .............$70,833,334
Commencement of Controlled Accumulation Period (subject
to adjustment) .................................................August 31, 2003
Annual Servicing Fee Percentage ..........................................2.00%
Series 1999-3 Termination Date ................................January 15, 2007
Series Issuance Date ........................................September 29, 1999
1. Class A Notes
Initial Class A Principal Amount ..................................$850,000,000
Note Rate ................................................................6.66%
Enhancement ...................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date ......................................September 15, 2004
Note Issuance Date ..........................................September 29, 1999
2. Class B Notes
Initial Class B Principal Amount ...................................$48,295,000
Note Rate ................................................................6.95%
Enhancement .....................................Subordination of Class C Notes
Scheduled Payment Date ....................................... October 15, 2004
Note Issuance Date .........................Same as above for the Class A Notes
3. Class C Notes
Initial Class C Principal Amount ...................................$67,615,000
Note Rate ..............................................One Month LIBOR + 0.95%
Enhancement .........................................Owner Trust Spread Account
Scheduled Payment Date .....................Same as above for the Class B Notes
Note Issuance Date .......Same as above for the Class A Notes and Class B Notes
SERIES 2000-1
SERIES 2000-1 CERTIFICATE
Initial Principal Amount ..........................................$892,857,000
Controlled Accumulation Amount (subject to adjustment) .............$62,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment) .......................................January 31, 2004
Annual Servicing Fee Percentage .............................................2%
Series 2000-1 Termination Date ...................................June 15, 2007
Series Issuance Date .............................................March 2, 2000
1. Class A Notes
Initial Class A Principal Amount ..................................$750,000,000
Note Rate ..............................................One Month LIBOR + 0.17%
Enhancement ...................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date .......................................February 15, 2005
S-53
Note Issuance Date ..............................................March 2, 2000
2. Class B Notes
Initial Class B Principal Amount ..................................$62,500,000
Note Rate .............................................One Month LIBOR + 0.35%
Enhancement ................................... Subordination of Class C Notes
Scheduled Payment Date .........................................March 15, 2005
Note Issuance Date ........................Same as above for the Class A Notes
3. Class C Notes
Initial Class C Principal Amount ..................................$80,357,000
Note Rate .............................................One Month LIBOR + 0.73%
Enhancement ........................................Owner Trust Spread Account
Scheduled Payment Date ....................Same as above for the Class B Notes
Note Issuance Date ......Same as above for the Class A Notes and Class B Notes
SERIES 2000-2
SERIES 2000-2 CERTIFICATE
Initial Principal Amount .......................................$1,071,429,000
Controlled Accumulation Amount (subject to adjustment) ............$75,000,000
Commencement of Controlled Accumulation Period
(subject to adjustment) .....................................February 28, 2002
Annual Servicing Fee Percentage ........................................... 2%
Series 2000-2 Termination Date ..................................July 15, 2005
Series Issuance Date ...........................................April 13, 2000
1. Class A Notes
Initial Class A Principal Amount .................................$900,000,000
Note Rate .............................................One Month LIBOR + 0.10%
Enhancement ..................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date .........................................March 17, 2003
Note Issuance Date .............................................April 13, 2000
2. Class B Notes
Initial Class B Principal Amount ..................................$75,000,000
Note Rate .............................................One Month LIBOR + 0.29%
Enhancement ....................................Subordination of Class C Notes
Scheduled Payment Date .........................................April 15, 2003
Note Issuance Date ........................Same as above for the Class A Notes
3. Class C Notes
Initial Class C Principal Amount ..................................$96,429,000
Note Rate .............................................One Month LIBOR + 0.68%
Enhancement ........................................Owner Trust Spread Account
Scheduled Payment Date ....................Same as above for the Class B Notes
Note Issuance Date ......Same as above for the Class A Notes and Class B Notes
SERIES 2000-3
SERIES 2000-3 CERTIFICATE
Initial Principal Amount .........................................$892,857,000
Controlled Accumulation Amount (subject to adjustment) ............$62,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment) .......................................August 31, 2004
Annual Servicing Fee Percentage ............................................2%
Series 2000-3 Termination Date ...............................January 15, 2008
Series Issuance Date ..........................................October 3, 2000
1. Class A Notes
Initial Class A Principal Amount .................................$750,000,000
Note Rate .............................................One Month LIBOR + 0.13%
Enhancement ..................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date .....................................September 15, 2005
S-54
Note Issuance Date ..............................................October 3, 2000
2. Class B Notes
Initial Class B Principal Amount ....................................$62,500,000
Note Rate ...............................................One Month LIBOR + 0.35%
Enhancement ......................................Subordination of Class C Notes
Scheduled Payment Date .........................................October 17, 2005
Note Issuance Date ..........................Same as above for the Class A Notes
3. Class C Notes
Initial Class C Principal Amount ....................................$80,357,000
Note Rate ...............................................One Month LIBOR + 0.70%
Enhancement ..........................................Owner Trust Spread Account
Scheduled Payment Date ......................Same as above for the Class B Notes
Note Issuance Date ........Same as above for the Class A Notes and Class B Notes
SERIES 2001-1
SERIES 2001-1 CERTIFICATE
Initial Principal Amount ...........................................$850,000,000
Controlled Accumulation Amount (subject to adjustment) ..............$59,500,000
Commencement of Controlled Accumulation Period
(subject to adjustment) ........................................January 31, 2005
Annual Servicing Fee Percentage ..............................................2%
Series 2001-1 Termination date ....................................June 16, 2008
Series Issuance Date .............................................March 15, 2001
1. Class A Notes
Initial Class A Principal Amount ...................................$714,000,000
Note Rate One ................................................Month LIBOR + 0.14%
Enhancement ....................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date ........................................February 15, 2006
Note Issuance Date ...............................................March 15, 2001
2. Class B Notes
Initial Class B Principal Amount ....................................$59,500,000
Note Rate ...............................................One Month LIBOR + 0.40%
Enhancement ......................................Subordination of Class C Notes
Scheduled Payment Date ...........................................March 15, 2006
Note Issuance Date ..........................Same as above for the Class A Notes
3. Class C Notes
Initial Class C Principal Amount ....................................$76,500,000
Note Rate ...............................................One Month LIBOR + 0.85%
Enhancement ....................Subordination of Class B Notes and Class C Notes
Scheduled Payment Date ......................Same as above for the Class B Notes
Note Issuance Date ........Same as above for the Class A Notes and Class B Notes
S-55
GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"ADJUSTED INVESTOR INTEREST" means, for any date of determination, an
amount equal to:
o the Investor Interest as of that date, minus
o the amount on deposit in the Principal Funding Account for that date.
"AVAILABLE ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT" will equal the
lesser of:
o the amount on deposit in the Accumulation Period Reserve
Account--after giving effect to the interest and earnings retained in
that account but before giving effect to any deposit to be made to
that account on a Transfer Date, and
o the Required Accumulation Period Reserve Account Amount for such
Transfer Date.
"AVAILABLE INVESTOR FINANCE CHARGE COLLECTIONS" means, with respect to any
Monthly Period, the sum of:
o the Floating Allocation Percentage of collections of Finance Charge
Receivables with respect to that Monthly Period excluding collections
of Finance Charge Receivables attributable to Interchange which are
allocable to Servicer Interchange,
o investment earnings on amounts in the Principal Funding Account, if
any, with respect to the related Transfer Date, and
o amounts, if any, to be withdrawn from the Accumulation Period Reserve
Account which are required to be included in Available Investor
Finance Charge Collections under the Series 2001-2 Supplement.
"AVAILABLE INVESTOR PRINCIPAL COLLECTIONS" means, with respect to any
Monthly Period, the sum of:
o the Fixed Allocation Percentage of collections of Principal
Receivables received during that Monthly Period and amounts applied to
cover the Investor Default Amount and Investor Charge-Offs and
previously unreimbursed Reallocated Principal Collections on the
related Transfer Date, plus
o any Shared Principal Collections with respect to other series that are
allocated to Series 2001-2, minus
o the amount of Reallocated Principal Collections used to fund the
interest payments on the Class A notes and the Class B notes and the
Net Investor Servicing Fee.
"BASE RATE" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction:
o the numerator of which is the sum of:
-- the Class A Interest Requirement,
-- the Class B Interest Requirement,
-- the Net Class C Interest Requirement, and
-- the Investor Servicing Fee with respect to that Monthly Period,
and
o the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
"CLASS A INTEREST REQUIREMENT" means, with respect to any Payment Date, the
sum of:
o the Class A Monthly Note Interest, and
o any unpaid Class A Note Interest Shortfall.
S-56
"CLASS A MONTHLY NOTE INTEREST" means the product of:
o the Class A Note Interest Rate for the related Note Interest Period,
o a fraction:
-- the numerator of which is the actual number of days in such Note
Interest Period and
-- the denominator of which is 360, and
o the Class A Note Principal Balance on the related Record Date or, with
respect to the initial Payment Date, the Class A Note Initial
Principal Balance.
"CLASS A NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to
any Payment Date on and after the earlier to occur of:
o the Class A Scheduled Note Payment Date, and
o any Note Principal Due Date,
the Class A Note Principal Balance on that Payment Date.
"CLASS A NOTE INITIAL PRINCIPAL BALANCE" means $500,000,000.
"CLASS A NOTE INTEREST RATE" means a rate of % per annum above LIBOR.
"CLASS A NOTE INTEREST SHORTFALL" means, with respect to any Payment Date,
the sum of:
o the excess, if any, of:
-- the Class A Interest Requirement for the preceding Payment Date,
over
-- the amount of interest paid on the Class A notes for the
preceding Payment Date, plus
o interest on the amount of overdue interest owed to the Class A
noteholders on the preceding Payment Date, to the extent permitted by
law, at the Class A Note Interest Rate from and including the
preceding Payment Date to but excluding the current Payment Date.
"CLASS A NOTE PRINCIPAL BALANCE" means, as of any date:
o the Class A Note Initial Principal Balance, minus
o the aggregate amount of any principal allocations paid to the Class A
noteholders prior to that date.
"CLASS A SCHEDULED NOTE PAYMENT DATE" means the May 2006 Payment Date.
"CLASS B INTEREST REQUIREMENT" means, with respect to any Payment Date, the
sum of:
o the Class B Monthly Note Interest, and
o any unpaid Class B Note Interest Shortfall.
"CLASS B MONTHLY NOTE INTEREST" means the product of:
o the Class B Note Interest Rate for the related Note Interest Period,
o a fraction:
-- the numerator of which is the actual number of days in such Note
Interest Period and
-- the denominator of which is 360, and
o the Class B Note Principal Balance on the related Record Date or, with
respect to the initial Payment Date, the Class B Note Initial
Principal Balance.
"CLASS B NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to
any Payment Date on and after the earlier to occur of:
S-57
o the Class B Scheduled Note Payment Date, and
o any Note Principal Due Date,
the Class B Note Principal Balance on that Payment Date.
"CLASS B NOTE INITIAL PRINCIPAL BALANCE" means $41,666,000.
"CLASS B NOTE INTEREST RATE" means a rate of % per annum above LIBOR.
"CLASS B NOTE INTEREST SHORTFALL" means, with respect to any Payment Date,
the sum of:
o the excess, if any, of:
-- the Class B Interest Requirement for the preceding Payment Date, over
-- the amount of interest paid on the Class B notes for the preceding
Payment Date, plus
o interest on the amount of overdue interest owed to the Class B
noteholders on the preceding Payment Date, to the extent permitted by
law, at the Class B Note Interest Rate from and including the
preceding Payment Date to but excluding the current Payment Date.
"CLASS B NOTE PRINCIPAL BALANCE" means, as of any date:
o the Class B Note Initial Principal Balance, minus
o the aggregate amount of any principal allocations paid to the Class B
noteholders prior to that date.
"CLASS B SCHEDULED NOTE PAYMENT DATE" means the June 2006 Payment Date.
"CLASS C INTEREST REQUIREMENT" means, with respect to any Payment Date, the
sum of:
o the Class C Monthly Note Interest, and
o the amount of any Class C Note Interest Shortfall.
"CLASS C MONTHLY NOTE INTEREST" means the product of:
o the Class C Note Interest Rate for the related Note Interest Period, o
a fraction:
-- the numerator of which is the actual number of days in such Note
Interest Period and
-- the denominator of which is 360, and
o the Class C Note Principal Balance on the related Record Date or, with
respect to the initial Payment Date, the Class C Note Initial
Principal Balance.
"CLASS C NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to
any Payment Date on and after the earlier to occur of:
o the Class C Scheduled Note Payment Date, and
o any Note Principal Due Date,
the Class C Note Principal Balance on that Payment Date.
"CLASS C NOTE INITIAL PRINCIPAL BALANCE" means $53,572,000.
"CLASS C NOTE INTEREST RATE" means a rate of % per annum above LIBOR.
"CLASS C NOTE INTEREST SHORTFALL" means, with respect to any Payment Date,
the sum of:
o the excess, if any, of:
-- the Class C Interest Requirement for the preceding Payment Date,
over
-- the amount of interest paid on the Class C notes for the
preceding Payment Date, plus
S-58
o interest on the amount of overdue interest owed to the Class C
noteholders on the preceding Payment Date, to the extent permitted by
law, at the Class C Note Interest Rate from and including the
preceding Payment Date to but excluding the current Payment Date.
"CLASS C NOTE PRINCIPAL BALANCE" means, as of any date:
o the Class C Note Initial Principal Balance, minus
o the aggregate amount of any principal allocations paid to the Class C
noteholders prior to that date.
"CLASS C SCHEDULED NOTE PAYMENT DATE" means the June 2006 Payment Date.
"CMB" or "SERVICER" means The Chase Manhattan Bank as servicer of the Chase
Credit Card Master Trust.
"CONTROLLED ACCUMULATION AMOUNT" means the amount scheduled to be deposited
in the Principal Funding Account on each Transfer Date during the Controlled
Accumulation Period which is initially scheduled to be $41,666,667 but can
become a larger amount if the Controlled Accumulation Period is shorter than
twelve months.
"CONTROLLED ACCUMULATION PERIOD" means a period:
o beginning at the close of business on the last day of the April 2005
Monthly Period (subject to adjustment as described herein) and
o ending on the earliest of:
-- the start of the Rapid Amortization Period, and
-- the Series Termination Date,
during which collections of Principal Receivables up to the amount specified
herein are deposited monthly into the Principal Funding Account.
"DEFAULT AMOUNT" means the amount of receivables in Defaulted Accounts for
any Monthly Period.
"DEPOSIT AND ADMINISTRATION AGREEMENT" means the agreement between Chase
Manhattan Bank USA, National Association, as Depositor and Administrator and
Wilmington Trust Company, not in its individual capacity but as Owner Trustee
for the Chase Credit Card Owner Trust 2001-2, as issuer, under which the Series
Certificate will be deposited into the owner trust.
"DISTRIBUTION DATE" means the 15th day of each month--or, if that day is
not a business day, the next succeeding business day--on which distributions of
interest or principal are to be made to certificateholders, including the owner
trust as holder of the Series Certificate.
"EVENTS OF DEFAULT" means, with respect to the notes, those events
described under "Description of the Securities--Description of the Notes--Events
of Default" in this supplement.
"EXCESS FINANCE CHARGE COLLECTIONS" means those finance charge collections
described under "Description of the Securities--Description of the Series
Certificate--Shared Excess Finance Charge Collections" in this supplement.
"EXCESS SPREAD PERCENTAGE" means, with respect to any Monthly Period, the
amount, if any, by which the Portfolio Yield exceeds the Base Rate.
"FIXED ALLOCATION PERCENTAGE" means the Investor Percentage described under
"Description of the Securities--Description of the Series
Certificate--Allocation Percentages" in this supplement.
"FLOATING ALLOCATION PERCENTAGE" means the Investor Percentage described
under "Description of the Securities--Description of the Series
Certificate--Allocation Percentages" in this supplement.
"GROUP I" means the group of series under the master trust to which the
Series Certificate for your series belongs.
S-59
"INVESTOR INTEREST" means:
o the initial principal amount of the Series Certificate, minus
o the amount of principal previously paid to the owner trust as
certificateholder, minus
o the amount of unreimbursed Investor Charge-Offs and Reallocated
Principal Collections.
"INVESTOR PRINCIPAL FUNDING INVESTMENT PROCEEDS" means the investment
earnings on funds in the Principal Funding Account, net of investment expenses
and losses for a single Monthly Period.
"INVESTOR SERVICING FEE" means, as of any Transfer Date, an amount equal to
one-twelfth of the product of:
o 2.0%, and
o the Adjusted Investor Interest as of the last day of the Monthly
Period preceding that Transfer Date; provided, however, with respect
to the first Transfer Date, the Investor Servicing Fee shall be equal
to the product of:
-- a fraction, the numerator of which is the number of days from and
including the Closing Date to and including the last day of the
June 2001 Monthly Period and the denominator of which is 360,
-- 2.0%, and
-- the Investor Interest on the Closing Date.
"LISTING AGENT" means Banque Generale du Luxembourg, S.A., 50 Avenue J.F.
Kennedy, L-2951, Luxembourg, phone number 011 352 4242 2367.
"MONTHLY PRINCIPAL REALLOCATION AMOUNT" means, with respect to any Monthly
Period, the sum of:
o the lower of:
-- the excess of the Class A Interest Requirement over the Available
Investor Finance Charge Collections allocated to the Class A
Interest Requirement, and
-- 6% of the initial Investor Interest minus the amount of
unreimbursed Investor Charge-Offs and unreimbursed Reallocated
Principal Collections, plus
o the lower of:
-- the sum of (A) the excess of the Class B Interest Requirement
over the Available Investor Finance Charge Collections allocated
to the Class B Interest Requirement and (B) the excess of the Net
Investor Servicing Fee over the Available Investor Finance Charge
Collections allocated to the Net Investor Servicing Fee, and
-- 9% of the initial Investor Interest minus the amount of
unreimbursed Investor Charge-Offs and unreimbursed Reallocated
Principal Collections.
"NET CLASS C INTEREST REQUIREMENT" means for each Transfer Date:
o the Class C Interest Requirement, minus
o the investment earnings on amounts in the Owner Trust Spread Account.
"NET INVESTOR SERVICING FEE" means the share of the Investor Servicing Fee
allocable to the owner trust as holder of the Series Certificate with respect to
any Transfer Date which is equal to one-twelfth of the product of:
o 1.0%, and
o the Adjusted Investor Interest as of the last day of the Monthly
Period preceding that Transfer Date;
S-60
provided, however, that with respect to the first Transfer Date, the Net
Investor Servicing Fee shall be equal to the product of:
o a fraction, the numerator of which is the number of days from and
including the Closing Date to and including the last day of the June
2001 Monthly Period, and the denominator of which is 360,
o the Net Servicing Fee Rate, and
o the Investor Interest on the Closing Date.
"NET SERVICING FEE RATE" means 1.0% per annum.
"NOTE DISTRIBUTION ACCOUNT" means an account in which payments made to the
owner trust by the master trust with respect to the Series Certificate are
deposited and from which payments to the noteholders are made.
"NOTE DOCUMENTS" means the Indenture, the Trust Agreement and the Deposit
and Administration Agreement.
"NOTE INITIAL PRINCIPAL BALANCE" means $595,238,000.
"NOTE INTEREST PERIOD" means, with respect to any Payment Date, the period
from the previous Payment Date through the day preceding such Payment Date,
except that the initial Note Interest Period will be the period from the Closing
Date through the day preceding the initial Payment Date.
"NOTE MATURITY DATE" means September 15, 2008, or if that day is not a
business day the next business day, which will be the final Payment Date on
which payments may be made to the noteholders of your series.
"NOTE PRINCIPAL DUE DATE" means any of:
o the date on which the master trust is terminated,
o the date on which the Investor Interest is paid in full,
o the Note Maturity Date,
o the Payment Date on which the Transferor exercises its option to
purchase the Series Certificates and
o the Payment Date in the month following the Monthly Period in which a
Pay Out Event (including an Event of Default) occurs.
"NOTE RATE" means the interest rate per annum for a class of notes set
forth under "Summary of Terms" in this supplement.
"OWNER TRUST SPREAD ACCOUNT" means the spread account maintained by the
owner trust for the benefit of the Class C notes.
"OWNER TRUSTEE" means Wilmington Trust Company, as Owner Trustee of the
owner trust.
"PAYMENT DATE" means the 15th day of each month--or, if that day is not a
business day, the next succeeding business day--on which distributions of
interest or principal are to be made to noteholders.
"PAY OUT EVENT" means, for the Series Certificate of your series, any of
the events described under "Description of the Securities--Description of the
Series Certificate--Pay Out Events" in this supplement.
"PORTFOLIO YIELD" means the annualized percentage equivalent of a fraction:
o the numerator of which is the sum of:
-- collections of Finance Charge Receivables,
S-61
-- Investor Principal Funding Investment Proceeds, and
-- amounts withdrawn from the Accumulation Period Reserve Account,
and deposited into the Finance Charge Account for such Monthly
Period, calculated on a cash basis after subtracting the Investor
Default Amount for such Monthly Period, and
o the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
"PRINCIPAL FUNDING INVESTMENT SHORTFALL" means, as of any Transfer Date
during the Controlled Accumulation Period, a deficiency that occurs when the
Investor Principal Funding Investment Proceeds for that Transfer Date are less
than the product of:
o the actual number of days in the related Note Interest Period divided
by 360, times
o the Class A Note Interest Rate, times
o the balance in the Principal Funding Account as of the Record Date
preceding that Transfer Date.
"QUARTERLY EXCESS SPREAD PERCENTAGE" means, with respect to any Monthly
Period, the average of the current Excess Spread Percentage and the Excess
Spread Percentages for the two immediately preceding Monthly Periods.
"RAPID AMORTIZATION PERIOD" means, for the Series Certificate, a period:
o beginning on the day a Pay Out Event occurs or such other date as may
be specified in this supplement, and
o ending on the earlier of:
-- the date on which the Investor Interest of the Series Certificate
has been paid in full, or
-- the Series Termination Date; and
during which the portion of collections of Principal Receivables allocable to
the Series Certificate of your series will be paid on each Distribution Date to
the owner trust as the holder of the Series Certificate.
"REALLOCATED PRINCIPAL COLLECTIONS" means with respect to any Transfer
Date, Available Investor Principal Collections used to pay interest on the Class
A notes and the Class B notes or used to pay the Net Investor Servicing Fee, in
an amount equal to the lesser of:
o the Monthly Principal Reallocation Amount for the related Monthly Period,
and
o the Investor Interest after giving effect to any Investor Charge-Offs for
that Transfer Date.
"RECORD DATE" means the last business day of the calendar month before the
Payment Date, as of which a noteholder must be the registered holder of a note
to receive a payment on the following Payment Date.
"REQUIRED ACCUMULATION PERIOD RESERVE ACCOUNT AMOUNT" means, with respect
to any Transfer Date on or after which principal is deposited into the
Accumulation Period Reserve Account, an amount equal to:
o the product of:
-- 84%,
-- the initial Investor Interest, and
-- 0.5%, or
o a greater amount in accordance with the provisions of the Series
2001-2 Supplement.
"REQUIRED OWNER TRUST SPREAD ACCOUNT AMOUNT" means the minimum amount
required to be held in the Owner Trust Spread Account for the benefit of the
Class C noteholders, equal to $5,952,380 unless the Quarterly Excess Spread
Percentage:
S-62
o is less than or equal to 4.50% per annum but greater than 4.25% per
annum, in which case the Required Owner Trust Spread Account Amount
will be increased to an amount equal to 1.50% of the Note Initial
Principal Balance,
o is less than or equal to 4.25% per annum but greater than 4.00% per
annum, in which case the Required Owner Trust Spread Account Amount
will be increased to an amount equal to 2.00% of the Note Initial
Principal Balance,
o is less than or equal to 4.00% per annum but greater than 3.50% per
annum, in which case the Required Owner Trust Spread Account Amount
will be increased to an amount equal to 2.50% of the Note Initial
Principal Balance,
o is less than or equal to 3.50% per annum but greater than 3.00% per
annum, in which case the Required Owner Trust Spread Account Amount
will be increased to an amount equal to 3.00% of the Note Initial
Principal Balance,
o is less than or equal to 3.00% per annum but greater than 2.50% per
annum, in which case the Required Owner Trust Spread Account Amount
will be increased to an amount equal to 3.50% of the Note Initial
Principal Balance,
o is less than or equal to 2.50% per annum but greater than or equal to
0.00% per annum, in which case the Required Owner Trust Spread Account
Amount will be increased to an amount equal to 4.00% of the Note
Initial Principal Balance, and
o is less than 0.00% per annum, in which case the Required Owner Trust
Spread Account Amount will be increased to an amount equal to 9.00% of
the Note Initial Principal Balance.
The Required Owner Trust Spread Account Amount will never be greater than
the Class C Note Principal Balance.
"RESERVE ACCOUNT FUNDING DATE" means the Transfer Date with respect to the
Monthly Period which commences no later than three months prior to the
commencement of the Controlled Accumulation Period, or an earlier date
determined by the Servicer.
"SCHEDULED NOTE PAYMENT DATE" means:
o for Class A, May 15, 2006,
o for Class B, June 15, 2006, and
o for Class C, June 15, 2006,
or if the Scheduled Note Payment Date for any class is not a business day, the
next business day.
"SCHEDULED PRINCIPAL ALLOCATION COMMENCEMENT DATE" means the May 2006
Distribution Date.
"SERIES 2001-2 SUPPLEMENT" means the supplement to the Pooling and
Servicing Agreement through which the Series Certificate is issued.
"SERVICER INTERCHANGE" means, for any Monthly Period, an amount equal to:
o Finance Charge Receivables allocated to the Investor Interest with
respect to that Monthly Period which are attributable to Interchange,
o but not in excess of one-twelfth of the product of:
-- the Adjusted Investor Interest, as of the last day of such
Monthly Period, and
-- 1.0%.
"SHARED PRINCIPAL COLLECTIONS" means those principal collections described
under "Description of the Securities--Description of the Series
Certificate--Shared Principal Collections" in this supplement.
"TRUST AGREEMENT" means the agreement under which the owner trust will be
established to be entered into by Chase USA, as the Depositor, and Wilmington
Trust Company, as the Owner Trustee.
S-63
Prospectus A security is not a
deposit and neither the
securities nor the
underlying accounts
or receivables or
CHASE CREDIT CARD MASTER TRUST series certificates
CHASE CREDIT CARD OWNER TRUSTS or notes are insured
or guaranteed by the
FDIC or any other
Issuers governmental
agency.
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Transferor and Administrator of Owner Trusts
A certificate will
THE CHASE MANHATTAN BANK represent an interest
Servicer of Master Trust in the master trust
only. A note will be
ASSET BACKED SECURITIES an obligation of an
owner trust only.
THE MASTER TRUST-- Neither the
certificates nor the
notes will represent
o may periodically issue asset backed certificates in interests in or recourse
on or more series, including series of asset backed obligations of Chase
certificates that will be sold to owner trusts and USA, the servicer or
pledged to secure notes, and any of their affiliates.
o will own receivables in a portfolio of consumer This prospectus maybe
revolving credit card accounts and other property used to offer and
described in this prospectus and in the sell any series of
prospectus supplement. securities only if
accompanied by the
prospectus supplement
for that series.
THE SECURITIES--
o with respect to the certificates, will represent interests in the master
trust and will be paid only from the assets of the master trust,
o with respect to the notes, will be obligations of an owner trust and will be
secured by the assets of that owner trust, including one or more
certificates,
o offered by this prospectus will be rated in one of the four highest rating
categories by at least one nationally recognized statistical rating
organization,
o may have one or more forms of credit enhancement, and
o will be issued as part of a series which may include one or more classes of
securities.
The certificateholders will receive interest and principal payments from a
varying percentage of credit card account collections.
The noteholders will receive interest and principal as described in the
prospectus supplement. Each series of notes will be secured by a series
certificate issued by the master trust and purchased by the owner trust that
will issue the notes and any other assets described in that prospectus
supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
June 6, 2001
TABLE OF CONTENTS
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT ................... 3
THE MASTER TRUST ................................... 4
THE OWNER TRUSTS ................................... 4
CHASE USA'S CREDIT CARD ACTIVITIES ................. 5
Acquisition and Maintenance of Credit
Card Accounts .............................. 5
Billing and Payments ......................... 7
Collection of Delinquent Accounts ............ 8
Description of First Data Resources Inc. ..... 9
Interchange .................................. 9
Recoveries ................................... 10
THE RECEIVABLES .................................... 10
USE OF PROCEEDS .................................... 11
MATURITY CONSIDERATIONS ............................ 11
Series of Certificates ....................... 11
Series of Notes .............................. 12
CHASE USA .......................................... 12
DESCRIPTION OF THE SECURITIES ...................... 13
Form of Your Securities ...................... 13
DTC .......................................... 14
Clearstream .................................. 14
Euroclear .................................... 15
Book-Entry Registration ...................... 15
Definitive Securities ........................ 17
Initial Settlement ........................... 18
Secondary Market Trading ..................... 18
Certain U.S. Federal Income Tax
Documentation Procedures Relating to
Global Securities ......................... 20
Description of the Certificates .............. 20
Transferor Interest .......................... 21
Issuing New Series of Certificates ........... 22
Interest Allocations ......................... 23
Principal Allocations ........................ 23
Transfer and Assignment of Receivables ....... 25
Chase USA's Representations and
Warranties ................................ 25
Addition of Master Trust Assets .............. 27
Removal of Master Trust Assets ............... 28
Discount Option .............................. 28
Master Trust Bank Accounts ................... 29
Companion Series ............................. 30
Funding Period ............................... 30
Investor Percentage and Transferor
Percentage ................................ 31
Application of Collections ................... 32
Shared Excess Finance Charge
Collections ............................... 33
Shared Principal Collections ................. 33
Default Allocations .......................... 33
Rebates and Fraudulent Charges ............... 33
Investor Charge-Offs ......................... 33
Optional Repurchase .......................... 34
Final Payment of Principal; Series
Termination ............................... 34
Pay Out Events ............................... 34
Servicing Compensation ....................... 35
The Servicer ................................. 35
Servicer Default ............................. 35
Payment of Expenses .......................... 36
Reports to Certificateholders ................ 36
Evidence as to Compliance .................... 37
Amendments ................................... 37
List of Certificateholders ................... 38
The Master Trust Trustee ..................... 38
Master Trust Termination ..................... 39
Description of the Notes ..................... 39
Principal and Interest on the Notes .......... 39
The Indentures ............................... 40
Certain Covenants ............................ 42
The Indenture Trustee ........................ 43
Transfer and Assignment of the Series
Certificate ............................... 43
Reports to Noteholders ....................... 43
Certain Matters Regarding the
Administrator ............................. 44
Amendments ................................... 44
Termination .................................. 45
CREDIT ENHANCEMENT ................................. 45
Specific Forms of Credit Enhancement ......... 46
SECURITY RATINGS ................................... 48
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES ........... 49
Transfer of Receivables ...................... 49
Certain Matters Relating to Receivership ..... 49
Consumer Protection Laws ..................... 51
Industry Litigation .......................... 51
Other Litigation ............................. 52
TAX MATTERS ........................................ 52
Tax Characterization of the Master Trust ..... 53
Tax Considerations Relating to
Certificate Owners ........................ 53
Tax Considerations Relating to Note
Owners .................................... 56
Non-U.S. Certificate Owners and
Non-U.S. Note Owners ...................... 57
Information Reporting and Backup
Withholding ............................... 59
State and Local Taxation ..................... 60
EMPLOYEE BENEFIT PLAN CONSIDERATIONS ............... 60
Certain ERISA Considerations With
Respect to Notes .......................... 61
Prohibited Transaction Considerations ........ 61
Certain ERISA Considerations With
Respect to Certificates ................... 62
Prohibited Transaction Considerations ........ 62
PLAN OF DISTRIBUTION ............................... 63
LEGAL MATTERS ...................................... 64
REPORTS TO SECURITYHOLDERS ......................... 65
WHERE YOU CAN FIND MORE INFORMATION ................ 65
GLOSSARY OF TERMS FOR PROSPECTUS ................... 66
2
OVERVIEW OF THE INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular
series of securities, including your series, and (b) the prospectus supplement,
which will describe the specific terms of your series of securities, including:
o the type of securities offered,
o the timing and amount of interest and principal payments,
o information about the receivables,
o information about credit enhancement for each class,
o credit ratings, and
o the method for selling the securities.
We have included a description of some of the basic terms and
characteristics of the securities that may be offered by this prospectus. We
have also included a description of any certificate offered by this prospectus
or sold to an owner trust to be pledged to secure notes. In addition, we have
included a description summarizing the terms and provisions that would apply to
all notes offered by this prospectus.
If you are purchasing notes, you should review carefully the descriptions
of the certificates in this prospectus and the prospectus supplement. The most
significant asset of each owner trust will be a certificate issued by the
master trust and pledged to secure the notes of the owner trust. The terms and
provisions of that certificate will be reflected in the terms and provisions of
the notes secured by that certificate.
Each certificate issued by the master trust and offered to investors or
pledged to secure the notes of an owner trust will be:
o registered under the registration statement we have filed with the SEC
relating to the securities,
o sold through this prospectus and the related prospectus supplement, and
o rated in one of the four highest rating categories by at least one
nationally recognized statistical rating agency.
You should rely only on the information provided in this prospectus and
the prospectus supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The preceding table of contents and the table of contents included
in the prospectus supplement provide the pages on which these captions are
located.
You can find a glossary of the defined terms that appear in this document
in bold faced type under the caption "Glossary of Terms for Prospectus"
beginning on page 66 in this prospectus.
3
THE MASTER TRUST
The Chase Credit Card Master Trust was formed in October 1995 to issue
certificates representing interests in a pool of credit card receivables held
by the master trust. Certificates issued by the master trust will be issued in
amounts, at prices and on terms to be determined at the time of sale as set
forth in a supplement to this prospectus.
The master trust exists through a POOLING AND SERVICING AGREEMENT among
the following parties:
o Chase Manhattan Bank USA, National Association, as TRANSFEROR,
o The Chase Manhattan Bank, as servicer, and
o The Bank of New York, as trustee.
The Chase Manhattan Bank has delegated substantially all of its servicing
duties to Chase USA.
The master trust will not engage in any business activity other than:
o acquiring and holding receivables,
o issuing series of certificates and a TRANSFEROR CERTIFICATE,
o making payments on these certificates,
o obtaining any credit enhancement or entering into any enhancement
contract necessary to issue certificates,
o entering into swap agreements to convert specified cash flows from one
form to another, and
o engaging in related activities, which activities cannot be contrary to
the status of the master trust as a "qualifying special purpose entity"
under existing accounting literature.
Because of the restricted nature of its activities, we do not expect that the
obligations of the master trust will ever exceed the value of the assets listed
above.
THE OWNER TRUSTS
Each series of notes will be issued by an owner trust. Each owner trust
will be formed as a statutory business trust or a common law trust under the
laws of the State of Delaware. Chase USA will deposit in an owner trust a
SERIES CERTIFICATE rated in one of the four highest rating categories by at
least one rating agency. Each owner trust will be the certificateholder of a
single SERIES CERTIFICATE. The descriptions of the certificates in this
prospectus and in the related supplement are important to purchasers of notes
because the SERIES CERTIFICATE will be the most significant asset of each owner
trust. The terms and provisions of the SERIES CERTIFICATE, including the
payment terms, will be reflected in the terms and provisions of the notes. Each
series of notes will be issued under an INDENTURE between the OWNER TRUSTEE and
the INDENTURE TRUSTEE. The notes will be secured by the SERIES CERTIFICATE and
the other collateral pledged by the owner trust to secure the notes pursuant to
the INDENTURE, which may include a reserve account for the benefit of one or
more classes of notes.
The activities of each owner trust will be limited to:
o acquiring and holding a SERIES CERTIFICATE and any other assets,
o issuing a single series of notes,
o making payments on the notes, and
o engaging in other activities that are appropriate to accomplish those
goals, which activities cannot be contrary to the status of the owner
trust as a "qualifying special purpose entity" under existing
accounting literature.
4
CHASE USA'S CREDIT CARD ACTIVITIES
Chase USA's portfolio of credit card receivables is originated through
MasterCard and VISA accounts principally established by:
o Chase USA,
o Chemical Bank, before the transfer of its credit card business to Chase
USA in June 1996, and
o The Bank of New York, before the purchase of its credit card operations
by Chase USA in November 1997.
Some of these accounts are designated as master trust accounts. The receivables
which Chase USA will convey to the master trust under the terms of the POOLING
AND SERVICING AGREEMENT have been and will be generated from transactions made
by the holders of these master trust accounts.
Chase USA is also seller and servicer, with Yasuda Bank and Trust Company
(U.S.A.) as trustee, of Chase Manhattan Credit Card Master Trust. This master
trust has issued several series of asset backed certificates one of which
remains outstanding. As long as that series remains outstanding, the accounts
designated for inclusion in Chase Manhattan Credit Card Master Trust will not
be available for addition to the master trust. However, Chase USA is allowed,
with rating agency approval, to periodically remove accounts from Chase
Manhattan Credit Card Master Trust and add some or all of them to the master
trust. See "Description of the Securities--Description of the
Certificates--Addition of Master Trust Assets" and "--Removal of Master Trust
Assets" for information on the conditions to any addition or removal of
accounts.
Chase USA has the right, and currently expects, to add accounts from time
to time to the master trust. Accounts available for addition to the master
trust might have been originated under policies and procedures which differ
from the policies and procedures used to originate accounts currently in the
master trust. If Chase USA adds any of these accounts, it does not expect that
these differences will have a material effect on your interests.
Chase USA services credit card accounts at facilities located in:
o Hicksville, New York,
o San Antonio, Texas,
o Tempe, Arizona,
o Tampa, Florida,
o Wilmington, Delaware and Newark, Delaware.
Many data processing and administrative functions for the BANK PORTFOLIO are
performed by First Data Resources, Inc.
ACQUISITION AND MAINTENANCE OF CREDIT CARD ACCOUNTS
The accounts in the master trust were generated under the VISA U.S.A.,
Inc. and MasterCard International Inc. programs. Chase USA, a member of VISA
and MasterCard International, originated or purchased these accounts. VISA and
MasterCard International license their respective marks permitting financial
institutions to issue credit cards to their customers. In addition, VISA and
MasterCard International provide clearing services facilitating exchange of
payments among member institutions and networks linking members' credit
authorization systems.
The VISA and MasterCard credit cards are issued by Chase USA as part of
the worldwide VISA and MasterCard International systems, and transactions
creating the receivables through the use of these credit cards are processed
through the VISA and MasterCard International authorization and settlement
systems.
5
VISA and MasterCard credit cards may be used:
o to purchase merchandise and services,
o to obtain cash advances from a financial institution, automated teller
machine, a check drawn on the account or as overdraft protection, and
o to consolidate and transfer balances from other credit cards.
Amounts due on master trust accounts for any of these purposes are included as
receivables in the master trust.
Chase USA entered into an agreement with MasterCard International,
effective as of July 1, 1999, as a result of which the BANK PORTFOLIO is
expected to have a larger proportion of MasterCard accounts in the future.
While this shift may be accompanied by some attrition of accounts, Chase USA
believes the amount of any such attrition will not be material. Based on
current analyses, Chase USA does not expect its performance of this agreement
or any such attrition of accounts to have a material adverse effect on Chase
USA, the master trust, the owner trusts or any holders of certificates or
notes.
Chase USA originates accounts through several channels:
o Applications. Chase USA makes applications for VISA and MasterCard
accounts available at all CMB branches and point of sale outlets. Chase
USA advertises on television, radio and in magazines with the goal of
generating customer applications. Chase USA also mails applications
directly to prospective cardholders. In each case, Chase USA reviews an
application for completeness and creditworthiness. Applications provide
information to Chase USA on the applicant's employment history, income
and residence status. A credit report on the applicant, requested from
an independent credit reporting agency, will also be evaluated.
Discrepancies between the credit report and the application must be
resolved before the application can be approved.
Chase USA generally evaluates the applicant's ability to repay credit
card balances through application of a credit scoring system using
proprietary models and models developed by independent consulting
firms. Credit scoring is intended to provide a general indication,
based on the information available from the application, credit bureaus
or other sources, of the applicant's likelihood to repay his or her
obligations. Credit scoring assigns values to the information provided
in each applicant's application and credit bureau report and then
estimates the associated credit risk. The score at which an applicant
will be approved correlates to Chase USA's credit risk tolerance at the
time of the approval. Chase USA's personnel and outside consultants
regularly review the predictive accuracy of the scoring models.
Applications are also evaluated with a proprietary profitability model,
which determines if the applicant is likely to meet Chase USA's
profitability expectations. These expectations are adjusted from time
to time based on economic conditions, Chase USA's and CMB's corporate
goals and competitive pressures. Applicants who fall outside of Chase
USA's desired credit and profitability segments will be denied a credit
card.
An approved application is assigned an initial credit limit based on
the applicant's credit score and income level,
o Direct Mail and Telemarketing. Chase USA uses direct mail and
telemarketing solicitation campaigns to access individuals whom Chase
USA has identified as desirable cardholders. A list of prospects from a
variety of sources are screened at one or more credit bureaus in
accordance with Chase USA's credit criteria, including previous payment
patterns and longevity of account relationships. Individuals qualifying
for pre-screened direct mail or telemarketing solicitation are
conditionally offered a credit card without having to complete a
detailed application. Credit limits offered to pre-screened prospective
cardholders are based on each individual's credit profile,
profitability potential and overall indebtedness relative to inferred
income,
6
o Purchase of Accounts. Chase USA has added, and may continue to add,
accounts to its credit card portfolio by purchasing accounts from other
financial institutions. Chase USA originally opened credit card
accounts it purchased using criteria established by another
institution. These purchased accounts may not have been subject to the
same level of credit review as accounts Chase USA initially
established. Following acquisition, purchased accounts are evaluated
against the same criteria used by Chase USA to maintain accounts which
it originates. This evaluation might indicate that the purchased
account should be closed immediately, which causes Chase USA to
authorize no future purchases or cash advances on the card. All
accounts passing the evaluation remain open, subject to the same
criteria Chase USA uses to periodically evaluate all of its accounts.
Regardless of origination channel, at least once per year each account is
subject to a systematic evaluation of payment and behavioral information. Chase
USA may adjust the account's credit limit up or down, based on updated credit
and profitability scores. Credit limits may also be adjusted at the request of
the applicant, subject to Chase USA's independent evaluation of the applicant's
payment and card usage history.
Each cardholder is subject to an agreement governing the terms and
conditions of the account. In these agreements, Chase USA has reserved the
right:
o to change or end any terms, conditions, services or features of each
account, including increasing or decreasing finance charges, fees or
minimum payments, and
o to sell or transfer the accounts and/or any amounts owed on such
accounts to another creditor.
BILLING AND PAYMENTS
The accounts in the master trust have various billing and payment
structures, including varying minimum payment levels and fees. Chase USA sends
monthly billing statements to cardholders. The following information reflects
the current billing and payment characteristics of the master trust accounts.
When an account is established it is randomly assigned to a billing cycle.
Currently there are 20 billing cycles, each with a different monthly billing
date. On each cycle's monthly billing date, all activity since the previous
monthly billing date for all accounts in the cycle are processed and billed to
cardholders.
Chase USA generally determines the minimum monthly payment with respect to
the accounts by multiplying the combined new balance of purchases and cash
advances, less any disputed amounts, by 2.000%. If the calculated minimum
payment amount is less than $10.00, it is increased to $10.00. The sum of this
amount and any past due amounts equals the minimum payment amount. The minimum
payment, however, is never more than the new balance.
When each account's monthly activity is processed for a billing cycle,
finance charges are assessed in two ways:
o Finance Charges on New Purchases. A daily periodic finance charge is
assessed on principal receivables from new purchases if the following
criteria are met:
-- on the first day of the billing cycle there was a balance
outstanding; and
-- there was a balance outstanding on the payment date shown on the
previous monthly statement.
If a finance charge is assessed on a new purchase, it will be calculated
as described below:
o Finance Charges on Cash Advances and Pre-Existing Purchases. Daily
periodic finance charges on cash advances and pre-existing purchase
balances are calculated as follows:
(average daily cash advance or pre-existing purchase balance) x
(applicable daily periodic finance charge rate) x (number of days in
the billing cycle)
7
In calculating the average daily cash advance and pre-existing purchase
balance, Chase USA will add the interest amount accrued on the previous day's
ending balance to the current day's balance. New cash advances and new
purchases are generally included in their respective average daily balances
from the date the advance or purchase occurs, although--as noted above--in some
cases finance charges do not begin to accrue until the first day of the
following billing cycle.
Chase USA offers fixed rate and variable rate accounts. The annual
percentage rate for fixed rate accounts generally ranges from 9.9% per annum to
19.8% per annum. The current annual percentage rate for variable rate accounts
is based on the prime rate published in the "Money Rates" table of The Wall
Street Journal plus a spread generally ranging from 4.4% to 14.99%. Chase USA
also offers temporary promotional rates and promotional rates on transferred
balances. In specific situations, the periodic finance charges on a limited
number of accounts may be either greater than or less than those assessed by
Chase USA generally. To the extent that the amount of any finance charge
applicable to a purchase balance is less than $0.50, the Bank increases this
amount to $0.50.
Chase USA charges annual membership fees on some accounts while other
accounts carry no annual membership fee. For those accounts with an annual
membership fee, the fee is generally $20.00 for regular accounts, $40.00 for
premium fixed rate accounts and $45.00 for premium variable rate accounts.
Chase USA may waive all or a portion of annual membership fees in connection
with solicitations of new accounts--and has done so for portions of recent
solicitations--or when Chase USA determines that, for competitive reasons, a
waiver is necessary. In addition to the annual membership fee, Chase USA may
charge accounts other fees generally at the rates specified below, including:
o a late fee of $29.00 if Chase USA does not receive the required minimum
monthly payment by the payment due date noted on the monthly billing
statement,
o a cash advance fee of 3.0% of the amount of each cash advance, with a
minimum fee of $5.00 for each cash advance,
o a balance transfer fee of $50 for each balance transfer, which fee may
be reduced in Chase USA's discretion in any balance transfer offer it
makes,
o a fee of $29.00 for each check written on a credit card account--a form
of cash advance--which Chase USA does not honor because the credit card
account is delinquent, overdrawn or closed,
o a fee of $29.00 for each dishonored check sent as payment by the
cardholder, and
o an overlimit charge of $29.00 if, at the end of the billing cycle, the
total amount owed for principal and finance charges exceeds the
cardholder's credit line.
Cardholder payments to Chase USA are processed and applied to any billed
and unpaid finance charges and to billed and unpaid transactions in the order
determined by Chase USA. Any excess is applied to unbilled transactions in the
order determined by Chase USA and then to unbilled finance charges. We can give
you no assurance that periodic finance charges, fees and other charges will
remain at current levels in the future.
COLLECTION OF DELINQUENT ACCOUNTS
An account is "delinquent" if, by the payment due date shown on the
account's monthly statement, Chase USA has not received the minimum monthly
payment. An account is "over limit" if its posted balance exceeds its credit
limit.
Efforts to collect delinquent credit card receivables are made by Chase
USA's personnel, collection agencies and attorneys retained by Chase USA.
Collection procedures are determined by an adaptive risk control system that
uses statistical models and basic account financial information to determine
the steps to be followed at various stages of delinquency. Generally, Chase USA
includes a request for payment of overdue amounts on billing statements issued
after the account becomes
8
delinquent. In addition, after a period determined by the risk control system,
Chase USA mails a separate notice to the cardholder with:
o notification that the account is delinquent,
o a warning that credit privileges may be revoked, and
o a request for payment of the delinquent amount.
Collection personnel generally initiate telephone contact with cardholders
whose credit card accounts have become 30 days or more delinquent. If the
initial telephone contact fails to resolve the delinquency, Chase USA continues
to contact the cardholder by telephone and by mail.
Based upon the risk control system's analysis, Chase USA may suspend an
account as early as the date on which the account becomes 30 days or more
delinquent. Chase USA generally suspends the account by the time the account
becomes 50 days delinquent. One hundred days after an account becomes
delinquent the credit card is automatically canceled. Based on the risk control
system's analysis of a delinquent cardholder's behavior, Chase USA may take any
or all of the above actions earlier than indicated here. In some cases,
depending on the financial profile of the cardholder and the stated reason for
and magnitude of a delinquency, Chase USA may enter into arrangements with a
delinquent cardholder to extend or otherwise change the payment schedule.
Chase USA's policy is to charge-off an account in the billing cycle
immediately following the cycle in which the account became one hundred fifty
(150) days delinquent. If Chase USA receives notice that a cardholder is the
subject of a bankruptcy proceeding, the Bank charges off such cardholder's
account upon the earlier of sixty (60) days after receipt of such notice and
the time period set forth in the previous sentence.
During the fourth quarter of 2000, JPMC implemented a revised policy for
consumer loan charge-offs to conform with the policy statement adopted by the
Federal Financial Institutions Examination Council. The FFIEC policy,
originally issued in February 1999, established uniform guidelines for the
charge-off of consumer loans to delinquent, bankrupt, deceased and fraudulent
borrowers. JPMC and Chase USA do not believe that the revised charge-off policy
will materially affect the interests of holders of the notes or certificates.
Chase USA also offers a "Flexible Payment Program" to certain delinquent
cardholders who have experienced temporary financial setbacks. In addition,
third-party consumer credit counseling services with which Chase USA has no
affiliation, provide external debt management programs, which cardholders may
elect to use. For both program types, participating cardholders must agree with
Chase USA to a schedule of fixed monthly payments for a specified duration at a
lowered annual percentage rate and as a result the account will be reported as
current. Upon the withdrawal of a customer from either program type, the
account returns to its pre-existing terms and may be returned to the
pre-existing level of delinquency or may age normally thereafter.
DESCRIPTION OF FIRST DATA RESOURCES INC.
First Data Resources Inc. is located in Omaha, Nebraska and provides
computer data processing services primarily to the bankcard industry. First
Data Resources Inc. is a subsidiary of First Data Corp.
INTERCHANGE
Financial institutions participating in the VISA and MasterCard
associations receive INTERCHANGE for performing specified tasks. Under the VISA
and MasterCard systems, a portion of INTERCHANGE in connection with cardholder
charges for goods and services is passed from banks which clear the
transactions for merchants to credit card issuing banks. MasterCard and VISA
set INTERCHANGE fees annually based on the number of credit card transactions
and the amount charged per transaction. MasterCard and VISA may from time to
time change the amount of INTERCHANGE reimbursed to banks issuing their credit
cards. Chase USA is required, under the terms of the POOLING AND SERVICING
9
AGREEMENT, to transfer to the master trust a percentage of INTERCHANGE. Each
month, INTERCHANGE allocated to the master trust is calculated as follows:
(INTERCHANGE for the MONTHLY PERIOD) x (total amount of purchases of
merchandise and services in the MASTER TRUST PORTFOLIO) (divided by)
(total amount of purchases of merchandise and services in the entire
BANK PORTFOLIO)
INTERCHANGE allocated to the master trust will be treated as collections of
finance charge receivables.
RECOVERIES
Chase USA is required, under the terms of the POOLING AND SERVICING
AGREEMENT, to transfer to the master trust a percentage of the recoveries on
charged-off accounts received each month. Each month, RECOVERIES allocated to
the master trust are calculated as follows:
(total RECOVERIES collected by Chase USA) x (defaulted receivables in the
MASTER TRUST PORTFOLIO) (divided by) (defaulted receivables in the BANK
PORTFOLIO)
RECOVERIES allocated to the master trust are treated by the master trust as
collections of finance charge receivables.
THE RECEIVABLES
The assets of the master trust include receivables generated through
accounts designated as master trust accounts, all of which are owned by Chase
USA. The master trust assets include:
o all monies due or to become due in payment of these receivables,
o all proceeds of these receivables,
o all proceeds of any credit insurance policies relating to these
receivables,
o any INTERCHANGE and RECOVERIES allocable to the master trust because of
these receivables,
o all monies on deposit in specified master trust bank accounts or
investments made with these monies, including any earned investment
proceeds if the supplement so indicates,
o proceeds of any credit enhancement, as described in the related
supplement, and
o proceeds of any derivative contracts between the master trust and a
counterparty, as described in the related supplement.
Receivables in the master trust consist of:
o principal receivables, which are amounts charged by master trust
account cardholders for goods and services, cash advances and
consolidation or transfer of balances from other credit cards, and
o finance charge receivables, which are periodic finance charges and
other amounts charged to master trust accounts, including cash advance
fees, late fees, and annual membership fees.
The master trust considers collections of INTERCHANGE and RECOVERIES as
collections of finance charge receivables. If Chase USA exercises the DISCOUNT
OPTION, an amount of monthly collections of principal receivables will be
considered finance charge collections. See "Description of the
Securities--Description of the Certificates--Discount Option" for a description
of the manner of and the conditions to exercise of the Discount Option.
Receivables conveyed to the master trust arise in accounts selected from
the BANK PORTFOLIO and designated as master trust accounts. Initially, a group
of accounts were selected on the CUT-OFF DATE and designated as master trust
accounts; since then additional accounts have been designated for inclusion in
the master trust. Accounts initially designated as master trust accounts, new
accounts so designated and any future accounts designated for inclusion in the
master trust must meet eligibility criteria set forth in the POOLING AND
SERVICING AGREEMENT. Receivables conveyed to the master trust
10
must also meet eligibility criteria set forth in the POOLING AND SERVICING
AGREEMENT. If receivables conveyed to the master trust are found to have been
ineligible when created or designated for inclusion, Chase USA must accept
retransfer of these receivables and either replace them with eligible
receivables or pay the value of the retransferred receivables to the master
trust.
Chase USA has agreed to maintain a MINIMUM TRANSFEROR INTEREST in the
MASTER TRUST PORTFOLIO, based on the total outstanding amount of principal
receivables in the MASTER TRUST PORTFOLIO plus the total amount on deposit in
the EXCESS FUNDING ACCOUNT. Chase USA has also agreed to maintain a MINIMUM
AGGREGATE PRINCIPAL RECEIVABLES amount. If the average daily TRANSFEROR
INTEREST for any 30 consecutive days is below the MINIMUM TRANSFEROR INTEREST,
or the amount of principal receivables in the master trust falls below the
amount of MINIMUM AGGREGATE PRINCIPAL RECEIVABLES, Chase USA is required by the
terms of the POOLING AND SERVICING AGREEMENT to designate accounts for addition
to the master trust so that the amount of receivables in these accounts, when
added to then-existing receivables in the master trust, equals or exceeds these
minimum levels. See "Description of the Securities--Description of the
Certificates--Addition of Master Trust Assets" for more information on adding
accounts to the master trust.
The POOLING AND SERVICING AGREEMENT also gives Chase USA the right to
remove accounts from the designated list of master trust accounts. If Chase USA
does so, the master trust will reconvey all receivables in these removed
accounts, whether existing or to be created, to Chase USA. See "Description of
the Securities--Description of the Certificates--Removal of Master Trust
Assets" for more information on removing accounts from the master trust.
When the master trust issues a new series of securities, Chase USA will
represent and warrant to the master trust that, as of the CLOSING DATE for the
new series, the accounts designated as master trust accounts meet the
eligibility criteria set forth in the POOLING AND SERVICING AGREEMENT. See
"Description of the Securities--Description of the Certificates--Chase USA's
Representations and Warranties" for more information on eligibility criteria
for accounts and receivables.
USE OF PROCEEDS
The net proceeds from the sale of each series of certificates will
generally be paid to Chase USA and used for general corporate purposes. If the
master trust is issuing a SERIES CERTIFICATE, it will be deposited in an owner
trust in exchange for a series of notes. The net proceeds from the sale of this
series of notes will generally be paid to Chase USA and used for general
corporate purposes.
The attached supplement may state that some of these net proceeds will be
paid to other parties and/or used for other purposes, such as funding a reserve
account or spread account.
MATURITY CONSIDERATIONS
SERIES OF CERTIFICATES
Following the REVOLVING PERIOD, each series of certificates is expected to
begin to accumulate principal or begin to distribute principal to
certificateholders. The attached supplement describes the conditions under
which an accumulation or amortization period will begin for your class of
certificates.
Principal will accumulate in a funding account if your series features
controlled accumulation or rapid accumulation and one of these principal
accumulation periods begins. As described in the attached supplement, during
controlled accumulation on each DISTRIBUTION DATE an amount of principal, up to
the amount specified, will be set aside in the funding account. If a PAY OUT
EVENT occurs and your series features rapid accumulation, the full amount of
principal available to your series will be deposited in a funding account, up
to the amount specified in the related supplement. This accumulated principal
will be paid to you on the expected payment date or dates for your class of
certificates, or earlier if an amortization period begins before your first
expected principal payment date. Note that although your series may feature an
accumulation period, your class of certificates may not make use of it.
11
Principal will be paid to you in increments--up to the amount specified in
the attached supplement--if your class of certificates features controlled
amortization and this period begins. Your class of certificates might also
begin to pay principal to you if the attached supplement specifies that your
class will begin rapid amortization. Rapid amortization will begin, for all
classes of your series, when a PAY OUT EVENT occurs. During any amortization
period, principal will be paid to you only on a DISTRIBUTION DATE.
If the series described in the attached supplement features multiple
classes, different classes of your series may have differing priorities for the
accumulation or payment of principal. This means that certificateholders of
other classes could begin to receive payments of principal before you do.
We can give you no assurance that principal will be available when
expected, either to accumulate or to pay to you. The scheduled payment date or
dates for your class of certificates is based upon assumptions about payment
rates on the master trust's credit card receivables, as detailed in the
attached supplement. Chase USA can give no assurance that these payment rate
assumptions will be correct. Payment rates depend on collections of
receivables; collections can vary seasonally and are also affected by general
economic conditions and the payment habits of individual cardholders. The
attached supplement will provide historical payment rates, total charge-offs
and other information relating to the master trust's receivables. We cannot
assure you that future payment rates, charge-offs or other factors will be
consistent with this historical data. The expected life of your certificates
might be longer than expected if principal is collected more slowly. The
attached supplement may detail that if the principal payment rate falls below a
specified level, a PAY OUT EVENT will occur. The occurrence of any PAY OUT
EVENT may substantially shorten the average life of your certificates.
The attached supplement will state if your series is a COMPANION SERIES to
any other outstanding series of certificates. If rapid accumulation begins with
respect to, or a PAY OUT EVENT occurs to, a series with a COMPANION SERIES, the
COMPANION SERIES may experience delayed payments of principal.
See the table on page 25 for a more complete description of possible
accumulation and amortization periods. See "Maturity Considerations" in the
attached supplement for specific information about how your series will
accumulate and/or pay principal, as well as historical payment rate information
for the master trust.
SERIES OF NOTES
Each series of notes from an owner trust will be secured by the owner
trust's pledge of a SERIES CERTIFICATE. The considerations described above for
payment of certificates will apply to payment of notes. If a PAY OUT EVENT
occurs with respect to a SERIES CERTIFICATE, principal may be paid earlier than
scheduled on the related notes. These notes may also be repaid earlier than
scheduled when an EVENT OF DEFAULT occurs. See "Description of the
Securities--Description of the Notes--The Indentures--Events of Default: Rights
Upon Event of Default."
CHASE USA
Chase USA, a wholly-owned subsidiary of JPMC, was formed in 1982 and is
headquartered in Wilmington, Delaware. Chase USA is currently chartered as a
national bank and as such is regulated primarily by the United States
Comptroller of the Currency. Chase USA's activities are predominantly related
to credit card lending and other forms of consumer lending.
The principal executive office of Chase USA is located at White Clay
Center Building 200, Route 273, Newark, Delaware 19711, telephone number (302)
575-5000.
On December 31, 2000, J.P. Morgan & Co. Incorporated and The Chase
Manhattan Corporation completed their merger, with the surviving corporation
being named J.P. Morgan Chase & Co. CMB, Chase USA and Morgan Guaranty Trust
Company of New York are the principal banking subsidiaries of JPMC.
12
DESCRIPTION OF THE SECURITIES
The securities are in the form of the master trust certificates and the
notes from each owner trust offered through this prospectus and the attached
supplement and will be issued in "series" consisting of one or more "classes."
o Certificates. Each series of certificates will represent an interest in
the master trust distinct from the TRANSFEROR CERTIFICATE and any other
series of certificates issued by the master trust. Each series of
certificates will be issued through the POOLING AND SERVICING AGREEMENT
and a SERIES SUPPLEMENT to the POOLING AND SERVICING AGREEMENT. If you
are purchasing certificates, the attached supplement describes any
series-specific provisions supplementing the information in this
prospectus.
o Notes. Each series of notes will be an obligation of a specified owner
trust, the primary asset of which will be a SERIES CERTIFICATE issued
by the master trust. Each series of notes from an owner trust will be
issued through an INDENTURE, entered into by the OWNER TRUSTEE and the
INDENTURE TRUSTEE. If you are purchasing notes, the attached supplement
describes any provisions of the notes supplementing the information in
this prospectus.
Following is a summary of provisions of the securities--either certificates or
notes--which you are purchasing. This summary describes the material provisions
common to each series of securities; the attached supplement will give you
additional information specific to the securities which you are purchasing.
This summary is qualified in its entirety by reference to the provisions of the
POOLING AND SERVICING AGREEMENT, the SERIES SUPPLEMENT and--if you are
purchasing notes--the related indenture, deposit and administration agreement
and trust agreement.
Each series of securities may consist of one or more classes, one or more
of which may be senior to other classes. Each class of a series will evidence
the right to receive a specified portion of principal and finance charge
collections on receivables in the MASTER TRUST PORTFOLIO. Each class of a
series may differ from other classes in some aspects, including:
o maturity date,
o interest rate, and
o availability and amount of credit enhancement.
Payments will be made to securityholders in whose names the securities were
registered on the RECORD DATES specified in the related supplement.
Generally, securities offered through this prospectus and the attached
supplement:
o will be represented by certificates or notes registered in the name of
a DTC nominee,
o will be available for purchase in minimum denominations and integral
multiples of $1,000, and
o will be available for purchase in book-entry form only.
We call the securities in book-entry form, in which you will hold a beneficial
interest as described below under "--Book-Entry Registration," "global
securities." The attached supplement will specify if your securities have
different characteristics from those listed above.
The attached supplement may state that application will be made to list
your series or class of securities on the Luxembourg Stock Exchange or another
exchange.
FORM OF YOUR SECURITIES
Following is a description of the form your securities, whether
certificates or notes, will take. We also describe how your securities will 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. Chase USA has not independently verified the accuracy
of this information.
13
DTC has informed Chase USA that its nominee will be Cede. Accordingly,
Cede is expected to be the holder of record of each series of securities. This
means that you, as an owner of securities, will generally not be entitled to
DEFINITIVE SECURITIES representing your interest in the issued securities: you
will own securities through a book-entry record maintained by DTC. References
in this document to distributions, reports, notices and statements will be made
to DTC or Cede, as registered holder of the securities, for distribution to you
in accordance with DTC procedures. All references in this document to actions
by securityholders shall refer to actions taken by DTC upon instructions from
DTC participants.
You may hold your securities through DTC in the U.S., CLEARSTREAM or
EUROCLEAR in Europe or in any other manner described in the attached
supplement. You may hold your securities directly with one of these systems if
you are a participant in the system, or indirectly through organizations which
are participants.
DTC
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, 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 Securities Exchange Act of 1934. DTC holds
securities that its participating organizations deposit with DTC. DTC also
facilitates the clearance and settlement among DTC participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic book-entry changes in DTC participants' accounts, eliminating the
need for physical movement of securities certificates. DTC participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include other organizations. DTC is owned by a number of
its DTC participants and the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Indirect access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through
or maintain a custodial relationship with a DTC participant, either directly or
indirectly. The rules applicable to DTC and its DTC participants are on file
with the SEC.
The information set forth in this section concerning DTC has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. Chase USA makes
no representations as to the accuracy or completeness of such information.
CLEARSTREAM
CLEARSTREAM is incorporated under the laws of Luxembourg. CLEARSTREAM
holds securities for CLEARSTREAM CUSTOMERS and facilitates the clearance and
settlement of securities transactions between CLEARSTREAM CUSTOMERS through
electronic book entry changes in accounts of CLEARSTREAM CUSTOMERS, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled through 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, as such is subject to regulation by the
Commission de Surveillance du Secteur Financier, which supervises Luxembourg
banks. CLEARSTREAM CUSTOMERS are world-wide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the underwriters
of any series of securities. CLEARSTREAM CUSTOMERS in the U.S. are limited to
securities brokers and dealers and banks. Currently, CLEARSTREAM has
approximately 2,000 customers located in over 80 counties, 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 Clearstream Bank,
S.A./N.V. as the operator of the EUROCLEAR system in Brussels to facilitate
settlement of trades between CLEARSTREAM and EUROCLEAR.
14
EUROCLEAR
The EUROCLEAR system was created in 1968 to hold securities of EUROCLEAR
PARTICIPANTS and to clear and settle transactions between EUROCLEAR
PARTICIPANTS through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 34 currencies, including U.S.
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 below. The EUROCLEAR system is operated by
Euroclear Bank, S.A./N.V., acting as the EUROCLEAR operator, under contract
with the COOPERATIVE. All operations are conducted by the EUROCLEAR operator,
and all EUROCLEAR securities clearance accounts and EUROCLEAR cash accounts are
accounts with the EUROCLEAR operator, not the COOPERATIVE. The COOPERATIVE
establishes policy for the EUROCLEAR system on behalf of EUROCLEAR
PARTICIPANTS. EUROCLEAR PARTICIPANTS include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of the series of securities offered through
this document. Indirect access to the EUROCLEAR system is also available to
other firms that clear through or maintain a custodial relationship with a
EUROCLEAR PARTICIPANT, either directly or indirectly.
The EUROCLEAR operator has a banking license from the Belgian Banking and
Finance Commission. As such, it is regulated and examined by the Belgian
Banking and Finance Commission.
Securities clearance accounts and cash accounts with the EUROCLEAR
operator are governed by the Terms and Conditions Governing Use of EUROCLEAR
and the related Operating Procedures of the EUROCLEAR system and applicable
Belgian law. These 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 terms and
conditions only on behalf of EUROCLEAR PARTICIPANTS and has no record of or
relationship with persons holding through EUROCLEAR PARTICIPANTS.
BOOK-ENTRY REGISTRATION
Cede, as DTC's nominee, will hold the global securities. CLEARSTREAM and
EUROCLEAR will hold omnibus positions on behalf of CLEARSTREAM CUSTOMERS and
EUROCLEAR PARTICIPANTS, respectively, through customers' securities accounts in
CLEARSTREAM'S and EUROCLEAR'S names on the books of their respective
depositaries. These depositaries will in turn hold these positions in
customers' securities accounts in the depositaries' names on DTC's books.
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 securities
directly or indirectly through DTC, on the one hand, and directly or indirectly
through CLEARSTREAM CUSTOMERS or EUROCLEAR PARTICIPANTS, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its depositary. However, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in the system in accordance
with its rules and procedures, and within its established European time
deadlines. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. CLEARSTREAM CUSTOMERS and EUROCLEAR PARTICIPANTS may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits of securities in CLEARSTREAM or
EUROCLEAR as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement
15
processing, dated the business day following the DTC settlement date, and such
credits or any transactions in such securities settled during such processing
will be reported to the relevant CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS on such day. Cash received in CLEARSTREAM or EUROCLEAR as a result
of sales of securities by or through a CLEARSTREAM CUSTOMER or a EUROCLEAR
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.
Your purchases of securities under the DTC system must be made by or
through DTC participants, which will receive a credit for the securities on
DTC's records. Your ownership interest is in turn recorded on the DTC
participants' and indirect participants' records. You will not receive written
confirmation from DTC of their purchase, but you can expect to receive written
confirmation providing details of the transaction, as well as periodic
statements of your holdings, from the DTC participant or indirect participant
through which you entered into the transaction. Transfers of ownership
interests in the securities are accomplished by entries made on the books of
DTC participants acting on behalf of you and other securityholders. You will
not receive securities representing your ownership interest in the securities
offered through this document, except in the event that use of the book-entry
system for these securities is discontinued.
To facilitate subsequent transfers, all securities deposited by DTC
participants with DTC are registered in the name of DTC's nominee, Cede. The
deposit of securities with DTC and their registration in the name of Cede
effects no change in beneficial ownership. DTC has no knowledge of the actual
owners of the securities; DTC's records reflect only the identity of the DTC
participants to whose accounts the securities are credited, which may or may
not be the actual securities owners. DTC participants remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC participants,
by DTC participants to indirect participants, and by DTC participants and
indirect participants to securityholders will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede will consent or vote with respect to these
securities. Under its usual procedures, DTC mails an omnibus proxy to Chase USA
as soon as possible after the record date, which assigns Cede's consenting or
voting rights to those DTC participants to whose accounts these securities are
credited on the relevant record date.
Principal and interest payments on these securities will be made to DTC.
DTC's practice is to credit DTC participants' accounts on the applicable
DISTRIBUTION DATE or PAYMENT DATE in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payment on such DISTRIBUTION DATE or PAYMENT DATE. Payments by DTC
participants to securityholders will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and will be the
responsibility of such DTC participant and not of DTC, the master trust
trustee, the INDENTURE TRUSTEE, the OWNER TRUSTEE or Chase USA, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the master
trust trustee, disbursement of these payments to DTC participants shall be the
responsibility of DTC, and disbursement of such payments to securityholders
shall be the responsibility of DTC participants and indirect participants.
DTC may discontinue providing its services as securities depository for
these securities at any time by giving reasonable notice to Chase USA, the
master trust trustee or the INDENTURE TRUSTEE. If this occurs, in the event
that a successor securities depository is not obtained, DEFINITIVE SECURITIES
will be printed and delivered. Chase USA may decide to discontinue use of the
system of book-entry transfers through DTC or a successor securities
depository. In that event, DEFINITIVE SECURITIES will be delivered to each
securityholder. See "--Definitive Securities" for a description of the
circumstances under which Definitive Securities will be issued.
16
Distributions on securities held through CLEARSTREAM or EUROCLEAR will be
credited to the cash accounts of CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to
tax reporting in accordance with relevant U.S. tax laws and regulations as
described under "--Certain U.S. Federal Income Tax Documentation Procedures
relating to Global Securities" and "Tax Matters." CLEARSTREAM or the EUROCLEAR
operator, as the case may be, will take any other action permitted to be taken
by a securityholder under the POOLING AND SERVICING AGREEMENT or 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 such actions on its behalf through DTC.
Although DTC, CLEARSTREAM and EUROCLEAR have agreed to the foregoing
procedures in order to facilitate transfers of securities among their
participants, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
DEFINITIVE SECURITIES
Although the attached supplement may indicate that this series of
securities, or one or more classes of this series, may be issued in a different
form, it is expected that securities offered through this document will be
issued in book-entry form. If these securities are initially issued in
book-entry form, DEFINITIVE SECURITIES in fully registered, certificated form
will not be issued to any party other than DTC or its nominee unless:
o Chase USA advises the master trust trustee, in the case of
certificates, or the OWNER TRUSTEE for this series, in the case of
notes, in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to this series
of securities, and the master trust trustee or the OWNER TRUSTEE, as
applicable, or Chase USA is unable to locate a qualified successor,
o Chase USA, at its option, advises the master trust trustee, in the case
of certificates, or the OWNER TRUSTEE for this series, in the case of
notes, in writing that it elects to terminate the book-entry system
through DTC, or
o after the occurrence of a SERVICER DEFAULT, in the case of
certificates, or an EVENT OF DEFAULT, in the case of notes,
securityholders representing not less than 50%--or such other
percentage specified in the related supplement--of the outstanding
principal amount of the certificates or the notes, as applicable,
advise the master trust trustee or the OWNER TRUSTEE, as applicable,
and DTC through DTC participants in writing that the continuation of a
book-entry system through DTC or its successor is no longer in the best
interests of the securityholders.
If any of these events occur, DTC must notify all DTC participants of the
availability through DTC of DEFINITIVE SECURITIES. Upon surrender by DTC of the
definitive security representing these securities and instructions for
re-registration, the master trust trustee will issue the securities as
DEFINITIVE SECURITIES, and thereafter the master trust trustee, in the case of
certificates, or the OWNER TRUSTEE, in the case of notes, will recognize the
holders of these DEFINITIVE SECURITIES as holders under the POOLING AND
SERVICING AGREEMENT, in the case of certificates, or the INDENTURE, in the case
of notes.
Allocations of finance charge and principal collections to certificates
which are DEFINITIVE SECURITIES will be made by the master trust trustee.
Distributions of these amounts on notes which are DEFINITIVE SECURITIES will be
made, after these amounts are received through the SERIES CERTIFICATE deposited
in the owner trust, by the INDENTURE TRUSTEE. In both cases, payments will be
made directly to holders of DEFINITIVE SECURITIES in accordance with the
procedures set forth in this prospectus, in the POOLING AND SERVICING AGREEMENT
and any related indenture. Payments on each DISTRIBUTION DATE or PAYMENT DATE
will be made to holders in whose names the DEFINITIVE SECURITIES were
registered at the close of business on the related RECORD DATE. If you own
DEFINITIVE SECURITIES in an amount greater than a minimum level stated in the
POOLING AND SERVICING AGREEMENT or INDENTURE, as applicable, payments of
principal and interest will be sent to you via wire transfer. If you own less
than this minimum level of DEFINITIVE SECURITIES, payments will be made by
check and mailed to you at an address maintained by the master trust trustee or
OWNER TRUSTEE, as applicable.
17
The final payment on any security, whether a DEFINITIVE SECURITY or the
securities registered in the name of DTC or its nominee, will be made only upon
presentation and surrender of the security at the office or agency specified in
the notice of final distribution to securityholders. The master trust trustee
or the INDENTURE TRUSTEE, as applicable, will provide this notice to registered
securityholders no later than the fifth day of the month in which the final
distribution will occur. If the securities are listed on the Luxembourg Stock
Exchange, payments of principal and interest, including the final payment on
any security, will also be made at the offices of Banque Generale du
Luxembourg, S.A.
DEFINITIVE SECURITIES will be transferable and exchangeable at the offices
of any of the transfer agents and registrars, which shall initially be CMB and
the master trust trustee or INDENTURE TRUSTEE, as applicable. No service charge
will be imposed for any registration of transfer or exchange, but the transfer
agent and registrar may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection with the transfer or exchange.
The transfer agent and registrar shall not be required to register the transfer
or exchange of DEFINITIVE SECURITIES for a period of fifteen days preceding the
due date for any payment on the DEFINITIVE SECURITIES.
INITIAL SETTLEMENT
All securities will be held in book-entry form by DTC in the name of Cede
as nominee of DTC. Investors' interests in the 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
will hold positions in accounts as DTC participants.
Custody accounts of investors who elect to hold securities through DTC
will be credited with their holdings against payment in same-day funds on the
settlement date.
Investors who elect to hold securities through CLEARSTREAM or EUROCLEAR
accounts will follow the settlement procedures that apply to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Securities will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between
investors holding securities through DTC will be conducted according to the
rules and procedures applicable to U.S. corporate debt obligations. Secondary
market trading between DTC participants will be settled in same-day funds.
Trading between Clearstream Customers and/or Euroclear
Participants. Secondary market trading between investors holding 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 CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
securities are to be transferred from the account of a DTC participant to the
account of a CLEARSTREAM CUSTOMER or a EUROCLEAR PARTICIPANT, the purchaser
will send instructions to CLEARSTREAM or EUROCLEAR through a CLEARSTREAM
CUSTOMER or EUROCLEAR PARTICIPANT at least one business day prior to
settlement. CLEARSTREAM or EUROCLEAR will instruct the respective depositary,
as the case may be, to receive the securities against payment. Payment will
include interest accrued on the securities from and including the last coupon
payment date to and excluding the settlement date. Payment will then be made by
the respective depositary to the DTC participant's account against delivery of
the securities. After
18
settlement has been completed, the 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. The securities credit will appear the next day, European time, and the
cash debit will be back-valued to, and the interest on the 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 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 the finance
settlement. Under this procedure, CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS purchasing securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the securities were credited to their
accounts. However, interest on the securities would accrue from the value date.
Therefore, in many cases the investment income on the securities earned during
that one-day period may substantially reduce or offset the amount of such
overdraft charges, although this result will depend on each CLEARSTREAM
CUSTOMER'S or EUROCLEAR PARTICIPANT'S particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can use their usual procedures for sending securities to the
respective depositary for the benefit of CLEARSTREAM CUSTOMERS or EUROCLEAR
PARTICIPANTS. The sale proceeds will be available to the DTC seller on the
settlement date. In this way, to the DTC participant a cross-market transaction
will settle no differently than a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CLEARSTREAM CUSTOMERS and EUROCLEAR
PARTICIPANTS may employ their customary procedures for transactions in which
securities are to be transferred by the respective clearing system, through the
respective depositary, to a DTC participant. The seller will send instructions
to CLEARSTREAM or EUROCLEAR through a CLEARSTREAM CUSTOMER or EUROCLEAR
PARTICIPANT at least one business day prior to settlement. In these cases,
CLEARSTREAM or EUROCLEAR will instruct the respective depositary, as
appropriate, to deliver the bonds to the DTC participant's account against
payment. Payment will include interest accrued on the securities from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the 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. Should the CLEARSTREAM CUSTOMER or EUROCLEAR PARTICIPANT
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date, i.e., the
trade fails, receipt of the cash proceeds in the CLEARSTREAM CUSTOMER'S or
EUROCLEAR PARTICIPANT'S account would instead be valued as of the actual
settlement date. Finally, day traders that use CLEARSTREAM or EUROCLEAR and
that purchase securities from DTC participants for delivery to CLEARSTREAM
CUSTOMERS or EUROCLEAR PARTICIPANTS should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(1) borrowing through CLEARSTREAM or EUROCLEAR for one day--until the
purchase side of the day trade is reflected in their CLEARSTREAM or
EUROCLEAR accounts--in accordance with the clearing system's customary
procedure,
19
(2) borrowing the securities in the U.S. from a DTC participant no later
than one day prior to settlement which would give the securities
sufficient time to be reflected in their CLEARSTREAM or EUROCLEAR
account in order to settle the sale side of the trade, or
(3) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at
least one day prior to the value date for the sale to the CLEARSTREAM
CUSTOMER or EUROCLEAR PARTICIPANT.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION PROCEDURES RELATING TO GLOBAL
SECURITIES
A beneficial owner of global securities holding securities through
CLEARSTREAM or EUROCLEAR (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that generally
applies to payments of interest--including original issue discount--on
registered debt issued by U.S. PERSONS, unless:
o each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable
certification requirements, and
o the beneficial owner provides appropriate certification that it is
eligible to obtain an exemption from or a reduced rate of withholding.
Certification requirements for NON-U.S. PERSONS are described under
"Tax Matters--Non-U.S. Certificate Owners and Non-U.S. Note Owners."
U.S. PERSONS should complete and file IRS Form W-9.
The term "U.S. PERSON" means:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in the United States
or under the laws of the United States or of any state,
o an estate the income of which is subject to United States federal
income taxation regardless of its source, or
o a trust that:
-- is subject to the supervision of a court within the United States
and the control of a United States person as described in section
7701(a)(30) of the tax code, or
-- has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person.
A NON-U.S. PERSON is a beneficial owner of securities that is not a U.S.
PERSON.
Investors are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the global securities and the
documentation procedures relating thereto.
DESCRIPTION OF THE CERTIFICATES
- -------------------------------
Following is a summary of the material provisions common to all series of
certificates issued through the POOLING AND SERVICING AGREEMENT, including
generally-distributed certificates and any SERIES CERTIFICATES purchased by
owner trusts and pledged to secure series of notes.
Where the term "certificateholder" is used in the following summary, it
refers also to any owner trust holding a SERIES CERTIFICATE pledged to support
notes.
The assets of the master trust are allocated among:
o certificateholders of each series, and
20
o providers of uncertificated credit enhancement backed by receivables.
Each series issued by the master trust is backed by an amount of principal
receivables and amounts on deposit in various master trust bank accounts. The
attached supplement may describe that your series' INVESTOR INTEREST will be
adjusted by the amount of funds deposited in a bank account or accounts, or
adjusted in other ways. These amounts can vary from period to period, and on
any date are equal to:
(initial INVESTOR INTEREST on the series' CLOSING DATE) -- (aggregate
principal payments made to the series' certificateholders) -- (aggregate
unreimbursed charge-offs and reallocated principal collections for the
series)
Any COLLATERAL INTEREST in a series will also be included in that series'
INVESTOR INTEREST; if your series includes a COLLATERAL INTEREST, a description
will be included in the attached supplement. During each series' REVOLVING
PERIOD, the amount of the series' INVESTOR INTEREST is expected to remain
constant to the extent noted in the attached supplement.
The aggregate INVESTOR INTEREST in the master trust is the sum of the
INVESTOR INTERESTS for all series issued from the master trust.
The certificates of each series represent undivided interests in the
assets of the master trust, including the right to each series' INVESTOR
PERCENTAGE of all cardholder payments on receivables in the master trust.
Certificateholders of each series will therefore receive varying amounts of
collections of principal and finance charges each month, and will also be
allocated a varying portion of receivables in defaulted accounts written off
during each month. Principal collections, finance charge collections and
receivables in defaulted accounts may be allocated to your series in different
ways: the attached supplement will describe how the various INVESTOR
PERCENTAGES are calculated. If your series includes multiple classes of
certificates, collections allocated to your series may be further allocated
among each class. See "--Investor Percentage and Transferor Percentage" for
descriptions of the allocation percentages.
As a certificateholder, your right to collections is limited to the
amounts needed to make required payments to you. Collections allocated to your
series or your class of certificates might be reallocated. The attached
supplement and the POOLING AND SERVICING AGREEMENT set forth how collections
will be allocated to, or reallocated from, your certificates.
Each series of certificates may be included in a GROUP of series. Series
in a GROUP may share excess principal collections, finance charge collections
or both among themselves. The attached supplement will state if your series is
in a GROUP and, if it is, what other series in your GROUP were outstanding on
your series' CLOSING DATE.
Each series of certificates represents interests in the master trust only,
and does not represent interests in or recourse obligations of Chase USA, CMB
or any of their affiliates. A certificate is not a deposit and neither the
certificates nor the underlying master trust accounts or receivables are
insured or guaranteed by the FDIC or any other governmental agency.
TRANSFEROR INTEREST
The total amount of principal receivables and amounts on deposit in
various master trust bank accounts minus the aggregate INVESTOR INTEREST and
the interest of credit enhancement providers--if not included as part of the
INVESTOR INTEREST--is the TRANSFEROR INTEREST. The TRANSFEROR INTEREST may be
certificated or uncertificated. When we refer to the TRANSFEROR CERTIFICATE we
mean this interest in the master trust in certificated or uncertificated form.
This interest in the master trust is currently uncertificated. The holder of
the TRANSFEROR INTEREST is entitled to a varying percentage of cardholder
payments from master trust receivables, called the TRANSFEROR PERCENTAGE.
Chase USA currently owns, and expects to continue owning, the TRANSFEROR
INTEREST. See "--Issuing New Series of Certificates."
21
The amount of principal receivables in the master trust will vary daily as
cardholder payments are received and new receivables are created. The amount of
the TRANSFEROR INTEREST will fluctuate from day to day as the amount of master
trust principal receivables varies. When a series begins to amortize or
accumulate, the INVESTOR INTEREST of the series will decline as principal
payments are made--or accumulated for future payment--to certificateholders.
The TRANSFEROR INTEREST will increase to reflect this decrease in the INVESTOR
INTEREST.
The TRANSFEROR INTEREST may be reduced through the issuance of a new
series as described below under "--Issuing New Series of Certificates." The
TRANSFEROR INTEREST may also be reduced, however, if:
o the servicer adjusts the amount of principal receivables in the master
trust for particular charge-offs from principal receivables used to
calculate the TRANSFEROR INTEREST, and
o the TRANSFEROR enters into a participation or other agreement with
another person who purchases an interest in the TRANSFEROR CERTIFICATE.
See "--Chase USA's Representations and Warranties," "--Rebates and
Fraudulent Charges" and "--Application of Collections" for other discussions on
how the Transferor Interest may be reduced.
ISSUING NEW SERIES OF CERTIFICATES
The POOLING AND SERVICING AGREEMENT provides that Chase USA, as owner of
the TRANSFEROR INTEREST, may from time to time issue new series of
certificates. Each new issuance would decrease the TRANSFEROR INTEREST and
increase the INVESTOR INTEREST.
Each new series may have a maturity date, principal payment method,
interest rate calculation method or other terms different from any other
outstanding series. Each new series may also have credit enhancement available
only to that series. Under the POOLING AND SERVICING AGREEMENT, the master
trust trustee holds credit enhancement only for the benefit of the related
series.
For Chase USA to exchange a portion of its interest in the master trust
for a new series, Chase USA must:
o notify the master trust trustee at least five business days in advance
of the exchange,
o receive written confirmation from each rating agency rating an
outstanding series of securities that issuing the new series of
securities will not cause a downgrade or withdrawal of any outstanding
rating of certificates and notes,
o deliver to the master trust trustee a SERIES SUPPLEMENT describing the
principal terms of the series,
o receive a TAX OPINION that issuing the new series will not have adverse
tax consequences for any outstanding series,
o deliver to the master trust trustee an executed credit enhancement
contract, if required under the terms of the new series, and
o deliver an officer's certificate stating that there are enough
receivables in the master trust to support all existing series and the
new one.
After satisfaction of these conditions and any other conditions set forth in
the POOLING AND SERVICING AGREEMENT, the master trust trustee will issue a new
series of certificates.
The POOLING AND SERVICING AGREEMENT also allows the TRANSFEROR, in
addition to the new issuances described above, to transfer all or a portion of
the TRANSFEROR INTEREST, provided that before the transfer:
o the master trust trustee receives written notification from each rating
agency rating an outstanding series of securities that the transfer
will not result in a lowering of its then existing rating of the
certificates of any outstanding series rated by it, and
o the master trust trustee receives a TAX OPINION.
22
INTEREST ALLOCATIONS
For each series of certificates and each related class, interest will
accrue from the date specified in the applicable supplement, on the outstanding
principal amount of the series or class at the applicable certificate interest
rate. Each certificate interest rate may be fixed, floating or any other type
of rate. Interest will be distributed to certificateholders in the amounts and
on the DISTRIBUTION DATES specified in the related supplement.
Interest payments made on each DISTRIBUTION DATE to a series will be
funded from:
o collections of finance charges allocated to the series' INVESTOR
INTEREST during the preceding MONTHLY PERIOD or MONTHLY PERIODS,
o investment earnings, if any, on any funds held in master trust bank
accounts,
o any credit enhancement, to the extent described in the related
supplement, and
o any derivative counterparty, to the extent described in the related
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 certificates, that series may have more
than one INTEREST FUNDING ACCOUNT.
Your class of certificates will pay interest on the dates and at the
interest rate specified in the attached supplement. If your certificates bear
interest at a floating or variable rate, the attached supplement will describe
how that rate is calculated. For each SERIES CERTIFICATE, the related
supplement will describe how interest is calculated.
PRINCIPAL ALLOCATIONS
Each series of certificates will be scheduled to receive principal in a
single payment, or in installments beginning on the PRINCIPAL COMMENCEMENT DATE
for the series. If a series has more than one class of certificates, a
different PRINCIPAL COMMENCEMENT DATE or scheduled principal payment date may
be assigned to each class. The related supplement will set forth when each
series and class of certificates is expected to receive principal.
Generally, each series will begin in the REVOLVING PERIOD, during which no
principal will be paid to any class of the series. Collections of principal
receivables allocated to a series in its REVOLVING PERIOD will be available, if
specified in the related supplement, to other series in a GROUP or paid to
Chase USA as holder of the TRANSFEROR CERTIFICATE.
Each series or class of certificates will use one or more of the following
principal payment methods:
o principal amortization,
o controlled amortization,
o rapid amortization,
o controlled accumulation, and
o rapid accumulation.
One of the principal payment methods named above will commence at the end
of the REVOLVING PERIOD and continue until:
o the DISTRIBUTION DATE on which the INVESTOR INTEREST for the class or
series is repaid,
o the date on which another principal payment method begins, or
o the SERIES TERMINATION DATE.
Each method involving accumulation will make periodic deposits into a
PRINCIPAL FUNDING ACCOUNT. At the end of the accumulation period, the amount in
the PRINCIPAL FUNDING ACCOUNT will be paid to certificateholders of the related
class or series.
23
Each method involving amortization will make periodic payments of
principal allocated to the series or class to certificateholders. The frequency
of payments will be specified in the related supplement, but in the event of
rapid amortization payments will always be made monthly.
Descriptions of principal payment methods are found in Table I on the
following page.
If your class of certificates is subordinated to more senior classes, you
will receive payments of principal only after the more senior classes are fully
repaid.
For a SERIES CERTIFICATE held by an owner trust, the master trust trustee
will transfer principal payments on the SERIES CERTIFICATE to the owner trust.
The related supplement will set forth how these payments will be made to
noteholders.
You may begin to receive payments of principal earlier or later than
expected. See "Maturity Considerations" for a discussion of how this might
occur.
24
TABLE I: DESCRIPTIONS OF PRINCIPAL PAYMENT METHODS
PRINCIPAL CONTROLLED RAPID CONTROLLED RAPID
AMORTIZATION AMORTIZATION AMORTIZATION ACCUMULATION ACCUMULATION
--------------------- --------------------- --------------------- --------------------- --------------------
Begins PRINCIPAL PRINCIPAL On first occurrence Adjustable date, On first occurrence
COMMENCEMENT COMMENCEMENT of a PAY OUT EVENT set in related of a RAPID
DATE for series or DATE for series or supplement ACCUMULATION
class class EVENT for series or
class
After REVOLVING PERIOD REVOLVING PERIOD Any other period REVOLVING PERIOD REVOLVING PERIOD
Controlled Controlled Controlled Controlled
amortization for amortization for amortization for amortization for
another class another class another class another class
Controlled Controlled Controlled Controlled
accumulation for accumulation for accumulation for accumulation for
another class another class another class another class
Rapid Rapid Rapid Rapid
accumulation accumulation accumulation accumulation for
for another class for another class for another class another class
Cannot Begin After Rapid Rapid N/A Rapid Rapid
amortization amortization amortization amortization
Rapid
accumulation
Ends Upon first to occur Upon first to occur Upon first to occur Upon first to occur Upon first to occur
of: of: of: of: of:
Repayment of Repayment of Repayment of Repayment of Repayment of
series or class series or class series series or class series or class
Beginning of rapid Beginning of rapid SERIES TERMINATION Beginning of rapid Beginning of rapid
amortization amortization DATE amortization amortization
SERIES TERMINATION SERIES TERMINATION Beginning of rapid SERIES TERMINATION
DATE DATE accumulation DATE
SERIES TERMINATION
DATE
Amount Paid Principal allocated CONTROLLED Principal allocated CONTROLLED Principal allocated
to class or series AMORTIZATION to class or series DEPOSIT to class or series
(no more than AMOUNT (no more than AMOUNT deposited deposited each
initial INVESTOR initial INVESTOR each period, then period (no more
INTEREST) INTEREST) paid to than initial
certificateholders INVESTOR INTEREST,
when period ends then paid to
certificateholders
on scheduled
payment date
Applies to Specific class Specific class Entire series Specific class Specific class
Additional CONTROLLED PAY OUT EVENTS CONTROLLED RAPID
Information AMORTIZATION as set forth in the DEPOSIT ACCUMULATION
AMOUNT related AMOUNT EVENTS
as set forth in supplement as set forth in as set forth in the
related related related
supplement supplement; supplement
subject to
adjustment
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The master trust has all right, title and interest in and to the
receivables in accounts designated as master trust accounts, as well as all
future receivables created in these accounts. Chase USA, as TRANSFEROR, has
indicated on its computer files which accounts are designated as master trust
accounts. When new accounts are designated for inclusion in the master trust,
Chase USA will provide a complete list of these additional accounts to the
master trust trustee and Chase USA will file, on behalf of the master trust,
UCC financing statements meeting the requirements of state law. Except as noted
above, Chase USA will take no other steps to identify receivables in master
trust accounts.
CHASE USA'S REPRESENTATIONS AND WARRANTIES
When the master trust issues a new series of certificates, Chase USA, as
TRANSFEROR, will make several representations and warranties to the master
trust, including the following:
25
o as of the CLOSING DATE, Chase USA has the authority to consummate the
issuance, and
o as of the initial account selection date or the date each account was
added to the master trust, it was an ELIGIBLE ACCOUNT.
If a representation or warranty made by Chase USA on the CLOSING DATE is later
found to be materially incorrect when made, and:
o certificateholders of your series had been materially and adversely
affected for a period of at least 60 days,
o notice had been given to Chase USA, and
o the condition persists beyond the date set forth in that notice,
a PAY OUT EVENT for your series can be declared by the master trust trustee, or
by certificateholders representing at least 50% of your series' outstanding
INVESTOR INTEREST. Declaring a PAY OUT EVENT will automatically begin rapid
amortization of principal.
Chase USA will make other representations and warranties, including:
o the POOLING AND SERVICING AGREEMENT constitutes a legal, valid and
binding obligation enforceable against Chase USA, and
o the master trust has all right, title and interest in the receivables
in the MASTER TRUST PORTFOLIO or has a first priority perfected
security interest in these receivables.
If either of these representations and warranties is ever breached, Chase USA
might be required to accept reassignment of the entire MASTER TRUST PORTFOLIO.
Certificateholders representing 50% or more of all of the master trust's
outstanding series' INVESTOR INTEREST may vote to give Chase USA 60 or more
days to cure the breach. If, at the end of this time, the breach has not been
cured, Chase USA:
o will be obligated to accept retransfer of the entire MASTER TRUST
PORTFOLIO, and
o will pay into the master trust's PRINCIPAL ACCOUNT on the next
DISTRIBUTION DATE a cash sum equal to the outstanding INVESTOR INTEREST
and any accrued and unpaid interest due as of that date.
This will constitute payment in full of the aggregate INVESTOR INTEREST.
Reassignment of the MASTER TRUST PORTFOLIO to Chase USA is the only remedy to
any breach of these representations and warranties.
Chase USA makes representations and warranties in the POOLING AND
SERVICING AGREEMENT concerning master trust accounts and the receivables in the
MASTER TRUST PORTFOLIO. Only ELIGIBLE ACCOUNTS can be designated as master
trust accounts. Chase USA can give you no assurance that ELIGIBLE ACCOUNTS will
remain eligible once added to the master trust.
Chase USA also represents that each receivable in the MASTER TRUST
PORTFOLIO is an ELIGIBLE RECEIVABLE when created. If a receivable is found to
be ineligible when created, and this receivable is charged-off as uncollectible
or the master trust's rights to the receivable are impaired, Chase USA must
accept reassignment of the principal amount of this ineligible receivable. The
master trust trustee may allow Chase USA a period of time to cure the
ineligibility before requiring reassignment. Chase USA will accept reassignment
by directing CMB, as servicer, to deduct the principal amount of the ineligible
receivable from the TRANSFEROR INTEREST. If this would make the TRANSFEROR
INTEREST a negative number, Chase USA will make a cash deposit in the master
trust's PRINCIPAL ACCOUNT in the amount by which the TRANSFEROR INTEREST would
have been negative. Any deduction or deposit is considered a repayment in full
of the ineligible receivable. Chase USA's obligation to accept reassignment of
any ineligible receivable is the only remedy to any breach of a representation
or warranty concerning eligibility of receivables.
The attached supplement may specify additional representations and
warranties made by Chase USA when your securities are issued. The master trust
trustee is not required to make periodic
26
examinations of receivables in the MASTER TRUST PORTFOLIO or any records
relating to them. However, CMB, as servicer, will deliver to the master trust
trustee once each year an opinion of counsel affirming, among other things,
that no further action is necessary to maintain the master trust's perfected
security interest in the receivables.
ADDITION OF MASTER TRUST ASSETS
Chase USA has the right to designate, from time to time, additional
accounts to be included as master trust accounts. As described above under "The
Receivables," Chase USA may also be obligated, from time to time, to designate
new accounts to be included as master trust accounts.
Each new account must be an ELIGIBLE ACCOUNT at the time of its
designation. However, new accounts may not be of the same credit quality as
existing master trust accounts.
Chase USA is also permitted to add PARTICIPATIONS to the master trust from
time to time. These PARTICIPATIONS must be undivided interests in a pool of
assets primarily consisting of receivables arising under consumer credit card
accounts owned by Chase USA. To amend the POOLING AND SERVICING AGREEMENT so
that a PARTICIPATION may be added to the master trust without certificateholder
consent, the following must occur:
o Chase USA must deliver an officer's certificate to the master trust
trustee stating that, in Chase USA's reasonable belief, adding the
PARTICIPATION will not have a material adverse effect on
certificateholders' interests, and
o the amendment allowing addition of the PARTICIPATION will not result in
a downgrade or withdrawal of any ratings of any outstanding series of
certificates.
The SEC currently requires that any PARTICIPATIONS added to the master trust be
registered under the Securities Act of 1933.
The POOLING AND SERVICING AGREEMENT allows Chase USA to add accounts to
the master trust automatically upon satisfaction of several conditions,
including:
o each account must be an ELIGIBLE ACCOUNT,
o Chase USA must not have designated the account as an account not to be
added,
o each new account was selected for inclusion in the master trust through
a selection process not harmful to certificateholders' interests, and
o as of the addition date, Chase USA is not insolvent.
In addition to the PARTICIPATION addition requirements noted above, Chase
USA must satisfy several conditions to add PARTICIPATIONS and--if accounts are
not being added automatically--accounts to the master trust, including:
o notice to the master trust trustee, each rating agency rating an
outstanding series of securities and CMB, as servicer,
o delivery and acceptance by the master trust trustee of written
assignment of receivables in new accounts or PARTICIPATIONS to the
master trust,
o delivery of a computer file or microfiche list with a list of all new
accounts or PARTICIPATIONS,
o representation from Chase USA that, on the addition date, each new
account is an ELIGIBLE ACCOUNT and was selected for inclusion in the
master trust through a selection process not harmful to
certificateholders' interests,
o as of the addition date, representation from Chase USA that Chase USA
is not insolvent, and
o receipt of confirmation from each rating agency that the addition will
not result in a downgrade or withdrawal of any ratings of any
outstanding series of certificates or notes.
27
Chase USA expects to file a report on Form 8-K with the SEC on any addition of
assets to the master trust not related to an automatic account addition.
REMOVAL OF MASTER TRUST ASSETS
Chase USA has the right to remove accounts and PARTICIPATIONS from the
master trust, subject to several conditions, including an officer's certificate
from Chase USA confirming:
o that removing the accounts or PARTICIPATIONS will not cause a PAY OUT
EVENT for any outstanding series,
o that Chase USA has delivered to the master trust trustee a list of
accounts or PARTICIPATIONS to be removed,
o that Chase USA represents that the accounts to be removed were not
selected through a selection process believed to be materially adverse
to the interests of the certificateholders and
-- a random selection procedure was used by Chase USA in selecting
the accounts to be removed--and only one such removal is
permitted for each monthly period, or
-- the removed accounts are subject to an arrangement with a third
party where the third party has the right or the option to
purchase the removed accounts, which right or option has arisen
in response to a third-party action or decision not to act and
not the unilateral action of Chase USA, and the third party has
exercised that option,
o receipt of confirmation from each rating agency that the removal will
not result in a downgrade or withdrawal of any ratings of any
outstanding series of certificates or notes,
o that the designation and reassignment of such receivables from removed
accounts will not:
-- adversely affect the tax characterization as debt of any class
of investor certificates of any outstanding series or class in
respect of which an opinion was delivered at the time of
issuance that such class would be treated as debt for U.S.
federal income tax purposes,
-- cause the master trust following such designation and acceptance
to be deemed to be an association taxable as a corporation, and
-- cause or constitute a taxable event in which gain or loss would
be recognized by any investor certificateholder or the master
trust, and
o that as of the removal date, either:
-- the receivables are not more than 15% delinquent by estimated
principal amount and the weighted average delinquency of such
receivables is not more than 60 days, or
-- the receivables are not more than 7% delinquent by estimated
principal amount and the weighted average delinquency of such
receivables does not exceed 90 days.
Chase USA also has the right to remove accounts that have receivables balances
of zero in certain circumstances.
DISCOUNT OPTION
Chase USA, has the option to reclassify a percentage of PRINCIPAL
RECEIVABLES in the MASTER TRUST PORTFOLIO as FINANCE CHARGE RECEIVABLES. This
is referred to as the DISCOUNT OPTION. Chase USA may use the DISCOUNT OPTION to
compensate for a decline in the PORTFOLIO YIELD, but only if there would be
sufficient PRINCIPAL RECEIVABLES to allow for that discounting. The designation
of PRINCIPAL RECEIVABLES as FINANCE CHARGE RECEIVABLES would result in a larger
amount of FINANCE CHARGE RECEIVABLES and a smaller amount of PRINCIPAL
RECEIVABLES. By doing so, Chase USA would reduce the likelihood that a PAY OUT
EVENT would occur as a result of a decreased PORTFOLIO YIELD, and at the same
time will increase the likelihood that Chase USA will have to add PRINCIPAL
RECEIVABLES to the master trust.
28
If the DISCOUNT PERCENTAGE is greater than zero, an amount of master trust
principal collections for each MONTHLY PERIOD equal to:
(the DISCOUNT PERCENTAGE) x (total principal collections allocable to
the master trust)
will be considered finance charge collections and allocated with regular
collections of FINANCE CHARGE RECEIVABLES in the MASTER TRUST PORTFOLIO.
To exercise the DISCOUNT OPTION, Chase USA must satisfy the conditions in
the POOLING AND SERVICING AGREEMENT, including confirmation from each rating
agency that the use of the DISCOUNT OPTION will not result in a downgrade or
withdrawal of any ratings of any outstanding series of certificates or notes.
Chase USA does not intend to exercise its DISCOUNT OPTION.
MASTER TRUST BANK ACCOUNTS
The master trust trustee has established and maintains the following bank
accounts on behalf of all series issued from the master trust:
o the PRINCIPAL ACCOUNT,
o the FINANCE CHARGE ACCOUNT,
o the COLLECTION ACCOUNT,
o the EXCESS FUNDING ACCOUNT, and
o one or more DISTRIBUTION ACCOUNTS.
CMB, as PAYING AGENT, has the revocable right to withdraw funds from the
DISTRIBUTION ACCOUNTS to make distributions to certificateholders.
The master trust trustee may establish, as set forth in the related
supplement, additional bank accounts for each series, including:
o the INTEREST FUNDING ACCOUNT,
o the PRINCIPAL FUNDING ACCOUNT, and
o the PRE-FUNDING ACCOUNT.
All of these bank accounts must be established with an ELIGIBLE
INSTITUTION, which may include:
o CMB, as the servicer, or
o a depository institution, which may be the master trust trustee or an
affiliate, organized under the laws of the United States or any state
which at all times:
-- has a certificate of deposit rating of "P-1" by Moody's,
-- has either a long-term unsecured debt rating of "AAA" by S&P or
a certificate of deposit rating of "A-1+" by S&P, and
-- is a member of the FDIC.
Funds on deposit in any of these master trust bank accounts are invested
in permitted investments, which generally include:
o U.S. government debt,
o deposits which mature within 90 days after the date of investment at
financial institutions having a rating in Moody's and S&P's highest
rating category,
o commercial paper, other than commercial paper issued by Chase USA or
any of its affiliates, having a rating in Moody's and S&P's highest
rating category,
o bankers' acceptances from the highest-rated financial institutions,
29
o some repurchase agreements, and
o any other investments, other than investments in Chase USA or any of
its affiliates, where the short-term unsecured debt or deposits of the
obligor on such investments have a rating in Moody's and S&P's highest
ratings category.
Deposits in series-specific bank accounts are for the benefit of the related
series, and the related supplement may set forth differing permitted
investments for amounts in these series-specific bank accounts.
COMPANION SERIES
The SERIES CERTIFICATE may be paired with a COMPANION SERIES in the
future. The issuance of a COMPANION SERIES is subject to the conditions
described above in "--Issuing New Series of Certificates," including the
condition that the rating agencies confirm that the issuance of a COMPANION
SERIES will not have a negative impact on the ratings of outstanding series of
certificates or notes.
A COMPANION SERIES may be funded with either a deposit to a pre-funding
account funded by the sale of the COMPANION SERIES or may have a variable
principal amount. Any pre-funding account would be for the benefit of the
COMPANION SERIES and not for your benefit.
As principal is allocated to the SERIES CERTIFICATE, the INVESTOR INTEREST
of the COMPANION SERIES will increase and either:
o an equal amount of funds on deposit in the pre-funding account will be
released to Chase USA, or
o an interest in the variable funding certificate that is equal to the
principal allocated to the SERIES CERTIFICATE will be sold and the
proceeds will be distributed to Chase USA.
A COMPANION SERIES may be issued privately or sold publicly. A COMPANION
SERIES sold publicly will be registered under the registration statement we
have filed with the SEC relating to the securities.
A COMPANION SERIES would be issued to finance the interest of Chase USA in
the MASTER TRUST PORTFOLIO. The TRANSFEROR INTEREST held by Chase USA grows if
the amount of PRINCIPAL RECEIVABLES in the master trust does not decrease and
principal is paid to a series or accumulated in a principal funding account for
the benefit of a series. The INVESTOR INTEREST of a COMPANION SERIES will
absorb what would otherwise be growth in the TRANSFEROR INTEREST as a result of
payments or deposits in a principal funding account for the benefit of a
series. Chase USA may choose to issue a COMPANION SERIES rather than have the
growth in the TRANSFEROR INTEREST reflected on its balance sheet for accounting
purposes.
We cannot assure you that terms of a COMPANION SERIES will not have an
adverse impact on the timing or amount of payments allocated to the SERIES
CERTIFICATE. A COMPANION SERIES will have a claim against the assets allocated
to it by the master trust. The master trust will have limited assets. If a
rapid amortization or rapid accumulation occurs for a COMPANION SERIES while
the SERIES CERTIFICATE is outstanding, the percentage of receivables allocated
to the SERIES CERTIFICATE may be reduced if the terms of the supplement
relating to the COMPANION SERIES required that the COMPANION SERIES also
receive its share of principal collections. In addition, if a rapid
amortization or rapid accumulation occurs for a SERIES CERTIFICATE, the
percentage of receivables allocated to the COMPANION SERIES may be reduced
until the SERIES CERTIFICATE is paid in full. See "--Funding Period" for more
discussion on Companion Series.
FUNDING PERIOD
For any series of certificates, principal receivables may not be available
in the amount of the issued certificates. If this occurs, the initial INVESTOR
INTEREST will be less than the certificate principal amount. In this case, the
related supplement will set forth the terms of the FUNDING PERIOD, which is the
period from the series' CLOSING DATE to the earlier of:
30
o the date the series' INVESTOR INTEREST equals the certificate principal
amount, and
o the date specified in the related supplement.
During the FUNDING PERIOD, the series amount not invested in receivables
will be maintained in the PRE-FUNDING ACCOUNT. On the CLOSING DATE, this amount
may be up to 100% of the certificate principal amount. The INVESTOR INTEREST
will increase as new receivables are conveyed to the master trust or as the
INVESTOR INTERESTS of other series are reduced. The INVESTOR INTEREST may
decrease due to charge-offs allocated to the series.
During the FUNDING PERIOD, funds on deposit in the PRE-FUNDING ACCOUNT
will be paid to Chase USA as the INVESTOR INTEREST increases. If the FUNDING
PERIOD does not end by the date specified in the related supplement, any amount
remaining in the PRE-FUNDING ACCOUNT will be repaid to certificateholders. This
type of event may also cause repayment of other amounts to certificateholders,
as set forth in the related supplement.
The prospectus supplement for a series with a FUNDING PERIOD will set
forth:
o the initial INVESTOR INTEREST,
o the full INVESTOR INTEREST, which is the initial certificate principal
balance,
o the date on which the series' INVESTOR INTEREST is expected to equal
the full INVESTOR INTEREST,
o when 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 INVESTOR INTEREST is funded.
A COMPANION SERIES may use a FUNDING PERIOD to pair a new series with an
existing series in, or about to begin, principal amortization or accumulation.
As the INVESTOR INTEREST for the existing series decreases, the INVESTOR
INTEREST for the COMPANION SERIES will increase. If either the existing series
or the COMPANION SERIES experiences a PAY OUT EVENT before the COMPANION SERIES
has reached its full INVESTOR INTEREST, the INVESTOR PERCENTAGES for the two
series may be reset as described in the related supplements. This could have an
effect on the allocation of principal collections to one or both series. We can
give you no assurance, if your series is paired with a COMPANION SERIES, that
the terms of the COMPANION SERIES will have no impact on the timing or amount
of payments made to certificateholders of your series.
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
From the amounts allocated to the master trust, CMB, as servicer, will
allocate finance charge collections, principal collections and receivables in
defaulted accounts to:
o each series,
o if a series has multiple classes, each class of the series,
o the TRANSFEROR INTEREST, and
o if the related supplement so states, to any credit enhancement
providers.
All allocations of these amounts will be made through the respective INVESTOR
PERCENTAGES for each series, the TRANSFEROR PERCENTAGE and, where appropriate,
the CREDIT ENHANCEMENT PERCENTAGE. The related supplements will set forth how
the INVESTOR PERCENTAGES are calculated and, if a series has multiple classes,
how allocations will be made among classes.
The TRANSFEROR PERCENTAGE is, in all cases, equal to:
100% - (all INVESTOR PERCENTAGES for outstanding series) - (all CREDIT
ENHANCEMENT PERCENTAGES for outstanding series)
31
APPLICATION OF COLLECTIONS
Except in the circumstance described below, CMB, as servicer, must deposit
into the COLLECTION ACCOUNT, no later than two days after processing, all
payments made on receivables in the MASTER TRUST PORTFOLIO. CMB must also
allocate these deposits between accounts and to various parties, as described
below. However, CMB will be able to make these deposits on a monthly or other
periodic basis if one of the following is true:
o all rating agencies rating an outstanding series agree in writing that
CMB does not need to make daily deposits, or
o CMB has a short-term rating of "P-1" from Moody's, a short-term rating
of "A-1" from S&P and deposit insurance from the Bank Insurance Fund.
CMB must make daily or periodic deposits to the COLLECTION ACCOUNT only to the
extent that the funds are needed for deposit into other bank accounts or
distribution to certificateholders or other parties. If the COLLECTION ACCOUNT
balance ever exceeds this amount for deposit or distribution, CMB will be able
to withdraw the excess.
Each time a COLLECTION ACCOUNT deposit is made, CMB will withdraw the
following amounts and apply them as indicated:
o Transferor Interest and Principal. The TRANSFEROR PERCENTAGE of
deposits of principal and finance charge collections will be paid or
held for payment to Chase USA as holder of the TRANSFEROR CERTIFICATE.
However, if the MINIMUM TRANSFEROR INTEREST exceeds the TRANSFEROR
INTEREST on the relevant date of processing, principal collections up
to the amount of such excess otherwise payable to the TRANSFEROR
INTEREST will be deposited to the PRINCIPAL ACCOUNT, the EXCESS FUNDING
ACCOUNT, or paid to series of certificates, as set forth in the POOLING
AND SERVICING AGREEMENT,
o Investor Finance Charges. For each series, the relevant INVESTOR
PERCENTAGE of finance charge collections will be deposited into the
FINANCE CHARGE ACCOUNT for allocation and distribution as set forth in
the related supplement,
o Investor Principal. Each series will be allocated a varying share of
principal collections based on the principal distribution status of the
series as follows:
-- if the series is in the REVOLVING PERIOD, the INVESTOR
PERCENTAGE of principal collections allocated to the series will
be invested or held for investment in new receivables,
-- if the series is in controlled accumulation or controlled
amortization, the INVESTOR PERCENTAGE of principal collections
allocated to the series will be available to fund the relevant
period's controlled deposit amount or controlled amortization
amount, and
-- if the series is in principal amortization or rapid
amortization, the INVESTOR PERCENTAGE of principal collections
allocated to the series will be deposited into the PRINCIPAL
ACCOUNT for distribution as provided in the related supplement.
As described in the related supplement, other series may use principal
collections not required by a series in any period to make deposits or
distributions. If the MINIMUM TRANSFEROR INTEREST exceeds the TRANSFEROR
INTEREST on the relevant date of processing, principal collections allocated to
but not needed by a series, up to the amount of such excess, will be deposited
to the PRINCIPAL ACCOUNT, the EXCESS FUNDING ACCOUNT, or paid to other series
of certificates, as set forth in the POOLING AND SERVICING AGREEMENT.
If a series of certificates has more than one class, principal and finance
charge collections allocated to the series will be further allocated and
applied to each class as set forth in the related supplement.
Principal collections allocated to a series but not required for deposit
or distribution may be shared with other series. The related supplement will
set forth the manner and priority of any principal sharing. See "--Shared
Principal Collections" for more information.
32
Principal collections not paid to Chase USA because the TRANSFEROR
INTEREST is less than the MINIMUM TRANSFEROR INTEREST will be held in the
PRINCIPAL ACCOUNT and paid to Chase USA when the TRANSFEROR INTEREST is again
at least equal to the MINIMUM TRANSFEROR INTEREST. Amounts so deposited in the
PRINCIPAL ACCOUNT will be allocated as regular principal collections to series
in their accumulation or amortization periods, as set forth in the related
supplements.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
If a series is in a GROUP, finance charge collections allocated to the
series in excess of the amount needed to make deposits or payments may be
shared with other series in the GROUP. If one series requires more finance
charge collections than allocated through its INVESTOR PERCENTAGE, it will have
access to all of these shared excess finance charge collections in other series
in its GROUP. If two or more series require more finance charge collections,
excess finance charge collections in the GROUP will be shared between the
series in the manner and priority set forth in the related supplements.
SHARED PRINCIPAL COLLECTIONS
If a series is allocated principal in excess of the amount needed for
deposit or distribution, this excess amount will be available to make principal
payments or deposits required by other series. These shared principal
collections may be limited to series within a GROUP. If principal collections
allocated to a series are shared with another series, the INVESTOR INTEREST for
the series from which collections were shared will not be reduced.
DEFAULT ALLOCATIONS
Each month, MASTER TRUST PORTFOLIO principal receivables in defaulted
accounts will be allocated to each series based on each series' INVESTOR
PERCENTAGE. Defaulted accounts are ACCOUNTS which were written off by the
servicer as uncollectible. The default amount allocated to each series will, if
the series has multiple classes of certificates, be further allocated to each
class.
REBATES AND FRAUDULENT CHARGES
CMB may adjust the amount of principal receivables in the MASTER TRUST
PORTFOLIO because of:
o a rebate or refund to a cardholder,
o merchandise refused or returned by a cardholder, and
o fraudulent or counterfeit charges.
The TRANSFEROR INTEREST will be reduced--net of the creation of new
receivables--by the adjustment amount. If reducing the TRANSFEROR INTEREST
would cause it to be less than the MINIMUM TRANSFEROR INTEREST, Chase USA, as
TRANSFEROR, will be required to pay the deficient amount into the EXCESS
FUNDING ACCOUNT.
INVESTOR CHARGE-OFFS
Each month, principal receivables in defaulted accounts will be allocated
to each series. Allocated default amounts will reduce each series' INVESTOR
INTEREST, unless these defaulted amounts are reimbursed through payment of
finance charge collections or other amounts, as set forth in each series'
supplement. Reducing a series' INVESTOR INTEREST through allocation of default
amounts is called an INVESTOR CHARGE-OFF. The INVESTOR INTEREST can be
increased through reimbursement of INVESTOR CHARGE-OFFS, which can happen in
any MONTHLY PERIOD where finance charge collections are available for that
purpose.
If your series has multiple classes, INVESTOR CHARGE-OFFS will generally
be applied to subordinate classes first. If you own a subordinate class of
certificates, your INVESTOR INTEREST could be reduced before other classes are
affected. The attached supplement describes how INVESTOR CHARGE-OFFS are
allocated to your class and any other classes.
33
OPTIONAL REPURCHASE
For each series, Chase USA--for so long as Chase USA is the servicer or an
affiliate of the servicer--has the option to repurchase the remaining INVESTOR
INTEREST when the series' total outstanding INVESTOR INTEREST is no more than
5% of the INVESTOR INTEREST on the series' CLOSING DATE. The repurchase price
must be for:
o the dollar amount of all of the remaining INVESTOR INTEREST--less any
amount on deposit in an associated PRINCIPAL FUNDING ACCOUNT--plus any
accrued and unpaid interest through the repurchase date, or
o a different optional repurchase price set forth in the related
supplement.
FINAL PAYMENT OF PRINCIPAL; SERIES TERMINATION
Each series will end on the earliest to occur of:
o the date on which the series' INVESTOR INTEREST is reduced to zero,
o the date set forth in the related supplement as the last day on which
interest and principal will be distributed to certificateholders,
referred to as the SERIES TERMINATION DATE, and
o the date on which the master trust terminates.
If the INVESTOR INTEREST is greater than zero on the SERIES TERMINATION DATE,
CMB or the master trust trustee may be required to sell receivables in an
amount sufficient to repay the outstanding INVESTOR INTEREST. Chase USA and its
affiliates and agents will not be permitted to purchase the receivables in this
type of sale.
PAY OUT EVENTS
For each series issued from the master trust, occurrence of a PAY OUT
EVENT will begin rapid amortization of principal. Rapid amortization of
principal will interrupt and replace the REVOLVING PERIOD or any other form of
principal amortization or accumulation. A PAY OUT EVENT will occur for all
series issued from the master trust if any one of the following occurs:
o Chase USA, as TRANSFEROR, is insolvent or enters receivership,
o Chase USA is unable for any reason to transfer receivables to the
master trust as required by the POOLING AND SERVICING AGREEMENT, or
o the master trust becomes subject to regulation as an "investment
company" within the meaning of the Investment Company Act of 1940.
Each series may, in the related supplement, specify additional PAY OUT EVENTS
applicable only to that series.
If Chase USA, as TRANSFEROR, voluntarily begins liquidation or a receiver
is appointed for Chase USA, Chase USA will:
o immediately stop transferring receivables to the master trust, and
o promptly notify the master trust trustee of the event.
Within 15 days the master trust trustee will publish a notice, stating that the
master trust trustee intends to liquidate the receivables in the MASTER TRUST
PORTFOLIO. The master trust trustee will liquidate the receivables unless
instructed to do otherwise by certificateholders representing a majority of the
outstanding INVESTOR INTEREST, or by Chase USA's conservator or receiver. The
conservator or receiver may have the power to cause or prevent an early sale of
master trust assets. Any early sale of these assets could cause early repayment
of outstanding certificates. Chase USA and its affiliates and agents will not
be permitted to purchase the receivables in this type of sale.
34
Rapid amortization begins immediately when any PAY OUT EVENT occurs. If
rapid amortization begins for your series before the scheduled payment date on
your certificates, you could begin receiving principal distributions earlier
than expected, which may shorten the average life of your investment.
SERVICING COMPENSATION
CMB, as servicer, receives a fee for its servicing activities and
reimbursement of expenses incurred in administering the master trust. This
servicing fee accrues for each outstanding series, in the amounts and
calculated on the balances as set forth in the related supplement. Each series'
servicing fee is payable each period from collections of FINANCE CHARGE
RECEIVABLES allocated to the series; some series, however, may direct all or a
portion of INTERCHANGE toward paying the servicing fee. In series with multiple
classes of certificates, each class will be responsible for a portion of the
series' servicing fee. Neither the master trust nor certificateholders are
responsible for any servicing fee allocable to the TRANSFEROR INTEREST.
THE SERVICER
The servicer is responsible for servicing and administering receivables in
the MASTER TRUST PORTFOLIO. CMB, currently the servicer, has delegated some of
its servicing duties to First Data Resources, Inc., a computer data processing
servicer for the bankcard industry and substantially all of its remaining
duties to Chase USA. The servicer is required to maintain insurance coverage
against losses through wrongdoing of its officers and employees who service
receivables.
SERVICER DEFAULT
The POOLING AND SERVICING AGREEMENT and any SERIES SUPPLEMENT specify the
duties and obligations of the servicer. A failure by the servicer to perform
its duties or fulfill its obligations can result in a SERVICER DEFAULT.
SERVICER DEFAULTS include:
o failure by the servicer to make any payment, transfer or deposit, or to
give instructions to the master trust trustee to do so, on the required
date under the POOLING AND SERVICING AGREEMENT or any SERIES SUPPLEMENT
or within the applicable grace period not exceeding 10 business days,
o failure on the part of the servicer to observe or perform any of its
other covenants or agreements if the failure:
-- materially adversely affects certificateholders of any series
issued and outstanding under the master trust, and
-- continues unremedied for a period of 60 days after written
notice and continues to materially adversely affect those
certificateholders, or
the delegation by the servicer of its duties, except as specifically
permitted under the POOLING AND SERVICING AGREEMENT and any SERIES
SUPPLEMENT,
o any representation, warranty or certification made by the servicer in
the POOLING AND SERVICING AGREEMENT and any SERIES SUPPLEMENT, or any
certificate delivered under the terms of those agreements, proves to
have been incorrect when made if it:
-- materially adversely affects certificateholders of any series
issued and outstanding under the master trust, and
-- continues to be incorrect in any material respect for a period
of 60 days after written notice and continues to materially
adversely affect those certificateholders,
o specific events of bankruptcy, insolvency or receivership of the
servicer, or
o any other event specified in the related supplement.
35
If a SERVICER DEFAULT occurs, the master trust trustee or
certificateholders representing a majority of the aggregate outstanding
INVESTOR INTEREST may remove CMB as servicer to the master trust and appoint a
new servicer. If a new, eligible servicer is not appointed or has not accepted
appointment by the time CMB--or a successor servicer--has ceased to act as
servicer, the master trust trustee will become the servicer. If the master
trust trustee is legally unable to act as successor servicer, then the master
trust trustee will use its best efforts to sell the receivables in the MASTER
TRUST PORTFOLIO by the solicitation of competitive bids. Chase USA and its
affiliates and agents will not be permitted to purchase the receivables in this
type of sale.
Chase USA's rights and obligations as TRANSFEROR will be unaffected by any
change in servicer.
If a conservator or receiver is appointed for the servicer and this causes
a SERVICER DEFAULT, the conservator or receiver may have the power to prevent a
transfer of servicing duties to a successor servicer.
PAYMENT OF EXPENSES
CMB, as servicer, has agreed to pay some expenses incurred in servicing
the MASTER TRUST PORTFOLIO, including:
o fees and expenses of the master trust trustee,
o fees and expenses of independent certified public accountants, and
o other fees and expenses of the master trust, excluding taxes.
REPORTS TO CERTIFICATEHOLDERS
Certificateholders of each series issued from the master trust will
receive reports with information on the series and the master trust. CMB, as
servicer, will prepare a certificateholder report on each series' DISTRIBUTION
DATES, setting forth information as specified in the related supplement. If a
series has multiple classes, information will be provided for each class, as
specified in the related supplement.
Periodic information to certificateholders generally will include:
o the total amount distributed,
o the amount of principal and interest for distribution,
o principal collections allocated to the series and to each class of
certificates,
o finance charge collections allocated to the series and to each class of
certificates,
o the aggregate amount of principal receivables in the MASTER TRUST
PORTFOLIO,
o the series' INVESTOR INTEREST amount and the INVESTOR INTEREST as a
percentage of principal receivables in the MASTER TRUST PORTFOLIO,
o receivables in the MASTER TRUST PORTFOLIO broken out by delinquency
status,
o aggregate defaults allocated to the series,
o INVESTOR CHARGE-OFFS for the series or each class of the series, and
any reimbursement of INVESTOR CHARGE-OFFS,
o the servicing fee due from the series,
o for each series or class, the available amount of credit enhancement,
if any,
o the "pool factor," which is the ratio of the current INVESTOR INTEREST
to the initial INVESTOR INTEREST,
o the PORTFOLIO YIELD for the series, and
36
o if the series or a class of certificates bears interest at a floating
rate, information relating to the floating rate.
CMB will also provide an annual summary of distributions to each series by
January 31 of the succeeding year. This information is intended to help
securityholders prepare their tax returns.
EVIDENCE AS TO COMPLIANCE
The POOLING AND SERVICING AGREEMENT provides that by March 31 of each
calendar year, CMB, as servicer, will have a firm of independent certified
public accountants furnish reports showing that, for the prior calendar year:
o the accounting firm has reviewed management's assertion that the system
of internal control over servicing of securitized credit card
receivables met the criteria for effective internal control as
specified by the Committee of Sponsoring Organizations of the Treadway
Commission, and that in the accounting firm's opinion, management's
assertion is fairly stated in all material respects, and
o for each outstanding series, the accounting firm has reviewed at least
one report prepared by the servicer from each quarter of the calendar
year, compared the amounts set forth in the reports with the servicer's
computer reports and disclosed any discrepancies.
The POOLING AND SERVICING AGREEMENT also provides that by March 31 of each
year, an officer of CMB will forward a signed statement to the master trust
trustee, stating that the servicer has performed under its obligations--as set
forth in the POOLING AND SERVICING AGREEMENT--during the prior calendar year,
and if there has been a default in the performance of any obligation,
specifying the nature and status of the default.
AMENDMENTS
The POOLING AND SERVICING AGREEMENT and any SERIES SUPPLEMENT may be
amended by Chase USA, CMB and the master trust trustee, as set forth in the
POOLING AND SERVICING AGREEMENT and the relevant SERIES SUPPLEMENT. These
amendments may be made without certificateholder consent to do the following:
o cure any ambiguity,
o revise specific exhibits and schedules,
o correct or supplement any provision which may be inconsistent with any
other provision, or
o add any necessary provision not inconsistent with the existing
provisions of the operative documents.
No amendment may be made without certificateholder consent which in any
material respect would adversely affect any certificateholder's interest or
which would significantly change the permitted activities of the master trust.
Amendment without certificateholder consent can occur only if:
o CMB, as servicer, furnishes an officer's certificate to the master
trust trustee, stating that the amendment will not materially adversely
affect any existing certificateholder's interest and will not
significantly change the permitted activities of the master trust,
o the amendment will not cause the master trust to be subject to
corporate taxation, or have any other negative federal income tax
effect on the master trust or certificateholders,
o each rating agency rating an affected series of certificates provides
written confirmation that the amendment will not cause a downgrade or
withdrawal of any existing rating of certificates or notes, and
37
o the amendment does not do any of the following:
-- reduce the amount or delay the timing of scheduled distributions
to certificateholders of any series,
-- change the manner or method of calculating interest due to
certificateholders of any series,
-- alter the requirements for calculating the MINIMUM TRANSFEROR
INTEREST for any outstanding series,
-- change the manner in which the TRANSFEROR INTEREST is
calculated, or
-- reduce the percentage of the INVESTOR INTEREST required to
consent to proposed changes which do require certificateholder
consent.
The POOLING AND SERVICING AGREEMENT may be amended by Chase USA, CMB and
the master trust trustee with the consent of certificateholders representing a
majority of the INVESTOR INTEREST which is adversely affected by an amendment
or, with respect to an amendment to significantly change the permitted
activities of the master trust, a majority of the INVESTOR INTEREST of all
certificateholders. Even with consent, these amendments may not occur if they:
o reduce the amount of or delay the timing of scheduled distributions to
certificateholders of any series,
o change the manner of calculating the INVESTOR INTEREST, the INVESTOR
PERCENTAGE or the amount of defaults allocated to certificateholders
without the consent of each affected certificateholder, and
o reduce the percentage of the INVESTOR INTEREST required to consent to
any amendment, without the consent of each affected certificateholder.
LIST OF CERTIFICATEHOLDERS
Certificateholders representing 10% of the outstanding INVESTOR INTEREST
of a series--or any other percentage as set forth in the related
supplement--may request access to the master trust trustee's current list of
certificateholders for purposes of communicating with other certificateholders
about their rights under the POOLING AND SERVICING AGREEMENT. See "--Book-Entry
Registration" and "--Definitive Securities."
THE MASTER TRUST TRUSTEE
Each series' prospectus supplement will identify the master trust trustee
under the POOLING AND SERVICING AGREEMENT. Chase USA, CMB and their affiliates
may from time to time enter into banking and trustee relationships with the
master trust trustee, and all three parties may from time to time hold
certificates in their own names.
In addition, where required by local jurisdictions, the master trust
trustee may appoint a co-trustee or separate trustees of all or any part of the
master trust. If this occurs, all rights, powers, duties and obligations
conferred or imposed by the POOLING AND SERVICING AGREEMENT on the master trust
trustee will be conferred or imposed:
o jointly on the master trust trustee and any separate trustee or
co-trustee, or
o where the master trust trustee shall be incompetent or unqualified to
perform required acts, singly upon any separate trustee or co-trustee.
In each case, a separate trustee or co-trustee shall exercise and perform
these rights, powers, duties and obligations solely at the direction of the
master trust trustee.
The master trust trustee may resign at any time. If this occurs, Chase USA
will be obligated to appoint a successor master trust trustee. Chase USA may
also remove the master trust trustee and appoint a successor if:
38
o the master trust trustee ceases to be eligible to continue in that role
under the POOLING AND SERVICING AGREEMENT; or
o the master trust trustee becomes insolvent.
Any resignation or removal of a master trust trustee will not become
effective until appointment of, and acceptance by, a successor.
MASTER TRUST TERMINATION
The master trust is scheduled to end on the earliest of:
o the date the aggregate INVESTOR INTEREST--including the interest of any
credit enhancement provider, if not part of the INVESTOR INTEREST--is
reduced to zero,
o the date on which all receivables are sold, disposed of or otherwise
liquidated due to insolvency, and
o August 31, 2016.
CMB and Chase USA may inform the master trust trustee of a change in the master
trust termination date, provided that a change may not affect existing
certificateholders.
DESCRIPTION OF THE NOTES
Following is a summary of the material provisions common to all series of
notes issued through an INDENTURE and offered by this prospectus. The
particular terms of your notes are described in the related supplement. The
summary is qualified in its entirety by references to the provisions of your
INDENTURE and related SERIES CERTIFICATE, and the related DEPOSIT AND
ADMINISTRATION AGREEMENT and TRUST AGREEMENT.
An owner trust will issue the notes under an INDENTURE. The owner trust
will pledge a SERIES CERTIFICATE to the INDENTURE TRUSTEE to secure the payment
of the notes. Each owner trust will issue one or more classes of notes that may
have different maturity dates, interest rates, priorities of payments and debt
ratings.
Chase USA will own the residual equity interest in each owner trust.
Amounts paid to the owner trust as holder of a SERIES CERTIFICATE that are not
payable in respect of the notes issued by the owner trust and not required to
be retained in a spread account will be distributed to Chase USA.
PRINCIPAL AND INTEREST ON THE NOTES
The related supplement will describe the timing and priority of payment,
seniority, allocations of losses, NOTE RATE and amount of or method of
determining payments of principal and interest on each class of notes of your
series. Your right to receive payments of principal and/or interest may be
senior or subordinate to the rights of holders of any other class or classes of
notes of your series, as described in related supplement. Payments of interest
on the notes of your series may be made prior to payments of principal. The
dates for payments of interest and principal on the notes of your series may be
different from the DISTRIBUTION DATES for the SERIES CERTIFICATE pledged to
secure payment of your notes. One or more classes of notes of your series may
be redeemable in whole or in part under the circumstances described in the
related supplement, including when Chase USA exercises its option under the
POOLING AND SERVICING AGREEMENT to purchase the related SERIES CERTIFICATE.
Your notes may have fixed principal payment schedules. In that event, you
would be entitled to receive on each specified PAYMENT DATE the applicable
amount of principal designated to be repaid, in the manner and to the extent
described in the related supplement.
Payments to all the noteholders of each class will have the same priority.
Under some circumstances, there may not be sufficient amounts available to pay
the amount of interest which is required to be paid to all the noteholders of
your class. In that event, you will receive a share, based upon the aggregate
amount of interest due to your class, of the aggregate amount available for
distribution of interest on the notes of your series.
39
If your series includes two or more classes of notes, the sequential order
and priority of payment of principal and interest, and any schedule or formula
or other provisions for determining the amount of principal and interest of
each class will be described in the related supplement. Payments of principal
and interest on any class of notes will be made equally among all the
noteholders of that class based on the principal amount of notes held by each
noteholder.
THE INDENTURES
Your owner trust will issue one or more classes of notes under an
INDENTURE. A form of INDENTURE has been filed as an exhibit to the Registration
Statement.
Events of Default: Rights Upon Event of Default. With respect to the notes
of a given series, "EVENTS OF DEFAULT" under your INDENTURE will be any of the
following:
o the owner trust fails to pay interest or principal when due and
payable,
o the owner trust becomes subject to regulation as an "investment
company" within the meaning of the Investment Company Act of 1940,
o specific events of bankruptcy with respect to the owner trust, and
o any other EVENTS OF DEFAULT described in the related supplement.
During the occurrence of an EVENT OF DEFAULT, the INDENTURE TRUSTEE or
holders of a majority in principal amount of the notes of your series may
declare the principal of the notes to be immediately due and payable. That
declaration may be rescinded by the holders of a majority of the notes with
respect to which the EVENT OF DEFAULT has occurred.
If your notes are declared to be due and payable following an EVENT OF
DEFAULT, the INDENTURE TRUSTEE may institute proceedings to collect amounts due
or foreclose on the owner trust property, exercise remedies as a secured party,
sell the owner trust property to a party or parties other than Chase USA and
its affiliates and agents or have the owner trust keep the owner trust property
and continue to apply collections on the owner trust property as if there had
been no declaration of acceleration. However, the INDENTURE TRUSTEE is
prohibited from selling the owner trust property following an EVENT OF DEFAULT,
unless:
o the holders of all the notes consent to the sale,
o the proceeds of the sale are sufficient to pay in full the principal
and the accrued interest on the notes at the date of the sale, or
o there has been an EVENT OF DEFAULT arising from a failure to make a
required payment of principal or interest on the notes, and the
INDENTURE TRUSTEE:
-- determines that the proceeds of the owner trust property would
not be sufficient to make all payments on the notes when those
payments would have become due if the obligations had not been
declared due and payable, and
-- obtains the consent of the holders of sixty-six and two-thirds
percent of the outstanding principal amount of the notes.
If an EVENT OF DEFAULT occurs and is continuing, the INDENTURE TRUSTEE
will not be obligated to exercise any of the rights or powers under the
INDENTURE at the request or direction of any noteholders, if 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 the provisions for indemnification and other
limitations contained in the INDENTURE, a majority of the noteholders of your
series:
o will have the right to direct the time, method and place of conducting
any proceeding or any remedy available to the INDENTURE TRUSTEE, and
o may, in some cases, waive any default with respect to their notes,
except a default:
-- in the payment of principal or interest, or
40
-- in respect of a covenant or provision of the INDENTURE that
cannot be modified without the waiver or consent of all the
holders of the notes of your series.
The INDENTURE TRUSTEE'S right to sell the SERIES CERTIFICATE will be
subject to restrictions on transferability described in the SERIES SUPPLEMENT,
including a requirement that no more than ninety-nine persons hold interests in
the master trust (including the SERIES CERTIFICATE) that have been issued
without an opinion for federal income tax purposes that those interests would
be treated as debt and limitations on the nature of the potential purchasers of
the SERIES CERTIFICATE. Examples of these limitations are:
o any foreign purchaser must certify that its ownership of the SERIES
CERTIFICATE is effectively connected with a trade or business within
the United States,
o any potential purchaser that is a partnership, Subchapter S corporation
or grantor trust for federal income tax purposes will be required to
represent that its interest in the SERIES CERTIFICATE represents less
than a specified percentage of its assets, and
o a potential purchaser must not be an employee benefit plan, a PLAN or
any entity whose underlying assets include "plan assets."
Also, any transfer of the SERIES CERTIFICATE in foreclosure will be
subject to the requirement that each purchaser of an interest in the SERIES
CERTIFICATE deliver to the master trust trustee and Chase USA an investment
letter relating to compliance with applicable securities laws and other
restrictions described in the applicable SERIES SUPPLEMENT.
You may institute proceedings with respect to the INDENTURE only if:
o you have previously given written notice to the INDENTURE TRUSTEE that
an EVENT OF DEFAULT continues,
o not less than 25% of the noteholders of your series have made written
request to the INDENTURE TRUSTEE to institute the proceeding in its own
name as INDENTURE TRUSTEE,
o you have offered the INDENTURE TRUSTEE indemnity reasonably
satisfactory to it against the costs, expenses and liabilities that may
be incurred in complying with that request,
o the INDENTURE TRUSTEE has for 60 days after receipt of notice, request
and offer of indemnity failed to institute the proceeding, and
o no direction inconsistent with the written request has been given to
the INDENTURE TRUSTEE during the 60-day period by a majority of the
noteholders.
In general, the INDENTURE TRUSTEE will enforce the rights and remedies of
the holders of accelerated notes. However, holders of notes will have the right
to institute any proceeding with respect to the INDENTURE if the following
conditions are met:
o the holder gives the INDENTURE TRUSTEE written notice of a continuing
EVENT OF DEFAULT,
o the holders of at least 25% in aggregate principal amount of the
outstanding notes make a written request of the INDENTURE TRUSTEE to
institute a proceeding as INDENTURE TRUSTEE,
o the holders offer indemnity reasonably satisfactory to the INDENTURE
TRUSTEE against the costs, expenses and liabilities of instituting a
proceeding,
o the INDENTURE TRUSTEE has not instituted a proceeding within 60 days
after receipt of the request and offer of indemnification, and
o the INDENTURE TRUSTEE has not received from the holders of a majority
in aggregate principal amount of the outstanding notes a direction
inconsistent with the request.
In addition in all circumstances, if the owner trust fails to pay interest
or principal when due and payable, the holders of the notes will have the right
to sue to force payment to be made.
41
The INDENTURE TRUSTEE and the noteholders, by accepting the notes, will
agree that they will not institute against the owner trust or master trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
The INDENTURE TRUSTEE, the OWNER TRUSTEE in its individual capacity, and
Chase USA as owner of the equity interest in the owner trust will not be
personally liable for the payment of the principal of or interest on the notes
or for the agreements of the owner trust contained in the INDENTURE.
Modification of Indenture. The owner trust and the INDENTURE TRUSTEE may,
with the consent of the holders of a majority of the notes, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the INDENTURE, or modify in any manner the rights of the
noteholders.
The owner trust and the INDENTURE TRUSTEE may, without the consent of the
holders of any notes, enter into one or more supplemental indentures for any of
the following purposes:
o to correct the description of any property 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
owner trust,
o to add to the covenants of the owner trust, for the benefit of the
holders of the notes, or to surrender any right or power of the owner
trust,
o to transfer or pledge any property to the INDENTURE TRUSTEE,
o to cure any ambiguity or supplement any provision in any supplemental
indenture that may be inconsistent with any other provision in any
supplemental indenture if that action would not materially and
adversely affect the interests of the holders of the notes,
o to appoint a successor trustee with respect to the notes, or
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.
The owner trust and the INDENTURE TRUSTEE will not enter into any
supplemental indenture that would:
o cause the owner trust or the master trust to be classified as an
association or a publicly traded partnership taxable as a corporation
for United States federal income tax purposes, or
o cause a taxable event that would cause the beneficial owner of any
outstanding notes to recognize gain or loss.
CERTAIN COVENANTS
The owner trust will not:
o except as expressly permitted by the INDENTURE, the DEPOSIT AND
ADMINISTRATION AGREEMENT and the TRUST AGREEMENT, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of the
owner trust,
o claim any credit on or make any deduction from the principal or
interest payable in respect of the notes (other than amounts withheld
under the tax code or applicable state law) or assert any claim against
any present or former holder of the notes because of the payment of
taxes levied or assessed on the owner trust,
o permit the validity or effectiveness of 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 permitted by the
INDENTURE,
o permit any lien, claim, or security interest to be created on the
assets of the owner trust, or
o permit the lien of the INDENTURE not to constitute a valid first
priority security interest in the owner trust.
42
Annual Compliance Statement. The owner trust 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.
List of Noteholders. Upon the issuance of DEFINITIVE NOTES, three or more
holders of the notes who have each owned a note for at least six months 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. An 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 for your series is identified in the related
supplement. The INDENTURE TRUSTEE may resign at any time, in which event your
ADMINISTRATOR will appoint a successor INDENTURE TRUSTEE for your series. The
ADMINISTRATOR may also 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. The ADMINISTRATOR will then be obligated to appoint
a successor INDENTURE TRUSTEE for your series. If an EVENT OF DEFAULT occurs
under an INDENTURE and the related supplement provides that a given class of
notes of your series is subordinated to one or more other classes of notes of
your series, 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 of those classes 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 series of notes will not
become effective until the successor INDENTURE TRUSTEE accepts its appointment
for your series.
TRANSFER AND ASSIGNMENT OF THE SERIES CERTIFICATE
On the CLOSING DATE for any series of notes, Chase USA will deposit in the
owner trust the SERIES CERTIFICATE under the terms of the DEPOSIT AND
ADMINISTRATION AGREEMENT. On the CLOSING DATE, the OWNER TRUSTEE will execute,
and the INDENTURE TRUSTEE will authenticate and deliver to Chase USA, the
notes.
REPORTS TO NOTEHOLDERS
On or prior to each TRANSFER DATE, the ADMINISTRATOR will provide to the
INDENTURE TRUSTEE for the INDENTURE TRUSTEE to forward to you and to each other
noteholder of your series, and to the OWNER TRUSTEE, a statement with the
following information on the notes for the related PAYMENT DATE or the period
since the previous PAYMENT DATE, as applicable:
o the amount of the distribution allocated to principal on the notes,
o the amount of the distribution allocated to interest on the notes,
o if the notes are floating rate, the rate for the current period,
o the aggregate outstanding principal balance of the notes after giving
effect to all payments reported under the first clause above, and
43
o the amount on deposit in the OWNER TRUST SPREAD ACCOUNT, on that
PAYMENT DATE, after giving effect to all transfers and withdrawals from
and all transfers and deposits to that account on that PAYMENT DATE,
and the amount required to be on deposit in the OWNER TRUST SPREAD
ACCOUNT on that date.
Each amount described in the first two clauses above will be expressed as
a dollar amount per $1,000 of the initial principal balance of the notes.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the INDENTURE, the INDENTURE
TRUSTEE will mail to you and to other investors who at any time during the
prior calendar year had been noteholders and received any payment on the notes,
a statement containing information which is required for the preparation of
federal income tax returns. See "Tax Matters" for information on tax reporting
procedures.
CERTAIN MATTERS REGARDING THE ADMINISTRATOR
The ADMINISTRATOR will, to the extent provided in the DEPOSIT AND
ADMINISTRATION AGREEMENT, provide the notices and perform on behalf of the
owner trust other administrative obligations required by the INDENTURE.
AMENDMENTS
Parties to the TRUST AGREEMENT may amend the TRUST AGREEMENT, with notice
to the rating agencies and without the consent of the INDENTURE TRUSTEE or the
noteholders to cure any ambiguity or correct or supplement any of its
provisions for the purpose of modifying the TRUST AGREEMENT or modifying the
rights of the noteholders; provided, however, that an amendment will not:
o as evidenced by an officer's certificate from Chase USA addressed and
delivered to the INDENTURE TRUSTEE and the OWNER TRUSTEE, materially
and adversely affect the interest of any noteholder or significantly
change any permitted activities of the owner trust described in the
trust agreement, and
o as evidenced by an opinion of counsel, cause the owner trust to be
classified as an association (or a publicly traded partnership) taxable
as a corporation for federal income tax purposes.
Parties to the DEPOSIT AND ADMINISTRATION AGREEMENT may amend the DEPOSIT
AND ADMINISTRATION AGREEMENT, with notice to the rating agencies and with the
consent of the INDENTURE TRUSTEE, but without the consent of the noteholders
for the purpose of adding any provisions to or changing or eliminating any
provisions of the DEPOSIT AND ADMINISTRATION AGREEMENT or modifying the rights
of the noteholders; provided, however, that such amendment will not:
o as evidenced by an officer's certificate from Chase USA addressed and
delivered to the INDENTURE TRUSTEE and the OWNER TRUSTEE, materially
and adversely affect the interest of any noteholder or the
certificateholder or significantly change the purposes and activities
of the owner trust, and
o as evidenced by an opinion of counsel, cause the owner trust to be
classified as an association (or a publicly traded partnership) taxable
as a corporation for federal income tax purposes.
In addition, the TRUST AGREEMENT or the DEPOSIT AND ADMINISTRATION
AGREEMENT may also be amended by the parties:
o with notice to the rating agencies,
o with the written consent of the INDENTURE TRUSTEE, and
o with the consent of the holders of notes evidencing at least a majority
of the then outstanding principal amount of the notes,
for the purpose of adding any provisions to or changing in any manner or
eliminating any provisions or modifying in any manner the rights of the
noteholders, provided, however, that in the case of the
44
TRUST AGREEMENT or the DEPOSIT AND ADMINISTRATION AGREEMENT, no amendment may
(1) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the SERIES CERTIFICATE or distributions
that are required to be made for the benefit of the noteholders or (2) reduce
the percentage of the holders of notes which are required to consent to any
such amendment, without the consent of the holders of all the outstanding
notes.
TERMINATION
The obligations of the ADMINISTRATOR, Chase USA, the OWNER TRUSTEE and the
INDENTURE TRUSTEE under the related INDENTURE, DEPOSIT AND ADMINISTRATION
AGREEMENT and TRUST AGREEMENT will end upon the earlier of:
o the payment to noteholders of the note principal balance and all
amounts required to be paid to them under the SERIES CERTIFICATE, the
DEPOSIT AND ADMINISTRATION AGREEMENT or the TRUST AGREEMENT, and
o the NOTE MATURITY DATE.
CREDIT ENHANCEMENT
CREDIT ENHANCEMENT may be provided with respect to one or more classes of
any series, including your series, offered by this prospectus. If so specified
in the related 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 the
prospectus supplement.
The type, characteristics and amount of CREDIT ENHANCEMENT for any series
or class:
o will be determined based on several factors, including the
characteristics of the receivables and accounts included in the MASTER
TRUST PORTFOLIO as of the CLOSING DATE with respect to that series and
the desired rating for each class, and
o will be established on the basis of requirements of each rating agency
rating the certificates or the notes of that series or class.
In general, CREDIT ENHANCEMENT will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal balance
of the certificates or the notes and/or payment of interest. If losses occur
which exceed the amount covered by CREDIT ENHANCEMENT or which are not covered
by CREDIT ENHANCEMENT, certificateholders and noteholders, as applicable, will
bear their allocable share of deficiencies.
If CREDIT ENHANCEMENT is provided with respect to a series or class of
securities, the related supplement will include a description of:
o the amount payable under CREDIT ENHANCEMENT,
o any additional conditions to payment under CREDIT ENHANCEMENT not
described in this prospectus,
o the conditions, if any, under which:
-- the amount payable under CREDIT ENHANCEMENT may be reduced, and
-- CREDIT ENHANCEMENT may be ended or replaced, and
o any material provision of any agreement relating to CREDIT ENHANCEMENT.
Additionally, the related supplement may provide information with respect
to any credit enhancement provider, including:
o a brief description of its principal business activities,
o its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business,
45
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 related supplement.
The related supplement may specify if CREDIT ENHANCEMENT with respect to a
series may be available to pay principal of the series' certificates after PAY
OUT EVENTS occur with respect to that series. If so, the credit enhancement
provider may have an interest in cash flows in respect of the receivables
called the ENHANCEMENT INVESTED AMOUNT, to the extent described in the related
supplement.
SPECIFIC FORMS OF CREDIT ENHANCEMENT
The related supplement will also specify the manner and to what extent the
following types of CREDIT ENHANCEMENT or other CREDIT ENHANCEMENT applies to
your series of securities or any class of your series:
Subordination
One or more classes of securities of any series may be subordinated as
described in the related supplement to the extent necessary to fund payments
with respect to senior securities. The rights of the holders of any
subordinated securities to receive distributions of principal and/or interest
on any DISTRIBUTION DATE for that series will be subordinated in right and
priority to the rights of the holders of senior securities, but only to the
extent described in the related supplement. The related supplement may specify
if subordination may apply only in the event of some types of losses not
covered by another CREDIT ENHANCEMENT. The related supplement will also set
forth information concerning:
o the amount of subordination of a class or classes of subordinated
securities in a series,
o the circumstances in which subordination will be applicable,
o the manner, if any, in which the amount of 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 subordinated securities will be
distributed to holders of senior securities.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as support for a class of another
series, the related supplement will specify the manner and conditions for
applying this cross-support feature.
Letter of Credit
One or more letters of credit may provide support for a series or one or
more classes of securities. The 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, called the L/C Bank, will be obligated to honor
demands with respect to the letter of credit, to the extent of the amount
available under the letter of credit, to provide funds under the circumstances
and subject to the conditions specified in the related supplement.
Cash Collateral Guaranty or Account
Support for a series or one or more classes of securities may be provided
by:
o a CASH COLLATERAL GUARANTY secured by the deposit of cash or some
permitted investments in a CASH COLLATERAL ACCOUNT reserved for the
beneficiaries of the CASH COLLATERAL GUARANTY, or
o a CASH COLLATERAL ACCOUNT alone.
46
The amount available from the CASH COLLATERAL GUARANTY or the CASH COLLATERAL
ACCOUNT will be the lesser of (1) amounts on deposit in the CASH COLLATERAL
ACCOUNT and (2) an amount specified in the related supplement. The related
supplement will set forth the circumstances under which payments are made to
beneficiaries of the CASH COLLATERAL GUARANTY from the CASH COLLATERAL ACCOUNT
or from the CASH COLLATERAL ACCOUNT directly.
Collateral Interest
An undivided interest in the master trust called the COLLATERAL INTEREST,
in an amount initially equal to the percentage of the certificates of a series
specified in the supplement for that series, may initially provide support for
a series or one or more classes of certificates. That series may also have the
benefit of a CASH COLLATERAL GUARANTY or CASH COLLATERAL ACCOUNT with an
initial amount on deposit in that account, if any, as specified in the related
supplement which will be increased:
o to the extent the TRANSFEROR elects, subject to the conditions
specified in the related supplement, to apply principal collections
allocable to the COLLATERAL INTEREST to decrease the COLLATERAL
INTEREST,
o to the extent principal collections allocable to the COLLATERAL
INTEREST are required to be deposited into the CASH COLLATERAL ACCOUNT
as specified in the related supplement, and
o to the extent excess finance charge collections are required to be
deposited into the CASH COLLATERAL ACCOUNT as specified in the related
supplement.
The total amount of CREDIT ENHANCEMENT available from the COLLATERAL
INTEREST and, if applicable, the CASH COLLATERAL GUARANTY or CASH COLLATERAL
ACCOUNT will be the lesser of the sum of:
o the COLLATERAL INTEREST and the amount on deposit in the CASH
COLLATERAL ACCOUNT, and
o an amount specified in the related supplement.
The related supplement will set forth the circumstances under which:
o payments which otherwise would be made to holders of the COLLATERAL
INTEREST will be distributed to holders of certificates, and
o if applicable, payment will be made under the CASH COLLATERAL GUARANTY
or under the CASH COLLATERAL ACCOUNT.
Surety Bond or Insurance Policy
A surety bond may be purchased for the benefit of the holders of any
series or class of securities to assure distributions of interest or principal
with respect to that series or class in the manner and amount specified in the
related supplement.
One or more insurance companies may provide insurance, with respect to a
series or one or more classes of securities, to guarantee, with respect to one
or more classes of that series, distributions of interest or principal in the
manner and amount specified in the related supplement.
Spread Account
Support for a series or one or more classes of securities may be provided
by the periodic deposit of available excess cash flow from the master trust
assets into an account called the SPREAD ACCOUNT, intended to assist with
subsequent distribution of interest and principal on that series or class in
the manner specified in the related supplement.
Reserve Account
The establishment of a RESERVE ACCOUNT provides support for a series or
one or more classes of securities. The Reserve Account may be funded, to the
extent provided in the related supplement, by:
o an initial cash deposit,
47
o the retention of excess cash,
o periodic distributions of principal or interest or both otherwise
payable to one or more classes of securities, including subordinated
securities,
o the provision of a letter of credit, guarantee, insurance policy or
other form of credit, or
o any combination of these items.
The Reserve Account will assist with the subsequent distribution of
principal or interest on that series or class in the manner provided in the
related supplement.
SECURITY RATINGS
Any rating of the securities by a rating agency will indicate:
o its view on the likelihood that securityholders will receive required
interest and principal payments, and
o its evaluation of the receivables and the availability of any CREDIT
ENHANCEMENT for the securities.
Among the things a rating will not indicate are:
o the likelihood that a PAY OUT EVENT will occur,
o the likelihood that a United States withholding tax will be imposed on
non-U.S. securityholders,
o the marketability of the securities,
o the market price of the securities, or
o whether the securities are an appropriate investment for you.
A rating will not be a recommendation to buy, sell or hold the securities.
A rating may be lowered or withdrawn at any time by a rating agency.
The TRANSFEROR will request a rating of the securities offered by this
prospectus and the prospectus supplement from at least one rating agency. It
will be a condition to the issuance of the securities of each series or class
offered by this prospectus and the related supplement--including each series
that includes a PRE-FUNDING ACCOUNT, and, with respect to any series of notes,
the related SERIES CERTIFICATE--that they be rated in one of the four highest
rating categories by at least one nationally recognized rating organization
selected by the TRANSFEROR to rate any series, which will be the rating agency.
The rating or ratings applicable to the securities of each series or class
offered by this prospectus will be set forth in the related supplement. Rating
agencies other than those requested could assign a rating to the securities and
that rating could be lower than any rating assigned by a rating agency chosen
by the TRANSFEROR.
48
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The transfer of receivables to the master trust constitutes either a
complete transfer of Chase USA's interest in the receivables or a grant of a
security interest in the receivables. If Chase USA's transfer creates a
security interest then it constitutes a perfected security interest under
applicable law.
The master trust will have a first priority claim on the receivables
subject only to some tax and other governmental liens, which are discussed
below.
The master trust will have a claim against Chase USA if the master trust
does not have an unencumbered claim to the receivables. See "Description of the
Securities--Description of the Certificates--Chase USA's Representations and
Warranties."
Chase USA will make all necessary filings under the UCC to perfect the
master trust's security interest in the receivables.
Notwithstanding the actions described above to protect the master trust's
interest in the receivables, there may be some circumstances in which a
creditor of Chase USA could acquire an interest in receivables that would have
priority over the master trust. Chase USA represents and warrants that no such
prior interests will exist. Chase USA also covenants not to further encumber or
sell the receivables.
In addition, a tax or other governmental lien on Chase USA's property that
arises before the transfer of the receivables to the master trust may have a
prior claim to the receivables. If the FDIC were appointed as Chase USA's
receiver, administrative expenses of the receiver may also have priority over
the interest of the master trust in the receivables.
While Chase USA's affiliate The Chase Manhattan Bank is the servicer,
collections from the receivables will be commingled with the servicer's general
funds and used for the servicer's benefit before each DISTRIBUTION DATE. The
master trust will not have a perfected security interest in commingled
collections. If the short-term deposit rating of the servicer is reduced below
"A-1" or "P-1" by the applicable rating agency, the servicer will be obligated
to cease commingling collections and begin depositing collections into the
COLLECTION ACCOUNT within two business days after the date of processing.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
Chase USA is chartered as a national banking association and is subject to
regulation and supervision by the Comptroller of the Currency. If Chase USA
becomes insolvent, is in an unsound condition, engages in certain violations of
laws or regulations, or if other similar circumstances occur, the Comptroller
is authorized to appoint the FDIC as conservator or receiver.
Under such circumstances the FDIC could:
o require the master trust trustee to go through an administrative claims
procedure to establish its right to payments collected on the
receivables in the master trust,
o request a stay of proceedings with respect to the master trust's claims
against Chase USA, or
o repudiate without compensation Chase USA's ongoing obligations under
the POOLING AND SERVICING AGREEMENT, such as the duty to collect
payments or otherwise service the receivables or to provide
administrative services to the owner trust.
If the FDIC were to take any of those actions, payments of principal and
interest on your notes could be delayed or reduced.
By statute, the FDIC as conservator or receiver is authorized to repudiate
any "contract" of Chase USA upon payment of "actual direct compensatory
damages." This authority may be interpreted by the FDIC to permit it to
repudiate the transfer of receivables to the master trust.
49
Under a recently enacted FDIC regulation, however, the FDIC as conservator or
receiver will not reclaim, recover, or recharacterize a bank's transfer of
financial assets if certain conditions are met, including that the transfer
qualifiies for sale accounting treatment, was made for adequate consideration,
and was not made fraudulently, in contemplation of insolvency, or with the
intent to hinder, delay, or defraud the bank or its creditors. Chase USA
believes the new FDIC regulation applies to the transfer of receivables under
the POOLING AND SERVICING AGREEMENT and that the conditions of the regulation
have been satisfied.
If a condition required under the FDIC regulation, or other statutory or
regulatory requirement applicable to the transaction, were found not to have
been satisfied, the FDIC as conservator or receiver might refuse to recognize
Chase USA's transfer of the receivables to the master trust. In that event the
master trust could be limited to seeking recovery based upon its security
interest in the receivables. The FDIC's statutory authority has been
interpreted by the FDIC and at least one court to permit the repudiation of a
security interest upon payment of actual direct compensatory damages measured
as of the date of conservatorship or receivership. Such damages do not include
damages for lost profits or opportunity, and no damages would be paid for the
period between the date of conservatorship or receivership and the date of
repudiation. The FDIC could delay its decision whether to recognize Chase USA's
transfer of the receivables for a reasonable period following its appointment
as conservator or receiver for the bank. If the FDIC were to refuse to
recognize Chase USA's transfer of the receivables, payments of principal and
interest on your notes could be delayed or reduced.
In the event that the FDIC refused to recognize the transfer of the
receivables and repudiated the master trust's security interest in the
receivables, the amount of compensation that the FDIC is required to pay is
limited to your "actual direct compensatory damages" determined as of the date
of the FDIC's appointment as receiver. There is no statutory definition of
"actual direct compensatory damages." The staff of the FDIC takes the position
that upon repudiation or disaffirmation these damages would not include
interest accrued to the date of actual repudiation or disaffirmation. Under the
FDIC interpretation, you would receive interest only through the date of the
appointment of the receiver. Since the FDIC may delay actual repudiation or
disaffirmation for up to 180 days following its appointment as receiver, you
may not receive the full amount of interest owing to you under the certificates
or the notes. There is one reported federal district court decision that
construes the term "actual direct compensatory damages." This 1993 court case
construed the term, in the context of the repudiation of zero coupon bonds, to
mean the fair market value of those bonds as of the date of repudiation. Under
neither interpretation, however, would you be compensated for the period
between the appointment of the receiver and the date of repudiation.
Chase USA will notify you if a receiver or a conservator is appointed for
it. This appointment will cause a PAY OUT EVENT for all outstanding series.
After that PAY OUT EVENT occurs, newly created receivables will not be
transferred to the master trust and the master trust trustee will proceed to
dispose of the receivables in a commercially reasonable manner and on
commercially reasonable terms:
o unless otherwise instructed within a specified period by holders of
certificates representing undivided interests aggregating more than 50%
of the INVESTOR INTEREST of each outstanding series (or if any series
has more than one class, of each class, and any other entity specified
in the POOLING AND SERVICING AGREEMENT or SERIES SUPPLEMENT), or
o unless otherwise required by the FDIC.
The proceeds from the sale of the receivables will be treated as
collections and will be distributed to certificateholders. The FDIC may delay
this procedure as described above.
If the only PAY OUT EVENT to occur is Chase USA's insolvency and the
appointment of a conservator or receiver for it, the FDIC may have the power to
prevent the early sale of the receivables and the commencement of the RAPID
AMORTIZATION PERIOD. In addition, the FDIC may have the power to cause the
early sale of the receivables and the early retirement of the certificates or
to prohibit the continued transfer of receivables to the master trust.
50
If no SERVICER DEFAULT other than the conservatorship or receivership of
the servicer exists, the FDIC may have the power to prevent the appointment of
a successor servicer. See "Description of the Securities--Description of the
Certificates--Pay Out Events."
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender
are extensively regulated by federal and state consumer protection laws. The
most significant laws include the federal Truth-in-Lending, Equal Credit
Opportunity, Fair Credit Reporting, Fair Debt Collection Practices and
Electronic Funds Transfer Acts. These statutes:
o impose disclosure requirements:
-- when a credit card account is advertised, when it is opened, at
the end of monthly billing cycles, and at year end,
o limit customer liability for unauthorized use,
o prohibit discriminatory practices in extending credit, and
o impose limits on the type of account-related charges that may be
assessed.
Cardholders are entitled under these laws to have payments and credits
applied to the credit card accounts promptly, to receive prescribed notices and
to require billing errors to be resolved promptly. The master trust may be
liable for some violations of consumer protection laws that apply to the
related receivables. In addition, a cardholder may be entitled to assert the
violations by way of set-off against his or her obligation to pay the amount of
receivables owing. Chase USA warrants that all related receivables have been
and will be created in compliance with the requirements of those laws. The
servicer will also agree to indemnify the master trust, among other things, for
any liability arising from such violations of consumer protection laws caused
by the servicer. For a discussion of the master trust's rights arising from the
breach of these warranties, see "Description of the Securities--Description of
the Certificates--Chase USA's Representations and Warranties."
There have been numerous attempts at the federal, state and local level to
further regulate the credit card industry. In particular, legislation has been
introduced in Congress that would impose a ceiling on the rate at which a
financial institution may assess finance charges and fees on credit card
accounts. These ceilings are substantially below the rate of the finance
charges and fees that is currently assessed on Chase USA's accounts. Chase USA
cannot predict whether any such legislation will be enacted. If ceilings on
finance charges or fees are enacted, the yield on the receivable pool may be
reduced. This reduction could result in a PAY OUT EVENT and a RAPID
AMORTIZATION PERIOD. See "Description of the Securities--Description of the
Certificates--Rebates and Fraudulent Charges" and "--Investor Charge-Offs."
INDUSTRY LITIGATION
In October 1998, the federal government filed an antitrust lawsuit against
VISA U.S.A., Inc., VISA International Inc. and MasterCard International
Incorporated alleging that these credit card associations restrain competition
and limit consumer choice. The government in this lawsuit challenges, among
other things:
o the control of VISA U.S.A., Inc., VISA International Inc. and
MasterCard International Incorporated by the same set of banks,
o the ability of banks to issue both VISA and MasterCard cards, as well
as
o the rules adopted by these associations prohibiting members from
offering credit cards of some competitors.
In public statements, VISA U.S.A., Inc., VISA International Inc. and
MasterCard International Incorporated have contested the government's
allegations. Chase USA is unable to predict the effect
51
of this lawsuit on Chase USA's credit card business. An adverse decision
against VISA U.S.A., Inc., VISA International Inc. and MasterCard International
Incorporated, or an adverse settlement of this litigation, could result in
changes in the current associations and Chase USA's ability to issue both VISA
and MasterCard cards as well as cards of other competitors.
OTHER LITIGATION
Several lawsuits have recently been commenced against various credit card
issuers alleging generally that the manner in which customer payments were
credited to accounts resulted in violations of the related account agreements
and state and federal law and unjustified finance charges, late fees and
penalty interest rates. Two such cases were filed against Chase USA in the
federal courts in Texas and California. A court has issued a final judgment and
order approving the class action settlement in its entirety, and dismissed the
lawsuits with prejudice. One class member who objected to the settlement filed
a notice of appeal from the order, which appeal we believe to be without merit.
We continue to believe that under the terms of the settlement there will not be
a material adverse effect on Chase USA's ability to originate and service the
receivables or on the performance of the receivables under the master trust.
TAX MATTERS
The following is a general discussion of the material U.S. federal income
tax consequences relating to the purchase, ownership and disposition of a
certificate or note. Unless otherwise indicated, this summary deals only with
U.S. CERTIFICATE OWNERS and U.S. NOTE OWNERS, as defined below, who acquire
their certificates or notes at their original issue price in the original
issuance of those certificates or notes and who hold these securities as
capital assets.
This discussion is based on present provisions of the Internal Revenue
Code of 1986, as amended, the proposed, temporary and final Treasury
regulations promulgated under the tax code, and administrative rulings or
pronouncements and judicial decisions all as in effect on the date of this
prospectus and all of which are subject to change, possibly with retroactive
effect.
The discussion does not address all of the tax consequences that may be
relevant to a particular certificate owner or note owner in light of that
certificate owner or note owner's circumstances, nor does it discuss the U.S.
federal income tax consequences that may be relevant to some types of
certificate owners or note owners that are subject to special treatment under
the tax code, such as:
o dealers in securities or currencies,
o financial institutions,
o tax-exempt entities,
o insurance companies,
o traders in securities who elect to mark their securities holdings to
market,
o persons holding certificates or notes as a part of a hedging,
integrated, conversion or constructive sale transaction or a straddle,
or
o persons whose functional currency is not the U.S. dollar.
In addition, the following discussion does not consider the alternative minimum
tax consequences, if any, of the investment in the certificates or notes, or
the state, local or foreign tax consequences of the investment. Each
prospective certificate owner or note owner is urged to consult its own tax
advisor in determining the federal, state, local and foreign income and any
other tax consequences of the purchase, ownership and disposition of a
certificate or note.
Prospective investors should note that no ruling will be sought from the
IRS with respect to any of the U.S. federal income tax consequences discussed
in this prospectus and opinions of counsel, such as those described below, are
not binding on the IRS or the courts. Consequently, no assurance can be given
that the IRS will not take positions contrary to those described below. In
addition, the opinions of Simpson Thacher & Bartlett ("tax counsel") described
below are based upon the representations
52
and assumptions set forth in their opinions, including, but not limited to, the
assumption that all of the relevant parties will comply with the terms of the
POOLING AND SERVICING AGREEMENT and the other related documents. If those
representations are inaccurate and/or the relevant parties fail to comply with
the terms of the POOLING AND SERVICING AGREEMENT or the other related
documents, the conclusions of tax counsel described in the opinions and the
discussion of the U.S. federal income tax consequences set forth in this
prospectus may not be accurate.
For purposes of this discussion, the terms U.S. CERTIFICATE OWNER and U.S.
NOTE OWNER mean a beneficial owner of a certificate (other than a SERIES
CERTIFICATE) or note, respectively, that is:
o a citizen or resident of the United States,
o a corporation or partnership created or organized in the United States
or under the laws of the United States or any political subdivision of
the United States,
o an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or
o a trust that:
-- is subject to the supervision of a court within the United
States and one or more United States persons has the authority
to control all substantial decisions of the trust; or
-- has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person.
For purposes of this discussion, the terms NON-U.S. CERTIFICATE OWNER and
NON-U.S. NOTE OWNER mean a beneficial owner of a certificate (other than a
SERIES CERTIFICATE) or a note, respectively, who is not a U.S. CERTIFICATE
OWNER or U.S. NOTE OWNER.
If a partnership holds certificates or notes, the tax treatment of a
partner will generally depend upon the status of the partner and the activities
of the partnership. A certificate owner or note owner that is a partner of a
partnership holding such certificates or notes should consult its own tax
advisor.
TAX CHARACTERIZATION OF THE MASTER TRUST
Tax counsel is of the opinion that the master trust will not be classified
as an association or as a publicly traded partnership taxable as a corporation
for U.S. federal income tax purposes. However, as discussed above, this opinion
is not binding on the IRS and no assurance can be given that this
characterization will prevail. See "--Tax Considerations Relating to
Certificate Owners--Possible Alternative Characterizations" below.
TAX CONSIDERATIONS RELATING TO CERTIFICATE OWNERS
Tax Characterization of the Certificates as Debt
The TRANSFEROR will express in the POOLING AND SERVICING AGREEMENT its
intent that the certificates (other than a SERIES CERTIFICATE) will be treated
as debt for all U.S. tax purposes. The TRANSFEROR, by entering into the POOLING
AND SERVICING AGREEMENT, and each certificate owner, by the acceptance of a
beneficial interest in a certificate, will agree to treat the certificates
(other than a SERIES CERTIFICATE) as debt for U.S. tax purposes. However, the
POOLING AND SERVICING AGREEMENT generally refers to the transfer of receivables
as a "transfer, assignment and conveyance," and the TRANSFEROR will treat the
POOLING AND SERVICING AGREEMENT, for some non-tax accounting purposes, as
causing a transfer of an ownership interest in the receivables and not as
creating a debt obligation.
For U.S. federal income tax purposes, the economic substance of a
transaction often determines its tax consequences. The form of a transaction,
while a relevant factor, is generally not conclusive evidence of the economic
substance of the transaction. In appropriate circumstances, the courts have
allowed the IRS, as well as, in more limited circumstances, taxpayers, to treat
a transaction in
53
accordance with its economic substance, as determined under U.S. federal income
tax law, even though the participants in the transaction have characterized it
differently for non-tax purposes. However, courts have substantially limited
the circumstances in which a taxpayer for tax purposes can ignore the form of a
transaction. Nevertheless, tax counsel has advised that, in a properly
presented case, this would not prevent a determination of the tax
characterization of the certificates based on the economic substance of the
transaction.
The determination of whether the economic substance of a purported sale of
an interest in property is, instead, a loan secured by such transferred
property has been made by the IRS and the courts on the basis of numerous
factors designed to determine whether the seller has relinquished and the
purchaser has obtained substantial incidents of ownership in the transferred
property. Among those factors, the primary factors examined are whether the
purchaser has the opportunity for gain if the property increases in value and
has the risk of loss if the property decreases in value. Tax counsel is of the
opinion that, although no transaction closely comparable to that contemplated
in this prospectus has been the subject of any Treasury regulation, revenue
ruling or judicial decision, the certificates (other than a SERIES CERTIFICATE)
will be properly characterized as indebtedness for U.S. federal income tax
purposes. Except where indicated to the contrary, the discussion below assumes
that the certificates (other than a SERIES CERTIFICATE) will be considered debt
for U.S. federal income tax purposes.
Taxation of Interest Income on the Certificates
General. The TRANSFEROR intends to take the position that a U.S.
CERTIFICATE OWNER generally will include the stated interest on a certificate
in gross income at the time such interest income is received or accrued in
accordance with that U.S. CERTIFICATE OWNER'S regular method of tax accounting.
This treatment is based on the TRANSFEROR'S position that the stated interest
on a certificate is unconditionally payable.
Under the applicable Treasury regulations, the stated interest on the
certificates will be considered unconditionally payable only if the terms and
conditions of the certificates make the likelihood of late payment or
non-payment of the stated interest a remote contingency. Since the master trust
and the master trust trustee will have no discretion to withhold, delay or
otherwise defer scheduled monthly payments of stated interest on the
certificates, provided the master trust has sufficient cash on hand to allow
the master trust trustee to make those interest payments, the TRANSFEROR
believes that the late payment or non-payment of stated interest on the
certificates is a remote contingency.
If, however, the stated interest on the certificates is not considered
unconditionally payable, the stated interest on the certificates will be
considered original issue discount, and a U.S. CERTIFICATE OWNER will be
required to include such stated interest in income, as original issue discount,
on a daily economic accrual basis regardless of that person's regular method of
tax accounting and in advance of receipt of the cash related to such income. In
addition, if the stated interest on the certificates is not paid in full on a
DISTRIBUTION DATE, the certificates may at such time, and at all later times,
be considered to be issued with original issue discount and all U.S.
CERTIFICATE OWNERS would be required to include that stated interest in income
as original issue discount on an economic accrual basis.
Original Issue Discount Obligations. Assuming that the stated interest on
the certificates is considered to be "unconditionally payable", a series of
certificates will not be considered to have been issued with original issue
discount unless the stated principal amount of the series of certificates
exceeds its issue price by more than a statutory de minimis amount of original
issue discount. In this case, the amount of such excess will be considered
original issue discount. For this purpose, the issue price of a series of
certificates is the first price at which a substantial amount of such series of
certificates is sold for money.
A U.S. CERTIFICATE OWNER must include the amount of such original issue
discount in income on a daily economic accrual basis regardless of such U.S.
CERTIFICATE OWNER'S method of accounting and in advance of the receipt of the
cash related to such income. A U.S. CERTIFICATE OWNER will not be
54
required to include in income separately any payments received on the
certificates in respect of such original issue discount. If any series of
certificates is issued with original issue discount it will be disclosed in the
relevant prospectus supplement.
Sale, Exchange or Retirement of Certificates
Upon a sale or other taxable exchange, retirement or disposition of a
certificate, a U.S. CERTIFICATE OWNER will recognize gain or loss equal to the
difference between:
o the amount realized on that sale, exchange, retirement or other
disposition, less an amount equal to any accrued but unpaid interest
that the U.S. CERTIFICATE OWNER has not included in gross income
previously, which will be taxable as interest income, and
o the U.S. CERTIFICATE OWNER'S adjusted tax basis in such certificate.
This gain or loss generally will be capital gain or loss and generally will be
considered long-term capital gain or loss if the U.S. CERTIFICATE OWNER held
the certificate for more than one year at the time of the sale, exchange,
retirement or other disposition. The long-term capital gains of individuals
generally are eligible for reduced rates of taxation. Capital losses generally
may be used only to offset capital gains.
Possible Alternative Characterizations
Although, as described above, it is the opinion of tax counsel that the
certificates (other than a SERIES CERTIFICATE) will be properly characterized
as debt for U.S. federal income tax purposes, this opinion is not binding on
the IRS and, consequently, no assurance can be given that this characterization
will prevail. If the IRS were to contend successfully that some or all of the
certificates or any COLLATERAL INTEREST were not debt obligations for U.S.
federal income tax purposes, all or a portion of the master trust could be
classified as a partnership or as a publicly traded partnership taxable as a
corporation for those purposes. No attempt will be made to comply with any IRS
reporting or other requirements that would apply if all or a portion of the
master trust were treated as a partnership or as a corporation because in the
opinion of tax counsel the certificates (other than a SERIES CERTIFICATE) will
be characterized as debt for U.S. federal income tax purposes and any
beneficial owner of an interest in a COLLATERAL INTEREST will agree to treat
that interest as debt.
If the master trust were treated in whole or in part as a partnership,
other than a publicly traded partnership taxable as a corporation, for U.S.
federal income tax purposes, such partnership would not itself be subject to
U.S. federal income tax. Rather, each item of income, gain, loss and deduction
of the partnership would be taken into account directly in computing the
taxable income of the TRANSFEROR, or the beneficial owner of the TRANSFEROR
CERTIFICATE, and any certificate owners treated as partners in the partnership
in accordance with their respective partnership interests. The amount and
timing of income reportable by any certificate owners treated as partners in
the partnership would likely differ from that reportable by those certificate
owners had they been treated as owning debt. Moreover, unless the partnership
were treated as engaged in a trade or business, an individual's and, under some
circumstances, a trust's share of the expenses of the partnership would be
miscellaneous itemized deductions that, in the aggregate, would be allowed as
deductions only to the extent that they exceeded two percent of the
individual's adjusted gross income, and subject to reduction if the
individual's adjusted gross income exceeded specified limits. As a result, in
these circumstances, a certificate owner subject to these limitations may be
taxed on a greater amount of income than the interest payable on that
certificate owner's certificates. In addition, all or a portion of the
partnership's taxable income that is allocable to a certificate owner that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity,
including an individual retirement account, may constitute unrelated business
taxable income, which generally would be taxable to that certificate owner
under the tax code.
Alternatively, if the master trust were treated in whole or in part as a
publicly traded partnership taxable as a corporation, the taxable income of the
master trust would be subject to U.S. federal income tax at the applicable
marginal corporate income tax rates applicable to that income. This
55
entity-level tax could result in reduced distributions to certificate owners.
In addition, the distributions from the master trust would not be deductible in
computing the taxable income of the deemed corporation, except to the extent
that any certificates were treated as debt of the corporation, and
distributions to owners of those certificates were treated as payments of
interest on the certificates. Moreover, distributions to certificate owners not
treated as holding debt would be treated as dividends for U.S. federal income
tax purposes to the extent of the current and accumulated earnings and profits
of the deemed corporation.
TAX CONSIDERATIONS RELATING TO NOTE OWNERS
Tax Characterization of the Owner Trusts
Tax counsel is of the opinion that no owner trust will be classified as an
association or as a publicly traded partnership taxable as a corporation for
U.S. tax purposes. However, as discussed above, this opinion is not binding on
the IRS and no assurance can be given that this characterization will prevail.
See "--Possible Alternative Characterizations--Alternative Characterizations
Relating to the Notes" below.
Tax Characterization of the Notes
The TRANSFEROR will express in the INDENTURE its intent that the notes
will be treated as debt for all U.S. tax purposes and, under the terms of the
INDENTURE and the related notes, the TRANSFEROR, and each note owner, by the
acceptance of a beneficial interest in a note, will agree to treat each note as
debt for such purposes. Tax counsel is of the opinion that, although no
transaction closely comparable to that contemplated in this prospectus has been
the subject of any Treasury regulation, revenue ruling or judicial decision,
the notes will be properly characterized as indebtedness for U.S. tax purposes.
Except where indicated to the contrary, the discussion below assumes that the
notes will be considered debt for U.S. federal income tax purposes.
Taxation of Interest Income on the Notes
General. A U.S. NOTE OWNER generally will include the stated interest on a
note in gross income at the time that interest income is received or accrued in
accordance with that person's regular method of tax accounting.
Original Issue Discount Obligations. Assuming that the stated interest on
the notes is considered to be "unconditionally payable", a series of notes will
not be considered to have been issued with original issue discount unless a
substantial amount of such series of notes is sold, pursuant to the original
issuance of such notes, to investors at a price that is less than the stated
principal amount of such notes by more than a statutory de minimis amount of
original issue discount. In this case, the amount of such discount will be
considered original issue discount.
A U.S. NOTE OWNER must include the amount of such original issue discount
in income on a daily economic accrual basis regardless of such U.S. NOTE
OWNER'S method of accounting and in advance of the receipt of the cash related
to such income. A U.S. NOTE OWNER will not be required to include in income
separately any payments received on the notes in respect of such original issue
discount. If any series of notes is issued with original issue discount it will
be disclosed in the relevant prospectus supplement. For this purpose, the issue
price of a series of notes is the first price at which a substantial amount of
such series of notes is sold for money.
Sale, Exchange or Retirement of Notes
Upon a sale or other taxable exchange, retirement or disposition of a
note, a U.S. NOTE OWNER will recognize gain or loss equal to the difference
between:
o the amount realized on such sale, exchange, retirement or other
disposition, less an amount equal to any accrued but unpaid interest
which the U.S. NOTE OWNER has not included in gross income previously,
which will be taxable as interest income, and
o the U.S. NOTE OWNER'S adjusted tax basis in such note.
56
This gain or loss generally will be capital gain or loss and generally will be
long-term gain or loss if the U.S. NOTE OWNER held the note for more than one
year at the time of such sale, exchange, retirement or other disposition. The
long-term capital gains of individuals generally are eligible for reduced rates
of taxation. Capital losses generally may be used only to offset capital gains.
Possible Alternative Characterizations
Alternative Characterizations Relating to the Notes. Although, as
described above, it is the opinion of tax counsel that the notes will be
properly characterized as debt for U.S. federal income tax purposes, such
opinion is not binding on the IRS and no assurance can be given that this
characterization will prevail. If the IRS were to contend successfully that
some or all of the notes were not debt obligations for U.S. federal income tax
purposes, an owner trust could be classified either as a partnership or as a
publicly traded partnership taxable as a corporation for those purposes.
Because in the opinion of tax counsel the notes will be characterized as debt
for U.S. federal income tax purposes, no attempt will be made to comply with
any IRS reporting or other requirements that would apply if an owner trust were
treated as a partnership or as a publicly traded partnership taxable as a
corporation.
If an owner trust were treated as a partnership, other than as a publicly
traded partnership taxable as a corporation, for U.S. federal income tax
purposes, the partnership would not be subject to U.S. federal income tax.
Rather, each item of income, gain, loss and deduction of the partnership would
be taken into account directly in computing the taxable income of the
TRANSFEROR and any note owners treated as partners in the partnership in
accordance with their respective partnership interests. The amount and timing
of income reportable by any note owners treated as partners in the partnership
would likely differ from that reportable by those note owners had they been
treated as owning debt. Moreover, unless the partnership were treated as
engaged in a trade or business, an individual's and, under some circumstances,
a trust's share of the expenses of such partnership would be miscellaneous
itemized deductions that, in the aggregate, would be allowed as deductions only
to the extent that they exceeded two percent of the individual's adjusted gross
income, and subject to reduction if the individual's adjusted gross income
exceeded specified limits. As a result, under these circumstances, a note owner
subject to these limitations may be taxed on a greater amount of income than
the interest payable on that note owner's notes. In addition, all or a portion
of any taxable income allocated to a note owner that is a pension, profit
sharing or employee benefit plan or other tax-exempt entity, including an
individual retirement account, may constitute unrelated business taxable
income, which generally would be taxable to such note owner under the tax code.
Alternatively, if an owner trust were classified as a publicly traded
partnership taxable as a corporation, the taxable income of the owner trust
would be subject to U.S. federal income tax at the marginal corporate income
tax rates applicable to such income. This entity-level tax could result in
reduced distributions to note owners. In addition, the distributions from the
owner trust would not be deductible in computing the taxable income of the
deemed corporation, except to the extent that any notes were treated as debt of
that corporation and distributions to the related note owners were treated as
payments of interest thereon. Moreover, distributions to note owners not
treated as holding debt would be treated as dividends for U.S. federal income
tax purposes to the extent of the current and accumulated earnings and profits
of the deemed corporation.
Alternative Characterization Relating to the Master Trust. If the master
trust were treated in whole or in part as a publicly traded partnership taxable
as a corporation, the taxable income of the master trust would be subject to
U.S. federal income tax at the marginal corporate income rates applicable to
such income. See "--Tax Considerations Relating to Certificate Owners--Possible
Alternative Characterizations" above. This entity-level tax could result in
reduced distributions to an owner trust and, therefore, to note owners.
NON-U.S. CERTIFICATE OWNERS AND NON-U.S. NOTE OWNERS
Assuming that all of the certificates and notes issued to NON-U.S.
CERTIFICATE OWNERS and NON-U.S. NOTE OWNERS are considered debt of the
TRANSFEROR for U.S. federal income tax purposes, under present U.S. federal
income and estate tax law, and subject to the discussion below concerning
backup withholding:
57
(a) no withholding of U.S. federal income tax will be required with
respect to the payment by the TRANSFEROR or any withholding agent of principal
or interest on a certificate or note owned by a NON-U.S. CERTIFICATE OWNER or a
NON-U.S. NOTE OWNER provided that:
o the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
TRANSFEROR entitled to vote within the meaning of section 871(h)(3) of
the tax code and the Treasury regulations promulgated under the tax
code,
o the beneficial owner is not a controlled foreign corporation that is
related to the TRANSFEROR through stock ownership,
o the beneficial owner is not a bank whose receipt of interest on a
certificate or note is described in section 881(c)(3)(A) of the tax
code, and
o the beneficial owner satisfies the statement requirement set forth in
section 871(h) and section 881(c) of the tax code and the Treasury
regulations promulgated under the tax code, and
(b) a certificate or note beneficially owned by an individual who at the
time of his or her death is a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER
will not be subject to U.S. federal estate tax as a result of such individual's
death provided that:
o the individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the
TRANSFEROR entitled to vote within the meaning of section 871(h)(3) of
the tax code, and
o the interest payments with respect to the certificate or note would not
have been, if received at the time of the individual's death,
effectively connected with the conduct of a U.S. trade or business by
the individual.
To satisfy the statement requirement referred to in paragraph (a) above,
the certificate owner or the note owner or a financial institution holding the
certificate or note on behalf of the owner, must provide, in accordance with
specified procedures, the TRANSFEROR or any withholding agent with a statement
to the effect that such certificate owner or note owner is not a U.S.
CERTIFICATE OWNER or U.S. NOTE OWNER. Currently, these requirements will be met
if:
o the certificate owner or note owner provides its name and address, and
certifies, under penalties of perjury, that it is not a U.S.
CERTIFICATE OWNER or U.S. NOTE OWNER, which certification may be made
on an IRS Form W-8BEN or successor form, or
o the certificate owner or note owner holds certificates or notes through
certain foreign intermediaries and satisfies the certification
requirements of applicable U.S. Treasury regulations.
Special certification rules apply to certain NON-U.S. CERTIFICATE OWNERS
and NON-U.S. NOTE OWNERS that are entities rather than individuals.
If a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER cannot satisfy the
requirements described in paragraph (a) above, payments of interest made to
that beneficial owner will be subject to a 30% withholding tax unless that
beneficial owner provides the TRANSFEROR or any withholding agent with a
properly executed:
o IRS Form W-8BEN, or successor form, claiming an exemption from, or a
reduction in the rate of, that withholding tax under the benefit of an
applicable U.S. income tax treaty, or
o IRS Form W-8ECI, or successor form, stating that the interest paid on
the certificate or note is not subject to that withholding tax because
it is effectively connected with the certificate owner's or note
owner's conduct of a trade or business in the United States.
The NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER that receives
interest that is effectively connected with its conduct of a U.S trade or
business, although exempt from the U.S. withholding tax discussed above, will
be subject to U.S. federal income tax on the interest on a net income basis in
the
58
same manner as if it were a U.S. CERTIFICATE OWNER or U.S. NOTE OWNER. In
addition, if that NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER is a
foreign corporation, it may be subject to a U.S. branch profits tax equal to
30%, or lower applicable treaty rate, of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, the
interest income will be included in such foreign corporation's earnings and
profits.
Any gain realized by a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER
upon the sale, exchange, retirement or other disposition of a certificate or
note generally will not be subject to U.S. federal income tax unless:
o the gain is effectively connected with a U.S. trade or business of the
NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER in the United States,
o for a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER who is an
individual, that individual is present in the United States for 183
days or more in the taxable year of the sale, exchange, retirement or
other disposition, and other conditions are met, or
o such NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER is subject to
tax pursuant to provisions of the tax code regarding the taxation of
U.S. expatriates.
If the certificates or notes were treated as an interest in a partnership,
other than a publicly traded partnership taxable as a corporation, that
recharacterization could cause a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE
OWNER to be treated as engaged in a trade or business in the United States. In
that event, the NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER would be
required to file a U.S. federal income tax return and, generally, would be
subject to U.S. federal income tax, including, for a NON-U.S. CERTIFICATE OWNER
or NON-U.S. NOTE OWNER that is a corporation, the U.S. branch profits tax, on
its allocable share of the net income from such partnership. Further,
withholding obligations would apply with respect to partnership income that is
allocable to a NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER that is
considered to be a partner in the partnership. That withholding would be
imposed at a rate equal to the highest marginal U.S. federal income tax rate
applicable to the NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER.
Alternatively, if some or all of the certificates or notes were treated as
equity interests in a publicly traded partnership taxable as a corporation, the
gross amount of any related dividend distributions to a NON-U.S. CERTIFICATE
OWNER or NON-U.S. NOTE OWNER generally would be subject to U.S. withholding tax
at the rate of 30%, unless that rate were reduced under an applicable U.S.
income tax treaty. See "--Tax Considerations Relating to Certificate
Owners--Possible Alternative Characterizations" and "--Tax Considerations
Relating to Note Owners--Possible Alternative Characterizations" above.
Special rules may apply for NON-U.S. CERTIFICATE OWNERS or NON-U.S. NOTE
OWNERS who:
o have an office or other fixed place of business in the U.S.,
o are former U.S. citizens,
o are engaged in a banking, financing, insurance or similar business in
the U.S., or
o are "controlled foreign corporations," "foreign personal holding
companies," "passive foreign investment companies" or corporations that
accumulate earnings in order to avoid U.S. federal income tax.
These persons should consult their own U.S. tax advisors before investing
in the certificates or notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to some payments
of principal and interest paid on certificates or notes and to the proceeds of
the sale of a certificate or note made by U.S. CERTIFICATE OWNERS or U.S. NOTE
OWNERS other than some exempt recipients, such as corporations. A backup
withholding tax will apply to those payments if the U.S. CERTIFICATE OWNER or
U.S. NOTE OWNER fails to provide a taxpayer identification number or
certification of exempt status or fails to report in full dividend and interest
income.
59
No information reporting or backup withholding will be required with
respect to payments made by the TRANSFEROR or any withholding agent to a
NON-U.S. CERTIFICATE OWNER or NON-U.S. NOTE OWNER if the statement described
above under "--Non-U.S. Certificate Owners and Non-U.S. Note Owners" has been
received and the payor does not have knowledge that the NON-U.S. CERTIFICATE
OWNER or NON-U.S. NOTE OWNER is actually a U.S. CERTIFICATE OWNER or U.S. NOTE
OWNER.
In addition, backup withholding and information reporting will not apply
if payments of principal and interest on a certificate or note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of a certificate owner or note owner or if a foreign office of a broker,
as defined in applicable Treasury regulations, pays the proceeds of the sale of
a certificate or note to the owner of that security. If, however, the
custodian, nominee, agent or broker is, for U.S. federal income tax purposes:
o a United States person,
o a controlled foreign corporation,
o a foreign person that derives 50% or more of its gross income for
specified periods from the conduct of a trade or business in the United
States, or
o a foreign partnership in which one or more United States persons, in
the aggregate, owns more than 50% of the income or capital interests in
the partnership or which is engaged in a trade or business in the
United States,
those payments will not be subject to backup withholding but will be subject to
information reporting, unless:
o that custodian, nominee, agent or broker has documentary evidence in
its records that the relevant certificate owner or note owner is not a
United States person and other conditions are met, or
o the certificate owner or note owner otherwise establishes an exemption.
Payments of principal and interest on a certificate or note paid to the
certificate owner or note owner by a United States office of a custodian,
nominee or agent, or the payment by the United States office of a broker of the
proceeds of sale of a certificate or note, will be subject to both backup
withholding and information reporting unless:
o the relevant certificate owner or note owner provides the statement
referred to above under "--Non-U.S. Certificate Owners and Non-U.S.
Note Owners," and
o the payor does not have actual knowledge that the certificate owner or
note owner is actually a U.S. CERTIFICATE OWNER or U.S. NOTE OWNER or
the certificate owner or note owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against a certificate owner's or note owner's U.S. federal
income tax liability provided the required information is furnished to the IRS.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of the
purchase, ownership or disposition of a certificate or note under any state or
local tax law. Each investor should consult its own tax advisor regarding state
and local tax consequences of purchasing, owning and disposing of a certificate
or note.
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Before investing in securities, a PLAN fiduciary should determine, among
other factors, whether the investment:
o is permitted under the governing PLAN,
60
o is appropriate for the PLAN in view of its overall investment policy
and the composition and diversification of its portfolio, and
o is prudent considering the factors discussed in this prospectus.
ERISA and the tax code prohibit some transactions involving the assets of
an ERISA PLAN and persons who are either "parties in interest" under ERISA or
"disqualified persons" under the tax code. Prohibited transactions may generate
excise taxes and other liabilities.PLANS that are not subject to Title I of
ERISA or Section 4975 of the tax code (such as governmental, church and
non-U.S. PLANS ) may be subject to SIMILAR LAWS which may affect their
investment in the securities. Thus, a PLAN fiduciary considering an investment
in the securities should also consider whether the investment might constitute
a prohibited transaction under ERISA or the tax code or a violation of a
SIMILAR LAW by reason of the acquisition of the notes by a PLAN.
CERTAIN ERISA CONSIDERATIONS WITH RESPECT TO NOTES
PLANS subject to the fiduciary and prohibited transactions rules of ERISA
and the tax code can purchase the notes subject to the considerations and
conditions discussed below.
PROHIBITED TRANSACTION CONSIDERATIONS
Treatment of the Notes as Debt Instruments
Some transactions involving the operation of the owner trust could give
rise to prohibited transactions under ERISA and the tax code if the assets of
the owner trust were deemed to be assets of an investing PLAN. Generally, under
an ERISA regulation, when an ERISA PLAN acquires an "equity interest" in an
entity such as the owner trust, the ERISA PLAN'S assets include both the equity
interest and an undivided interest in each of the underlying assets of the
entity unless the exceptions set forth in the regulation apply.
In general, an "equity interest" is defined under the regulation as any
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 is very little published authority concerning the application of
this definition, the TRANSFEROR believes that the notes should be treated as
debt rather than equity interests under the regulation because the notes:
o should be treated as indebtedness under applicable local law and debt,
rather than equity, for U.S. tax purposes (see "Tax Matters--Tax
Considerations Relating to Note Owners" above), and
o should not be deemed to have any "substantial equity features."
Accordingly, the assets of the owner trust should not constitute PLAN assets
subject to the fiduciary or prohibited transaction rules of ERISA or the tax
code by reason of the acquisition of the notes by an ERISA PLAN.
Acquisition of Notes
If an ERISA PLAN purchases notes and a person who has a relationship to
the owner trust, such as the TRANSFEROR, the servicer, any trustee, or
underwriters, or any of their affiliates, is also a "party in interest" or a
"disqualified person" with respect to such PLAN, the purchase may be prohibited
under ERISA or the tax code, unless an exemption applies. Accordingly,
fiduciaries of a PLAN considering an investment in the notes should consult
their own counsel concerning the propriety of the investment prior to making
the purchase.
SIMILAR LAWS governing the investment of the assets of PLANS not subject
to Title I of ERISA or Section 4975 of the tax code (such as governmental,
church and non-U.S. PLANS) may contain prohibited transaction requirements
similar to those under ERISA and/or the tax code. Accordingly, fiduciaries of
such PLANS, in consultation with their advisors, should consider the impact of
applicable SIMILAR LAWS on an investment in the notes and the considerations
discussed above, as applicable.
61
In light of the foregoing, by acceptance of a note, each holder will be
deemed to have represented and warranted that either:
o the holder is not acquiring, or considered to be acquiring, the note
with the assets of a PLAN, or
o no non-exempt prohibited transaction under Section 406 of ERISA,
Section 4975 of the tax code or a violation of any SIMILAR LAW will
occur as a result of the acquisition and holding of the notes.
EACH PLAN FIDUCIARY SHOULD CONSULT WITH ITS COUNSEL REGARDING THE
POTENTIAL CONSEQUENCES UNDER ERISA, THE TAX CODE OR SIMILAR LAWS OF THE
ACQUISITION AND HOLDING OF THE NOTES.
CERTAIN ERISA CONSIDERATIONS WITH RESPECT TO CERTIFICATES
PROHIBITED TRANSACTION CONSIDERATIONS
Treatment of Master Trust Assets as Plan Assets
Some transactions involving the operation of the master trust might
constitute prohibited transactions under ERISA and the tax code, if assets of
the master trust were deemed to be assets of an investing PLAN. As noted above,
the ERISA regulation concerns whether or not an ERISA PLAN'S assets would
include an interest in the underlying assets of an entity (such as the master
trust) for purposes of the reporting and disclosure and fiduciary
responsibility provisions of ERISA. If assets of the master trust were deemed
to be assets of an investing ERISA PLAN, any person who has discretionary
authority or control with respect to master trust assets will be a fiduciary of
the investing ERISA PLAN. This fiduciary status would increase the scope of
activities which could be considered prohibited transactions under ERISA and
the tax code. Accordingly, if PLANS invest in the master trust, the master
trust could be deemed to hold PLAN assets unless one of the exceptions
contained in the ERISA regulation applies.
Exception for Insignificant Participation by Benefit Plan Investors
The ERISA regulation provides that the assets of an entity such as the
master trust will not be deemed to be PLAN assets if equity participation in
the entity by "benefit plan investors" is not "significant." Examples of
benefit plan investors include ERISA PLANS as well as PLANS not subject to
Title I of ERISA or Section 4975 of the tax code. Equity participation in an
entity by benefit plan investors is not "significant" on any date if,
immediately after the most recent acquisition of any equity interests in the
entity, less than 25% of the value of each class of equity interests in the
entity is held by benefit plan investors. This less than 25% interest excludes
the value of any equity interests held by the TRANSFEROR, the master trust
trustee or its affiliates. No monitoring or other measures will be taken to
ensure that the exception applies with respect to the master trust. No
assurance can be given as to whether the value of any class of equity interests
in the master trust held by benefit plan investors will be less than 25%, or
whether the value will remain below 25%.
Exception for Publicly Traded Securities
The ERISA regulation contains an exception which provides that if an ERISA
PLAN acquires a "publicly-offered security," the issuer of the security is not
deemed to hold PLAN assets solely by reason of such acquisition. A
publicly-offered security is a security that is:
o freely transferable,
o part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another, and
o either:
-- part of a class of securities registered under the Securities
Exchange Act of 1934, or
62
-- sold to the PLAN as part of an offering of securities to the
public under the Securities Act of 1933 and the class of
securities of which this security is a part is registered under
the Securities Exchange Act of 1934 within 120 days, or such
later time as may be allowed by the SEC, after the end of the
fiscal year of the issuer during which the offering of these
securities to the public occurred.
Although it is anticipated that the conditions of this exception may be
met with respect to some classes of the certificates, no assurance can be given
and no monitoring will be done.
Fiduciaries and other persons contemplating purchasing the certificates on
behalf of or with the assets of any PLAN should consult their own counsel
concerning the consequences to the PLAN of an investment in the certificates,
including the consequences to the PLAN if the assets of the master trust were
to become subject to the fiduciary and prohibited transactions rules of ERISA
and the tax code.
Additional Considerations for Insurance Company General Accounts
In particular, insurance companies considering the purchase of
certificates of any series should consult their own employee benefits counsel
or other appropriate counsel with respect to the U.S. Supreme Court's 1993
decision in which it was held that, under some circumstances, assets held in an
insurance company's general account may be deemed to be assets of ERISA PLANS
that were issued policies supported by the general account. In addition,
insurance companies may wish to consult with their own counsel regarding the
Small Business Job Protection Act of 1996, which added a new section of ERISA
relating to the status of the assets of insurance company general accounts
under ERISA and a section of the tax code. This new section provides that
assets underlying general account policies issued before December 31, 1998 will
not be considered assets of an ERISA PLAN to the extent criteria set forth in
DOL regulations are satisfied. This section also requires the DOL to issue
regulations establishing those criteria. On January 5, 2000, the DOL published
final regulations, called the general account regulations, for this purpose.
The general account regulations provide that when an ERISA PLAN acquires a
transition policy issued by an insurance company on or before December 31,
1998, which is supported by assets of the insurance company's general account,
the ERISA PLAN'S assets will include the policy but not the underlying assets
of the general account to the extent the requirements set forth in the general
account regulations are satisfied. The general account regulations do not apply
to any general account policies issued after December 31, 1998. Accordingly,
investors should analyze whether the U.S. Supreme Court case, the relevant
ERISA section and the general account regulations may have an impact with
respect to their purchase of the certificates of any series.
As noted above, SIMILAR LAWS governing the investment and management of
the assets of PLANS not subject to Title I of ERISA or Section 4975 of the tax
code may contain fiduciary and prohibited transaction requirements similar to
those under ERISA and/or the tax code. Accordingly, fiduciaries of such PLANS,
in consultation with their advisors, should consider the impact of applicable
SIMILAR LAWS on an investment in the certificates and the considerations
discussed above, as applicable.
In light of the foregoing, by acceptance of a certificate, each holder
will be deemed to have represented and warranted that either:
o the holder is not acquiring, or considered to be acquiring, the
certificate with the assets of a PLAN, or
o no non-exempt prohibited transaction under Section 406 of ERISA or 4975
of the tax code or a violation of any SIMILAR LAW will occur as a
result of such acquisition and holding of the certificates.
PLAN OF DISTRIBUTION
The TRANSFEROR may sell the securities offered by the prospectus:
o through underwriters or dealers,
o directly to one or more purchasers, or
o through agents.
63
The prospectus supplement for any offered series will set forth the terms
of the offering of the offered securities, including, without limitation, the
names of any underwriters, the purchase price of the offered securities and the
resulting proceeds to Chase USA, any underwriting discounts and other items
constituting underwriters' compensation, the initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
The underwriters of any underwritten securities will purchase the
securities for their own account. The underwriters may sell any securities they
purchase in one or more transactions. Those sales may be transacted at a fixed
public offering price, or at varying prices to be determined at the time of
sale, which will be set forth or described in the prospectus supplement for the
offered securities.
If Chase USA sells any securities to dealers as principals, those dealers
may re-sell those securities to the public at varying prices set by those
dealers from time to time.
Chase USA also may sell securities through agents on a best-efforts basis
at varying prices.
Each underwriting agreement will provide that Chase USA, as TRANSFEROR of
the receivables, will indemnify the underwriters of the offered securities
against liabilities under the federal securities laws, or contribute to any
amounts the underwriters may be required to pay with respect to such
liabilities. Dealers and agents may also be entitled to indemnification or
contribution with respect to liabilities under the federal securities laws.
Any underwriter will be permitted to engage in the following transactions,
to the extent permitted by Regulation M under the Securities Exchange Act of
1934:
o Over-allotment transactions, which involve syndicate sales in excess of
the offering size creating a syndicate short position,
o Stabilizing transactions, which permit bids to purchase the offered
securities so long as the stabilizing bids do not exceed a specified
maximum,
o Syndicate covering transactions, which involve purchases of the offered
securities in the open market after the distribution has been completed
in order to cover syndicate short positions, and
o Penalty bids, which permit the underwriters to reclaim a selling
concession from a syndicate member when the offered securities
originally sold by the syndicate member are purchased in a syndicate
covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause prices of the offered
securities to be higher than they would otherwise be in the absence of such
transactions. Neither the master trust nor any of the underwriters represent
that the underwriters will engage in any such transactions nor that such
transactions, once commenced, will not be discontinued without notice.
This prospectus and the attached prospectus supplement may be used by J.P.
Morgan Securities Inc., a wholly owned subsidiary of J.P. Morgan Chase & Co.
and an affiliate of Chase USA, in connection with offers and sales related to
market-making transactions in the offered securities. J.P. Morgan Securities
Inc. may act as principal or agent in such transactions. Such sales will be
made at prices related to prevailing market prices at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the issuance of the securities will be
passed upon for the TRANSFEROR by Simpson Thacher & Bartlett, New York, New
York. Certain legal matters relating to the issuance of the securities will be
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
New York, New York. Helene L. Kaplan, of counsel to Skadden, Arps, Slate,
Meagher & Flom LLP, is a member of the Board of Directors of The Chase
Manhattan Bank and J.P. Morgan Chase & Co. and owns 11,700 shares of JPMC'S
common stock, with the associated rights attached thereto, 14,117 units of
JPMC'S common stock equivalents which entitle the holder upon termination
64
of service as a member of JPMC'S Board of Directors to receive a cash payment
for each unit equal to the fair market value at that time of a share of JPMC'S
common stock and 5,554 units of JPMC'S common stock equivalents which entitle
the holder upon termination of service as a member of JPMC'S Board of Directors
to receive an equal number of shares of JPMC'S common stock.
REPORTS TO SECURITYHOLDERS
Unless and until DEFINITIVE SECURITIES are issued, monthly and annual
reports, containing information concerning the applicable master trust or owner
trust and prepared by the servicer or the ADMINISTRATOR, will be sent on behalf
of the master trust or owner trust to Cede as nominee of DTC and registered
holder of the related securities. See "Description of the Securities--Form of
Your Securities--Book-Entry Registration," "--Description of the
Certificates--Reports to Certificateholders" and "--Evidence as to Compliance."
The reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. The servicer does not intend to
send any financial reports of Chase USA or CMB to the securities owners. The
servicer will file with the SEC such periodic reports with respect to the
master trust and the owner trusts as are required under the Securities Exchange
Act of 1934 and the rules and regulations of the SEC under that Act.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the securities with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
All required annual, monthly and special SEC reports and other information
will be filed by the TRANSFEROR with respect to the master trust or with
respect to each owner trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus or the related supplement. We incorporate by reference any
future annual, monthly and special SEC reports and proxy materials filed by or
on behalf of the master trust and any related owner trust until we terminate
our offering of the securities.
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 at: Comptroller of Chase USA, 802 Delaware Avenue, Delaware 19801,
(302) 575-5000.
65
GLOSSARY OF TERMS FOR PROSPECTUS
"ACCOUNT" means each MasterCard and VISA credit card account established
under a credit card agreement between Chase USA and any person and selected by
Chase USA to have its receivables included in the master trust including each
Additional Account but excluding each Removed Account.
"ACCUMULATION PERIOD" means either a Controlled Accumulation Period or a
Rapid Accumulation Period during which principal collections are accumulated in
a Principal Funding Account for payment to certificateholders on a scheduled
payment date.
"ACCUMULATION PERIOD RESERVE ACCOUNT" means an Eligible Deposit Account
held for the benefit of the certificateholders of a series to be funded to
cover potential shortfalls resulting from the difference between:
o the amount of investment earnings on funds accumulated in the Principal
Funding Account during an Accumulation Period, and
o the amount of interest payments to be made to certificateholders.
"ADDITIONAL ACCOUNT" means each MasterCard and VISA credit card account
selected by Chase USA to be included in the master trust as an Account to have
its receivables added to the master trust.
"ADDITIONAL INTEREST" means interest on overdue Monthly Interest at the
rate specified in the related supplement.
"ADMINISTRATOR" means Chase USA as the administrator of an owner trust
under a Deposit and Administration Agreement.
"AMORTIZATION PERIOD" means a Controlled Amortization Period, a Principal
Amortization Period or a Rapid Amortization Period.
"BANK PORTFOLIO" means the portfolio of MasterCard and VISA accounts owned
by Chase USA.
"CASH COLLATERAL ACCOUNT" means an account securing a Cash Collateral
Guaranty.
"CASH COLLATERAL GUARANTY" means a guaranty secured by the deposit of cash
or permitted investments in a Cash Collateral Account reserved for the
beneficiaries of that Cash Collateral Guaranty.
"CHASE USA" means Chase Manhattan Bank USA, National Association.
"CLEARSTREAM" means Clearstream Banking, societe anonyme, an institution
administering a book-entry settlement system for trading of securities in
Europe.
"CLEARSTREAM CUSTOMERS" means organizations participating in Clearstream's
book-entry system.
"CLOSING DATE" means the date of issuance of a series.
"COLLATERAL INTEREST" means a subordinated interest in a series of
certificates, in an amount initially equal to the percentage of the
certificates of a series specified in the prospectus supplement for that
series.
"COLLECTION ACCOUNT" means an Eligible Deposit Account for the benefit of
the certificateholders into which the servicer deposits collections on the
receivables.
"COMPANION SERIES" means:
o a series which has been paired with a previously issued series and has
an Investor Interest that increases as the Investor Interest of the
previously issued series decreases, or
o any series designated as a Companion Series in the related Series
Supplement.
"CONTROLLED ACCUMULATION AMOUNT" means a designated amount scheduled to be
deposited in the Principal Funding Account on each Transfer Date during the
Controlled Accumulation Period as specified in the related supplement.
66
"CONTROLLED ACCUMULATION PERIOD" means a period:
o beginning on a date specified in the related supplement after the
Revolving Period and
o ending on the earliest of:
- the start of the Rapid Accumulation Period,
- the start of the Rapid Amortization Period, and
- the Series Termination Date, and
during which collections of Principal Receivables up to the amount specified in
the related supplement are deposited monthly into the Principal Funding
Account.
"CONTROLLED AMORTIZATION AMOUNT" means a designated amount scheduled to be
paid on each Distribution Date during the Controlled Amortization Period as
specified in the related supplement.
"CONTROLLED AMORTIZATION PERIOD" means a period:
o beginning on a date specified in the related supplement, and
o ending on the earlier of:
- the start of the Rapid Amortization Period, and
- the Series Termination Date, and
during which collections of Principal Receivables up to an amount specified in
the related supplement are paid to certificateholders on each Distribution
Date.
"CONTROLLED DEPOSIT AMOUNT" means the amount to be deposited in the
Principal Funding Account on each Transfer Date during the Controlled
Accumulation Period to cover principal amounts due certificateholders on each
scheduled payment date equal to the sum of:
o the Controlled Accumulation Amount for that Transfer Date, and
o any remaining shortfall in the Controlled Deposit Amount for any prior
Distribution Date.
"COOPERATIVE" means the Euroclear Clearance System, S.C., a Belgian
cooperative corporation.
"CREDIT ENHANCEMENT" means any instrument, agreement or other arrangement
providing support for a series or class of securities. Credit Enhancement may
be in the form of:
o the subordination of one or more classes of the certificates or the
notes of a series,
o a letter of credit,
o cash collateral guaranty or account,
o a collateral interest,
o a surety bond,
o an insurance policy,
o a spread account,
o a reserve account,
o the use of cross support features,
o another method of Credit Enhancement described in the related
supplement, or
o any combination of the above.
"CREDIT ENHANCEMENT PERCENTAGE" means the percentage interest in the
receivables allocated to some credit enhancement providers.
67
"CUT-OFF DATE" means September 27, 1995.
"DEFAULTED ACCOUNT" means an Account written off as uncollectible by the
servicer.
"DEFINITIVE NOTES" means notes in fully registered, certificated form.
"DEFINITIVE SECURITIES" means securities in fully registered, certificated
form.
"DEPOSIT AND ADMINISTRATION AGREEMENT" means an agreement between the Bank
and an owner trust as specified in the related supplement under which a Series
Certificate is deposited with the owner trust and Chase USA agrees to act as
Administrator of the owner trust.
"DISCOUNT OPTION" means the Transferor's option to designate a
percentage--the Discount Percentage--of receivables in the master trust that
would otherwise be Principal Receivables, to be treated as Finance Charge
Receivables.
"DISCOUNT OPTION RECEIVABLES" means those receivables that otherwise would
have been treated as Principal Receivables that are to be treated as Finance
Charge Receivables at the option of Chase USA.
"DISCOUNT PERCENTAGE" means a specified fixed or variable percentage as
specified in the related supplement.
"DISTRIBUTION ACCOUNT" means an Eligible Deposit Account from which
distributions are made to certificateholders.
"DISTRIBUTION DATE" means each date specified in the related supplement on
which distributions of interest or principal are to be made to
certificateholders.
"DOL" means the U.S. Department of Labor.
"ELIGIBLE ACCOUNT" means, as of the relevant Cut-Off Date, or, with
respect to Additional Accounts, as of their date of designation for inclusion
in the master trust, each Account owned by the Transferor:
o which was in existence and maintained with the Transferor,
o which is payable in United States dollars,
o the obligor of which has provided, as his or her most recent billing
address, an address located in the United States or its territories or
possessions,
o which has not been classified by the Transferor as counterfeit,
deleted, fraudulent, stolen or lost,
o which has either been originated by the Transferor or acquired by the
Transferor from other institutions, and
o which has not been charged off by the Transferor in its customary and
usual manner for charging off Accounts as of the Cut-Off Date and, with
respect to an Additional Account, as of its date of designation for
inclusion in the master trust.
"ELIGIBLE DEPOSIT ACCOUNT" means either:
o a segregated bank account with an Eligible Institution, or
o a segregated bank account with the corporate trust department of a
depository institution organized under the laws of the United States or
any state, including the District of Columbia, or any domestic branch
of a foreign bank, and acting as a trustee for funds deposited in such
accounts, so long as any of the securities of such depository
institution has an investment grade rating from each rating agency.
"ELIGIBLE INSTITUTION" means those financial institutions described under
"Description of the Securities--Description of the Certificates--Master Trust
Bank Accounts."
68
"ELIGIBLE RECEIVABLE" means each receivable:
o which has arisen under an Eligible Account,
o which was created in compliance, in all material respects, with all
requirements of law applicable to the Transferor, and under the terms
of a credit card agreement which complies in all material respects with
all requirements of law applicable to the Transferor,
o with respect to which all consents, licenses or authorizations of, or
registrations with, any governmental authority required to be obtained
or given by the Transferor in connection with the creation of a
receivable or the execution, delivery, creation and performance by the
Transferor 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 the receivable,
o as to which, at the time of its creation, the Transferor or the master
trust has good title free and clear of all liens and security interests
arising under or through the Transferor, other than some tax liens for
taxes not then due or which the Transferor is contesting,
o which is the legal, valid and binding payment obligation of the obligor
under the receivable, legally enforceable against that obligor in
accordance with its terms, subject to some bankruptcy-related
exceptions, and
o which constitutes an "account" or "general intangible" under Article 9
of the UCC as then in effect in the State of Delaware.
"ENHANCEMENT INVESTED AMOUNT" means a subordinated investor interest in
cash flows in respect of the receivables to the extent described in the related
supplement.
"ERISA PLAN" means a Plan that is subject to Title I of ERISA or Section
4975 of the tax code.
"EUROCLEAR" means the system operated by Euroclear Bank, S.A./N.V. under
contract with the Cooperative.
"EUROCLEAR PARTICIPANTS" means participants of the Euroclear system.
"EVENTS OF DEFAULT" means, with respect to the notes, those events
described under "Description of the Securities--Description of the Notes--The
Indentures--Events of Default: Rights Upon Event of Default."
"EXCESS FUNDING ACCOUNT" means the Eligible Deposit Account for the
benefit of the certificateholders in which principal collections are held as
collateral if the Transferor Interest is less than the Minimum Transferor
Interest.
"FDR" means First Data Resources, Inc., a computer data processing
servicer for the bankcard industry.
"FINANCE CHARGE ACCOUNT" means a bank account held for the benefit of the
certificateholders in which the servicer will deposit collections of finance
charge receivables allocated to the certificateholders.
"FINANCE CHARGE RECEIVABLES" means periodic finance charges and other
amounts charged in respect of some credit card fees, including cash advance
fees, late fees and annual membership fees plus the amount of any Discount
Option Receivables.
"FUNDING PERIOD" means with respect to any pre-funded series, the period:
o beginning on the Closing Date and ending on a specified date before an
Amortization Period or an Accumulation Period begins, and
o during which the aggregate amount of Principal Receivables in the
master trust may be less than the aggregate principal amount of the
certificates of the related series and an amount is held in a
Pre-Funding Account for the benefit of the certificateholders.
69
"GROUP" means each series specified in the related supplement to be
included in any group.
"INDENTURE" means an agreement between an Owner Trustee on behalf of a
Chase credit card owner trust and the applicable Indenture Trustee under which
notes are issued.
"INDENTURE TRUSTEE" means the trustee acting on behalf of the noteholders
under an Indenture.
"INTERCHANGE" means fees received by creditors participating in the VISA
and MasterCard associations as partial compensation for taking credit risk,
absorbing fraud losses, and funding receivables for a limited period prior to
initial billing.
"INTEREST FUNDING ACCOUNT" means an Eligible Deposit Account for the
benefit of the certificateholders in which amounts to be paid to
certificateholders as interest will be deposited on a monthly basis, if
interest payments are made to certificateholders less frequently than monthly.
"INVESTOR CHARGE-OFF" means, for any Monthly Period, and for any series:
o the amount by which the sum of (w) related Monthly Interest, (x)
overdue Monthly Interest, (y) any Additional Interest, and (z) the
accrued and unpaid Investor Servicing Fees payable from collections of
Finance Charge Receivables, the Investor Default Amount and any other
required fees exceeds
o amounts available to pay those amounts out of collections of Finance
Charge Receivables, available credit enhancement amounts, if any, and
other sources specified in the related supplement, if any, but not more
than the Investor Default Amount.
"INVESTOR DEFAULT AMOUNT" means, for any Monthly Period, the product of:
o the Investor Percentage with respect to that Monthly Period, and
o the aggregate amount of Principal Receivables in Defaulted Accounts for
that Monthly Period.
"INVESTOR INTEREST" means the aggregate principal amount of the interest
of the certificateholders in a series as specified in the related supplement.
"INVESTOR PERCENTAGE" means each of the varying percentages used to
allocate to a series receivables in Defaulted Accounts and collections of
Finance Charge Receivables and collections of Principal Receivables.
"INVESTOR SERVICING FEE" means the servicing fee allocable to the Investor
Interest of a series, as specified in the related supplement.
"JPMC" means J.P. Morgan Chase & Co.
"MASTER TRUST PORTFOLIO" means the portfolio of MasterCard and VISA
accounts selected from the Bank Portfolio to be Accounts designated to have
their receivables included in the master trust.
"MINIMUM AGGREGATE PRINCIPAL RECEIVABLES" means an amount equal to:
o the sum of the numerators used to calculate the Investor Percentages
for the allocation of collections of Principal Receivables for each
series outstanding minus
o the amount on deposit in the Excess Funding Account;
provided, that the Minimum Aggregate Principal Receivables may be reduced to a
lesser amount at any time if the Rating Agency Condition is satisfied.
"MINIMUM TRANSFEROR INTEREST" means, for any period, 7% of the sum of:
o the average Principal Receivables for that period, and
o the amount on deposit in each of the Excess Funding Account, the
Principal Funding Account and any other bank account specified in the
Pooling and Servicing Agreement or any Series Supplement;
70
provided, however, that Chase USA may reduce the Minimum Transferor Interest to
not less than 2% of the sum of the amounts specified above upon satisfaction of
the Rating Agency Condition and other conditions set forth in the Pooling and
Servicing Agreement.
"MONTHLY INTEREST" means interest accrued for a specified month for any
series or class.
"MONTHLY PERIOD" means a calendar month, except that the first Monthly
Period for any series:
o begins on the Closing Date for that series, and
o ends on the last day of the calendar month before the month in which
the first Distribution Date occurs for that series.
"NON-U.S. CERTIFICATE OWNER" means a beneficial owner of a certificate
other than a U.S. Certificate Owner.
"NON-U.S. NOTE OWNER" means a beneficial owner of a note other than a U.S.
Note Owner.
"NOTE MATURITY DATE" means the final Payment Date on which payments are to
be made to the noteholders of a series.
"NOTE RATE" means the interest rate per annum applicable for any series or
class of notes.
"OWNER TRUSTEE" means the trustee of an owner trust identified in the
related supplement.
"PARTICIPATIONS" means undivided interests in a pool of assets primarily
consisting of receivables arising under consumer revolving credit card accounts
owned by the Transferor.
"PAYMENT DATE" means the dates specified in the related supplement on
which distributions of interest or principal are to be made to noteholders.
"PAY OUT EVENT" means, for any series of certificates issued by the master
trust, any of the events identified in the related supplement and any of the
events described under "Description of the Securities--Description of the
Certificates--Pay Out Events."
"PAYING AGENT" means The Chase Manhattan Bank.
"PLAN" means:
o an employee benefit plan within the meaning of Section 3(3) of ERISA,
whether or not subject to ERISA,
o a plan within the meaning of Section 4975 of the tax code, whether or
not subject to Section 4975 of the tax code, or
o any entity which may be deemed to hold the assets of any of those plans
under ERISA, the regulations promulgated under ERISA (including,
without limitation, an insurance company general account), or any
Similar Law.
"POOLING AND SERVICING AGREEMENT" means the Third Amended and Restated
Pooling and Servicing Agreement, dated as of November 15, 1999, among the
Transferor, the servicer and the master trust trustee, as amended from time to
time.
"PORTFOLIO YIELD" means, with respect to any series for any Monthly
Period, the annualized percentage equivalent of a fraction:
o the numerator of which is the sum of collections of Finance Charge
Receivables, investment earnings on amounts in the Principal Funding
Account--net of investment expenses and losses--and amounts withdrawn
from the Accumulation Period Reserve Account deposited into the Finance
Charge Account for that Monthly Period, calculated on a cash basis
after subtracting the Investor Default Amount for that Monthly Period,
and
o the denominator of which is the Investor Interest as of the close of
business on the last day of that Monthly Period.
71
"PRE-FUNDING ACCOUNT" means a bank account:
o established with the master trust trustee for the benefit of
certificateholders of a series, and
o in which is deposited the difference between the aggregate amount of
principal receivables allocable to that series and the aggregate
outstanding principal amount of the certificates of that series.
"PRINCIPAL ACCOUNT" means a bank account held for the benefit of the
certificateholders in which the servicer will deposit collections of Principal
Receivables allocated to the certificateholders.
"PRINCIPAL AMORTIZATION PERIOD" means a period:
o beginning on the date specified in the related supplement, and
o ending on the earlier of:
- the start of the Rapid Amortization Period, and
- the Series Termination Date, and
during which collections of Principal Receivables allocable to the Investor
Interest of a series and other amounts specified in the related supplement will
be used on each Distribution Date to make principal distributions to the
certificateholders of that series or any class then scheduled to receive
principal distributions.
"PRINCIPAL COMMENCEMENT DATE" means the date on which principal payments
on the securities of a series are scheduled to begin.
"PRINCIPAL FUNDING ACCOUNT" means an Eligible Deposit Account held for the
benefit of the certificateholders of a series with an Accumulation Period in
which collections of principal receivables are accumulated. At the end of the
Accumulation Period, the amount in this account will be paid to
certificateholders of the related class or series.
"PRINCIPAL RECEIVABLES" means receivables that consist of amounts charged
by cardholders for:
o goods and services,
o cash advances, and
o consolidation or transfer of balances from other credit cards,
less the amount of any Discount Option Receivables.
"RAPID ACCUMULATION EVENT" means an event specified in the related
supplement that would cause a Rapid Accumulation Period to commence.
"RAPID ACCUMULATION PERIOD" means a period:
o beginning when a Rapid Accumulation Event occurs or at such other time
as is specified in the related supplement, and
o ending on the earliest of:
- the start of the Rapid Amortization Period,
- payment in full of the Investor Interest of the certificates of
that series, and
- the Series Termination Date, and
during which collections of Principal Receivables allocable to a series will be
deposited on each Transfer Date into the Principal Funding Account and used to
pay principal to the certificateholders of that series or class on the
scheduled payment date.
"RAPID AMORTIZATION PERIOD" means a period:
o beginning on the day a Pay Out Event occurs or such other date as may
be specified in the related supplement, and
72
o ending on the earlier of:
- the date on which the Investor Interest of the certificates of
that series have been paid in full, or
- the related Series Termination Date, and
during which collections of Principal Receivables allocable to a series will be
paid on each Distribution Date to the certificateholders of that series.
"RATING AGENCY CONDITION" means the notification in writing by each rating
agency that a proposed action will not result in that rating agency reducing or
withdrawing its then-existing rating of the investor certificates or notes of
any outstanding series or class with respect to which it is a rating agency.
"RECORD DATE" means the date specified in the related supplement as of
which a certificateholder must be the registered holder of a certificate to
receive a payment on the following Distribution Date.
"RECOVERIES" means amounts received by the servicer with respect to
charged-off accounts in the Bank Portfolio.
"REMOVED ACCOUNTS" means Accounts designated by the Transferor to have
their receivables conveyed from the master trust to the Transferor and which no
longer constitute Accounts.
"RESERVE ACCOUNT" means a bank account established to provide support for
a series or one or more classes of securities. This type of account may be
funded by an initial cash deposit or any other method provided in the related
supplement.
"REVOLVING PERIOD" means, with respect to any series, a period:
o beginning on the Closing Date, and
o ending when an Accumulation Period or Amortization Period begins, and
during which collections of Principal Receivables allocable to that series are
generally not paid to certificateholders or accumulated but are generally paid
to the Transferor.
"SERIES CERTIFICATE" means a Series Certificate issued by the master trust
and deposited in an owner trust.
"SERIES SUPPLEMENT" means the supplement to the Pooling and Servicing
Agreement relating to a particular series.
"SERIES TERMINATION DATE" means for any series the earliest to occur of:
o the Distribution Date on which the Investor Interest has been paid in
full,
o the final Distribution Date on which principal and interest with
respect to a series is scheduled to be paid as described in the related
supplement, and
o the Trust Termination Date.
"SERVICER DEFAULT" means any failure of the servicer under the Pooling and
Servicing Agreement and any Series Supplement:
o to perform its duties or fulfill its obligations (each, a "breach"),
and
o to cure the breach within a specified period of time, including any
grace period, after discovery or notice of the breach.
See "--Description of the Securities--Description of the Certificates--Servicer
Default" for a description of the specific events that could result in a
Servicer Default.
"SIMILAR LAW" means any federal, state or local law that is substantially
similar to the provisions of Title I of ERISA or Section 4975 of the tax code.
73
"SPREAD ACCOUNT" means an account providing support for a series or one or
more classes of securities by the periodic deposit in that account of available
excess cash flow from the master trust assets.
"TAX OPINION" means an opinion of counsel to the effect that, for federal
income tax purposes:
o an issuance will not adversely affect the tax characterization as debt
of certificates of any outstanding series or class that were
characterized as debt at the time of their issuance,
o following the issuance, the master trust will not be deemed to be an
association, or publicly traded partnership, taxable as a corporation,
and
o the issuance will not cause or constitute an event in which gain or
loss would be recognized by any certificateholder or the master trust.
"TRANSFER DATE" means the business day immediately prior to a Distribution
Date.
"TRANSFEROR" means:
o with respect to the period before June 1, 1996, CMB (formerly known as
Chemical Bank), and
o with respect to the period beginning on June 1, 1996, Chase USA.
"TRANSFEROR CERTIFICATE" means the certificate that represents the
Transferor Interest in the master trust or the uncertificated interest in the
master trust comprising the Transferor Interest.
"TRANSFEROR INTEREST" means the aggregate principal amount of the interest
of the Transferor in the master trust.
"TRANSFEROR PERCENTAGE" means the percentage of receivables in Defaulted
Accounts and collections of Finance Charge Receivables and collections of
Principal Receivables allocated to the holder of the Transferor Certificate
equal to 100% minus the sum of the applicable Investor Percentages for all
series of certificates then outstanding.
"TRUST TERMINATION DATE" means the earliest of:
o the day after the Distribution Date on which the aggregate Investor
Interest and Enhancement Invested Amount or Collateral Interest, if
any, with respect to each series outstanding is zero,
o August 31, 2016, or
o if the receivables are sold, disposed of or liquidated after an
insolvency event occurs, immediately after that sale, disposition or
liquidation.
"UCC" means the Uniform Commercial Code as in effect in the jurisdiction
where Chase USA is located.
"U.S. CERTIFICATE OWNER" means a beneficial owner of a certificate (other
than a Series Certificate) described under "Tax Matters."
"U.S. NOTE OWNER" means a beneficial owner of a note described under "Tax
Matters."
"U.S. PERSON" means a person described under "Description of the
Securities--Form of Your Securities--Certain U.S. Federal Income Tax
Documentation Procedures relating to Global Securities."
74
PRINCIPAL OFFICE OF
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
White Clay Center Building 200
Route 273
Newark, Delaware 19711
CHASE CREDIT CARD MASTER TRUST
TRUSTEE
The Bank of New York
101 Barclay Street
New York, New York 10286
CHASE CREDIT CARD OWNER TRUST 2001-2
OWNER TRUSTEE INDENTURE TRUSTEE
Wilmington Trust Company The Bank of New York
Rodney Square North 101 Barclay Street
1100 North Market Street New York, New York 10286
Wilmington, Delaware 19890
PAYING AGENT AND TRANSFER AGENT
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10036
LISTING AND INTERMEDIARY AGENT
Banque Generale du Luxembourg, S.A.
50 Avenue J.F. Kennedy
L-2951 Luxembourg
LEGAL ADVISOR TO THE TRANSFEROR AND THE OWNER TRUST
as to United States law
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
LEGAL ADVISOR TO THE UNDERWRITERS
as to United States law
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
INDEPENDENT ACCOUNTANTS TO THE TRANSFEROR
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
PROSPECTUS SUPPLEMENT
CHASE CREDIT CARD
OWNER TRUST 2001-2
ISSUER
$500,000,000
CLASS A FLOATING RATE
ASSET BACKED NOTES
$41,666,000
CLASS B FLOATING RATE
ASSET BACKED NOTES
$53,572,000
CLASS C FLOATING RATE
ASSET BACKED NOTES
CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION
TRANSFEROR AND ADMINISTRATOR
THE CHASE MANHATTAN BANK
SERVICER OF CHASE
CREDIT CARD MASTER TRUST
UNDERWRITERS OF THE CLASS A NOTES
JPMORGAN
BANC ONE CAPITAL MARKETS, INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
GUZMAN & COMPANY
UNDERWRITERS OF THE CLASS B NOTES AND THE CLASS C NOTES
JPMORGAN
BANC ONE CAPITAL MARKETS, INC.
SALOMON SMITH BARNEY
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THESE NOTES AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE NOTES WILL DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL , 2001.
----------